We know from Larry Bartels that inequality tends to go up under Republican presidents, and down during Democratic presidents. If Obama is elected, when can certainly expect some increase in inequality. He'll raise taxes on the wealthy, and if the Employee Free Choice Act is passed, wages in the middle should go up some. Tack on the traditional Democratic focus on unemployment as opposed to inflation, along with the possibility of minimum wage increases, and some decrease in inequality is certain.
But it will be a modest decrease, and it won't satisfy those who's major objection to inequality is that the tippity-top of the income distribution having vastly more money than everyone else is necessarily bad. That's because there are two different types of income inequality, and your standard Democratic policy solutions, or an increased investment in human capital as suggested by Ed Glaeser, only affects one. Robert Gordon and Ian Dew-Becker wrote a paper explaining these two types of inequality. One type of inequality is "90-10″ inequality. This is the standard, skills based technological change explanation of inequality. Basically, managers got more money and benefited the most from productivity gains, which were unchained from median wages in the late 1970s. There's also the unbounded increase in the college wage premium, which is no longer cyclical. This is the 90th percentile, and above, running away from everyone else - or, everyone else staying behind, while the 90th percentile's income inequality shoots up.
But that's not the entire inequality story, the other is inequality within the top decile. This is the inequality that liberals and progressives find so objectionable. This inequality that isn't driven so much by technological change, lagging minimum wage, or decreased unionization, but instead by the "superstar effect" (JK Rowling can sell more books than any other author in history) or the institutional failures behind skyrocketing CEO pay. And the only way to address that inequality is massively increasing marginal income rates.
Take a simple thought experiment. Family A makes 50,000 a year. Family B makes 100,000 a year. Family C makes 500,000 a year. Further imagine that they are taxed as follows: Family A at 10%, Family B at 20%, and Family C at 30%.
That means that Family A takes home 40,000, Family B takes home 80,000, and family C takes home 350,000. You've got a roughly 9X difference between Family A and Family C after tax, and a roughly 10X difference pre-tax.
Now say that Family A's income goes up by 20%, Family B's income goes up by 100%, and Family C's goes up by 1000%.
Now family A has 55,000 pretax, and 49,500 post-tax. Family B has 120,000 pretax, and 96,000 after tax. And Family C has 5,000,000 pre-tax, and 3,500,000 after tax. So now Family C makes roughly 100 times as much as Family A pretax, and about 70 times as much as them post tax.
To get back to the original ratio, you'd have to raise Family C's tax rate to roughly 90%. If you merely wanted to let inequality double, we'd still have to take away $4 million worth of income, an effective tax rate of 80%--which implies a marginal rate even higher than 80%.
We can't do that, either politically or economically. For all that I despise the way that supply-siders have abuse the Laffer Curve, at those kinds of rates, the deadweight loss is enormous. We'd be costing everyone else economic growth just to punish the rich. I know, I know--some bright young thing is going to claim that since the rich get all the growth anyway, this doesn't matter. That is, not to put too fine a point on it, USDA Prime hogwash. Compare the consumption basket of any demographic group you'd care to between 1970 or now. There's no question that even poor families are better off materially (the War on Drugs is a different matter). And I'm not talking about iPods; I'm talking about housing, health care, automobiles, telephones, and other things that we think of as basic accoutrements for a decent life.
That is not to argue that the poor are really rich and therefore don't need any help; that's an argument for a different day. I merely point out that the poor would indisputibly be worse off if the economy hadn't grown any since 1970.
Great post, thanks
Economics made easy, that is why I am here.
This is why helping family A to become rich is the best bet. Then they pay more taxes even while doing better. They can also aspire to be family C, giving them an incentive to do better.
Pulling family C down to least common denominator level does only one thing. It makes everyone interested in being the same. Taxes increase because there isn't as much in the pot, if family C comes down. Why should they try to get ahead?
Family C is the group that pays 65% of all taxes in the US. What exactly are we punishing them for again? The Audacity of Hope or something?
In the real world no family with an income of $5 million per year would pay the 30% tax rate. It simply doesn't happen, since there are so many ways to avoid the full tax burden. Just look at Dick Cheney's tax figures. (And remember that he also gets bags of undeclared cash and snuff films from various defense contractors, too.)
Discussions based on "simple thought experiments" never amount to much.
D:
Because they can afford it, that's why. Look at the money Stephen Schwartzman makes. Is he really going to be missing a couple million dollars? What seems to be forgotten here is what tax rates used to be(Meaning from FDR through to Ray-gun). Top end rates aren't going back to FDR levels, but they could go back to Ray-gun levels.
