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ZippyTheChimp
August 14th, 2009, 01:53 PM
Emmanuel Saez, professor of Economics, University of California Berkley, has updated (through 2007) his study of income and wealth distribution in the United States.

His results show that income inequality is at record levels.


http://static.businessinsider.com/~~/f?id=4a84c484212958130bd0774d



Share of Income Going To Top 10%
http://static.businessinsider.com/~~/f?id=4a84c4a5fd8e8928424dd01a


http://static.businessinsider.com/~~/f?id=4a84c4cf13a8b1452b10e89a



From The Business Insider:
Professor Saez's numbers go through 2007. Judging from what happened after the last recession, income disparity will likely ease in 2008 and 2009 as the richest 10% of Americans get clobbered by stock and house wealth destruction.

Excluding the temporary effect of the recession, however, Professor Saez believes that the trend toward greater inequality is likely to continue unless the government implements radical policy changes--such as those that developed during the Great Depression. The Great Depression changes, it should be noted, reduced income disparity for nearly 50 years, until it began climbing again during the Reagan years.


Emmanuel Saez study here. (http://elsa.berkeley.edu/~saez/)

Kris
August 14th, 2009, 02:45 PM
Wednesday, August 12, 2009
Mind the Gap
What the right wing really thinks about inequality.
Jonathan Chait, The New Republic

Should we care about economic inequality? That question is the subtext for most debates in American politics. It just remains below the surface because the party that thinks we shouldn't care about inequality--I'll give you one guess--has an endless string of obfuscations ("death tax," "small business," "tollgate to the middle class") to avoid admitting that it doesn't care about inequality.

There are, however, some real reasons not to care about income inequality, and right-wingers who don't have to run for public office are happy to admit it. A new paper by the Cato Institute's Will Wilkinson, which compiles all the reasons why we shouldn't worry our pretty little heads about inequality, has drawn a lot of attention. It's a usefully honest and relatively persuasive iteration of the belief system that undergirds right-wing thought.

Alas, it still isn't very persuasive. Wilkinson begins by pointing out that, while the gap between how much the rich and the non-rich earn has exploded, the gap between how much the rich and the non-rich consume has remained fairly stable. And that's true. But Wilkinson misunderstands the implications of this fact. "Suppose you made a million dollars last year and put all but $50,000 of it in a shoebox," he writes. (He must have enormous feet.) "Now imagine you lose the box. What good did the $950,000 do you?"

Wilkinson's point--money only has value if you eventually spend it--may be true. Yet most rich people don't put their money in shoeboxes. They invest it so they, their children, or young trophy wives can one day spend even more of it. And, indeed, the gap in wealth (how much money you have) has grown even faster than the gap in income. Meanwhile, the middle class has tried to keep pace with the rich by spending beyond its means, sending average household debt skyrocketing. Tell me why this should make us feel better about inequality?

Wilkinson's most interesting argument holds that material inequality between the rich and the non-rich lags behind the wealth and income gaps. For one thing, he argues that the luxury goods rich people own offer only marginal improvement over the cheap stuff that poor people own. For instance, he compares the luxurious Sub-Zero PRO 48 refrigerator to a standard IKEA fridge. Despite the vast difference in cost ($11,000 vs. $350), he writes, "The lived difference ... is rather smaller than that between having fresh meat and milk and having none." He also notes that rich people have used some of their increased income merely bidding up the price of positional goods, like fancy real estate or elite college tuition, forcing them to buy the same stuff at higher prices. Wilkinson thinks this goes to show that there's "an often narrowing range of experience" between being rich and being poor, so inequality isn't that big a deal.

In fact, Wilkinson is inadvertently bolstering the strongest liberal argument against inequality: it's inefficient. In case you're unfamiliar with this argument--as Wilkinson seems to be; he doesn't rebut or even mention it anywhere in his paper--it runs like this: Taking money from the rich and giving it to the poor helps the latter more than it hurts the former (at least until you create serious work-incentive effects, a point which most liberals think we're not close to). Wilkinson is saying the rich are getting little (in the case of luxury goods like refrigerators) or zero (in the case of real estate and higher tuition) actual benefit from their rising incomes. So why not take some of that income away and use it to buy extremely useful but currently unaffordable things for the non-rich, like, oh, basic medical care?

One liberal complaint about inequality holds that it increases the political influence of the rich, thereby locking in even more inequality. Wilkinson scoffs at this prospect, pointing to rich voters' support for Barack Obama over John McCain. Oddly, Wilkinson confines his analysis to campaigning and pays no attention to governing. While it's true that many rich people used their money to help bring about Democratic control of Washington, every day brings a new example of the rich using their money to ensure that Democrats pose the least possible harm to their interests. Democrats in Congress have abandoned Obama's sensible call to limit deductions for the top bracket, backed away from an upper-income surtax to pay for health care despite favorable polls, shot down bank nationalization, and on and on.

The deeper problem with Wilkinson's argument is that it assumes the natural correctness of all market-based outcomes. This is a premise you either take on faith or don't, and which undergirds most of his argument. Wilkinson assumes that inequalities arising from the market are inherently fair. Therefore, he asserts that just about the only unjust forms of economic inequality are those that spring from non-market circumstances: "t's not enough to identify a mechanism of rising inequality. An additional argument is required to show that there is some kind of injustice involved."

If such injustices persist, he further argues, it's usually because the American people like it that way. Wilkinson recognizes that some liberals blame "wealthy elites," not public opinion, for the persistence of injustice. But he dismisses this complaint as a "'false consciousness'" argument by liberals "frustrated to find that [their] convictions are in the minority." So we should stop whining. Yet, later on in the same paper, Wilkinson blames the state of education on teachers' unions, and hawkish foreign policy on "special interests that stand to benefit from war." Wait, what about that false-consciousness business? Apparently, it's fair to complain about special interests when they subvert the libertarian agenda but not otherwise.

Wilkinson concludes by asserting that people should only care about their absolute well-being, not their relative well-being. But comparisons are among the best measures we have to gauge our material well-being. Ten years ago, I felt perfectly happy with my low-definition television, because high-definition hadn't come out. Today, that same television gives me slightly less enjoyment because I realize that I'm missing out on a better picture.

"How are a poor, inner-city kid's life chances affected," asks Wilkinson, "by the fact that some Web entrepreneur makes billions of dollars as opposed to just millions?" They're not. But if the Web entrepreneur has to pay a slightly higher tax rate so the inner-city kid can afford to attend a decent college, or so the kid's parents can see a dentist, how are the entrepreneur's life chances affected?

[I]Jonathan Chait is a senior editor of The New Republic.

http://www.tnr.com/politics/story.html?id=ab981331-13e8-40d3-89b7-26406e29af5a

Ninjahedge
August 14th, 2009, 03:18 PM
Depression changes, it should be noted, reduced income disparity for nearly 50 years, until it began climbing again during the Reagan years.

I noticed that. The spikes are VERY apparent right around 1982 or so.

I wish the "average American" that voted for this actor really knew what he was doing. The US seemed so prosperous, but that was because the rich were selling the ground out from beneath the feet of the poor......

Now we have many bureaucratic social welfare programs for the destitute, and an upper class that even after declairing huge debt can still manage to come back w/o any signs of problems (Trump) leaving the middle class to hold up the poor, and be bled dry by the rich.

It is only a matter of time before we become 2-tier again.

dtolman
August 14th, 2009, 04:45 PM
I noticed that. The spikes are VERY apparent right around 1982 or so.



This corresponds with the long and strong secular bull market that started that year, and kept going with few interruptions until 2007.

I'm betting this isn't a coincidence, as "the rich" are more likely to invest big $$$s and make big $$$ in the stock market than the "average american" - who is more likely to invest in lottery tickets, which as far as I know, has never been anything but a bear market.

lofter1
August 14th, 2009, 05:47 PM
Those early 80s spikes also coincide with the introduction of the Individual Retirement Account (http://www.treas.gov/education/fact-sheets/taxes/ustax.shtml) scheme.

ZippyTheChimp
August 15th, 2009, 01:21 PM
I noticed that. The spikes are VERY apparent right around 1982 or so.

I wish the "average American" that voted for this actor really knew what he was doing. The US seemed so prosperous, but that was because the rich were selling the ground out from beneath the feet of the poor......The US was at its most prosperous when its middle-class was thriving. That's where all the volume is.

I grew up in that environment. The problems we had back then were social in nature, and from a perspective of the present, that turmoil might mask the economic reality - economically, the US population was the envy of the world.

The problems that developed in cities were simply a matter of depopulation. We built airports and interstate highways, and sprawled into the countryside. The resulting crime and decay were framed as the effect of the post-war societal changes. Thus was born the culture-wars that, although finally beginning to wane, still exist today.

ablarc
August 15th, 2009, 06:59 PM
Re-graduate the income tax.

Luca
August 15th, 2009, 08:03 PM
I'm always struck by the amount of attention income distribution receives.

First of all income/wealth/non-monetary income data has to be handled carefully.

Secondly, some of the data representation suffers from scale "misuse". If the top 10% go from garnering 37% to 42% of national income is that really a socially transformational change?

Thirdly, there is a sticky issue of causality. All sorts of things changed since the early and mid 20th century. What caused what? Also, utility functions change. Maybe in the 1950s you could get as good (at least in relative terms) professionals, executives, leaders, etc. for less money. Maybe they got "paid" in other forms like deference, etc. Let's not forget that in this presumed golden age of American equality many groups (Jews, Blacks, Mexicans, WOMEN) were excluded from many positions of wealth and influence. Maybe it was MEIRTOCRAACY that created inequality. Maybe only in a distorted system the top 0.1% DON'T earn such a big chunk.

Fourthly and most importantly, why does the inequality matter per se? Some people and some social scientists believe that it’s better for everyone to have less but for it to be distributed more equally. Uh hu. Ask them to live like people IN THEIR STATION lived in the 1940sa or 190s. NO ****IGN CHANCE. They’d never wear it.

There ARE many REAL issues facing less economically advantaged people throughout the developed worlds. Like long periods of stagnating REAL income or the semi-permanent exclusion of substantial minorities from the economic mainstream. Compared to that, income inequality is AT BEST a symptom and at worst a stupid distraction.

BrooklynRider
August 18th, 2009, 09:12 PM
...Compared to that, income inequality is AT BEST a symptom and at worst a stupid distraction.

Considering that both elected government positions as well as patronage jobs are pretty much awarded to the highest bidder in this country, it is hardly a symptom.

Personally, I have no problem with people earning high salaries. My problem is not taxing them at a rate proportional to how far above the median average their TOTAL income lies.

User Name
August 18th, 2009, 09:47 PM
Personally, I have no problem with people earning high salaries. My problem is not taxing them at a rate proportional to how far above the median average their TOTAL income lies.

Equality in all things except servitude to the government?



