We don’t have free healthcare in the US. It’s disingenuous to not consider health care as a benefit with monetary value. These people would otherwise have to pay actual money for health care.
I would agree with you but healthcare isn't a liquid/tangible asset like own stock or making cash is. I can't take out my healthcare the same way I can sell stock or collect a paycheck. Which in my opinion makes all the difference when calculating income. Its a much easy argument to make when healthcare's cost can be much greater than funds paid out. For instance if the equation for income was Income = Wages + Asset_growth (simplistic) but you could compare two people person A makes 10$ person B makes 100$. There is a lot of income inequality but if you add healthcare to that which is only "cashable when sick" of say 20$ both parties have a real delta of 100$ but there % difference lowered significantly in this case it went from 90% to 75% even though the actually income which people can choose how it is spent and use still has a 90% difference. Sounds like adding extraneous variables to mask more interesting differences
You’re making it way more complicated than it needs to be. Most everyone pays for healthcare with pre-tax dollars. Others get it for free outright from the government. The cash benefit of government paid insurance does not need to be more complicated than the median cost of healthcare for paying participants.
While I do agree, it's also often incredibly difficult to compare monetarily.
Plans vary in coverage and out of pocket expenses significantly combined with the fact you don't know what you will need to use the insurance for, if anything at all.
When you're younger, it's less likely it's valuable, when you're older, it's more likely that it's valuable.
If you have a preexisting condition (say someone needs dialysis), it's a little bit more straightforward because you already know what sort of services you need. Ultimately you don't know what you service provider will end up charging the insurance to cover costs, how little your insurance will try and provide, and what you'll have left to pickup on the tab.
Furthermore, employers are known to shop the market for better deals, so the insurance you sign up for could shift in 6-12 months. I factor insurance into comp but I look at only the most general attributes and I don't weight these as directly as compensation because I (knock on wood) am fairly healthy and tend not to use my insurance.
It's also disingenuous to not factor in the massive wealth transfer in progress via the US health care system in an article on income inequality that counts healthcare as income.
The US pays almost double per capita for health care compared to its northern neighbour Canada.
You can’t make this argument and also make the argument that free healthcare is not a financial benefit. If US citizens pay twice as much as Canadian citizens, why can’t I argue that Medicaid is twice as valuable?
I mean, it’s a part of your compensation package and isn’t a requirement for small companies, so yeah, it should be counted. You are receiving a benefit the company pays for.
Edit: maybe OP was referring to public healthcare? In that case it depends on the methodology. Seems like this methodology subtracts taxes then adds back in what you receive.
This doesn’t seem unreasonable as someone who isn’t making enough to pay taxes may get Medicaid coverage. That’s a direct transfer payment to that person.
Each of my employees receive about $7800 less per year in their paychecks because a Democrat made me buy them health insurance instead of giving them the money to buy their own healthcare.
And if they each had to buy their own health care they would pay much more than $7800/yr. Negotiating premiums with carriers is easier as part of a group of EEs than as an individual.
Pre-tax contributions is certainly a benefit, but the true benefit is that premium for employment based benefits are much lower than for individuals. One employer represents many employees, the employer deals with a broker, the broker represents many employers and the broker negotiates with carriers to lower premiums based on the fact that they represent a significant amount of potential members.
This is the kind of weight that you don't have as an individual shopping for health insurance.
Absolutely. I was really just curious why the person I responded to was forced to buy insurance. I don't think that's the case nationally, but may be something state specific.
> the employer deals with a broker, the broker represents many employers
I need to look into this again, but it wasn't the case last I checked. Larger employers (those who can really move the negotiating needle) don't want to help smaller companies by being the anchor in a group situation because the larger employers see insurance as a competitive advantage. It's been a few years, but the last time I checked going through broker they were just negotiating for the individual company and not a group. I clearly need to revisit or maybe find a different/better broker.
I spent 3 years in the health insurance/benefits industry building tools for employers/employees/brokers to organize their respective workflows around benefits.
For sure, very big employers will have a different setup, but SMB definitely use brokers to get better deals for themselves and their employees.
Obamacare requires me to pay for health insurance directly for my 279 employees otherwise I must pay a ~$4k/head penalty to the IRS. The entire point of my original comment was to refute the notion that counting benefits as income is a “very Republican” idea, because it was a Democrat would thought of it and made it a law.
I know a business owner who just pays the penalty. It's actually better for his workers in Massachusetts, since they get state-subsidized healthcare that is better than what he could get for the cost of the penalty.
So, consider doing that. Taking the $4000 penalty from the $7800 you currently pay, that leaves $3800 that can be split between you and the worker. (split it as needed to attract and keep talent)
Depending on the state you are in, the workers needing insurance might do better having some portion of that $3800 than having the insurance you can get for them. You may even have workers who get insurance from elsewhere, such as a parent or spouse, and they'd much prefer a portion of the $3800 saved.
Yes, and this is part of the problem. I should not have to join a PEO (or employ 10k+ people) to provide my employees the best possible insurance rates. For that matter, nobody should have to work anywhere to get the best possible rates. The original point is that income inequality is not nearly as big of a deal as some would want to believe because of the chicanery of benefits systems. New York State provides about $140k of services (direct cost to the state government) to a family of 4 making $39,500. Yet this is not considered income to the family. Why?
If I'm evaluating job offers that have identical salary/bonus and one company offers a copay plan and another has a high deductible plan of $2000, I'm absolutely treating the copay plan as $2000 more valuable. In fact, I'd probably gross it up given that's $2000 in after-tax dollars I would pay for healthcare each year. And that doesn't even count the 10%+ coinsurance on the backend once the deductible is met.
For you. Premiums and deductible options on the open market are different between individuals. A 20 year old is going to pay a good deal less than a 50 year old.
And it's not "my choice." That's mathematically how you evaluate different alternatives. All other things being equal, would you not value a house with a pool higher than one that doesn't?
As such, we should also admit that this benefit is potentially worth $0 to a healthy person.
I didn't do that calculation on a "for me" basis: I looked at the generally advertised cost. Paying in advance is cheaper for anyone taking out a policy.
For a person covered on a spouse’s better insurance, it’s possibly worth $0. If you’re going to be covered for catastrophic incidents, that’s economically worth more than $0 no matter how healthy you are.
The high deductible plan likely comes with an HSA which is perhaps the most tax advantaged way to store funds. That may not be as valuable to you as $2000 deductible coverage but the equation isn’t as stark as that dollar amount.
Anecdotally, every time I run the numbers for my family the high deductible plan comes out ahead so I view an offer without one as less appealing. Though most employers offer both.
It doesn’t have to “come with” an HSA. If you have an HDHC plan, you can use a third-party HSA. (An employer plan may come with an employer contribution, of course.)
It is the best type of retirement account when used that way and I think it’s worth at least $1K/yr today assuming you’ll be able to drain it before it turns into an IRA.
Unfortunately low fees haven’t come to the third party HSA world (yet) so the employer provided account has intrinsic value. That said even without it I’d bet my equations stay the same.
I've never yet seen an HSA that's actually advantageous unless you're able to tightly plan out your medical costs for the next year. They're always "decide how much goes in for 2021 in October 2020, then use it or lose it".
Sure, the tax advantage is nice, but it doesn't make up for expecting to be paying $2000 in visits over the course of a year, then (for whatever unexpected reason) paying half that—the extra $1000 just goes away, and with it the tax savings you would have made over years of effective use.
Not in your test case, but a problem with many HD plans is that they have grown their deductibles faster than IRS rules for the plan to be HSA eligible (currently $7k max single person deductible). So HSA eligible plans end up costing more than HD plans which further complicates the issue.
Of course, leave it up to the IRS to take something that should be a good thing, and put rules around it that make it hard to use.
>As government transfer payments to low-income households exploded, their labor-force participation collapsed and the percentage of income in the bottom quintile coming from government payments rose above 90%.
Ding ding ding. Look at the sea of “help wanted” signs. But why would you go do actual work when you can ride fat unemployment checks and other benefits for 15 months?
Well considering Government transfers like EITC arent included in many analyses of poverty or income inequality, this is a very different analysis than others.