A big factor in liberal talk on income inequality, though, isn't just an objection to inequality per se.
I mean, as a lower middle-class liberal, do I think it kinda sucks that a tiny fraction of Americans make truck loads of money, while my parents pull in just enough to cover everything? Of course, but that's probably always going to be the case. That's the kind of frustration we can deal with.
It's when we look around and see that the people being shafted by all the inequality are struggling just to make ends meet that we get upset. It's when we see ourselves squeezed at the gas pump, the grocery store, the doctor's office, and everywhere else and then watch the right talk about how we need to keep favoring that upper economic eschelon to save the economy that we get angry and resentful.
At least among the bulk of your everyday liberals, I'd wager that complaints about inequality would decrease significantly if you also decreased the economic distress that the middle class is feeling. It's not that we hate rich people being rich. It's that we see them being rich, watch the government pamper tham, and then realize the floor beneath our feet, down here in the realm of the working class, is threatening to shatter.
Basically, inequality isn't, essentially, the problem. It's the backdrop that makes economic hardship so infuriating.
Joe Klein's Conscience wrote:
What seems to be forgotten here is what tax rates used to be(Meaning from FDR through to Ray-gun). Top end rates aren't going back to FDR levels, but they could go back to Ray-gun levels.
Yes, but you didn't have companies like Microsoft, Google, and even Blackstone Group sprout up all over the place and excel during this period. If you have high marginal rates, high achievers will become doctors, lawyers, and management and not entrepreneurs. The reduction in marginal rates has played a large part in the transformation from a management based economy to an entrepreneurial economy.
Until progressives realize that inequality-as-numbers has no moral content, and is therefore not a legitimate target for attack by policy, we're just going to keep sabotaging ourselves.
Assuming Family C earned that money, i.e. they are neither politicians nor mob bosses, they are entitled to it. We have no legitimate moral claim to STEAL WHAT THEY HAVE PRODUCED in order to satisfy some meaningless, arbitrary ratio. That is the end of the story.
JKC wrote: Look at the money Stephen Schwartzman makes. Is he really going to be missing a couple million dollars?
Very probably, yes. Barrying a few winner-take-all sports stars and the like, persons in his possession rarely get there unless they become extremely good at noticing where "$2 million here, $2 million there" is actually going.
Now, would he work any less hard if we could find a way to take another $2 million from him by force? Possibly not, but I'm not Stephen Schwartzman, so it's hard to say. At some point the confiscation rate WILL cross the line of the marginal $2 million, and then persons like Stephen Schwartzman decide that retirement in Tuscany looks nice, and cease creating miles upon miles of economic activity that pay far more into the economy -- both in GDP, and in distributed corporate and personal income taxes -- that Stephen Schwartzman could possibly pay alone.
If you perhaps have some insight on where Stephen Schwartzman's marginal $2 million actually lies on the scale, and the best way to get everything below it, we can talk tax policy. If you don't, we can talk envy.
What the simple thought experiment does demonstrate is that more inequality is not always an evil. Therefore it is incumbent on anyone who complains about rising inequality to show not just that inequality is rising, but that it is rising in a way that is objectionable. Not that I expect this any time soon.
"Very smart" except for the second quoted sentence, which is grammatically incoherent. Sounds like there must be a typo in there, but I can't tell what it is. "WE can expect ... DEcrease" maybe?
This is about class envy. Let's not pretend otherwise. This has nothing to do with practical economics.
What the simple thought experiment does demonstrate is that more inequality is not always an evil. Therefore it is incumbent on anyone who complains about rising inequality to show not just that inequality is rising, but that it is rising in a way that is objectionable. Not that I expect this any time soon.
Posted by Aaron Haspel | September 10, 2008 5:55 PM
Well liberals point to average CEO pay being 100x the average worker. This is objectionable in itself to liberals. It breeds envy and hate from the workers, thus increasing the chance of a socialist revolution. The better option is to bring back FDR tax rates and avoid a revolution.
Until progressives realize that inequality-as-numbers has no moral content, and is therefore not a legitimate target for attack by policy, we're just going to keep sabotaging ourselves.
What we have are a few competing ethos (ethoses? ethii?), all of which do contain some moral component.
So, the first is the one that is expressed above, that taxation is theft. This probably means something like "taxation above what is necessary to make a functioning government." In theory, in this construct, it might be ok to take different amounts from different folks, assuming that the money went somewhere for the good of all.