The top 1 percent of taxpayers (AGI over $410,096) earned approximately 22.8 percent of the nation's income (as defined by AGI), yet paid 40.4 percent of all federal income taxes. That means the top 1 percent of tax returns paid more in federal individual income taxes than the bottom 95 percent of tax returns.

http://www.taxfoundation.org/news/show/250.html

ZippyTheChimp
August 18th, 2009, 09:51 PM
Secondly, some of the data representation suffers from scale "misuse". If the top 10% go from garnering 37% to 42% of national income is that really a socially transformational change?Looking at the graphs, that's like asking if ANY socially transformational change can occur in a couple of years.


Maybe only in a distorted system the top 0.1% DON'T earn such a big chunk.


Fourthly and most importantly, why does the inequality matter per se?


Compared to that, income inequality is AT BEST a symptom and at worst a stupid distraction.All of these statements bring up the same point.

Who's suggesting that there should be equality of income? That's absurd. Rich people have always made more income than middle class, who've made more than poor people. But the trend line over three decades is hardly stupid distraction.


This corresponds with the long and strong secular bull market that started that year, and kept going with few interruptions until 2007.

http://graphics8.nytimes.com/images/2006/04/08/business/pay.graphic.jpg

Ninjahedge
August 19th, 2009, 09:07 AM
User, could we see that stat with the ones not paying any taxes because of low income removed from the stats?

The only thing that comes to mind is that when you start getting below about 80K combined in a lot of areas, the money you earn is the money you live by. Any taxation of that money effects DIRECTLY what and how much you eat, drink, and live your life.

I am not talking the difference between McD's and Nobu, but more like Skirt Steak vs. Chuck vs. Kidney Beans and Rice.

I would really like to see the whole table of #'s before cherry picking a certain % point that seems to bear a contrary position. What do the top 0.1% earn and pay? What do the top 10% earn and pay? Statisticians have a field day playing with numbers dont you know! ;)

ZippyTheChimp
August 19th, 2009, 09:18 AM
AGI = Adjusted Gross Income.

Keyword: Adjusted.

BrooklynRider
August 19th, 2009, 09:55 AM
The top 1 percent of taxpayers (AGI over $410,096) earned approximately 22.8 percent of the nation's income (as defined by AGI), yet paid 40.4 percent of all federal income taxes. That means the top 1 percent of tax returns paid more in federal individual income taxes than the bottom 95 percent of tax returns.

http://www.taxfoundation.org/news/show/250.html

Yes, that is a convenient source of misleading data to bolster arguments of right-wing propagandists, shills for CEO's and corporate whores, ignorant people watching Glenn Beck, Fox News or depending on Larry Cramer for investing advice.

Here is what is printed at the end of that report:


Some important facts to keep in mind about the information provided on this page.

(1) All tax returns that have a positive AGI are included, even those that do not have a positive income tax liability.

It is interesting that you victimize the top 1%. They do have the top .1% numbers as well, which are blended into that top 1% in certain places and broken out in others.

Based on this report:

The top .1% of tax returns were made up of 141,000 returns that had an aggregate AGI of $1,049,000,000,000. That's an average income of $7,439,716.

The bottom 50% of tax returns were made up of 70,535,000 returns that had an aggregate AGI of $1,079,000,000,000. That's an average income of $15,297.

The report you are citing actually is reporting the number of tax dollars paid in relationship to the number of tax returns filed. It would be more accurate (and honest) to report how much in taxes were paid in relationship to all other returns that also report a positive tax liability.


2) Income tax after credits (the tax measure above) does not account for the refundable portion of EITC. If it were included (as is often the case with other organizations), the tax share of the top income groups would be higher. The refundable portion is legally classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.

This basically notes that people in the highest brackets are getting tax credits. Yes, people in the highest income groups (that would be the top .1 percentile earning over $7,000,000) are actually receiving CREDITS from the government.

What tax rates does this report cite for different groups?

Top .1% = 21.46% (Tax = 1,596,563 / Remaining Income $5,843,153)
Bottom 50% = 2.99% (Tax = 457 / Remaining income $14,840)


(3) The only tax analyzed here is the federal individual income tax, which is responsible for about 25 percent of the nation's taxes paid (at all levels of government). Federal income taxes are much more progressive than payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes (depending upon the economic assumption made about property taxes and corporate income taxes).

Yes, payroll taxes are responsible for about 20% of ALL taxes paid. That's why the big CEO's and highest paid Americans get paid in stock options, deferred bonuses, etc.; to avoid paying these taxes. In addition, Payroll taxes do not apply to non-salaried income, such as stock dividends or trust funds. Further, the richest Americans pay FICA taxes on their first $102,000 of earnings. The top .1% of tax payers earn $624,476 per month.


(4) AGI is a fairly narrow income concept, and does not include income items like government transfers (except for the portion of Social Security benefits that is taxed), the value of employer-provided health insurance, underreported or unreported income (most notably that of sole proprietors), income derived from municipal bond interest, net imputed rental income, worker's compensation benefits and others.

Ah yes, we are basing this all on a fairly narrow income "concept". Look at the list of exceptions, but wait... we don't have enough room for all of the exceptions so we'll end the list with "and others".


(5) Tax return is the unit of analysis, which is broader than households, especially for those at the bottom end, many of which are dependent returns. Some dependent returns are included in the figures here, and under other units of analysis (like Treasury's Family Economic Unit), would likely be paired with their parents' returns.

Oh dear, more exceptions to the reporting calculations and, therefore, more evidence that the numbers don't compare "apple to apples".


(6) The source data is the IRS Statistics of Income Division, which uses a national sample of tax returns to provide the figures used here. The figures above were taken from data that was labeled an "early release" by SOI in July 2009, and may be revised in subsequent months.

My, my... this is a national "sample of returns". The data used was labeled "early release" and might have been revised in subsequent months. I guess it is kind of like "early polling" - the kind that had Norm Colemen beating Al Franken in the Minnesota Senate race. Of course, once all of the votes were counted, Franken was sworn in. The revisions took eight months.

I wonder how much this "sample" tax data changed over eight months.


(7) Figures presented represent the legal incidence of the income tax, although most distributional tables (such as those from CBO, Tax Policy Center, Citizens for Tax Justice, Treasury, and JCT) assume that the entire economic incidence of personal income taxes falls on the income earner.

Finally, we see that this report does not use the prevailing assumptions used by governmental and reputable non-partisan tax policy and watchdog groups.

This report is pure crap.

lofter1
August 19th, 2009, 10:01 AM
So, there.

(Bravo, BR)

Is it any wonder that everyone is confused?

Ninjahedge
August 19th, 2009, 12:24 PM
It's all number juggling.

All we need is something simple. You earn $XX, you bring home $YY. Period. I don't care WHERE you earned it, how, or whatever. "earned" also applies to all stock dividends and gains even if unsold, rental property income, every last penny.

Then you get a better idea of where the money is coming from.

Also, take a look at COL, to a modest extent. I do not expect Trump to be living off of Beans and Rice, but at the same time, he can certainly get by on less than $500 a plate....

Subtract what people need to have to live on, then look at the % that is left after that and compare that number to taxes garnered in ALL facets of that persons life (electricity, sales tax, gas, income, fees on medical, ANYTHING).

You will find that the ratios get massively skewed even when you allow the rich to have MUCH better lifestyle allowances than the poor.



The key thing to this whole thread is not necessarily breaking things down like I have described, but noting that the people that seem to be paying the most are the ones that are out of the bottom bracket, but who are not able to divest their funds and earnings into non-taxable sources of revenue (maximum taxation on stock profits is 15%, not the 39% or so for income tax.)

the middle class id being ridden too hard and there is more and more of a gap between the Upper Class and the Lower Class. You squeeze the middle too much and you head for problems, as you no longer have a working "body" of society to a) Feed the poor, and b) Buy things that the rich market and sell.

Our system does not work well without a viable working middle class America.

Unfortunately, 75% of said class are idiots and will go to town hall meetings crying over Lady Liberty and the Death Panel eyeing up Grandma.

Disinformation and public gullibility will be our downfall. See it now on PPV!!!!

BrooklynRider
August 19th, 2009, 09:41 PM
Sometimes I don't understand what you are saying - like now. If you are suggesting a flat tax, then you are suggesting a major shift in tax burden to the working middle- and lower-class.

15% of $7,000,000 vs. 15% of $15,000

I don't think so...

Ninjahedge
August 20th, 2009, 09:03 AM
Please show me where I even mentioned flat tax BR.

I was not even getting into that. All I wanted to see was a bottom line. How much does John Q. Public get paid, in TOTAL earnings, and how much of that goes towards state and federal taxes. ALL of it, including gas taxes, sales taxes, FAA taxes on telephone services, everything.

Once we see those numbers, we can get a better idea of where the monies are coming from and how much is actually left in your pocket in the end.

BrooklynRider
August 20th, 2009, 10:50 AM
I understand that, but what would that tell you?

You know what the person makes and how much in taxes they pay. How do you draw comparisons between the low end and the high end?

Ninjahedge
August 20th, 2009, 11:20 AM
I understand that, but what would that tell you?

It would give a more realistic idea of the levels of income individuals eran and possess, rather than these skewed reports that keep siting one inequality next to another.

What I want is the meat, not whatever crispy topping the Chef of the Day decided to fry it with.


You know what the person makes and how much in taxes they pay. How do you draw comparisons between the low end and the high end?

That gets more complicated, but less so than our current methods of comparison.

There are compulsory taxes that everyone pays regardless of what they spend on, and some "elective" ones (such as sales tax) that are supposed to be a kind of choice by the taxpayer. (You don't like taxes, do not buy as much luxury/unneeded goods). While I do not agree with this kind of reasoning, I can see where a direct comparison could get difficult when this is not taken into account.

Now, that being said, you hav ethe raw $$ that a person earns. Would it be fair to penalize someone because they earn more money? No, but it also would not be fair to deny someone their basic needs because they do not earn enough to afford the same percentage. There are certain levels that need to be taken into account, and that is where the fuzzy math starts.

How would you determine the COL at different income brackets? In different areas? How could you say it costs just as much to live in the suburbs of Alabama as a carpenter as it does to live in NYC as a construction manager? That is the one question I find difficult to answer when trying to figure out what every persons "fair share" is.

Just because the wealthy can afford to give more, does not mean they should be bearing the entire tax burden, but it does not mean they should be entitled to rules and regulations that allow them to pay less on what they earn than the "average joe".

BTW, if I remember right, taxes do start climbing over 15% on regular income way before the next bracket jump. So if that is the case, why are multimillon dollar stock options still only taxed at 15%?

Anyway, what I would do with the final number is try to establish a bracket. Each bracket has a deductable for simple costs of living limited to essential items similar to what we have now (but stripped down, simplified, and applied to a FLOATING COL INDEX dependent on larger demographic areas). The remainder of the spendable monies after that are then taxed.

Housing taxes on estates less than $1M? Deductable. Over $1M, or second residences, not deductable. This is only an example and the #'s would change depending on the area/real estate.

I think the key is in keeping the % simple, but trying to itemize the expenses a bit better.