Seems reasonable? Compare what people end up with after al is said and done versus what their job pays them before taxes?
Especially when the minimum wage is so low and going in to work to serve people refusing to wear masks could kill you or curse you with a constellation of life-ruining symptoms for the remainder of your life.
"When you’re competing against a government dropping taxpayer money out of metaphorical helicopters, it’s not exactly an even competition."
You have to pay a living wage. That's all you have to do. The other side won't bid higher.
And given a person has to work to live, whereas a business only has to hire if they see a profit, it fixes the imbalance in power between the two contracting parties. Each party can say 'no deal' and make it stick.
Currently there are 19 bones and 20 dogs. A guaranteed alternative income makes it 20 - 20 - and that's fair.
> Not only is income inequality in America not growing, it is lower today than it was 50 years ago.
Of course. This is common sense if you understand the US welfare state has expanded radically since the late 1960s, and nearly all of that is a financial transfer from the top 1/3 to the bottom 1/3. The US has an exceptionally progressive taxation system that puts much of Europe to shame. Our single greatest governmental flaw is that we spend such a large amount of money on our welfare state and get such poor results because we don't administer it well; affluent European nations largely embarrass the US at that.
If you attempt to point any of this out using facts, you will be shouted down because it's against the popular narrative (which is to pretend that the US has no welfare state, no social safety net, the rich are evil and don't pay their "fair share" - whatever that means in a system where the top brackets pay nearly all the taxes).
> If you attempt to point any of this out using facts, you will be shouted down because it's against the popular narrative
Anybody can claim anything and it will turn into a shouting match unless reliable sources are cited (Breitbart, Alex Jones, Fox, etc. aren't reliable sources)
Welfare:
- what counts as welfare
- how much of it do people get (percentage of GDP and per capita)
- what percentage of coats does it cover
- which people get it
- how long do people get it
Then there are questions of what poverty is defined as, how many people live in it, and how many live below the poverty line.
The topic of healthcare is naturally important in all this.
Taxes:
- what is the rate (% paid by tax bracket)
- is it actually paid
- which percentage of the population is paying the highest rate
And of course, how does this compare to Europe (since you say "it puts Europe to shame")?
You can focus on one point, cite your source and contrast them.
Where is this "welfare state"? How are people suppose to get that money? I don't see it happening - it all goes to programs that suck the money up before it reaches anyone like Medicare and supporting end of life cost for people that weren't even poor while providing little for the actual poor, etc.
I think you'd get a better reaction if you dropped the straw men and the persecution complex.
The thing is – you are in some ways correct! The US has a large welfare and social security system. It's hard to compare directly, but it's probably reasonable to say that US social spending is in the same ballpark as many European countries.
The point about an "exceptionally progressive taxation system" is of course nonsense, and the idea that the "popular narrative" claims the US has "no welfare state, no social safety net" is misleading. In reality, the popular argument is that these services is the US are exceptionally broken. There is no effective "social safety net" if that system fails to capture people so often. It's like US healthcare expenditure – spending that's fare above that of many countries with efficient, effective, and universal systems, but with a huge chunk of the population unable to access it.
However, even an article like this—which tries to choose a comparison to make its ideological point as forcefully is possible—only manages to claim that income inequality has shrunk to a relatively limited extent, if you count all forms of government spending as income! Not a ringing endorsement.
The US is so weird with this stuff. Massive government spending programs with a culture that wants to deny it, resulting in this messed-up system with massive spending and rubbish outcomes.
Sounds like some serious manipulation of numbers to get the result you want. Open source the data, assumptions and formulas used and I might consider your argument WSJ
Yes, they specifically mention "adjustments" due to changes in the way the Census collects data. They don't explain what those adjustments were and why they were needed. It all feels very much like adjusting the axis on a graph to make a big slope look smaller or to take small slope and make it look like a hockey stick. Smells very much like manipulating data to get the results you want.
The author is "Phil Gramm"-- former republican senator who has spent his entire political career pushing for lower taxes and standard Reagan era deregulation. He was involved in passing The Commodity Futures Modernization Act in 2000 which promptly paved the way for the Enron mess. He now works for UBS as a rich-people money shuffler.
I think his angle here is "we've done enough" to address income inequality, let's stop worrying about it and keep the gravy train flowing to the 1% of the 1%.
How can a layperson believe anything these respected publications publish? It seems everything is twisted or manipulated - super annoying. It is time the media took a serious look at themselves.
Does he exclude unrealized capital gains from his definition of "income"?
Favorable tax treatment of capital gains is already the primary vehicle by which the wealthy pay a lower tax rate than the middle class. I bet it would do a fine job of rigging the outcome in TFA as well!
How is that? If anything it is an argument against UBI.
From the article:
„ As government transfer payments to low-income households exploded, their labor-force participation collapsed and the percentage of income in the bottom quintile coming from government payments rose above 90%.“
„We are debating the alleged injustice of a supposedly growing social problem when—for all the reasons outlined above—that problem isn’t growing, it’s shrinking. Those who want to transform the greatest economic system in the history of the world ought to get their facts straight first.“
I guess my point is that by including government payments in calculation of income inequality they are legitimizing the use of government payments to reduce inequality.
There's a lot more of their prior art in WSJ. At this point you could just use tune an AI writer with appropriate prior works and churn out opinion pieces like this, each unique, to send to every right leaning newspaper. Oh wait, that is actually already being done.
According to this article, income for the poorest has increased more via government programs than income has increased (minus taxation) for the wealthiest.
But this can't be a healthy way for a society to operate: to have the rich get richer and transfer their money to the poor so they don't get poorer.
A primary cause of this change to our society's structure is our monetary policy which ensures we will have massive trade deficits that ship our manufacturing jobs overseas [1].
Redistribution of wealth is pretty much the solution that’s been bandied about. And it’s the method by which many low inequality countries achieve low inequality.
What’s your proposal? We have more unproductive people than productive people. We have more lazier people than dilligent people. We have more stupid people than smart people. Even free education doesn’t fix it because people are free not to study.
Interestingly, the US manufacturing output today is the greatest it has ever been. Jobs get lost mostly due to automation. This a good thing: Do more with less and focus on higher-value activities.
This belief, that US manufacturing is doing better than ever and job losses are due to automation is false and based on statistics that overvalue microprocessors. Here’s a great paper on that with an excerpt from the introduction.
First, it is generally unknown that the robust growth in real GDP in the manufacturing sector is largely driven by one industry: computers and electronic products. For most of manufacturing, real output growth has been relatively weak or negative.5 When the computer and electronic products industry is excluded, real GDP growth in manufacturing falls by two- thirds between 1997 and 2007, the decade leading up to the Great Recession. In 2011, without computer-related industries, real GDP in the manufacturing sector was actually lower than in 2000. The computer and electronic products industry similarly drives real manufacturing output growth in most U.S. states. Real manufacturing GDP growth between 1997 and 2007 falls by more than half in a majority of states and by at least 25 percent in all but 10 states.
Furthermore, the extraordinary growth in real value added and accompanying productivity growth in the computer and electronic products industry results largely from prices for two sets of products: computers and semiconductors that, when adjusted for quality improvements, are falling rapidly. These quality improvements, in turn, largely reflect better design and increases in the density of electronic circuitry. While changes in manufacturing processes are necessary to produce these improved designs, the production processes in computer and semiconductors have been automated for many decades. Thus, the high growth in real value added and productivity in the computer and semiconductor product segments, and by extension the manufacturing sector, reflects, to a large degree, product improvements from research and development rather than automation of the production process. Unlike productivity resulting from automation, which involves the substitution of capital for labor, productivity arising from improvements to product design and production processes does not, in and of itself, cause job losses.
Ironically, the extraordinary growth in real value added and productivity in the computer and semiconductor industries does not signal the competitiveness of the United States as a manufacturing location for these products. Drawing on new market research data, we provide evidence of the shift in the location of computer and semiconductor manufacturing to Asia. Few personal computers and servers are assembled in the United States today, and consequently the United States runs a large trade deficit for these products. The United States retains a significant presence in semiconductor wafer fabrication, but over the last decade manufacturing capacity has expanded much more rapidly in Asia, and, as a result, U.S. market share has declined rapidly. Although many of the computers and semiconductors produced overseas are still designed in the United States, the shift in the location of production has important implications for the number and types of U.S. jobs.