The second is that any successful society should care for its poor and helpless. This is certainly a moral claim (one I believe), and it is redistributive in nature. If you accept this requirement, then you must open Pandora's box and make some hard decisions about who is poor, how they are helped, etc. There is a lot of room for disagreement over the details even among those that agree with the principle.
The third is one notion of "the American Dream," where the claim is made that through "honest work," one should be able to make it into the middle class. That is, through effort alone (and not necessarily brilliance), one should reasonably expect to be able to afford whatever we happen to think the middle class is these days. Getting the "working poor" from one group to another is also redistributive -- it isn't necessarily the natural case.
Fourth, there is the notion of equality of opportunity. This, too, is essentially redistributive -- in most things, the wealthy will be able to buy advantages (the obvious case is schooling). If opportunity is to be equal (or if inequalities are even to be mitigated), money must be spent.
So, absolutely, the experience of inequality has a moral component. (I'm not sure what "as numbers" means -- that it shouldn't be measured?). But I think for the most part, liberals are concerned about the floor, not the ceiling (as NS Allen suggests upthread), because that is where our moral failings show most clearly.
I don't think too many people actually begrudge JK Rowling, David Beckham, or Bill Gates their fortunes. Even liberals (or else why would Steve Jobs be so popular? Not exactly a pauper, he). It is wrongheaded to think that taxing the rich really is meant to be "punitive," as the post suggests.
So what is happening? Of course, as is human nature, when people want to start redistributing, the easiest target is "anybody with more than me," but this is a different sort of failing; and one that has at least some grounding in reality. After all, Family A really is going to feel the hit more than Family C, and there are lots more of them to feel the pain. But rarely do you hear an argument about calibrating the burden in that sense -- it's more often you hear food fights about taxes being bad/theft/socialism, etc.
But when you forget that there is a moral component here, you lose sight of what progressives actually think about the matter.
I think for the most part, liberals are concerned about the floor, not the ceiling
If that were the case, why would anyone, anywhere, every have cause to bring up "inequality," as such? If the problem is merely on of assuring a decent floor, then inequality is meaningless, only the floor matters. And thus even if inequality was increasing, as long as the floor held, there would be no cause for complaint.
If that were the case, why would anyone, anywhere, every have cause to bring up "inequality," as such?
Rob-
There are two reasons: the first is that if you think you are failing at the floor, then it is appropriate to notice whether the circumstances are similar for groups across the board.
That is, failing the poor while the wealthiest are experiencing unusual growth is a particularly loathsome case. The injury is at the floor, the insult is added at the ceiling.
The other reason is a matter of genuine curiousity combined with a sense of fairness that isn't particularly well-formed. It's not just liberals that have wondered about why CEO pay is (or should be) so far higher than the pay of the workers . We have an innate sense of fairness -- we think that someone being paid 100 times more should be 100 times more valuable in some way. Normally, we think of this as skill, but really it could be anything. So, when Bill Gates founds a company and makes a product that changes the world, the value is pretty obvious. And when companies experience sharp downturns, but pay their caretaker CEOs massive bonuses, it's a little jarring -- it doesn't fit our inner-grade-schooler's sense of how the world is supposed to work.
But honestly, this latter part I think is the least of the complaints (both in terms of volume and validity). I'll admit this as an article of faith, but I believe if the poor and lower-middle are taken care of, arguments about inequality would be far, far reduced.
'll admit this as an article of faith, but I believe if the poor and lower-middle are taken care of, arguments about inequality would be far, far reduced.
Perhaps, but my corresponding article of faith is that it is impossible to to "take care of" the poor and lower-middle to the satisfaction of the left.
"If you have high marginal rates, high achievers will become doctors, lawyers, and management and not entrepreneurs." -- Robert
Well, clearly none of us wants to live in a world where high achievers would become -- God forbid - doctors!
I know I want low achievers in charge when I or a loved one is seriously ill.
Ahhhhhh. The right never ceases to amuse!
The touching naivety where its thought that under Republican economics the vast majority of young punks on the make will start amazing computer companies in their garages rather than, oh, say go into finance is worth noting too. This week especially.
On the other hand, the ludicrous belief/talking-point that no one will ever aspire to great wealth if tax rates are somewhat higher probably isn't worthy of even that.
paging joe klein's conscience... 2 things, although one has been mentioned...