Merry
December 17th, 2010, 10:07 PM
New York's Income Inequality Worse Than In Chile: Study

A new report by the Fiscal Policy Institute called "Grow Together or Pull Further Apart? Income Concentration Trends in New York, (http://www.fiscalpolicy.org/FPI_GrowTogetherOrPullFurtherApart_20101213.pdf%3C br%20/%3E)" details the vast and growing economic gap between New York's wealthiest and poorest communities. The report (http://www.fiscalpolicy.org/FPI_GrowTogetherOrPullFurtherApart_20101213.pdf%3C br%20/%3E) states quite plainly that "New York State has the highest income inequality of all states."

By comparing income shares from four groups in 1990 and 2007, the report found that while the top 1% had made impressive gains in income level, the bottom 50% actually lost ground in earnings, which shows just how much the gap is widening.
Given its degree of inequality, if New York City were a nation, it would rank 15th worst among 134 countries with respect to income concentration, in between Chile and Honduras. Wall Street, with its stratospheric profits and bonuses, sits within 15 miles of the Bronx--the nation's poorest county. The study faults (http://www.fiscalpolicy.org/FPI_GrowTogetherOrPullFurtherApart_20101213.pdf%3C br%20/%3E) among many factors the decline of local manufacturing as a boon for lower income communities:
The city used to have a broad middle class, rooted in a vast manufacturing sector and mid-level positions in corporate headquarters as well as in education, government, construction and other good-paying blue-collar jobs. But manufacturing is about one tenth the size it used to be, and the city's labor market has seen the disappearance of thousands of middle-paying jobs and the growth in their place of moderate- to low-paying jobs, mainly in services. [VIA (http://www.nakedcapitalism.com/2010/12/banana-republic-watch-new-york-city-more-unequal-than-chile.html)]

http://www.huffingtonpost.com/2010/12/17/new-yorks-income-inequali_n_798462.html

sterpetron
January 1st, 2011, 05:04 PM
Yes, that is a convenient source of misleading data to bolster arguments of right-wing propagandists, shills for CEO's and corporate whores, ignorant people watching Glenn Beck, Fox News or depending on Larry Cramer for investing advice.This report is pure crap.

Keep the attacks and silly nonsense flowing. Those of us who work for a living and have watched the NYC economy vanish - helped by a heavy dosage of obscene public worker giveaways, which even Cuomo appears to be thinking of stopping:

http://www.nytimes.com/2011/01/02/nyregion/02inaugural.html?hp

"Mr. Cuomo strongly emphasized his plan to cap the growth of local property taxes, a particular concern to suburban and rural residents. That proposal is already setting off worry among local officials and some public-employee unions , who say that it will result in deep spending cuts in cities and towns. The governor described homeowners as being imprisoned by burdensome tax bills.

“People can’t afford to pay any more taxes, period,” Mr. Cuomo said. “In the real world, taxes are going up 5, 6, 7 percent. No one’s income is going up 5, 6, 7 percent. No one’s bank account is going up 5, 6, 7 percent. No one’s home value is going up 5, 6, 7 percent.”

The middle class in NYC is gone because there are no jobs here left for them; the city decided to grow its public worker sector to laughable levels, which directly led to insane tax levels, driving businesses out of the city.

So, the only industry left is Wall Street, and baby, if you lose that - there is NO NYC left.

infoshare
January 1st, 2011, 05:30 PM
So, the only industry left is Wall Street, and baby, if you lose that - there is NO NYC left.

Well said, and I fully agree: here is youtube vidio I think you will enjoy - and a good article below as well. Happy New Year!
http://www.youtube.com/watch?feature=player_embedded&v=WCkTIrncRg0

Disgusting Rich Bashing 
by Tibor R. Machan
There are many welcome developments in America in our time, mainly in the media. *Certainly Judge Andrew Napolitano’s and John Stossel’s Fox Business Network TV programs are quite unprecedented in their principled libertarian commentaries. *The way Reason Magazine’s staff is all over the place on line, in print, and on television is gratifying (especially to someone like me who was one of those who were instrumental in making the magazine a regular monthly publication in 1970). *There are numerous wonderful blogs where the Left and Right have met their serious critics, such as GMU’s economists’ Cafe Hayek.

Nonetheless the vehemence with which the likes of Nancy Pelosi and a bunch of her fellow Democrats in Congress voice the nastiest line of class warfare rhetoric--so much so that even President Obama can at times sound like a moderate man of the Center--is also quite unprecedented, at least in my memory. *(Of course, there have been periods in American political history when these kinds of populist and near-communist sentiments flourished but I wasn’t around then to be upset by them. *And in some eras we can find critics of statism, such as H. L. Mencken, every bit as emphatic and entertaining as, say, P. J. O’Rourke is today.)

Still, for my taste the current crowd takes the cake. *The unabashed demagoguery forthcoming from the likes of Pelosi, Bernie Sanders and their cheerleaders of envy in the media and academy is for me very difficult to stomach. As is the way many in the media cover their blather as if it was just a tad different in content from, say, that of Bill Clinton’s when in fact it is out and out advocacy of tyrannical socialism.

Why is this so upsetting now? *Because these people carry on as if there had never been a Soviet Union and the catastrophic meltdown of its type of statist economics, one that embraced to the fullest the sort of government interventionism that our current enthusiastic rich-bashers advocate. Before this, some modicum of excuse may have been possible for buying into the zero-sum type thinking that generates hatred for the rich (although even there anyone familiar with the works of von Mises, et al., could tell that what the Soviets were attempting hadn’t a ghost of a chance succeeding). *Prior to the world-wide spectacle of socialism’s fatal failure in the Soviet bloc most people might be forgiven for confusing the wealth-creation under a substantially capitalist, free market economic arena with how wealth had been obtained for centuries on end, namely via military conquest, pillaging, murder, and other forms of brutal human-on-human violence. *

But that was when the memory of how riches had been garnered for too many people who had them was all tainted with the primitivism of mercantilist economics and worse. *That was mostly after the likes of Adam Smith pointed out that trade was a superior approach to wealth creation to what had been routine in the ancient and even later times, namely, coercive force. *This lesson may understandably have taken a bit of time to sink in but once the Soviet debacle occurred, there could be no excuse for thinking that when people are wealthy--yes, indeed, very, very wealthy--this came about because they robbed others. *No sane person could think now that the likes of Bill Gates or Mark Zuckerberg make their riches by depriving millions of others of theirs. *(This despite the fact that neither of these beneficiaries of capitalism speaks up about the matter often enough!)

So there is no excuse for rich-bashing, none. *And I don’t even believe, as some good friends of mine do, that this is all about envy since the nastiest rich-bashing comes from people who are by no stretch of the imagination poor. *The best explanation to my way of thinking is that these people are demagogues, trying to cash in on the gullibility of many Americans who are hurting and in desperation and ignorance--they are busy with their ordinary lives--engage in scapegoating instead of seeking clear understanding about economics and, in particular, the current financial fiasco. *

Why would they resort to this? *Because they have indeed run out of sound arguments for acting like the petty tyrants they are and now can only depend for gaining and keeping power on playing to the worst tendencies of human social thinking, the tendency of too many of us to blame someone, anyone, for what the very people have perpetrated whom they have sent to Washington to do good! Under such circumstances it will probably take many more sensible and articulate media folks like Napolitano and Stossel to counter this hysteria about the rich, giving way to a civilized attitude of live and let live among people occupying the great variety of economic positions one can reasonably expect in a free society.

lofter1
January 1st, 2011, 06:33 PM
Stossel :rolleyes:

sterpetron
January 1st, 2011, 07:44 PM
Stossel :rolleyes:

Let's avoid the nonsensical one-liner personal attacks on the messenger, and stick with the message, shall we?

Back on point, the bashing is primarily by public union officials who are watching their cash cows start to come to a halt. With new governors like Wisconsin openly calling for the end of collective bargaining, and real estate taxes getting capped, the salad days for the public workers enjoying perpetual raises and benefit increases, while the private sector tax bases get crushed - are over, so, so very over.

ZippyTheChimp
January 1st, 2011, 08:22 PM
So, the only industry left is Wall Street, and baby, if you lose that - there is NO NYC left.NYC has been in this mess since it became a one-industry town.

The industry doing "God's Work" sucks out exorbitant profits, and continually holds the city hostage with demands for tax breaks by threatening to take their business elsewhere. And when lack of self-discipline causes the system to crash, the financial wizards cry to the government for a bailout. And financial centers like New York have to endure the wild swings in these, you'll pardon the expression, business cycles.

Machen decries rich-bashing and abhors socialism. It seems to me that what rich investment bankers got last year was a healthy does of socialism.

When things get back to 'nomal', any guess what updated charts of tbhose in post #1 will look like?

The overtaxed American is such a fool.

lofter1
January 1st, 2011, 08:32 PM
Let's avoid the nonsensical one-liner personal attacks on the messenger, and stick with the message, shall we?


Then let's avoid touting the nonsensical messengers.

And I'll post what I like, thank you very much ... and happy new year.

sterpetron
January 1st, 2011, 08:36 PM
NYC has been in this mess since it became a one-industry town.

The industry doing "God's Work" sucks out exorbitant profits, and continually holds the city hostage with demands for tax breaks by threatening to take their business elsewhere. And when lack of self-discipline causes the system to crash, the financial wizards cry to the government for a bailout. And financial centers like New York have to endure the wild swings in these, you'll pardon the expression, business cycles.

Who are you to say what is an "exorbitant" profit? Do you also curse movie actors, musicians, athletes, chefs etc., for making "too much money"? Or is that just sour grapes from someone making far less who cannot make more due to a lack of skills, desire, etc?

And the "holds the city hostage" line is hilarious...did Wall St force NYC to abandon all of the other major industries? Is it Wall St's fault that the city has been horribly managed - aided and bankrupted more than once by public unions and its patrons, the elected officials? Are moon eclipses the fault of Wall St too?

And anyone complaining about the notion of business cycles needs to take basic economics and history classes...

sterpetron
January 1st, 2011, 08:38 PM
Then let's avoid touting the nonsensical messengers.

And I'll post what I like, thank you very much ... and happy new year.

If you do not like the post, ignore it. Adding nonsensical one-liners adds nothing to the discussion.

lofter1
January 1st, 2011, 08:43 PM
Five posts and I'm being told what to ignore. Sheesh.

ZippyTheChimp
January 1st, 2011, 08:50 PM
If you do not like the post, ignore it. Adding nonsensical one-liners adds nothing to the discussion.Stop telling people what you do when your first sentence in this forum was:

"Keep the attacks and silly nonsense flowing."

lofter1
January 2nd, 2011, 12:35 AM
The latest scapegoats ...

Public Workers Facing Outrage as Budget Crises Grow (http://www.nytimes.com/2011/01/02/business/02showdown.html?hp)

... this battle comes woven with complications. Across the nation in the last two years, public workers have experienced furloughs and pay cuts. Local governments shed 212,000 jobs last year.

A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers. The Manhattan Institute, which is not terribly sympathetic to unions, studied New Jersey and concluded that teachers earned wages roughly comparable to people in the private sector with a similar education.

Benefits tend to be the sorest point. From Illinois to New Jersey, politicians have refused to pay into pension funds, creating deeper and deeper shortfalls.

In California, pension costs now crowd out spending for parks, public schools and state universities; in Illinois, spiraling pension costs threaten the state with insolvency.