I've seen this argument, but i never understand the people making this argument. China is called the factory of the world, and it is undeniable that a lot of chinese labor force works in manufacturing. So if jobs weren't lost due to outsourcing, then what are these industries and jobs doing in china? I think the standard response is that usa's manufacturing output has increased, but comparing 1970s manufacturing output to 2020 isn't at all fair. You need to consider the alternate world, where globalism wasn't this big a force, and most manufacturing stayed in usa. There would be even more manufacturing in USA, so globalism did lead to job loss.
> But this can't be a healthy way for a society to operate: to have the rich get richer and transfer their money to the poor so they don't get poorer.
I mean, it's literally the point of a welfare state to do this, because it's a whole lot more unhealthy to just let the poor get poorer or try to fix incomes
Manufacturing jobs shifting overseas has virtually nothing to do with monetary policy and everything to do with the fact that Asia has got much better at manufacturing and has relatively cheap labour. Similar manufacturing shifts happened in other Western nations whose currencies are not reserve currencies
(Sure, in theory the US could have countered trade imbalances by aggressively devaluing their currency to make buying things from overseas expensive, but less drastic approaches to promoting manufacturing exist...)
This. And correlation between the income/wealth spectrums, because if the higher incomes accrue mostly to the already-rich then wealth disparities can accelerate even if income disparities contract
Sure, but income doesn’t measure all consumption. How would you consider a third home in the Hamptons? Certainly not income, but definitely both wealth and consumption. Wealth is probably a better proxy for consumption.
Not exactly the sign of a healthy economy when the government has to make up for the lack of economic opportunities by taking my taxes and giving them to poor people, is it?
I am more interested in why they publish these articles? Who are they trying to sell these ideas to, exactly? Certainly not the poor.
They write these pieces for the same audience who watches Fox News and listens to Sean Hannity. This helps keep their base supporters (or supporters of people and policies they align with) speaking the same language and believing the same things they have been told to believe for decades.
"Poor people are poor because they are lazy or stupid."
"Rich people are rich because they worked very hard and built great things."
"Taxing the rich to pay the poor will destroy our economy."
etc. etc.
It is an important component of disinformation campaigns to reinforce the primary ideas periodically, because the audience is regularly encountering situations which disprove these lies. If the message isn't reinforced, the people will begin to question and doubt.
I read it more as "it's unhealthy when, in the absence of government redistribution, some people are starving on the streets while others are making more money than God."
Which I would think is an even bigger indictment of what we've got now, since we already have a moderate amount of government redistribution, but still have people starving in the streets and others making more money than God.
To expect nobody to starve in the absence of government redistribution, you'd have to be quite optimistic about private charity or voluntary community provision. For example, some people are born severely disabled. Others can't hold a job down. Not everybody saves enough for retirement. Etc.
I don't understand why many people care so much about income inequality. Live has been improving for everyone for centuries. Why does it matter if some have more than others if everyone has more material wealth and, more importantly, more opportunities than ever before?
In ever measure there is, life has been getting better for centuries. Life expectancy, abolishment of oppression (slavery, debtor's prisons, serfdom, involuntary servitude, military conscription in many countries), educational attainment, and even standard of living have all improved.
Finally, the word "poor" needs to be retired. I've met lots of people with no money, and very few of them were poor people.
> Life expectancy, abolishment of oppression (slavery, debtor's prisons, serfdom, involuntary servitude, military conscription in many countries), educational attainment, and even standard of living have all improved
What fancy measures you have. How about "cost of owning a house", "cost of getting an education", "cost of getting health care" instead of those banal measures you got there?
Nobody cares that life is comparatively better than during Roman times.
Our fathers and our grandfathers lived a better easier life. In particular they had much better economic opportunities. People are upset about those opportunities evaporating.
Life expectancy is down in the US pre-covid, driven in part by the opioid epidemic and in part by poor health/obesity,both of which are associated with poverty. Involuntary servitude is alive and well in US prisons which incidentally don't have a ton of high income people.
So I don't think it's fair to say that life is necessarily getting better in the US for low income people.
Sure, if you set the averaging horizon to much longer than 40 years the problems of the last 40 years wash out, but that doesn't mean they are small.
People can tell when they have things worse off than their parents. The social contract will erode in ways that people don't expect. In particular, the tidy arrangement where your retirement is in investments, so if you hurt the capital gains of the wealthy you hurt yourself, falls apart if most people are too poor for retirement savings. Suddenly, in a democracy, our retirement accounts (and the poorly hidden accounts of the actual wealthy) become up for grabs. That situation is developing quickly enough that we may well see the breaking point in our lifetime.
>In ever measure there is, life has been getting better for centuries.
My country has salary record from 16th century. It is in gold, so can be translated to buying parity. Shoe maker today and in 16th century had roughly the same salary and expenses for living, heating, food etc.
>Life expectancy
has improved mainly by reducing child deaths. For adults it has not improved significantly, for some groups life expectancy is declining.
> abolishment of oppression (slavery, debtor's prisons, serfdom, involuntary servitude, military conscription in many countries)
Slavery and serfdom is still a reality in many countries. Even western countries have debtors prison and involuntary servitude (child support).
>educational attainment
It just caused education inflation. Person has to now study longer to do the same job. For simple child minding you may need college degree in some countries...
> standard of living have all improved.
Standard of living in most western countries is declining.
> I've met lots of people with no money, and very few of them were poor people
You compete with other people for scarce resources, so relative wealth matters. Real estate and the stock market spring to mind, but political influence is probably the most pernicious place where this applies.
Because it‘s good for business for left-wing politicians. If they didn‘t stir the shit up by means of data skewed in their favor, we‘d all be living more satisfying lives.
I think that argument would be more compelling if everyone had adequate food, shelter, and medical care.
Yes, we have high average wealth. Yes, even people in poverty have access to technology that was unavailable to the richest people on the planet a century ago. But none of that really matters when you don’t have enough money to feed your kids and you can’t afford to see a doctor about that nagging pain that’s threatening your ability to string together multiple <$10/hr jobs.
In a vacuum you may have an argument, but income inequality is really a proxy to multiple larger issues. A big one is lack of healthcare and/or health issues driving people to bankruptcy. Second, which many people here are keenly aware, is the cost of education. And finally, people having few other options when in a crap work situation.
So yeah, it doesn't matter that Bezos has more material wealth than any of his workers, but what matters is that healthcare will not bankrupt him and he can easily send his kids to school.
Phil Gramm and John Early have been trying to spin a story like this many times in the last several years on WSJ.
Indeed there are always different numerical outcomes when you change your methods and definitions, so it is possible that by their definition things aren't as bad as the "other numbers" show.
However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now than they have been for decades.
Ironically, they want to focus on "Medicare, Medicaid, food stamps and some 100 other government transfer payments". Those services aren't needed by people who earn enough to actually live on. The reason those services have increased is because the people who need them are not being paid reasonably. This is also why the top earners (particularly the top class who "earn" via capital gains instead of "income") have seen their wealth balloon over the same period that is being debated about.
The authors can choose any definition they wish, but at the end of the day, there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10%.
When we reach a point where one individual theoretically has $200 billion (not liquid of course, but plenty of that is), and there are still children without food, there is something wrong. What is considered fair will vary from person to person, but there are limits.
The problem with this analysis and others like it is it makes atemporal distributional claims as if they were temporal. And conflates unrelated measures.
Eg., consider the claim that "college graduate salaries have stagnated" -- this is true, but in 1990 c., 10% were graduates; today that's c. 55%.
So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago.
Consider the claim about "productivity". The reason production has increases at a greater pace than wages is automation. No one is "missing out" on the benefits from automation; they correspond to massive increases in disposable income and time, as we benefit from those tools/products.
> there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10%
This is true only due to the extraordinary efficacy of capitalism. As in all of these cases it's the exceptional increases in abundance which have lead to this apparent "disparity in lifestyle". And if you chose different percentiles it would be false.