A] the because they can afford it argument doesn't hold MORE water. The Tax code is already progressive, therefore we are already taxing them more because they can afford it. Taxing them something reasonable is what keeps a top earner in country, and what keeps them thinkin' new stuff up. If you penalize them for creating wealth, then why should they. What if they can create more wealth somewhere else? Think about it... right now you get a large amount of taxes from a high bracket person, more than all the taxes combined from the low ones. Don't you want to tap into that money? Or do you want them to never make it, and sell hot dogs on the Plaza in Taos? [his name was Lomax, funny guy, former investment banker turned hot dog vendor...]
Importantly while you talk about the top figures you are ignoring the bottom. While FDR was charging 94% in 44-45 for the top bracket they were ALSO charging 23%!!!! at the bottom. As far as I can tell, there was no roll off either. If you made $1, you owed the govt. .23... During Ike's administration it was 91% at the top and 20% at the bottom. LBJ started pulling it down 77%-16%... Reagan went 50%-12% and then 38%-11%
Can it be that it was our friend Bill Clinton that raised the bottom bracket to 15% while keeping the top at 39.6%? That's funny, I thought he was a Dem.
The current Prez... put the bottom end down to 10% while bringing the top down to 35% You might also note that at the bottom end, there are enough kickbacks now that the bottom 50% of wage earners only pay 3.6% of taxes, while the top 50% pay 96.4%
It's a complicated question, no doubt, but taxation just because they can afford it give you the incentive to never do too wll, it they are just going to tax you for it anyway.
That is what I mean when I say it is better to make everyone richer... 'merican dream and all that...
Rob Lyman writes: "Perhaps, but my corresponding article of faith is that it is impossible to to "take care of" the poor and lower-middle to the satisfaction of the left."
And it's impossible to fuck them over enough to satisfy the right. Newt Gingrich called for a vast network of orphanages and workhouses and most of the right barked like happy, stupid seals.
If we returned to the days of company towns and scrip pay the wingnuts would be delirious with joy.
And meanwhile John McCain doesn't think Americans would pick crops for 50 bucks an hour.
meanwhile John McCain doesn't think Americans would pick crops for 50 bucks an hour
In that belief, he shares more in common with the left that the right (excepting Reason and the WSJ editors). It's one of the reasons I find him too distastefully liberal.
Warren Buffet, linked in Instapundit today, said that we are spending, as a government $ 3.1 trillion and taking in $2.6 trilion, so taxes are going to have to go up (absent at least every nowhere getting no bridge). The 'income' inequality is not primarliy based on what Madonna makes selling music but based on capital gains. If Buffet sells a little $135,000 share or more of Berkshire Hatheway, he doen't have income, he has a capital gain, max rate 25%? I see nothing wrong with Megan selling her Treck stock and getting a little tax break but, heh, how about if she sold 1000 shares of Berkshire Hathaway that she had a cost basis of $1 in. Seems like you could make the capital gains tax progressive with the amount of gain.
The Salk of today is going to have to be a biotech entrepreneur. Sorry to disappoint anyone viscerally opposed to the profit motive.
This is obviously beside the point you're making, but your arithmetic for family A is completely wrong. Last I looked, 10% of 50,000 is 5,000; a 20% increase goes to 60,000; etc.
Rob is correct. The floor in this country is higher pretty much year after year. Only in recessions does the floor actually fall, and it usually never falls far. Of course, many on the left completely deny this and foolishly complain that things were better for the poor in 1980, 1970, 1960, or 1950 than they are today. Most of the professed anguish over inequality is really about envy, nothing more, nothing less.
Isnt income inequality a byproduct of equal opportunity?
If opportunity exists, and person X takes it, while person Y does not, and person X makes a greater income because of taking the risk, didn't inequality just arise? Should person X be made to pay person Y for not taking a risk?
As a self-described progressive, I think the premise of Zeitlin's last argument is over-generalized. He assumes that progressives have the biggest problems with the ultra-rich. Personally, I don't have any issue with the rich, whether ultra or not; my concern is for increasing the standard of living for the poor and protecting those that are living in the school of hard knocks (I assume you know what I mean if you've heard those anecdotes from the Democrats) - that lower 10%. And so, as I see it, the issue actually is about increasing efficiency and technology to improve the standard of living for all - and not massively about increasing marginal tax rates for the ultra-rich.
I know this is controversial and a slightly complicated issue, but I have a feeling that lives have improved for the poor mostly because of gains in technology and efficiency; this has been the main driver in growing the economy and hence improving the standard of living across the board.
D,
Those tax rates for FDR/Ike/Clinton are fascinating and not something I've come across before. Do you have a link with that information?