And taxpayer resentment simmers ...

... such thinking also “leads to a race to the bottom.” That is, as businesses cut private sector benefits, pressure grows on government to cut pay and benefits for its employees.

Robert Master, political director for the Communication Workers of America District 1, which represents 40,000 state workers, speaks to that difficulty.

“The subtext of Christie’s message to a lot of people is that ‘you’re paying for benefits you’ll never have,’ ” he says. “Our challenge is how to defend middle-class health and retirement security, not just for our members but for all working families, when over the past 30 years retirement and health care in the private sector have been essentially demolished.” ...

© 2011 The New York Times Company

sterpetron
January 2nd, 2011, 01:10 AM
Five posts and I'm being told what to ignore. Sheesh.

You're right, only after 6 posts can I mention people are supposed to follow the forum rules and basic net etiquette :roll:

lofter1
January 2nd, 2011, 01:30 AM
Yeah, always wise to take your own counsel.

And now half of your posts are complaints. Talk about nonsensical one-liners. Double sheesh.

ZippyTheChimp
January 2nd, 2011, 01:51 AM
You're right, only after 6 posts can I mention people are supposed to follow the forum rules and basic net etiquette :roll:

Post #22: Your first, not much etiquette there.

Post #25: Deriding public figures is not a violation of forum rules.

Post #28: You question my right to comment, and insult me throughout.

Post #29: You state, "If you do not like the post, ignore it." Yet you take exception with a post that wasn't even directed at anything you posted.

Take two weeks off and think about it. When I let you back in, try not to act like a jerk.

infoshare
January 2nd, 2011, 09:28 AM
Tibor Machan has a slight Hungarian accent (http://www.youtube.com/watch?feature=player_embedded&v=WCkTIrncRg0), so when he said "bureaucracy" it sounded to me as if he said 'Barackcrazy': that may have been intentional, if not he has inadvertently invented a very funny neologism.

Barackcrazy (LOL), that's a good one!

http://www.youtube.com/watch?feature=player_embedded&v=WCkTIrncRg0

212
January 2nd, 2011, 08:34 PM
Equality, a True Soul Food


By NICHOLAS D. KRISTOF
(http://www.nytimes.com/2011/01/02/opinion/02kristof.html?src=twrhp)
John Steinbeck observed that “a sad soul can kill you quicker, far quicker, than a germ.”

That insight, now confirmed by epidemiological studies, is worth bearing in mind at a time of such polarizing inequality that the wealthiest 1 percent of Americans possess a greater collective net worth than the bottom 90 percent.

There’s growing evidence that the toll of our stunning inequality is not just economic but also is a melancholy of the soul. The upshot appears to be high rates of violent crime, high narcotics use, high teenage birthrates and even high rates of heart disease.

That’s the argument of an important book by two distinguished British epidemiologists, Richard Wilkinson and Kate Pickett. They argue that gross inequality tears at the human psyche, creating anxiety, distrust and an array of mental and physical ailments — and they cite mountains of data to support their argument.

“If you fail to avoid high inequality, you will need more prisons and more police,” they assert. “You will have to deal with higher rates of mental illness, drug abuse and every other kind of problem.” They explore these issues in their book, “The Spirit Level: Why Greater Equality Makes Societies Stronger.”

The heart of their argument is that humans are social animals and that in highly unequal societies those at the bottom suffer from a range of pathologies. For example, a long-term study of British civil servants found that messengers, doormen and others with low status were much more likely to die of heart disease, suicide and some cancers and had substantially worse overall health.

There’s similar evidence from other primates. For example, macaque monkeys are also highly social animals, and scientists put them in cages and taught them how to push a lever so that they could get cocaine. Those at the bottom of the monkey hierarchy took much more cocaine than high-status monkeys.

Other experiments found that low-status monkeys suffered physical problems, including atherosclerosis in their arteries and an increase in abdominal fat. And as with monkeys, so with humans. Researchers have found that when people become unemployed or suffer economic setbacks, they gain weight. One 12-year study of American men found that when their income slipped, they gained an average of 5.5 pounds.

The correlation is strong around the world between countries with greater inequality and greater drug use. Paradoxically, countries with more relaxed narcotics laws, like the Netherlands, have relatively low domestic drug use — perhaps because they are more egalitarian.

Professors Wilkinson and Pickett crunch the numbers and show that the same relationship holds true for a range of social problems. Among rich countries, those that are more unequal appear to have more mental illness, infant mortality, obesity, high school dropouts, teenage births, homicides, and so on.

They find the same thing is true among the 50 American states. More unequal states, like Mississippi and Louisiana, do poorly by these social measures. More equal states, like New Hampshire and Minnesota, do far better.

So why is inequality so harmful? “The Spirit Level” suggests that inequality undermines social trust and community life, corroding societies as a whole. It also suggests that humans, as social beings, become stressed when they find themselves at the bottom of a hierarchy.

That stress leads to biological changes, such as the release of the hormone cortisol, and to the accumulation of abdominal fat (perhaps an evolutionary adaptation in preparation for starvation ahead?). The result is physical ailments like heart disease, and social ailments like violent crime, mutual distrust, self-destructive behaviors and persistent poverty. Another result is the establishment of alternative systems in which one can win respect and acquire self-esteem, such as gangs.

Granted, humans are not all equal in ability: There will always be some who are more wealthy — and others who constitute the bottom. But inequality does not have to be as harsh, oppressive and polarized as it is in America today. Germany and Japan have attained modern, efficient economies with far less inequality than we have — and far fewer social problems. Likewise, the gap between rich and poor fell during the Clinton administration, according to data cited in “The Spirit Level,” even though that was a period of economic vigor.

“Inequality is divisive, and even small differences seem to make an important difference,” Professors Wilkinson and Pickett note. They suggest that it is not just the poor who benefit from the social cohesion that comes with equality, but the entire society.

So as we debate national policy in 2011 — from the estate tax to unemployment insurance to early childhood education — let’s push to reduce the stunning levels of inequality in America today. These inequities seem profoundly unhealthy, for us and for our nation’s soul.



I invite you to visit my blog, On the Ground. Please also join me on Facebook, watch my YouTube videos and follow me on Twitter.

Ninjahedge
January 3rd, 2011, 11:24 AM
The key is not necessarily to make it so the top and the bottom are closer together, but that they do not become as seperated. When you look at income strata, the lower levels has much mixing.

You get many different people working for anything from minimum wage up to 6 figures. But then the numbers drop precipitously. Once you reach a certain level you are much more likely to have more disposable income to actuate other profitable investments and your numbers jump.

While it is likely to find domeone with just about every $1K mark between $50K and $80K/year, try doing the same between $100K and $1M. Try doing it at every $10K instead of $1K. You will probably find the thin spot in the ice.

This jump is one thing that hurts more than the absolutes. When the moat gets bigger, people feel the seperation more than when the castle gets bigger.

212
January 4th, 2011, 05:48 PM
http://graphics8.nytimes.com/images/2011/01/04/opinion/04fixes-brazil/04fixes-brazil-blog427.jpg
Bruno Domingos/Reuters
An apartment building in front of the Rocinha shantytown in Rio de Janeiro.

To Beat Back Poverty, Pay the Poor

(http://opinionator.blogs.nytimes.com/2011/01/03/to-beat-back-poverty-pay-the-poor/?hp)By TINA ROSENBERG

The city of Rio de Janeiro is infamous for the fact that one can look out from a precarious shack on a hill in a miserable favela and see practically into the window of a luxury high-rise condominium. Parts of Brazil look like southern California. Parts of it look like Haiti. Many countries display great wealth side by side with great poverty. But until recently, Brazil was the most unequal country in the world.

Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians. Poverty has fallen during that time from 22 percent of the population to 7 percent.

Contrast this with the United States, where from 1980 to 2005, more than four-fifths of the increase in Americans’ income went to the top 1 percent of earners. (see this great series in Slate by Timothy Noah on American inequality) Productivity among low and middle-income American workers increased, but their incomes did not. If current trends continue, the United States may soon be more unequal than Brazil.

Several factors contribute to Brazil’s astounding feat. But a major part of Brazil’s achievement is due to a single social program that is now transforming how countries all over the world help their poor.

The program, called Bolsa Familia (Family Grant) in Brazil, goes by different names in different places. In Mexico, where it first began on a national scale and has been equally successful at reducing poverty, it is Oportunidades. The generic term for the program is conditional cash transfers. The idea is to give regular payments to poor families, in the form of cash or electronic transfers into their bank accounts, if they meet certain requirements. The requirements vary, but many countries employ those used by Mexico: families must keep their children in school and go for regular medical checkups, and mom must attend workshops on subjects like nutrition or disease prevention. The payments almost always go to women, as they are the most likely to spend the money on their families. The elegant idea behind conditional cash transfers is to combat poverty today while breaking the cycle of poverty for tomorrow.

Most of our Fixes columns so far have been about successful-but-small ideas. They face a common challenge: how to make them work on a bigger scale. This one is different. Brazil is employing a version of an idea now in use in some 40 countries around the globe, one already successful on a staggeringly enormous scale. This is likely the most important government antipoverty program the world has ever seen. It is worth looking at how it works, and why it has been able to help so many people.

In Mexico, Oportunidades today covers 5.8 million families, about 30 percent of the population. An Oportunidades family with a child in primary school and a child in middle school that meets all its responsibilities can get a total of about $123 a month in grants. Students can also get money for school supplies, and children who finish high school in a timely fashion get a one-time payment of $330.

Bolsa Familia, which has similar requirements, is even bigger. Brazil’s conditional cash transfer programs were begun before the government of President Luiz Inacio Lula da Silva, but he consolidated various programs and expanded it. It now covers about 50 million Brazilians, about a quarter of the country. It pays a monthly stipend of about $13 to poor families for each child 15 or younger who is attending school, up to three children. Families can get additional payments of $19 a month for each child of 16 or 17 still in school, up to two children. Families that live in extreme poverty get a basic benefit of about $40, with no conditions.

Do these sums seem heartbreakingly small? They are. But a family living in extreme poverty in Brazil doubles its income when it gets the basic benefit. It has long been clear that Bolsa Familia has reduced poverty in Brazil. But research has only recently revealed its role in enabling Brazil to reduce economic inequality.

The World Bank and the Inter-American Development Bank are working with individual governments to spread these programs around the globe, providing technical help and loans. Conditional cash transfer programs are now found in 14 countries in Latin America and some 26 other countries, according to the World Bank. (One of the programs was in New York City — a small, privately-financed pilot program called Opportunity NYC. A preliminary evaluation showed mixed success, but it is too soon to draw conclusions.) Each program is tailored to local conditions. Some in Latin America, for example, emphasize nutrition. One in Tanzania is experimenting with conditioning payments on an entire community’s behavior.

The program fights poverty in two ways. One is straightforward: it gives money to the poor. This works. And no, the money tends not to be stolen or diverted to the better-off. Brazil and Mexico have been very successful at including only the poor. In both countries it has reduced poverty, especially extreme poverty, and has begun to close the inequality gap.