The bottom 10% have seen their disposable income double in a time when the top 50% have seen it treble. Thus an apparent "gap".
This is the duplicitous information missing from all these atemporal comparisons.
Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on.
Much of the apparent difference is created from two effects, (1) the media and social media show the lifestyles of the very rich as if they were very common; and (2) people feel "the local rate of change of growth".
The vast majority of this alleged "problem with inequality" is just that local rates of change of growth have been unstable since the financial crisis in 2008. Despite gains for everyone since then, people do not "remember the macroeconomy of 2008" and compare it today.
Rather, all they see is the day-to-day negative news created by accelerating and decelerating growth. Even when growth is positive, if it is decelerating, people think the sky is falling.
Nothing about the contemporary economy is much different, in distributional terms, than it was in 2006. Where then was this hysteria?
> So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago.
You are leaving the cost of education out of the equation, which has increased massively over the past 30 years. Most Americans graduate under a mountain of debt. If salaries have remained stagnant, for the 10% who would have been that amounts to a net lower salary, at least for the first X years of employment until the debt is paid off. For the other 40%, they might have had the option to go work in a steel mill or an auto plant with a high-school degree, and now they have to go to university, and acquire a massive debt to have a hope of competing for a job outside the service industry.
I'm not so convinced this is a net win for anyone involved.
> Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on.
I'm also not so convinced this is the case. If you want to make the argument that I am living like Jeff Bezos because we can both have an LCD TV and and iPad, I think this is a very shallow argument.
While the cost of consumer goods has not risen significantly in the past few decades, the cost of the markers of a middle-class existence absolutely have. For instance, due to the increased cost of housing, the rate of home ownership among millennials is much lower than that of previous generations. Due to student loan debt and the high cost of healthcare, many young people who might have risked leaving a 9-to-5 job to start a business don't feel safe to do so.
Low cost consumer goods are nice, but the "American Dream" has always been about owning your own future, and being able climb into the next social class above your origins with hard work and ingenuity. Due to income inequality, the price of getting a seat at the table is what has increased out of the reach of almost everyone.
To be fair, it is a net win for the overall education of our country. That's not something to just dismiss—but it doesn't have a great deal of easily-measurable economic value.
Is an education un-exercised worth having? The experience of getting the education probably has some (hopefully positive) impact on the individual, but if there is no real opportunity to use that education later, there may also be some psychological downsides.
Not entirely related, but also worth pondering is the brain drain of diverse intellectual talent into the world of finance, particularly private investment. What would the overall benefit been if the dozens of MIT physics and chemistry grads used their education to make things, make discoveries, etc. instead of making money for a limited group of beneficiaries in finance?
I am glad to know many things that will (most likely) never help me earn more money. The value of an education cannot be measured entirely in economic terms.
Two aspects of this that are very important, and have been sadly neglected and devalued in recent decades, are civics and critical thinking.
> also worth pondering is the brain drain of diverse intellectual talent into the world of finance
Yeah, that depresses me every time I think about it.
Let's say that an individual gets the recommended education and is given enough loans to leave school with 60+k in debt.
Unless that person is able to get a _really_ good job, this debt will sap any momentum they might have otherwise developed by living wisely and saving/investing.
Now since for better or worse, people are driven to form partnerships and create offspring, and this will likely occur before that student debt is paid off, what kind of start will the children have? Will the parents be saving for their children's college funds?
The value of critical thinking and ability to learn is great, but for most people in the above situation it will not compensate for the financial situation they will find themselves in for many years after they've forgotten much of what they learned. Also, the stress of their financial situation will actually have a greater influence on how they think than what they learned in school.
I'm really not sure how much more clearly I can say "the value of education cannot be measured in economic terms."
There are things in this world that are worthwhile, that do not have a monetary value; that may, if considered in economic terms, be a net negative, and yet still be something the person who has them values highly.
The value of civics and critical thinking, for example, are not just to the person who has them, but to society as a whole: the more members of our society who are educated in these things, the more likely we are to have good governance, as more people are able to properly evaluate the available candidates and willing to go out and vote.
I was more addressing a common kind of a claim which analysis wealth without consider time/population differences. As if "college graduates" were a fixed group of people whose "wages have stagnated". They havent; the average is stable because the population has quintupled.
Whether eductional policy here makes any sense is a seperate issue. It clearly doesn't. This is a side effect of how extraordinarily effective capitalism is also.
People looked at the top 10% in the 70/80s and saw "they had degrees" and imagined that they could be in the top 10% if they got them too.
This turned out to be "true" only if you mean the actual wealth of a 10%-er in the 70s/80s. Today, the top 10% have much different characteristics.
My point here is that there is also another force at work creating this apparent "inequality panic" which is status envy.
People thought that by imitating a 1%-er of 1970s they'd be a 1%-er today. Alas, no.
You were going to be a bottom 40%-er, now you're a top 20%-er, well done. But you ain't getting that 1% you think you're owed.
All this agit-prop is intra-elite warfare. People who've risen to the top 20% with their BScs, wondering where their mansions are.
At transferring wealth from hard working well-intentioned individuals (and those who must compete with them) to hustlers, yes.
You repeated your narrow point about the group of college educated individuals growing, but as far as I can tell that doesn't actually address skohan's much broader claims about healthcare, housing, and education. Can you address those as well? "Look over there!" isn't an argument.
Wealth is just a measure of "popularity * productivity". Besos is more wealthy than a nurse because amazon engages in billions of transactions which are each productive. A nurse engages in one.
Your wealth, at a first approximation, is the rate at which you are productively transacting.
> Besos is more wealthy than a nurse because amazon engages in billions of transactions which are each productive.
Bezos is wealthy because he is a parasitic rentier capitalist. He's one of the major beneficiaries of the imperialist American intellectual property regime. That's it. That's the special sauce.
"Place Silicon Valley in its proper historical context and you see that, despite its mythology, it’s far from unique. Rather, it fits into a pattern of rapid technological change which has shaped recent centuries. In this case, advances in information technology have unleashed a wave of new capabilities. Just as the internal combustion engine and the growth of the railroads created Rockefeller, and the telecommunications boom created AT&T, this breakthrough enabled a few well-placed corporations to reap the rewards. By capitalising on network effects, early mover advantage, and near-zero marginal costs of production, they have positioned themselves as gateways to information, giving them the power to extract rent from every transaction.
Undergirding this state of affairs is a set of intellectual property rights explicitly designed to favour corporations. This system — the flip side of globalisation — is propagated by various trade agreements and global institutions at the behest of the nation states who benefit from it the most. It’s no accident that Silicon Valley is a uniquely American phenomenon; not only does it owe its success to the United States’ exceptionally high defence spending — the source of its research funding and foundational technological breakthroughs — that very military might is itself what implicitly secures the intellectual property regime."
Besos got wealthy because he built a successful business which provides a ton of value to customers. Besos is the wealthiest person on earth because the benefits from a financial system designed to grow the wealth of already wealthy people exponentially.
You can make the argument that bezos and other "self made" entrepreneurs deserve their astronomical wealth, but many people in the top wealth tiers just had the privilege of being born wealthy, and of living in a system their class has the power to bias in their favour.
Solving child hunger has nothing to do with an individual being worth 200B or not. If the government siezed all of Warren Buffet's money tomorrow would hungry children magically have food show up in front of them? The government just spent 1.9T, clearly they are not limited on spending by Buffet hoarding all the money. It is terrible that children grow up with food scarcity and it is terrible that children grow up with alcoholic parents, but taxing rich people isn't going to fix that.
Not to be too pedantic, but the $200B is Bezos, not Buffett.
Regardless, taxing the weathy can feed poor children by literally funding programs like food stamps.
The covid payments are effectively unfunded, and taxes are the primary source of revenue for the government
We're going to need to pay for these programs somehow. I'd personally be pretty happy with a lot of inflation, give how much my house cost, but I dont think that that would be the best solution for the country as a whole.