Thanks,
All you have said is so, yet I believe that when the highest marginal income tax rate actually was 90% the wealthiest Americans could choose to not pay the tax by using the option of giving the money to charity or philanthropic enterprises. If it will only cost you ten cents to give a dollar in support of, say, a new college library, then you still do have an incentive to earn that extra dollar. The interesting question which follows is whether or not money thus donated to avoid paying tax was better spent than if it had actually gone to the Federal government. My impression of the period in question is that individuals, especially the wealthy, were more active in civic affairs and charitable organizations than they are now.
Re: It's when we look around and see that the people being shafted by all the inequality are struggling just to make ends meet that we get upset. It's when we see ourselves squeezed at the gas pump, the grocery store, the doctor's office, and everywhere else and then watch the right talk about how we need to keep favoring that upper economic eschelon to save the economy that we get angry and resentful.
There's also this: Most people don't mind Bill Gates or Steven Jobs being richer than God. Those guys have done something worthwhile. Likewise with, say, Madonna or JK Rowlings, whether we individually appreciate their product or not. What is resented are people who contribute nothing at all except some taloid drama (the heirs and heiresses), or worse, people whose work adds negative value but who still make out like bandits (the CEOs of failed and failing corporations). The heir class of people should be sent to work at McDonalds, and the economy-wreckers should be sleeping in shelters and begging at freeway exits. But they aren't because they've rigged the game in their favor so that no matter what they do (short of murder-- maybe) they will always be rich and powerful. We don't have rags to riches stories any more because we also don't have riches to rags stories.
Rob Lyman on McCain: "It's one of the reasons I find him too distastefully liberal."
It's too bad for you that George Lincoln Rockwell died young, I guess. The Constitution Party is calling you, too.
In that belief, he shares more in common with the left that the right (excepting Reason and the WSJ editors).
Kudos on a provocative statement, but I am curious why you think this is a liberal belief. Do you think that liberals generally don't think people will do hard work for 100k/year? What is the conservative corollary - that people will?
It's hard for me to see this on the L-C continuum. Instead, this statement, far more than the 'houses' gaffe, betrayed a certain disconnect from most folks' reality. I think he really didn't get that, to most people, 100k is a damn good salary, one that would command some serious sacrifice.
Is someone proposing raising marginal tax rates to 90%?
No.
Is someone proposing reducing marginal tax rates still further?
Yes. In fact, one of the two presidential candidates proposes to do this.
Let's talk about reality, rather than fantasy worlds.
Rob: "my corresponding article of faith is that it is impossible to to "take care of" the poor and lower-middle to the satisfaction of the left."
It's really not a matter of "taking care of" people. Two things are completely fucked up in American society today. The first is that lower-class people can't or don't get a decent education, for reasons that combine MANY factors, some of which you'll like and some of which you won't. The second is that lower-class people bear an unacceptable level of social and economic risk -- lack of health insurance, high levels of student and consumer debt -- which is a disincentive to hard work and investment and helps keep them poor. That works the same in Detroit as it does in Bangladesh: you don't invest in something that could be taken away from you. This is part of why we're starting to see social mobility that's higher in Europe than in the US, even though the US thinks of itself as rewarding "hard work" more than Europe does.
We need more government revenue, first, to pay for what our government spends, instead of falling $400 billion short every year. Second, we need it to fix the educational system so that every American baby gets a fair shot at making it into that top 0.1%. Third, we need it to fix the health insurance system so we don't have 50 million people risking bankruptcy for a serious illness. (This will ultimately save the country a lot of money, but it will probably require the government to bring in more revenue, at least at the beginning.) THEN we need it to fix America's infrastructure so our airports, bridges, railroads and highways look more like France's and less like Mexico's. This revenue has to come from somewhere. It's not coming from the median worker, who's making less now than he was in 2001. It should come from the people who've become fantastically wealthier since 2001, in large measure due to tax breaks which they didn't need and the country couldn't afford.
I think the problem is that they won't get a decent education. We have gone past the point of providing things to people who desperatly want them, and we find ourselfes at the point of trying to force things on people who desperatly need them. Education is a prime example of this.