The idea’s other purpose — to give children more education and better health — is longer term and harder to measure. But measured it is — Oportunidades is probably the most-studied social program on the planet. The program has an evaluation unit and publishes all data. There have also been hundreds of studies by independent academics. The research indicates that conditional cash transfer programs in Mexico and Brazil do keep people healthier, and keep kids in school.

In Mexico today, malnutrition, anemia and stunting have dropped, as have incidences of childhood and adult illnesses. Maternal and infant deaths have been reduced. Contraceptive use in rural areas has risen and teen pregnancy has declined. But the most dramatic effects are visible in education. Children in Oportunidades repeat fewer grades and stay in school longer. Child labor has dropped. In rural areas, the percentage of children entering middle school has risen 42 percent. High school inscription in rural areas has risen by a whopping 85 percent. The strongest effects on education are found in families where the mothers have the lowest schooling levels. Indigenous Mexicans have particularly benefited, staying in school longer.

Bolsa Familia is having a similar impact in Brazil. One recent study found that it increases school attendance and advancement — particularly in the northeast, the region of Brazil where school attendance is lowest, and particularly for older girls, who are at greatest risk of dropping out. The study also found that Bolsa has improved child weight, vaccination rates and use of pre-natal care.

When I traveled in Mexico in 2008 to report on Oportunidades, I met family after family with a distinct before and after story. Parents whose work consisted of using a machete to cut grass had children who, thanks to Oportunidades, had finished high school and were now studying accounting or nursing. Some families had older children who were malnourished as youngsters, but younger children who had always been healthy because Oportunidades had arrived in time to help them eat better. In the city of Venustiano Carranza, in Mexico’s Puebla state, I met Hortensia Alvarez Montes, a 54-year-old widow whose only income came from taking in laundry. Her education stopped in sixth grade, as did that of her first three children. But then came Oportunidades, which kept her two youngest children in school. They were both finishing high school when I visited her. One of them told me she planned to attend college.

Outside of Brazil and Mexico, conditional cash transfer programs are newer and smaller. Nevertheless, there is ample research showing that they, too, increase consumption, lower poverty, and increase school enrollment and use of health services.

If conditional cash transfer programs are to work properly, many more schools and health clinics are needed. But governments can’t always keep up with the demand — and sometimes they can only keep up by drastically reducing quality. If this is a problem for medium-income countries like Brazil and Mexico, imagine the challenge in Honduras or Tanzania.

For skeptics who believe that social programs never work in poor countries and that most of what’s spent on them gets stolen, conditional cash transfer programs offer a convincing rebuttal. Here are programs that help the people who most need help, and do so with very little waste, corruption or political interference. Even tiny, one-village programs that succeed this well are cause for celebration. To do this on the scale that Mexico and Brazil have achieved is astounding.

On Saturday, I’ll respond to reader comments. I’ll also explain why this idea is so remarkably successful — and what we can learn from it.

http://graphics8.nytimes.com/images/2010/10/18/opinion/tinaimg/tinaimg-thumbStandard.jpg
Tina Rosenberg won a Pulitzer Prize for her book “The Haunted Land: Facing Europe’s Ghosts After Communism.” She is a former editorial writer for The Times and now a contributing writer for the paper’s Sunday magazine. Her new book, “Join the Club: How Peer Pressure Can Transform the World,” is forthcoming from W.W. Norton.

Ninjahedge
January 5th, 2011, 08:40 AM
So, lemme get this strait....


You spend money directly on things that will help and motivate people to learn things that will reduce overall long term expenses and you end up getting a favorable result?

Who knew!


I thought you either gave all the money to the rich and let it "trickle down", or you threw the most money you can at the worst areas and did not bother looking where it ended up.

What is this intelligent stuff?

It has to be the Devil!!!! :p

BBMW
January 5th, 2011, 12:23 PM
No, you pay people not to work. Any safety net you build, a lot of people will get comfortable laying around in.

There are millions of people in the country who will fight anything like this hammer and tongs (and that includes already existing programs.)

Ninjahedge
January 5th, 2011, 12:41 PM
Millions fighting this? Why? Do you mean THIS country? If so, yes (and it is hammer and nails, I have never heard of hammer and tongs).

The problem is, our programs do not have much encouragement fopr progressing. Why work MORE to get LESS? Why don't we have more programs to help people get a better education or feed their family, but do not punish them because their job passes that magic $$ that excludes all help?

If you could still get the majority of your welfare payments while still working a minimum wage job, you will see more people motivated to do so. But we also need to do as these countries have and encourage healthy living and eating.


Maybe if we had some other sort of motivation for living healthy we would not have so much medicaid expense for all the morbidly obese in the lower economic brackets.

BBMW
January 5th, 2011, 02:40 PM
"hammer and tongs" is a saying I picked up a while back. Maybe it's not so popular, but you can guess the meaning.

I don't think there should be any direct payment to individuals from the government at all. It's an individual's responsibility to support themselves. I also include retirement in this.

There is a role for government spending to create jobs, as long as the results of those jobs form long lasting assets to society (think public works, education, etc..) But I, and many, many more people draw the line at paying people to do nothing.

Ninjahedge
January 5th, 2011, 03:50 PM
It does not work that way.

As much as people would like to say that it is all the responsibility of the individual you will not get enough individuals that CAN do this and get themselves out on their own.

The difference is, in some countries they are trying to make it so that the long term costs are minimized.

It takes less money to keep a person healthy than for our health care to heal them when they are seriously ill or injured.

Now we can also say "to hell with that", but you end up getting an increase in crime and virtual bastions of human disease. What then? Walls? This just does not work.

Now, that being said, I am not in favor of absolute give-aways. You should not be rewarded for additional kids. Maybe you should have additional help for things that kids need for life and school, but no direct cash for having another kid.

The hard part is when things like food stamps are misused, and that seems to demand even stricter controls (such as planned diets/ Issued foods). The only problem is that gets influenced by political groups/ special interests and you end up giving fat people tons of cheese (instead of that peanut buttery stuff they are succeeding with in Africa).

The only problem you have in your assessment is that different people have different ways of defining "nothing". I am not in favor of the abuse the Welfare system is subjected to, but I also do not like the call of "nothing" being used to cut invalids funding.

Anyway, what we probably need to do is start re-inventing this on a smaller scale to see how some programs work, then work to expand it to others.

Any national plan will fail just on the enormity of trying to change so much so quickly. Bureaucratic entropy will do the rest... :P

212
January 5th, 2011, 07:05 PM
Any safety net you build, a lot of people will get comfortable laying around in.

Not in Brazil, apparently.

The Brazilian economy has grown like crazy (http://www.tradingeconomics.com/Economics/GDP-Per-Capita.aspx?Symbol=BRL), more than twice as fast as America's since 2003.

This while it's had the "most important government antipoverty program the world has ever seen."
Which seems to be working -- and Brazilians seem to be working too.

BBMW, do you have a good explanation for why this might be happening? Cause it looks like Brazil might be proving you a bit wrong.

212
January 5th, 2011, 07:27 PM
There is a role for government spending to create jobs, as long as the results of those jobs form long lasting assets to society (think public works, education, etc..)

BBMW, this is a moderate statement, and you deserve credit for it.

Do you think there is a role for spending to create jobs in a country with 10% unemployment, and only 1 job opening for every 4 people out of work?

Fabrizio
January 5th, 2011, 07:39 PM
It should be noted however that Brazil is still much more unequal than the US.

The article says: "Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians."

I should hope so. If their Gini Coefficient is so bad today, it must have been very extreme in 2003.

The article says: "Poverty has fallen during that time from 22 percent of the population to 7 percent."

But it would be interesting know what constitutes poverty in Brazil and what constitutes poverty in the US.

Be that as it may, if the Gini coefficient is meaningful, then US inequality is rather shocking:

Gini coefficient around the world -

http://en.wikipedia.org/wiki/File:Gini_Coefficient_World_CIA_Report_2009.png

lofter1
January 5th, 2011, 08:14 PM
I don't think there should be any direct payment to individuals from the government at all. It's an individual's responsibility to support themselves. I also include retirement in this.


What do you propose we do with all the money paid in by individuals as social security tax / medical tax that the government is currently holding? And please don't tell us that SS is busted. The money was paid in. The government has all sorts of cash here and there -- the SS fund may not be properly funded, but my cash has been paid and will come due in time.

ZippyTheChimp
January 24th, 2011, 10:34 PM
As Incomes Gap Widens, New York Grows Apart

by James Parrott
18 Jan 2011

New York has the greatest disparities in income of any major U.S. city, with the top 1 percent of the population getting 44 percent of the income in the city.

That New York City has extreme wealth and extreme poverty, and lots of both, seems like a law of nature, older than the subway or the Brooklyn Bridge. While there is a lot of truth in that, the city has not always had the extremes to the extent it has them now. Today, the wealthiest 1 percent of city residents has 44 percent of all income in the city, a share nearly four times as great as 30 years ago.

Over the past three decades, the bulk of economic gains in the United States and New York has accrued to those at the very top of the income pyramid. The economy has grown significantly over this period, but those at the very top have taken a vastly disproportionate share of the gains, leaving very little for the rest.

The Big Change

The chart below, from a recent report on income concentration by the Fiscal Policy Institute (PDF) (http://www.fiscalpolicy.org/FPI_GrowTogetherOrPullFurtherApart_20101213.pdf) , demonstrates that the first three decades after World War II -- from the mid 1940s to the late 1970s -- were a time when the share of total income going to the wealthiest 1 percent stayed remarkably steady. In 1947, the top 1 percent received 12 percent of the total, and three decades later, in 1978, that remained about the same -- actually slightly lower -- at 9 percent. The top 1 percent's share held at close to 10 percent throughout all three decades.

http://gothamgazette.com/graphics/2011/01/top1percent.jpg

Full size image (PDF) (http://www.gothamgazette.com/pdf/top1percent.pdf)


The post-war era is widely seen as a golden age of the middle class, with an economy fueled in significant part by middle-class spending. The middle class flourished. Its numbers expanded, and its living standards rose steadily. The U.S. economy grew, and that growth lifted millions of families out of poverty and into the middle class. Parents could expect their children to do even better than they had done.

The top 1 percent gained as well -- executives and bankers enjoyed the success of the American economy as much as anyone. Their incomes grew steadily, but together with the rest of the country in a rising tide that lifted all boats, in New York and in the country as a whole. We grew together.

The picture since 1980 has changed dramatically . In 1980, the top 1 percent of households nationally held 10 percent of the total income. By 2007, that share had more than doubled, rising to 23.5 percent -- a high previously attained only in 1928, the eve of the 1929 stock market crash that ushered in the Great Depression.

The economy has grown considerably in the three decades since 1980, albeit not as fast as in the 1950s through the 1970s. But growth after 1980 looked different than it had in the preceding era. The incomes of the top 1 percent and the top 5 percent grew faster, much faster, than in the post-war period, while the incomes of everyone else, those with low incomes as well as the broad middle class, faltered and stagnated. We grew apart.