I think the point is that the government makes money. They can spend whatever they want, they can literally name any number and spend it in dollars. They have been limited in spending by the rule that they have to loan money, not just spend made up money (after screwing up pretty badly this rule was introduced). But that still gives them trillions per year to spend.
Therefore incoming dollars do not matter, taxes do not really matter. Which I think is the point that we were trying to make.
So there is no justification in taxing "the rich" in any need for increased spending.
This is further complicated that "the 1%" is an annual income of 500k, or an individual income of 250k. A lot of people on this site who don't see themselves as rich (but are) will be included, and will point out that this does not give a "rich" lifestyle in San Francisco. Taxing them so their income drops to, say 160k (down 30% or so) will cost them very directly in comforts, apartments, ... they will fight this tooth and nail.
If you then look at the income that can be generated for the government you quickly realize that you need to tax at least the top 30%. You'll see that this will mean increased taxes (and think 70-80%) for any income over, say 90k per person, if you indeed want to increase taxes. I don't think many people will find this acceptable, because they cannot possibly maintain their lifestyles with such taxes. This will effectively mean anyone not in the 1% is limited to ~120k per year, down 30-40% from what they have now, 100 million voters. More than enough to massively swing towards whichever party opposes this.
So the question becomes if this fight is really worth it, since it will not actually allow for increased spending ... Much easier for any party to force interest rates to zero and spend infinite.
Well, actually the Fed is responsible for the money supply, and is pretty independent from the rest of the government (as much as it can be these days, anyway). So the claim that the government can just print money to pay for anything they want is technically true, but fails to understand the nuance of the system.
Further, there are consequences to injecting large amounts of money. Namely, inflation. The great "mystery" of the past decade is why inflation hasn't manifested alongside the various forms of stimulus from the Fed and Treasury. However, theoretically, and historically, printing money to pay down government debt will result in inflation which can be harmful if done carelessly or out of necessity (eg. being a forced seller).
To your last point about forcing rates to zero, the same principle applies. This would happen via market action undertaken by the Fed (who again, is not concerned with government spending, that's not their mandate). Even if the Fed did act in concert with congress in the manner you describe, they would do so by purchasing bonds in the open market. This would again require the injection of more currency into the economy and provide further upward pressure on inflation.
I should say that I definitely agree with your points regarding the politics.
The fact that an individual can accumulate that kind of wealth while another individual can work three jobs and barely live is an indication of some fundamental imbalance.
I'm glad you used Warren Buffet as an example. He has made a point to illustrate how he pays a significantly lower effective tax rate than his secretary. Oversimplifying, it is because his income isn't labeled "income" - it is gains from investments. His secretary, however, has "income". the two are taxed much differently. That example alone shows how the wealthiest are taxed at a lower rate than at least the middle class. And very much simplifying the equation, you can see how two people with different tax rates would see their wealth increased at different rates.
But the really fundamental problem is not taxation of individuals. It is:
- monetary policies which have allowed one group to create money and keep it amongst themselves
- loosening of rules regarding corporations and their employees which allow companies to pay less and provide less benefits now than they did when the Baby Boomers and their parents grew up
- globalization, which has allowed a small few to take labor and resources from distant lands and profit (at the expense of the people in those distant lands)
You've let a bit slip with the "alcoholic parents" phrase. Wouldn't it be convenient if we could explain why poor people who grow up in a slum have few opportunities just because their parents were alcoholics? It doesn't work like that. Without doing research, I would bet that alcoholism is as high or higher amongst the wealthier class than the poorest class.
How about higher education? How has that changed in the last few decades? Student debt? Have starting salaries increased in line with cost of education? No, absolutely not. The value proposition for higher education has diminished significantly, but the requirement of having a college degree has increased.
There's so much more going on than most people notice.
> However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now
How large is that group in absolute numbers and what demographics do they represent?
A high school student earning this amount because his parents want him to accrue some basic time management skills - no big deal.
A college or certificate program student working a minimum wage job as they are waiting to graduate and switch into professional career - slightly bad deal, but things will get better.
An income earner for a family of 6 where this individual is the only one working - very bad deal.
Would be interesting to see distribution of demographics before coming up with blanket solutions.
This is fantastically wrong. Just imagine to what you would have to raise the minimum wage to disqualify an individual from any government assistance. And then imagine what that would do to the prices of the services those people provide. WalMart makes about $6k profit per US employee and if they gave all of it to the employees, the employees would still qualify for welfare. So what you’re actually talking about is making Walmart customers (mostly low income people) pay more for groceries. Taxpayers aren’t subsidizing Walmart; they’re subsidizing Walmart customers. You really sound like youd prefer the poor be poorer so long as the rich are less rich.
One thing that’s not really appreciated is that the US has a very progressive income tax. In aggregate the top 10% account for 70% of federal income tax receipts at an average effective rate of 22%. The bottom 50% of households account for only 3% of federal income tax receipts, paying an effective rate of 4%.
European economies manage to collect a higher tax base as a percent of GDP. Some of this comes from higher taxes on the very wealthy. But the vast majority comes from much higher tax rates on the middle class, particularly the upper middle class- those around the 75th percentile. This is done three ways.
One middle class tax bracket rates are higher. In France, the 25k-35k bracket pays a 30% tax rate. The US equivalent is 12%. Two is having top rates start at much lower levels. In France, the top rate of 45% starts at 158k, versus the US top rate of 37% which starts at 518k. Finally a sizable percent of taxes are captured through regressive VAT taxes.
I'd be fairly sceptical of something like this, given the source. Here's a better start for looking at inequality: the World Inequality Database's World Inequality Report 2018. Authors include Piketty, Saez and Zucman, who are heavyweights in the field:
Um... I was hoping the report was for a layperson... maybe I need to recalibrate a bit...! The https://wid.world website is quite a good start. And there's Piketty's book, it's a slog but is aimed at the intelligent general reader. I haven't read his new one.
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[ 3.2 ms ] story [ 193 ms ] threadShould we also count caring for relatives as 'income' to the people being cared for? (We don't.)
Plans vary in coverage and out of pocket expenses significantly combined with the fact you don't know what you will need to use the insurance for, if anything at all.
When you're younger, it's less likely it's valuable, when you're older, it's more likely that it's valuable.
If you have a preexisting condition (say someone needs dialysis), it's a little bit more straightforward because you already know what sort of services you need. Ultimately you don't know what you service provider will end up charging the insurance to cover costs, how little your insurance will try and provide, and what you'll have left to pickup on the tab.
Furthermore, employers are known to shop the market for better deals, so the insurance you sign up for could shift in 6-12 months. I factor insurance into comp but I look at only the most general attributes and I don't weight these as directly as compensation because I (knock on wood) am fairly healthy and tend not to use my insurance.
The US pays almost double per capita for health care compared to its northern neighbour Canada.
Edit: maybe OP was referring to public healthcare? In that case it depends on the methodology. Seems like this methodology subtracts taxes then adds back in what you receive.
This doesn’t seem unreasonable as someone who isn’t making enough to pay taxes may get Medicaid coverage. That’s a direct transfer payment to that person.
Also, this may be state specific, but another benefit for the employee of doing it this way, is their portion is from pre-tax money.
This is the kind of weight that you don't have as an individual shopping for health insurance.
> the employer deals with a broker, the broker represents many employers
I need to look into this again, but it wasn't the case last I checked. Larger employers (those who can really move the negotiating needle) don't want to help smaller companies by being the anchor in a group situation because the larger employers see insurance as a competitive advantage. It's been a few years, but the last time I checked going through broker they were just negotiating for the individual company and not a group. I clearly need to revisit or maybe find a different/better broker.
For sure, very big employers will have a different setup, but SMB definitely use brokers to get better deals for themselves and their employees.
So, consider doing that. Taking the $4000 penalty from the $7800 you currently pay, that leaves $3800 that can be split between you and the worker. (split it as needed to attract and keep talent)
Depending on the state you are in, the workers needing insurance might do better having some portion of that $3800 than having the insurance you can get for them. You may even have workers who get insurance from elsewhere, such as a parent or spouse, and they'd much prefer a portion of the $3800 saved.
I checked some private healthcare insurance where I live, and the difference in cost between these plans was in fact only $800.