This post, and the article that inspired it make no sense at all. For starters Mr Zeitlin, to paraphrase, suggests Republican presidents are focused on low inflation while Democrats are obsessed with wage growth and "income equality". Based on what, exactly? Given their track records, Republican presidents (who've occupied the White House 28 of the last 40 years), their economic records can be best characterized by astronomical debt, comparatively low economic growth (compared at least to pre 1968 and Bill Clinton standards) and financial sector shenanigans (the 80's Savings and Loans disasters; Enron style fraud and the recent mortgage crisis) that are widely blamed on poor to non-existent oversight. I don't see Mr Zeitlin's academic theories playing out in reality at all. On the subject of taxes, the tax structure since 1981 has tilted so far in favor of the ridiculously wealthy that, as Warren Buffet himself put it, his secretary pays a far high proportion of her income in taxes than he does. As is your norm lately, you're hacking down straw-men claiming the Democrats want to storm the Bastille and soak the rich, thus plunging the economy into the dark ages. WTF? Other than the Nader left, which I would reming you, voted for Nader; Democrats are simply asking the rich to - oh I don't know, pay the same proportion of their income in taxes as their secretaries so that the budget deficits don't keep ballooning. Is that too much to ask?
Interesting post, but you may want to double-check your math. 10% of $50,000 is $5000, so the take-home would be $45,000. 20% of $50,000 is $10,000, so the family would make $60,000 after the increase. 100% of $100,000 is $100,000 so family B would make $200,000 after the increase. There are lots of other mistakes, too. Might want to nip 'em in the bud before the detractors get their claws on them.
It was once the case that lower-class people bore an unacceptable risk of being destitute when they were old. To resolve this problem the government forced people to contribute to social security. It wasn't a case of people wanting the ability to purchase a government backed annuity. It was the case of the government forcing people to do what is in their best interest.
One of the ways we could reduce the feeling of economic insecurity would be to force people to contribute more towards unemployment insurance, allowing for more generous benifits. Instead of asking people to save their own money to carry them through a job loss, we would mandate that people contribute towards a government savings program (unemployment insurance) that would provide the same benifit.
I guess the question is: What right to people have to do what is not in their best interest?
1/3 of the people without health insurance make more than 50k a year, 1/6 make more than 75k. In MA we now mandate that if you make enough money you have to buy insurance. 1/3 of those without health insurance are already eligible for government health benifits, we are now mandating that those people sign up.
I guess my question is - if people choose to not buy insurance, or save for retirement, or not save to cover a job loss, what role does the government have in mandating those behaviors?
I am curious why you think this is a liberal belief
I was thinking of it in terms of "comprehensive immigration reform," where McCain is on the "liberal" end of things.
If MLaJ was referring to a specific recent quote from McCain, I missed it, so my comment makes no sense in that light. Thinking people won't work for 100k is stupid, not liberal or conservative.
We have gone past the point of providing things to people who desperatly want them, and we find ourselfes at the point of trying to force things on people who desperatly need them. Education is a prime example of this.
The people we are trying to "force" a decent education on are between the ages of 5 and 16. They may indeed resist acquiring a good education, but they are not adults, and it is our responsibility to tell them to shut the f*** up and do their damn homework. As with most things regarding raising children, it doesn't make sense to conceive of them as responsible actors in a market economy who should be left to fend for themselves.
The fact that their parents may not be helping them get the education they deserve is a problem; the fact that American pop culture is actively discouraging them from getting a good education, likewise. These present formidable practical obstacles to getting every American kid a good education. But they are morally irrelevant. And if you admit that the US is simply giving up on its moral obligation to get every kid a good education because it's too difficult as a practical matter, then you have admitted that inequality among adults is a result of a moral failure by the state. Which means there is a moral obligation to compensate adults for income inequality.
Personally, I prefer to spend money tackling inequality of opportunity, rather than compensate people for inequality of results.
Well liberals point to average CEO pay being 100x the average worker. This is objectionable in itself to liberals.
Oddly, they never point to how even dreadful pro sports "stars" (see the entire Knicks roster of the Isiah era) ... Hollywood actors ("Waterworld" Costner) and media people (Katie "Lower ratings than even Dan" Couric) make as just as much. It seems not objectionable to them at all.
Even though CEOs spend a lot more years putting in a whole lot more hours getting to their paydays.
The better option is to bring back FDR tax rates and avoid a revolution.
As I've noted here before, I used to sit in a blue-collar bar with my fellow Mets fans watching Mo Vaughn get paid $15 million a year for hitting on the Interstate and losing ground balls under the wheelbarrow that he used to push his belly around.
If those guys didn't grab their pitchforks over that, believe me, the revolution ain't coming.
Rob Lyman writes: "If MLaJ was referring to a specific recent quote from McCain, I missed it, so my comment makes no sense in that light. Thinking people won't work for 100k is stupid, not liberal or conservative."