Growing Apart in New York

In New York City in 1980, the share of all incomes going to the top 1 percent was 12 percent -- more or less in line with the rest of the U.S. But by 1990 the top 1 percent's share in New York City had risen to almost 20 percent, and after a period of extreme concentration in the late 1990s reached nearly 35 percent in 2000. The 2001-2003 recession briefly pushed the top share down, but then it gained at its fastest pace over the past 30 years, climbing to 44 percent in 2007, almost double the historically high national level of 23.5 percent.

New York State is the most polarized among the 50 states, and New York City is the most polarized among the 25 largest cities in the United States.

Today, most experts expect the pace of the nascent recovery from the Great Recession of 2008-09 to remain subdued in large part because of high household debt burdens, stagnant or declining wages, and a bleak job outlook. The recession was triggered by the bursting of the housing bubble and a speculative, excess-prone financial system, but it occurred in an economy with an increasingly shaky foundation characterized by weak job growth, continued export of middle-income jobs and wage growth that failed to keep pace with inflation and the growth in the productivity of labor.

This shaky foundation has a lot to do with the post-1980 hyper-concentration of income. The expansion from 2004 to 2007 was the first in which family incomes and median wages adjusted for inflation did not rise over the cycle to reach the peak of the previous business cycle. Despite economic growth, many Americans never saw their income return to the levels they had reached in 2000. Faced with this, families turned to debt, using credit cards and home equity borrowing to sustain their living standards. The crash of the financial and housing bubbles destroyed trillions of dollars in retirement and college savings that had been accumulated by middle- and low-income Americans, and decimated the value of their homes.

Rebuilding that wealth and economic security and restoring a sense of optimism for the next generation will be doubly difficult given the current polarized system of economic rewards and the bleak outlook for job and economic growth. The broadly shared prosperity that prevailed in the three decades after World War II is a distant memory. Are we destined to grow further apart?

Growth at the Top

The concentration of income growth at the top does not necessarily mean that those below the top will not see living standards improve. Incomes could rise up and down the income scale even as gains are disproportionately concentrated at the top. That, though, is not what has happened recently.

Over the period from 1980 to 2007, when inflation-adjusted income in New York state grew an average of 2.1 percent a year after adjusting for population increase, incomes for those in the bottom half of the income spectrum (incomes below $33,000) generally declined. Incomes of people in the middle-range (incomes from $33,000 to $176,000) rose but at only a fraction of the pace of total income growth. Meanwhile, the real incomes of those in the top 1 percent (incomes over $580,000) grew 7 percent annually, over three times as fast as overall income growth. The rest of those in the top 5 percent (incomes from $176,000 to $580,000) saw their incomes rise a little faster than the pace of total income growth.

Most New York City workers and their families have experienced very little real income or wage growth over the past two decades. For example, as the table below shows, the inflation-adjusted median hourly wage fell by 8.6 percent from 1990 to 2007, and poverty came down very little during a period when the income share of the top 1 percent doubled from 21.5 percent to 44 percent.

http://gothamgazette.com/graphics/2011/01/nycgrowthchart.jpg

Full size image (PDF) (http://www.gothamgazette.com/pdf/nycgrowthchart.pdf)


New York's Stark Split

In New York City, there are about 34,500 households, representing about 90,000 people, in the top 1 percent. On average, these households have annual incomes of $3.7 million. At the same time, about 900,000 people in New York City -- about 10.5 percent of city residents -- live in deep poverty. Deep poverty is half of the federal poverty line; for a four-person family, that means an income of $10,500. An annual income of $3.7 million translates into a daily level of $10,137 -- more than the average annual family income of those living in deep poverty. According to state tax data, half of the households in New York City have annual incomes below $30,000, an amount that the top 1 percent receives over the course of a holiday weekend.

If New York City were a nation, its level of income concentration would rank 15th worst among 134 countries, between Chile and Honduras. Wall Street, with its stratospheric profits and bonuses, sits within 15 miles of the Bronx -- the nation's poorest urban county.

Behind the Income Concentration

It is often argued that skills-based technological change largely explains the trend toward greater income polarization. According to this reasoning, the steady advance of technological change raises skill requirements. As a result, those who pursue higher education and obtain the skills needed to master new technologies receive greater economic rewards. Those lacking higher education see the demand slacken for their limited skills and their wages fall accordingly.

There is a certain appeal to this explanation, but it does not account for the intensified degree of income concentration that has taken place. One third of New Yorkers aged 25 to 64 in the workforce now have a four-year college degree or better, a considerable increase since 1990. Despite that, income gains have been concentrated among a much smaller segment of the population. In New York City, inflation-adjusted annual earnings of college-educated young workers have fallen 6 percent from 1990 levels. In addition, among the well-educated those with the highest incomes do not have the best education.

Something else must be at work since education, however important on an individual level, simply cannot serve as a compelling explanation for increased income concentration.

Moreover, skills-based technological change -- and globalization for that matter -- has occurred throughout the developed world. Yet no other country has seen the heightened polarization of incomes that has taken place in the United States. In the early 1970s, the richest 1 percent in the U.S. had a share of total income that was roughly in line with several other developed economies, including Canada, France, Japan and the United Kingdom. By 2000, however, the top 1 percent's share had risen much higher in the U.S. than in any other country. In Germany, there was almost no change in the income share of the top 1 percent. France even saw a decline in the share going to the richest 1 percent, and by 2000 that share was half what it was in the United States. Japan’s top 1 percent received a slight gain in share, but that share also was only half that of the U.S. in 2000.

Jacob Hacker and Paul Pierson persuasively argue in their book, Winner-Take-All Politics, that incomes have risen so high at the top not because of education or other economic factors but because of national policy changes that have favored the wealthy and certain institutions, such as the largest financial companies. Hacker and Pierson point to several national policy changes involving labor markets and labor unions, financial deregulation and taxation that were largely unique to the U.S.

These changes -- such as financial deregulation and the failure to limit executive compensation -- have tremendously benefited large financial firms and corporate executives. Those developments have made a big difference in New York City. National policies that allowed the purchasing power of the minimum wage to seriously erode and that reduced the power of labor unions also have made a significant difference in depressing wages for middle- and low-income workers.

There is nothing inevitable in the operation of markets that generates extreme polarization in the distribution of economic rewards, but policy choices on how markets can operate and on taxes have everything to do with the distribution of economic rewards.
It has become increasingly understood that the many steps taken since the 1970s to deregulate financial markets played a key role in excessive speculation, poorly designed and unregulated financial innovations, and eventually, in the 2008 financial collapse. Deregulation gave financial institutions virtually a free hand to combine commercial and investment-banking, increase leverage and sell exotic financial instruments such as derivatives without regard for effective risk management. In financial bubble periods, such as the one based on commercial real estate lending in the 1980s and the dot.com boom of the late 1990s, financial firms reap enormous profits and pay their top bankers and traders huge bonuses. Nationally, in 2004, Hacker and Pierson point out, nearly 20 percent of America's super-wealthy (the top one-tenth of 1 percent) worked in finance; 40 percent were CEOs and other executives.

Federal tax policy also has contributed greatly . The moves to reduce top tax rates and capital gains tax rates -- as Presidents Ronald Reagan and George W. Bush did -- and to maintain glaring loopholes have all had a major effect. Hacker and Pierson found that the average effective federal income tax rate on the top 1 percent fell by one third from 1970 to 2004.

States have much more limited authority. Despite that, several tax policy changes enacted by New York State have eased the tax burden at the top. New Yorks top state personal income tax rate was 15 percent in the early 1970s and in several steps it was reduced to 6.85 percent by 2009, when the state enacted a temporary surcharge. While the management fees referred to as "carried interest" received by hedge fund managers is taxed at the lower capital gains tax rate at the federal level, New York City exempts it from taxation altogether under the city's unincorporated business tax.

Can We Grow Together?

The Great Recession dramatically worsened an already highly polarized economy. Policy changes are needed at the state and national level to stimulate more robust growth and to reverse excessive income polarization. Not all of these changes are politically possible in the immediate term, but it is hard to see how the economy can fundamentally improve in the absence of significant changes that move us toward more broadly shared prosperity.

The kinds of policies that would help include: increasing the minimum wage, strengthening the enforcement of labor standards, expanding living wage requirements, increasing labor union membership, making investments in economic growth rather than slashing government budgets, helping small businesses grow, provide real assistance on home foreclosures including keeping people in their homes as renters, and investing in public higher education.

At this moment, the most critical move to reverse extreme income polarization would be enacting progressive tax policies at all levels of government. In New York State, the top 1 percent pays a smaller share of their income in state and local taxes than all of those less well off, from the upper-middle, to the middle, to the poor. The story is similar in New York City. While the top one percent has 44 percent of city income and pay slightly over half of all local personal income taxes, they account for only one-third of total New York City tax revenue including personal income, city sales and residential property taxes.

At the national level, the income and estate tax changes agreed to by President Barack Obama and the Republican leadership will give 34 percent of the tax cuts going to all New Yorkers to the richest 1 percent. On average, the richest households will receive a tax cut averaging $124,000 in 2011. The middle fifth of New Yorkers will average a $1,500 tax cut, and the poorest 20 percent will get less than $300 on average.

There are many reasons to be concerned about New York's extreme income concentration. Among the most pressing is that the pronounced polarization in the distribution of the rewards of economic growth is holding back the nascent recovery. Growth is stalled because our system of rewarding economic effort is out of kilter. In the last three decades, the U.S. has become a country where average workers can no longer count on being paid for their productivity, while those at the top receive an income far out of proportion to what they contribute to our economy.


James Parrott is deputy director and chief economist of the Fiscal Policy Institute. He has been studying and writing about the New York economy since he landed in New York City a quarter century ago.

Gotham Gazette is brought to you by Citizens Union Foundation.

BBMW
January 24th, 2011, 10:56 PM
The government isn't "holding" your SS trust fund money. The gov't, in the form of the SS administration, "lent" the money back to the gov't, in the form of the US Treasury, which promptly spent it (at the direction of Congress.) To get it back, the Treasury is going to have to either borrow, tax, or print more money. Each of those presents problems, of which I'm sure you're well aware.

At some point, the gov't is going to have to impose direct pain on the entirety of the American people in order to prop up the house of cards that is the entitlement system (Not just SS, but also Medicare, Medicaid, and Welfare), most likely in the form of sigificant new taxes. When this happens, we'll see exactly how much political support Social Security really has. Expect to see real bare knuckled fights between working age taxpayers and retirees.


What do you propose we do with all the money paid in by individuals as social security tax / medical tax that the government is currently holding? And please don't tell us that SS is busted. The money was paid in. The government has all sorts of cash here and there -- the SS fund may not be properly funded, but my cash has been paid and will come due in time.

Ninjahedge
January 25th, 2011, 08:45 AM
BBMW, he knows this.

What he is saying is how it SHOULD HAVE BEEN DONE.

According to its original charter, SS was set up to HOLD YOUR MONEY, not lend it back to itself and THEN have to get MORE MONEY BACK FROM YOU TO PAY FOR IT!