And it's not "my choice." That's mathematically how you evaluate different alternatives. All other things being equal, would you not value a house with a pool higher than one that doesn't?
I didn't do that calculation on a "for me" basis: I looked at the generally advertised cost. Paying in advance is cheaper for anyone taking out a policy.
Anecdotally, every time I run the numbers for my family the high deductible plan comes out ahead so I view an offer without one as less appealing. Though most employers offer both.
It is the best type of retirement account when used that way and I think it’s worth at least $1K/yr today assuming you’ll be able to drain it before it turns into an IRA.
(No connection other than as a client.)
Sure, the tax advantage is nice, but it doesn't make up for expecting to be paying $2000 in visits over the course of a year, then (for whatever unexpected reason) paying half that—the extra $1000 just goes away, and with it the tax savings you would have made over years of effective use.
HSA is basically a retirement account that lets you early withdraw for healthcare related expenses. There is no 'lose it'.
Side by side comparison here: https://www.investopedia.com/insurance/hsa-vs-fsa/
Edit: And to be clear, that's not "lose it if you leave the job"; it's "lose it at the end of the year."
Of course, leave it up to the IRS to take something that should be a good thing, and put rules around it that make it hard to use.
Ding ding ding. Look at the sea of “help wanted” signs. But why would you go do actual work when you can ride fat unemployment checks and other benefits for 15 months?
Seems reasonable? Compare what people end up with after al is said and done versus what their job pays them before taxes?
Competition is good isn’t it? All you have to do to hire people is offer a decent deal.
It’s not as if unemployment insurance is going to compete back.
When you’re competing against a government dropping taxpayer money out of metaphorical helicopters, it’s not exactly an even competition.
You have to pay a living wage. That's all you have to do. The other side won't bid higher.
And given a person has to work to live, whereas a business only has to hire if they see a profit, it fixes the imbalance in power between the two contracting parties. Each party can say 'no deal' and make it stick.
Currently there are 19 bones and 20 dogs. A guaranteed alternative income makes it 20 - 20 - and that's fair.
Wow gee I guess businesses just need to up their game.
And if you hire the people government spending will go down automatically, so the level of government spending is in your hands.
Where's the problem? It shouldn't be an issue if you're not trying to low ball wages and instead cheerfully pay enough for people to live on.
Of course. This is common sense if you understand the US welfare state has expanded radically since the late 1960s, and nearly all of that is a financial transfer from the top 1/3 to the bottom 1/3. The US has an exceptionally progressive taxation system that puts much of Europe to shame. Our single greatest governmental flaw is that we spend such a large amount of money on our welfare state and get such poor results because we don't administer it well; affluent European nations largely embarrass the US at that.
If you attempt to point any of this out using facts, you will be shouted down because it's against the popular narrative (which is to pretend that the US has no welfare state, no social safety net, the rich are evil and don't pay their "fair share" - whatever that means in a system where the top brackets pay nearly all the taxes).
Anybody can claim anything and it will turn into a shouting match unless reliable sources are cited (Breitbart, Alex Jones, Fox, etc. aren't reliable sources)
Welfare:
- what counts as welfare
- how much of it do people get (percentage of GDP and per capita)
- what percentage of coats does it cover
- which people get it
- how long do people get it
Then there are questions of what poverty is defined as, how many people live in it, and how many live below the poverty line.
The topic of healthcare is naturally important in all this.
Taxes:
- what is the rate (% paid by tax bracket)
- is it actually paid
- which percentage of the population is paying the highest rate
And of course, how does this compare to Europe (since you say "it puts Europe to shame")?
You can focus on one point, cite your source and contrast them.
That's $1347b a year. The US population is 330m, that's $4000 per person.
The NHS in England costs £147b, or $200b. England's population is 56m.
So the NHS in England, which costs the government 13% less than the cost of medicare/medicaid, manages to cover the entire population.
My understanding is that medicare at least has extra charges for those who are covered too?
The thing is – you are in some ways correct! The US has a large welfare and social security system. It's hard to compare directly, but it's probably reasonable to say that US social spending is in the same ballpark as many European countries.
The point about an "exceptionally progressive taxation system" is of course nonsense, and the idea that the "popular narrative" claims the US has "no welfare state, no social safety net" is misleading. In reality, the popular argument is that these services is the US are exceptionally broken. There is no effective "social safety net" if that system fails to capture people so often. It's like US healthcare expenditure – spending that's fare above that of many countries with efficient, effective, and universal systems, but with a huge chunk of the population unable to access it.
However, even an article like this—which tries to choose a comparison to make its ideological point as forcefully is possible—only manages to claim that income inequality has shrunk to a relatively limited extent, if you count all forms of government spending as income! Not a ringing endorsement.
The US is so weird with this stuff. Massive government spending programs with a culture that wants to deny it, resulting in this messed-up system with massive spending and rubbish outcomes.
As to the details, yes, it would be interesting to dig into.
https://en.wikipedia.org/wiki/Phil_Gramm#Career_with_UBS
Favorable tax treatment of capital gains is already the primary vehicle by which the wealthy pay a lower tax rate than the middle class. I bet it would do a fine job of rigging the outcome in TFA as well!
„ As government transfer payments to low-income households exploded, their labor-force participation collapsed and the percentage of income in the bottom quintile coming from government payments rose above 90%.“
„We are debating the alleged injustice of a supposedly growing social problem when—for all the reasons outlined above—that problem isn’t growing, it’s shrinking. Those who want to transform the greatest economic system in the history of the world ought to get their facts straight first.“
https://www.wsj.com/articles/the-truth-about-income-inequali...
(2019, same opinion piece authors)
But this can't be a healthy way for a society to operate: to have the rich get richer and transfer their money to the poor so they don't get poorer.
A primary cause of this change to our society's structure is our monetary policy which ensures we will have massive trade deficits that ship our manufacturing jobs overseas [1].
[1] https://www.lynalden.com/fraying-petrodollar-system/
http://www.upjohn.org/MEG/papers/Measuring%20Mfg_Houseman_Ba...
First, it is generally unknown that the robust growth in real GDP in the manufacturing sector is largely driven by one industry: computers and electronic products. For most of manufacturing, real output growth has been relatively weak or negative.5 When the computer and electronic products industry is excluded, real GDP growth in manufacturing falls by two- thirds between 1997 and 2007, the decade leading up to the Great Recession. In 2011, without computer-related industries, real GDP in the manufacturing sector was actually lower than in 2000. The computer and electronic products industry similarly drives real manufacturing output growth in most U.S. states. Real manufacturing GDP growth between 1997 and 2007 falls by more than half in a majority of states and by at least 25 percent in all but 10 states. Furthermore, the extraordinary growth in real value added and accompanying productivity growth in the computer and electronic products industry results largely from prices for two sets of products: computers and semiconductors that, when adjusted for quality improvements, are falling rapidly. These quality improvements, in turn, largely reflect better design and increases in the density of electronic circuitry. While changes in manufacturing processes are necessary to produce these improved designs, the production processes in computer and semiconductors have been automated for many decades. Thus, the high growth in real value added and productivity in the computer and semiconductor product segments, and by extension the manufacturing sector, reflects, to a large degree, product improvements from research and development rather than automation of the production process. Unlike productivity resulting from automation, which involves the substitution of capital for labor, productivity arising from improvements to product design and production processes does not, in and of itself, cause job losses.
Ironically, the extraordinary growth in real value added and productivity in the computer and semiconductor industries does not signal the competitiveness of the United States as a manufacturing location for these products. Drawing on new market research data, we provide evidence of the shift in the location of computer and semiconductor manufacturing to Asia. Few personal computers and servers are assembled in the United States today, and consequently the United States runs a large trade deficit for these products. The United States retains a significant presence in semiconductor wafer fabrication, but over the last decade manufacturing capacity has expanded much more rapidly in Asia, and, as a result, U.S. market share has declined rapidly. Although many of the computers and semiconductors produced overseas are still designed in the United States, the shift in the location of production has important implications for the number and types of U.S. jobs.