I'm surprised you missed it, Rob, since you seem to be paying attention to such things, which is more than I can say for most conservatives.
http://sensico.wordpress.com/2008/08/22/video-mccain-americans-wont-pick-lettuce-for-50hr/
McCain is a delusional past-his-prime fool and Sarah Palin is his woefully-unprepared understudy.
For 50 bucks an hour I would have been out picking every year in the summer from age 14 to 21, at the very least. Ever sod lawns in August? I did, and for a whole lot less. McCain is - as you say - STUPID.
While FDR was charging 94% in 44-45 for the top bracket they were ALSO charging 23%!!!! at the bottom. As far as I can tell, there was no roll off either. If you made $1, you owed the govt. .23... During Ike's administration it was 91% at the top and 20% at the bottom. LBJ started pulling it down 77%-16%.
Don't believe all that for a minute. In those days the personal exemption for every member in the family, standard deduction , and other "free from the bottom" amounts were much larger than today.
Also, there were hugely larger deduction and tax shelter opportunities all around, especially, of course, at the top level.
For instance, in 1965 when the top rate was 70%...
Inflation adjusting to todays dollars, the effective (actually paid) tax rate was 13.3% for income from $75,000 to $105,000.
The highest effective rate was 36.4% at from $700k to $3.5 million.
Then, inspite of a 70% rate all the way up from there, the effective rate fell to 30.8% at income over $7 million.
Remember, the deadweight cost of taxes rises not with the tax rate but the square of the increase -- so doubling a top rate from 35% to 70% increases its deadweight cost by 4x, and taking it to 90% increases the cost by > 6x.
This creates huge political and economic incentives to riddle the top brackets with loopholes -- which enable the very richest to pay less in tax than the merely rich, as was clear in 1965.
The '86 Act that dropped the top rate to 28% destroyed the tax shelter industry -- but we've been working back towards re-creating it ever since.
(The '65 data is from the IRS cited by Nobelist William Vickery as he explored this point in his his book "Public Economics")
Re: One of the ways we could reduce the feeling of economic insecurity would be to force people to contribute more towards unemployment insurance, allowing for more generous benifits.
Um, this already happens, although the fact that the employer is the one who sends in the check (and the employee never actually the accounting for it) obscures that fact. But all employer-paid benefits are in fact being paid for by the employees. Perhaps we should include these sums in their check stubs so they are better aware of it.
OK, suppose you get your 90% tax rate on incomes over $250,000, say, and those people all go away. Won't you be just as jealous of those making $100,000? Won't you soon be agitating for punishing tax rates for them?
This problem is really so simple to solve. There are some people who make way too much money. We all know who they are. Warrren Buffet, Bill Gates et al.
So collect their names. Make a list using Forbes and E! and the National Enquirer. Then pass a law confiscating everything they have and Voila! Egalite, Fraternite et Liberte for everybody.
No more class warfare. No one suffers except the rich and it has been tested many times. Also it is a good idea to put these people and their associates in re-education programs.
This is not class warfare. It is simply administrating Justice to 500 really bad eggs.
Thus Obama will make the USA a true People's Paradise with Freedom, Brother- and Sisterhood, and Equaity pour tout. Revolutionary ideas need revolutionary methods of implementation. You can't ring the liberty bell without striking it. Can't make an omelet without breaking eggs.
If you really believe this, you are not a progressive as you state. This is a supply side argument.
The existence of opportunity results in inequality whether it is equal or not.
Then people will no longer sell their appreciated assets, even though they might want to move to other investments. They will also not invest in more inovative companies (riskier) but settle for lower gains or ultimately municipal bonds if you make the tax progressive enough.
Robert: Then people will no longer sell their appreciated assets,
Governments are going to have pay for what they spend. Buffet doesn't seem too rattled by the prospect of higher taxes. Why should his ability to see value in companies be handled so differently in a tax sense from a biochemist who is able to write grants and complete experiments and get paid as a leading researcher or than the surgeon who is able to keep Biden from dieing of an anyeurism.
Or government could spend less.
I am not particularly interested in imposing punishing taxes on high paid biochemists either.
As a pracitcal matter, financial assets are much more easily moved and thus sensitive to tax policy. Sure the biochemist will eventually give up his profession if the taxes get too high, but he will hang in there much longer than an investor who can move his investments to municipal bond at the click of a mouse,
Brooksfoe, sorry, but I can't subscribe to this. I can agree that there might be a moral obligation to make the possibility of a good education available (and we can argue over just how "good" this education currently is another time), but there is no moral obligation to any outcome of education or income.