Why are we being forced to pay cash to pay ourselves back? (rhetorical question)

They do not have to impose the pain you are talking about on everyone. What they have to do is look at the entire system and do a few things:

1. Start regulating the pharmeceutical companies so they do not simply raise the price of their meds when the Medicare funds are increased. (Edit: This applies to many things. Giving out more money to pay for necessities, but not regulating what is charged for those necessities is just a 2nd person gift.)
2. Reduce certain tax grants and other buisness benefits that may be outdated, partisan, or simply ineffective (why do we still give subsidies to Tobacco farmers?)
3. Increase the taxes on disposable income. Althought it is seen as unfair, how is it that such a small proportion of operational costs of the country are actually footed by those that hold the countries wealth? Maybe we should rescale the tax system on how much of the country you "own" and see how many start crying unfair.
4. ELIMINATE TAXES below a certain level. Get rid of them entirely, don't even collect them! Why the hell do we even HAVE taxes on minimum wage? Why do we need to pay a system of collectors and accountants to something that should never have been collected in the first place. the more times money changes hands, the less there is when it finally gets to where it is going.

The main problems we have are politicians that keep paying back their buddies and "supporters" and get us to fight amongst ourselves.

Overgeneralization will never get us a working solution, and neither will blind class (or other) warfare. We need to be more surgical in our solutions and stop trying to solve the rat problem with nukes.

lofter1
January 25th, 2011, 11:01 AM
They seem to always make enough money or find it somewhere to bomb and war on the other side of the world.

Money isn't real anyway.

BBMW
January 25th, 2011, 12:57 PM
Actually, this is quite correct. The caveat is that if it's abused, it' becomes worthless (think inflation).





Money isn't real anyway.

BBMW
January 25th, 2011, 01:10 PM
BBMW, he knows this.

What he is saying is how it SHOULD HAVE BEEN DONE.

According to its original charter, SS was set up to HOLD YOUR MONEY, not lend it back to itself and THEN have to get MORE MONEY BACK FROM YOU TO PAY FOR IT!



AFAIK, this is incorrect. Orignally SS was set up as a "pay as you go" system. The benefits were defined, but it was not a "savings account." Benefits were paid out of the receipts from taxes on current workers. Those workers were to receive benefits paid out of receipts from future workers. There was no accumulation of assets to pay future benefits.

Then the baby boom happened. This was a demographic pig in a python, and the SS actuaries figured that when the bulge reached the end of the line, there ratio of workers to retirees would narrow significantly. The got congress to raise SS taxes, and funnel the excess into the SS trust fund. This was to be used to fund the SS deficits caused by retirement of the boomers. They made a huge mistake though. Congress required that the SS trust fund be invested only in US treasury securities. Then From the 80's till today, the gov't has run huge deficits. In part these were funded by the SS trust fund.

So the trust fund is 100% invested in US Treasury securities, which will have to be paid back by the gov't, which is running gigantic deficits.



Why are we being forced to pay cash to pay ourselves back? (rhetorical question)

They do not have to impose the pain you are talking about on everyone. What they have to do is look at the entire system and do a few things:

1. Start regulating the pharmeceutical companies so they do not simply raise the price of their meds when the Medicare funds are increased. (Edit: This applies to many things. Giving out more money to pay for necessities, but not regulating what is charged for those necessities is just a 2nd person gift.)


This has nothing to do with SS. Medicare yes. But that should probably be in the health care thread.



2. Reduce certain tax grants and other buisness benefits that may be outdated, partisan, or simply ineffective (why do we still give subsidies to Tobacco farmers?)



Yes, but this is small beans compared to the money we're talking about.




3. Increase the taxes on disposable income. Althought it is seen as unfair, how is it that such a small proportion of operational costs of the country are actually footed by those that hold the countries wealth? Maybe we should rescale the tax system on how much of the country you "own" and see how many start crying unfair.


Good luck with that. Raising taxes is tantamount to political suicide.



4. ELIMINATE TAXES below a certain level. Get rid of them entirely, don't even collect them! Why the hell do we even HAVE taxes on minimum wage? Why do we need to pay a system of collectors and accountants to something that should never have been collected in the first place. the more times money changes hands, the less there is when it finally gets to where it is going.


Other way around everyone earning anything should be paying taxes. Maybe small, but something.



The main problems we have are politicians that keep paying back their buddies and "supporters" and get us to fight amongst ourselves.

Overgeneralization will never get us a working solution, and neither will blind class (or other) warfare. We need to be more surgical in our solutions and stop trying to solve the rat problem with nukes.

Really its a simple cash flow problem. We're spending too much and taking in to little. Things need to be brought into balance, one way or another. But at what point is the benefit not worth the cost?

lofter1
January 25th, 2011, 01:22 PM
People are living too long.

Ninjahedge
January 25th, 2011, 01:32 PM
Everything has to do with everything BBMW.

Whether or not you see Medicare and SS as different lines on different sheets of peper will not matter jack when they effect the same people.

Subsidies and other spending is not small beans. That is what they are called to justify them. You get enough small beans together and you will have enough to feed someone.

As for raising taxes, the # of people that would have this happen to them is small. In a "democracy" that would mean very little. What needs to be done is further reform to things like campaign funding so that individuals cannot benefit so handily from corporate and other connections.

Once the $$/vote advantage is minimized, you can start putting a proportionate % "ownership" tax on everyone (with a base living expense being subtracted).


As for your "other way around", it makes no sense. If you do not have enough money to LIVE on, why should you be paying anything? Do you want an increase in poverty? Disease? Malnutrition? That has been proven to be bad for a country regardless of how much money is saved in the short term.

You need to keep your working class HEALTHY in order for things to work. You do not gift out everything and hand out free food for having 12 kids, but you do not ignore them and start BS like "pay your 'fair' share". That simply will not work.

The BIGGEST thing that needs to be done is an elimination of the speed bumps that are making it so hard for things like small buisnesses to start up and for people to jump the class barriers. Politicians seem to like to talk a lot about the American Way and how people can work their way to the top, but in reality that is becoming harder and harder to do (as the shelters for the rich are still just out of the reach of those approaching that level, making it harder to earn ENOUGH to be able to actually use them).


Anyway...

BBMW
January 25th, 2011, 09:57 PM
You're being sarcastic, but it's true. When SS was implemented the average life expectance was, IIRC 67. It's now in the late 70's. They've fudged the ages for receiving benefits, but not to the same extent. And, of course this is part of what's skewing the payer to collector ratio.


People are living too long.

ZippyTheChimp
January 25th, 2011, 10:33 PM
No, you pay people not to work. Any safety net you build, a lot of people will get comfortable laying around in.

There are millions of people in the country who will fight anything like this hammer and tongs (and that includes already existing programs.)This post has led to a side discussion that has little to do with the premise of this thread:

Income inequality has risen to historic levels over despite a steadily growing economy and an increasingly educated workforce.

Nowhere is this more apparent than in NYC.

To repeat:
In New York City in 1980, the share of all incomes going to the top 1 percent was 12 percent -- more or less in line with the rest of the U.S. But by 1990 the top 1 percent's share in New York City had risen to almost 20 percent, and after a period of extreme concentration in the late 1990s reached nearly 35 percent in 2000. The 2001-2003 recession briefly pushed the top share down, but then it gained at its fastest pace over the past 30 years, climbing to 44 percent in 2007, almost double the historically high national level of 23.5 percent.

New York State is the most polarized among the 50 states, and New York City is the most polarized among the 25 largest cities in the United States.

...

It is often argued that skills-based technological change largely explains the trend toward greater income polarization. According to this reasoning, the steady advance of technological change raises skill requirements. As a result, those who pursue higher education and obtain the skills needed to master new technologies receive greater economic rewards. Those lacking higher education see the demand slacken for their limited skills and their wages fall accordingly.

There is a certain appeal to this explanation, but it does not account for the intensified degree of income concentration that has taken place. One third of New Yorkers aged 25 to 64 in the workforce now have a four-year college degree or better, a considerable increase since 1990. Despite that, income gains have been concentrated among a much smaller segment of the population. In New York City, inflation-adjusted annual earnings of college-educated young workers have fallen 6 percent from 1990 levels. In addition, among the well-educated those with the highest incomes do not have the best education.

Something else must be at work since education, however important on an individual level, simply cannot serve as a compelling explanation for increased income concentration.

Moreover, skills-based technological change -- and globalization for that matter -- has occurred throughout the developed world. Yet no other country has seen the heightened polarization of incomes that has taken place in the United States. In the early 1970s, the richest 1 percent in the U.S. had a share of total income that was roughly in line with several other developed economies, including Canada, France, Japan and the United Kingdom. By 2000, however, the top 1 percent's share had risen much higher in the U.S. than in any other country.

lofter1
January 25th, 2011, 11:39 PM
You're being sarcastic ...

Not a bit. Just like you said in your follow up: The SS plan as enacted didn't count on so many folks living into their 80s & 90s.

RandySavage
January 26th, 2011, 12:09 AM
^ The wealth disparity has little to do with one's technical skills/education and everything to do with one's place within the hierarchy of NYC's financial industry and the sheer size of transactions that take place here. Those at the top of the wealth pyramid are in on big money deals/movements (e.g. a bond trader, hedge fund manager, major individual investor, etc.). The players involved in these transactions get their cuts - or directly benefit from the exchange - and there is so much money moving that those "at the table" in finance take out a proportionate amount for themselves - an absurd amount.

Then there are the ancillary professions, like a partner at a corporate law firm, who exist by virtue of these financial transactions, and are first to get the scraps at the table (e.g., fees collected and dispersed from facilitating the floating of billion dollars of bonds for JP Morgan)

Only a relative handful of people can be (or are wanted) at the table. That is why there is the big disparity.

BBMW
January 26th, 2011, 11:58 AM
So maybe it should be reworked as something of a disability program. If you can show you're not in good enough shape to work, you get benefits. If you can still work, you don't.

I think one of the things that's going to come out of the financial crysis, especially with it lining up with the baby boomers aging, is the death of the concept of retirement being an extented, government subsidized vacation, from late middle age to death.


Not a bit. Just like you said in your follow up: The SS plan as enacted didn't count on so many folks living into their 80s & 90s.

BBMW
January 26th, 2011, 12:00 PM
Fair enough. If you want to start, or find an old, retirement/social security thread, we can move that discussion there.


This post has led to a side discussion that has little to do with the premise of this thread:

To repeat:

ZippyTheChimp
January 26th, 2011, 12:44 PM
The financial industry has been here a long time. The disparity in income levels has only escalated to historic levels in recent decades. And while NYC is more pronounced than the rest of the country, the historic disparity exists nationally, where the financial industry isn't predominant.

And it can be said that London is similar to NYC as to industrial profile. While the UK is much more dependent on metro London for its total GDP than the US is to NYC metro, the wealth disparity in the UK is much less than in the US.

ZippyTheChimp
January 26th, 2011, 12:52 PM
Fair enough. If you want to start, or find an old, retirement/social security thread, we can move that discussion there.Why do I have to do that?

If you think it's relevant, you can explain it. I just don't see it getting anywhere as to this topic.