I mean, it's literally the point of a welfare state to do this, because it's a whole lot more unhealthy to just let the poor get poorer or try to fix incomes
Manufacturing jobs shifting overseas has virtually nothing to do with monetary policy and everything to do with the fact that Asia has got much better at manufacturing and has relatively cheap labour. Similar manufacturing shifts happened in other Western nations whose currencies are not reserve currencies (Sure, in theory the US could have countered trade imbalances by aggressively devaluing their currency to make buying things from overseas expensive, but less drastic approaches to promoting manufacturing exist...)
http://metrocosm.com/wealth-vs-income-inequality/
https://www.theweek.com/articles/717294/wealth-inequality-ev...
https://journals.plos.org/plosone/article?id=10.1371/journal...
I am more interested in why they publish these articles? Who are they trying to sell these ideas to, exactly? Certainly not the poor.
"Poor people are poor because they are lazy or stupid."
"Rich people are rich because they worked very hard and built great things."
"Taxing the rich to pay the poor will destroy our economy."
etc. etc.
It is an important component of disinformation campaigns to reinforce the primary ideas periodically, because the audience is regularly encountering situations which disprove these lies. If the message isn't reinforced, the people will begin to question and doubt.
Which I would think is an even bigger indictment of what we've got now, since we already have a moderate amount of government redistribution, but still have people starving in the streets and others making more money than God.
Not true. Life for the poor in the west has been getting worse.
Finally, the word "poor" needs to be retired. I've met lots of people with no money, and very few of them were poor people.
What fancy measures you have. How about "cost of owning a house", "cost of getting an education", "cost of getting health care" instead of those banal measures you got there?
Nobody cares that life is comparatively better than during Roman times. Our fathers and our grandfathers lived a better easier life. In particular they had much better economic opportunities. People are upset about those opportunities evaporating.
So I don't think it's fair to say that life is necessarily getting better in the US for low income people.
On quite a few of these, I think you might be shocked to discover how much of the apparent gain is definitional rather than material.
People can tell when they have things worse off than their parents. The social contract will erode in ways that people don't expect. In particular, the tidy arrangement where your retirement is in investments, so if you hurt the capital gains of the wealthy you hurt yourself, falls apart if most people are too poor for retirement savings. Suddenly, in a democracy, our retirement accounts (and the poorly hidden accounts of the actual wealthy) become up for grabs. That situation is developing quickly enough that we may well see the breaking point in our lifetime.
My country has salary record from 16th century. It is in gold, so can be translated to buying parity. Shoe maker today and in 16th century had roughly the same salary and expenses for living, heating, food etc.
>Life expectancy
has improved mainly by reducing child deaths. For adults it has not improved significantly, for some groups life expectancy is declining.
> abolishment of oppression (slavery, debtor's prisons, serfdom, involuntary servitude, military conscription in many countries)
Slavery and serfdom is still a reality in many countries. Even western countries have debtors prison and involuntary servitude (child support).
>educational attainment
It just caused education inflation. Person has to now study longer to do the same job. For simple child minding you may need college degree in some countries...
> standard of living have all improved.
Standard of living in most western countries is declining.
> I've met lots of people with no money, and very few of them were poor people
Maybe change social group.
Yes, we have high average wealth. Yes, even people in poverty have access to technology that was unavailable to the richest people on the planet a century ago. But none of that really matters when you don’t have enough money to feed your kids and you can’t afford to see a doctor about that nagging pain that’s threatening your ability to string together multiple <$10/hr jobs.
So yeah, it doesn't matter that Bezos has more material wealth than any of his workers, but what matters is that healthcare will not bankrupt him and he can easily send his kids to school.
Indeed there are always different numerical outcomes when you change your methods and definitions, so it is possible that by their definition things aren't as bad as the "other numbers" show.
However if you look at the national minimum wage of $7.25/hr, compare that to inflation or productivity, you'll see that the lowest earners are worse now than they have been for decades.
Ironically, they want to focus on "Medicare, Medicaid, food stamps and some 100 other government transfer payments". Those services aren't needed by people who earn enough to actually live on. The reason those services have increased is because the people who need them are not being paid reasonably. This is also why the top earners (particularly the top class who "earn" via capital gains instead of "income") have seen their wealth balloon over the same period that is being debated about.
The authors can choose any definition they wish, but at the end of the day, there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10%.
When we reach a point where one individual theoretically has $200 billion (not liquid of course, but plenty of that is), and there are still children without food, there is something wrong. What is considered fair will vary from person to person, but there are limits.
Eg., consider the claim that "college graduate salaries have stagnated" -- this is true, but in 1990 c., 10% were graduates; today that's c. 55%.
So what's happening is this artificial grouping "college graduate" has massively expanded, whilst maintaining its average. That's a remarkable increase in wealth for the 40% "left out" three decades ago.
Consider the claim about "productivity". The reason production has increases at a greater pace than wages is automation. No one is "missing out" on the benefits from automation; they correspond to massive increases in disposable income and time, as we benefit from those tools/products.
> there absolutely is a vast and growing disparity between the lifestyles of the <50% and those of the >10%
This is true only due to the extraordinary efficacy of capitalism. As in all of these cases it's the exceptional increases in abundance which have lead to this apparent "disparity in lifestyle". And if you chose different percentiles it would be false.
The bottom 10% have seen their disposable income double in a time when the top 50% have seen it treble. Thus an apparent "gap".
This is the duplicitous information missing from all these atemporal comparisons.
Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on.
Much of the apparent difference is created from two effects, (1) the media and social media show the lifestyles of the very rich as if they were very common; and (2) people feel "the local rate of change of growth".
The vast majority of this alleged "problem with inequality" is just that local rates of change of growth have been unstable since the financial crisis in 2008. Despite gains for everyone since then, people do not "remember the macroeconomy of 2008" and compare it today.
Rather, all they see is the day-to-day negative news created by accelerating and decelerating growth. Even when growth is positive, if it is decelerating, people think the sky is falling.
Nothing about the contemporary economy is much different, in distributional terms, than it was in 2006. Where then was this hysteria?
You are leaving the cost of education out of the equation, which has increased massively over the past 30 years. Most Americans graduate under a mountain of debt. If salaries have remained stagnant, for the 10% who would have been that amounts to a net lower salary, at least for the first X years of employment until the debt is paid off. For the other 40%, they might have had the option to go work in a steel mill or an auto plant with a high-school degree, and now they have to go to university, and acquire a massive debt to have a hope of competing for a job outside the service industry.
I'm not so convinced this is a net win for anyone involved.
> Let's be clear. The top 1% in 1950 lived more differently than the rest of society in 1950; more so than the top 1% do of society today. Today the top 1% live much more like the top 10% who live much more like the top 50%, and so on.
I'm also not so convinced this is the case. If you want to make the argument that I am living like Jeff Bezos because we can both have an LCD TV and and iPad, I think this is a very shallow argument.
While the cost of consumer goods has not risen significantly in the past few decades, the cost of the markers of a middle-class existence absolutely have. For instance, due to the increased cost of housing, the rate of home ownership among millennials is much lower than that of previous generations. Due to student loan debt and the high cost of healthcare, many young people who might have risked leaving a 9-to-5 job to start a business don't feel safe to do so.
Low cost consumer goods are nice, but the "American Dream" has always been about owning your own future, and being able climb into the next social class above your origins with hard work and ingenuity. Due to income inequality, the price of getting a seat at the table is what has increased out of the reach of almost everyone.
Not entirely related, but also worth pondering is the brain drain of diverse intellectual talent into the world of finance, particularly private investment. What would the overall benefit been if the dozens of MIT physics and chemistry grads used their education to make things, make discoveries, etc. instead of making money for a limited group of beneficiaries in finance?
I am glad to know many things that will (most likely) never help me earn more money. The value of an education cannot be measured entirely in economic terms.
Two aspects of this that are very important, and have been sadly neglected and devalued in recent decades, are civics and critical thinking.
> also worth pondering is the brain drain of diverse intellectual talent into the world of finance
Yeah, that depresses me every time I think about it.
Unless that person is able to get a _really_ good job, this debt will sap any momentum they might have otherwise developed by living wisely and saving/investing.