Flat out reject this.
You and I both, but we have a much harder time measuring opportunity than we do results. Plus when the result for one class of people differs from others, it is politically & socially untenable to accept the reasons why that might be so, so we just gloss over it by saying that the "opportunity" is the problem.
I grew up in post-Vietnam-War southern California. I know what the poor (and I do mean poor) Vietnamese & Cambodian refugee kids were doing after school (homework) and what others were doing (not homework!). Now, those asian kids have "Dr." in front of their names while many others are yet another generation on food stamps.
I agree that having less money means you have more risk. But you don't invest in something that could be taken away from you? Seriously? You just give up? I don't invest in an education because I might get laid off tomorrow? What is the absolute worst that can happen? Bankruptcy? Please. No one is going to kill you, or force you into servitude until you repay your debts. So you tried to climb the hill and slid back down to where you were. Might as well give up...stop trying. Then you guarantee your result.
How do you propose we do this? If you have a parent that thinks a "C" average is perfectly fine, how do you propose to convince the child that a "C" average is not fine?
jmo - Or even harder, what if the kid is genuinely only capable of managing a "C" average? That is, what if he is just not that intelligent? What do you do then?
Brooksfoe seems to be implicitly assuming that true equality of opportunity (spec. equality of education) will largely erase inequality of results. But if you have a really smart kid and a really dumb kid, even if you force them to both go all the way through grad. school, the smart kid is going to be getting more out of it every step of the way and be able to do things with it that the other kid won't.
It's kind of like assuming that the reason that basketball is dominated by the very tall is that short people didn't get enough practice time or oppurtunity to play. But, of course, even if you mandate equal play time for people of all sizes, the tall people are still going to be much better at basketball than the short ones. All you do by trying to force equality onto the system is ruin the sport.
Of course, then we could discuss why some people are taller than others. Some might say it's genetics, while others would say it's the result of poor nutrition and if we just got the government involved in making sure every one ate the same height-inducingly nutritious meals we wouldn't have to worry about how to deal with short people in basketball any more.
Of course, that sounds kind of silly too...
I'm surprised you missed it, Rob, since you seem to be paying attention to such things
Actually, I pay almost no attention at all. I just give the impression of paying attention by not commenting on stuff I don't understand (like Lehman Brothers or subprime mortgages).
tell them to shut the f*** up and do their damn homework.
You know, if Obama had thought of that while he was working in the Chicago projects, he could have pretty much solved the gang problem right there.
In all seriousness, although I certainly favor education, I don't think you need much of one to avoid crushing poverty and perpetual dependence. Why I can hardly remember the last time a boss or interviewer asked me about the significance--in both military and technological terms--of the battle between the C.S.S. Virginia and the U.S.S Monitor.
On the other hand, if you can 1) read, 2) do basic math with fractions and decimals (preferably some light algebra), 3) Shower daily and 4) show up for work on time, there are large numbers of entry-level jobs that will enable you to afford your own crappy apartment and Ramen noodles 2 meals a day. If you don't spend your earnings on cigarettes and lattes--and lots of people in those jobs do--you can even save a little. And if you manage to do what you're told, you can move up gradually.
I've worked fast food, 10-minute oil change, plywood factor, and auto parts. The difference between the management and rank and file of those places is basically "Who is responsible enough not to spit in the burgers?" A thorough understanding of Borges is only occasionally helpful.
"show up for work on time, there are large numbers of entry-level jobs that will enable you to afford your own crappy apartment and Ramen noodles 2 meals a day." Rob L
no incentive to do this if the govt. is willing to cut you a check instead...
Rob, it may not be necessary to understand Borges to work in fast food, but it is probably necessary to work in fast food to really understand Borges.
There are typos in this sentence: "If Obama is elected, when can certainly expect some increase in inequality."
I think it probably should read: "If Obama is elected, WE can certainly expect some DECREASE in inequality."
We see lots of information about the middle middle-class and upper middle-class, but can anyone give me a web link where the current economic “consumption basket” of the lower middle-class is detailed, including item prices?
From personal experience, I’m under the impression that for many such Americans, “housing, health care, automobiles, telephones, and other things that we think of as basic accoutrements for a decent life” are becoming very difficult to obtain. Or maybe I’ve simply slipped into the lowest-income group. What are the current consumption basket details for this economic group, also? Thanks for any data.