Now since for better or worse, people are driven to form partnerships and create offspring, and this will likely occur before that student debt is paid off, what kind of start will the children have? Will the parents be saving for their children's college funds?
The value of critical thinking and ability to learn is great, but for most people in the above situation it will not compensate for the financial situation they will find themselves in for many years after they've forgotten much of what they learned. Also, the stress of their financial situation will actually have a greater influence on how they think than what they learned in school.
There are things in this world that are worthwhile, that do not have a monetary value; that may, if considered in economic terms, be a net negative, and yet still be something the person who has them values highly.
The value of civics and critical thinking, for example, are not just to the person who has them, but to society as a whole: the more members of our society who are educated in these things, the more likely we are to have good governance, as more people are able to properly evaluate the available candidates and willing to go out and vote.
Whether eductional policy here makes any sense is a seperate issue. It clearly doesn't. This is a side effect of how extraordinarily effective capitalism is also.
People looked at the top 10% in the 70/80s and saw "they had degrees" and imagined that they could be in the top 10% if they got them too.
This turned out to be "true" only if you mean the actual wealth of a 10%-er in the 70s/80s. Today, the top 10% have much different characteristics.
My point here is that there is also another force at work creating this apparent "inequality panic" which is status envy.
People thought that by imitating a 1%-er of 1970s they'd be a 1%-er today. Alas, no.
You were going to be a bottom 40%-er, now you're a top 20%-er, well done. But you ain't getting that 1% you think you're owed.
All this agit-prop is intra-elite warfare. People who've risen to the top 20% with their BScs, wondering where their mansions are.
At transferring wealth from hard working well-intentioned individuals (and those who must compete with them) to hustlers, yes.
You repeated your narrow point about the group of college educated individuals growing, but as far as I can tell that doesn't actually address skohan's much broader claims about healthcare, housing, and education. Can you address those as well? "Look over there!" isn't an argument.
Wealth is just a measure of "popularity * productivity". Besos is more wealthy than a nurse because amazon engages in billions of transactions which are each productive. A nurse engages in one.
Your wealth, at a first approximation, is the rate at which you are productively transacting.
Bezos is wealthy because he is a parasitic rentier capitalist. He's one of the major beneficiaries of the imperialist American intellectual property regime. That's it. That's the special sauce.
"Place Silicon Valley in its proper historical context and you see that, despite its mythology, it’s far from unique. Rather, it fits into a pattern of rapid technological change which has shaped recent centuries. In this case, advances in information technology have unleashed a wave of new capabilities. Just as the internal combustion engine and the growth of the railroads created Rockefeller, and the telecommunications boom created AT&T, this breakthrough enabled a few well-placed corporations to reap the rewards. By capitalising on network effects, early mover advantage, and near-zero marginal costs of production, they have positioned themselves as gateways to information, giving them the power to extract rent from every transaction.
Undergirding this state of affairs is a set of intellectual property rights explicitly designed to favour corporations. This system — the flip side of globalisation — is propagated by various trade agreements and global institutions at the behest of the nation states who benefit from it the most. It’s no accident that Silicon Valley is a uniquely American phenomenon; not only does it owe its success to the United States’ exceptionally high defence spending — the source of its research funding and foundational technological breakthroughs — that very military might is itself what implicitly secures the intellectual property regime."
Source: https://tribunemag.co.uk/2019/01/abolish-silicon-valley
You can make the argument that bezos and other "self made" entrepreneurs deserve their astronomical wealth, but many people in the top wealth tiers just had the privilege of being born wealthy, and of living in a system their class has the power to bias in their favour.
Regardless, taxing the weathy can feed poor children by literally funding programs like food stamps.
The covid payments are effectively unfunded, and taxes are the primary source of revenue for the government
We're going to need to pay for these programs somehow. I'd personally be pretty happy with a lot of inflation, give how much my house cost, but I dont think that that would be the best solution for the country as a whole.
Therefore incoming dollars do not matter, taxes do not really matter. Which I think is the point that we were trying to make.
So there is no justification in taxing "the rich" in any need for increased spending.
This is further complicated that "the 1%" is an annual income of 500k, or an individual income of 250k. A lot of people on this site who don't see themselves as rich (but are) will be included, and will point out that this does not give a "rich" lifestyle in San Francisco. Taxing them so their income drops to, say 160k (down 30% or so) will cost them very directly in comforts, apartments, ... they will fight this tooth and nail.
If you then look at the income that can be generated for the government you quickly realize that you need to tax at least the top 30%. You'll see that this will mean increased taxes (and think 70-80%) for any income over, say 90k per person, if you indeed want to increase taxes. I don't think many people will find this acceptable, because they cannot possibly maintain their lifestyles with such taxes. This will effectively mean anyone not in the 1% is limited to ~120k per year, down 30-40% from what they have now, 100 million voters. More than enough to massively swing towards whichever party opposes this.
So the question becomes if this fight is really worth it, since it will not actually allow for increased spending ... Much easier for any party to force interest rates to zero and spend infinite.
Further, there are consequences to injecting large amounts of money. Namely, inflation. The great "mystery" of the past decade is why inflation hasn't manifested alongside the various forms of stimulus from the Fed and Treasury. However, theoretically, and historically, printing money to pay down government debt will result in inflation which can be harmful if done carelessly or out of necessity (eg. being a forced seller).
To your last point about forcing rates to zero, the same principle applies. This would happen via market action undertaken by the Fed (who again, is not concerned with government spending, that's not their mandate). Even if the Fed did act in concert with congress in the manner you describe, they would do so by purchasing bonds in the open market. This would again require the injection of more currency into the economy and provide further upward pressure on inflation.
I should say that I definitely agree with your points regarding the politics.
I'm glad you used Warren Buffet as an example. He has made a point to illustrate how he pays a significantly lower effective tax rate than his secretary. Oversimplifying, it is because his income isn't labeled "income" - it is gains from investments. His secretary, however, has "income". the two are taxed much differently. That example alone shows how the wealthiest are taxed at a lower rate than at least the middle class. And very much simplifying the equation, you can see how two people with different tax rates would see their wealth increased at different rates.
But the really fundamental problem is not taxation of individuals. It is:
- monetary policies which have allowed one group to create money and keep it amongst themselves
- loosening of rules regarding corporations and their employees which allow companies to pay less and provide less benefits now than they did when the Baby Boomers and their parents grew up
- globalization, which has allowed a small few to take labor and resources from distant lands and profit (at the expense of the people in those distant lands)
You've let a bit slip with the "alcoholic parents" phrase. Wouldn't it be convenient if we could explain why poor people who grow up in a slum have few opportunities just because their parents were alcoholics? It doesn't work like that. Without doing research, I would bet that alcoholism is as high or higher amongst the wealthier class than the poorest class.
How about higher education? How has that changed in the last few decades? Student debt? Have starting salaries increased in line with cost of education? No, absolutely not. The value proposition for higher education has diminished significantly, but the requirement of having a college degree has increased.
There's so much more going on than most people notice.
How large is that group in absolute numbers and what demographics do they represent?
A high school student earning this amount because his parents want him to accrue some basic time management skills - no big deal.
A college or certificate program student working a minimum wage job as they are waiting to graduate and switch into professional career - slightly bad deal, but things will get better.
An income earner for a family of 6 where this individual is the only one working - very bad deal.
Would be interesting to see distribution of demographics before coming up with blanket solutions.
European economies manage to collect a higher tax base as a percent of GDP. Some of this comes from higher taxes on the very wealthy. But the vast majority comes from much higher tax rates on the middle class, particularly the upper middle class- those around the 75th percentile. This is done three ways.
One middle class tax bracket rates are higher. In France, the 25k-35k bracket pays a 30% tax rate. The US equivalent is 12%. Two is having top rates start at much lower levels. In France, the top rate of 45% starts at 158k, versus the US top rate of 37% which starts at 518k. Finally a sizable percent of taxes are captured through regressive VAT taxes.
https://wid.world/document/world-inequality-report-2018-engl...
If anyone wants the full nerd treatment, I teach a class on this topic and can list a bunch of academic papers.