Or you can continue on the thread you started last year (http://wirednewyork.com/forum/showthread.php?t=23509&highlight=social+security). :)

RandySavage
January 26th, 2011, 04:35 PM
The financial industry has been here a long time. The disparity in income levels has only escalated to historic levels in recent decades. And while NYC is more pronounced than the rest of the country, the historic disparity exists nationally, where the financial industry isn't predominant.

And it can be said that London is similar to NYC as to industrial profile. While the UK is much more dependent on metro London for its total GDP than the US is to NYC metro, the wealth disparity in the UK is much less than in the US.


It has been around for a long time, but it's gotten much more complex (e.g., derivatives) and much, much larger (in terms of the volume of capital moving through it) in recent decades. People, particularly those at the top of the wealth pyramid in NY, have also gotten greedier and more audacious in their avarice - and the example they've set has trickled down.

And the same financial industry is present throughout the country, just more pronounced in NY, as you said.

Not sure how to account for the London difference, except maybe that Londoners don't have the same breed of greed that New York spawns.

This is just coming from my personal experience - I could be wrong - but the richest people I know all do basically the same thing - while I and my acquaintances in non-financial fields are in a much lower tax bracket.

BBMW
January 26th, 2011, 05:08 PM
Okay, brought back to life.


Why do I have to do that?

If you think it's relevant, you can explain it. I just don't see it getting anywhere as to this topic.

Or you can continue on the thread you started last year (http://wirednewyork.com/forum/showthread.php?t=23509&highlight=social+security). :)

Merry
February 25th, 2011, 08:34 PM
The Oldest Trick in the Book: Redistribution of Wealth in America

by Russell Simmons

I have been thinking a lot about the last recorded words of Dr. Martin Luther King Jr., before a lone gunman took his life as he rested on the balcony of the Lorraine Motel in Memphis, Tennessee. It was 43 years ago this month that Dr. King traveled to Memphis to join the city's public sanitation workers who had finally had enough of the abuses by their government, and so walked off the job, staging a 64-day strike. The "poor people's campaign (http://www.npr.org/templates/story/story.php?storyId=91626373)" was in full swing, led by a public employees union, and it would be Dr. Martin Luther King Jr.'s last stand against injustice. It was the night before his assassination that he spoke these eloquent words (http://mlk-kpp01.stanford.edu/index.php/encyclopedia/documentsentry/ive_been_to_the_mountaintop/):
We've got some difficult days ahead. But it doesn't matter with me now... And I've looked over. And I've seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the Promised Land.As I've traveled the country the past two months on a tour to promote my new book, Super Rich, I have spoken with thousands of proud, hard-working Americans and their families who still struggle to realize King's dream of dignity, decency, economic justice and equality. I have spoken to the factory worker who counts the loose change in their cookie jar to pay for the gas in their car to get back and forth to work. I have spoken to the teacher who is scared to death of losing the job they have held for forty years because the city must make cuts. I have spoken to the men who have recently come home from prison to neighborhoods that are 80% unemployed. And in every hotel room I've settled in, I've watched on television, with horror, the struggle of the people of the state of Wisconsin who are replaying out the 1968 Memphis rallies of the public sanitation workers' "I Am A Man" campaign. And when I flip the channel, I see the horrific images of the Libyan people who, like King, have rose up against their oppressive government to demand freedom.

Like Mayor Henry Loeb of Memphis, and Muammar Gaddafi of Libya, Governor Scott Walker has declared war on his own people. I am emphatically not saying the means are the same. Gov. Walker won an election, Gaddafi is a dictator. However, I'm saying the aims are the same - permanent power of your political party and the destruction of the proud, hard working class of the nation. And here we are 43 years later, standing with the working families of this great nation up against politicians whose pockets are lined by greedy, rich men. But the men that we respect are men like King and Sargent Shriver, two men who would never declare war on their own people, but war on the systemic problems that destroyed their people.

Gov. Walker, and those who are even thinking of standing "behind" him, in the spirit of Dr. King and those who stood by his side, we will no longer endure a war against middle and working class families in this country, for we have had enough. We see who your billionaire oil buddies are, and we will stand up to your bullying with the strength of those 1,300 sanitation workers of Memphis, Tennessee and the 100,000 public employees protesting in Madison as our power. Gov. Walker, to threaten your own people that if you don't get your way there will "dire consequences" is as pathetic and thuggish as listening to an 68-year-old dictator say he will "fight till the last drop of blood."

The middle class of this country is struggling to have any class at all, for they are on the brink of poverty with every paycheck that doesn't show up on time. And the people living in poverty have been forgotten about, as politicians on both sides of the aisle give speech after speech and forget to even mention their existence. While Wall Street booms and I get tax breaks, the working people who reside on Main Street are holding on by a thread. These incredible, resilient, proud Americans have no one fighting for them, so they have decided to pick up the protest signs and fight for themselves. But, make no mistake, you continue to wage war on them, you might catch an uprising you only thought happened in Middle Eastern or African countries. It's that serious. A couple of tweets from our compassionate friends like Eminem, Ashton Kutcher, Diddy, or even Kim Kardashian, all of whom have more Twitter influence than the President, could start the movement that this country needs.

America will reach the Promised Land when we stop paying into the war machine and lobbying firms and start educating our children and protecting our public workers. The battleground has been set and as history as our indicator, we know that the people will prevail.

http://www.huffingtonpost.com/russell-simmons/the-oldest-trick-in-the-b_b_827958.html?ir=New%20York

BBMW
February 27th, 2011, 02:26 PM
Mr Simmons misses the point. It not about Gov. Walker. I don't follow Wisconsin politics, but I tend to believe that he is doing exactly what the people who elected him want him to be doing.

For a long time, the public employee unions have used their political power to extort unaffordable long-tail benefits from the governmental organizations they work for. On the flip side, politicians where more than happy to agree to benefits that wouldn't have to paid for until years or decades after they were promised, and after those politicians were retired (buying current votes with future dollars).

However, now the bills are coming due, and the majority of voters (who are NOT members of public employee unions, and do not get their gold plated benefits) are refusing to pay. And as much as the unions want to huff and puff, they're in the minority here, and are likely to lose.

lofter1
February 27th, 2011, 04:00 PM
Mr Simmons misses the point. It not about Gov. Walker. I don't follow Wisconsin politics, but I tend to believe that he is doing exactly what the people who elected him want him to be doing.

Maybe among those who voted, but apparently the general populace disagrees in bigger numbers ...

February 22, 2011 -- Poll: Americans favor union bargaining rights (http://www.usatoday.com/news/nation/2011-02-22-poll-public-unions-wisconsin_N.htm)

And in Wisconsin, even the voting public doesn't agree ...

Walker's Over-Reach, Ctd

THE DAILY DISH (http://andrewsullivan.theatlantic.com/the_daily_dish/2011/02/walkers-over-reach-ctd.html)
27 FEB 2011 01:07 PM



Dick Morris's latest poll (http://www.dickmorris.com/blog/the-dick-morris-poll-on-wisconsin/) shows Wisconsin voters where the Dish is - in favor of Walker's specific requests of public sector unions, but unwilling to remove most collective bargaining rights ...

In a poll reliant on Rasmussen's pro-GOP skewed sample, we get the following result (http://tpmdc.talkingpointsmemo.com/2011/02/mysterious-conservative-poll-of-walkers-budget-plan-hits-wisconsin.php):



More than half (56%) of respondents said Wisconsin state workers should have collective bargaining power. Just 32% sided with Walker and said state workers should not be allowed to collectively negotiate benefits and other compensation.

***

From the Morris Poll (http://www.dickmorris.com/blog/the-dick-morris-poll-on-wisconsin/):



VOTERS OPPOSE CHANGING COLLECTIVE BARGAINING AGREEMENTS

On the issue of limiting collective bargaining to wage and benefit issues, however, they break with the Governor, opposing the proposal by 41-54.

If the issues to be taken off the bargaining table are related to giving schools flexibility to modify tenure, pay teachers based on merit, discharge bad teachers and promote good ones, however, they support such limits on collective bargaining by 58-38.

Ninjahedge
February 28th, 2011, 08:25 AM
BB, that is not the case. AAMOF, most of the benefits have been misused by people with connections to the political parties.

NJ for instance. There are part time positions in the state. Help on advisory boards and the like, that pay a pittance. $2500 a year.

Does not sound bad...yet.

What happens, though, is that these guys get these meaningless "jobs" for 18-20 years. In the last 2 years before "retiring" they get hired full time at $100K or so.

OK, still that is only 2 years, right?

Until you read the wording on the contracts. They were paying in a percentage of their "salary" into the pension fund. 5%, 8%, whatever it is it was nothing at $2,500 a year. Under the contract, you take the AVERAGE salary for the last 2 (maybe 3) years of the "employee" and multiply that by a factor based on the time they spend "working" for the state/county/town.

So this guy, with his own business/job outside the city, works for the city for 2-3 years at a nice salary, then retires pulling in more from the pension fund in ONE YEAR than they put into it themselves their entire time on the payroll.

Add this to the pension funds investing in what our financial bodies called "safe" and "A+" investments going to trash, and not 2 years later the same responsible for glossing over these junk bonds and other investments are earning almost record amounts again. Add these abuses together with the myriad of other ABSOLUTELY LEGAL AND CONTRACTUAL abuses of our financing and you get the schism you see today.

It is not the Unions that are responsible for Wisconsin's debt. If they are willing to negotiate (which they said they were) he is being an unreasonable individual trying to use the misery of the people to break organized labors spine.

Ninjahedge
February 28th, 2011, 08:31 AM
Loft, it seems like the people just want to break on whatever THEY feel they are better equipped to decide on.

The only problem with getting rid of teacher tenure are two things.

1. If teaching was so great and so easy, why was there shortfalls of finding SUITABLY QUALIFIED teachers to fill the gaps we have experienced? Especially in Math and Science? One of the ONLY solid benefits teachers have had has been job security.

2. If tenure is removed, the kids will come second. If the person that evaluates you has more power over your position, you will see just what happens in the Corporate World, the talented being exploited and the butt-kissers rising to the top. Although I agree that merit should win over seniority, in something that can be this politically steeped, a teachers career can be ruined with the deadly 1-2 of a slime-bag supervisor and the disgruntled parent of a disruptive child.

Every single person that thinks they know better about teaching should have to spend a month trying to teach these kids themselves. Not a day, that is Babysitting. A month.

After that month maybe they will have a better idea of what teachers have to deal with.

212
February 28th, 2011, 07:40 PM
It not about Gov. Walker. I don't follow Wisconsin politics, but I tend to believe that he is doing exactly what the people who elected him want him to be doing.

More second thoughts in Wisconsin ...

Wisconsin Survey Results (www.publicpolicypolling.com/pdf/BarrettWalkerRematchResults.pdf)
February 24-27, 2011
Survey of 768 Wisconsin voters by Public Policy Polling

If you could do last fall’s election for Governor
over again, would you vote for Democrat Tom
Barrett or Republican Scott Walker?

Tom Barrett ........... 52%
Scott Walker........... 45%
Not sure ................ 4%

Ninjahedge
March 1st, 2011, 08:21 AM
Reactionary politics never gets you what you really want. It only swings you to the other end of an issue along an axis that is perpendicular to the direction you really want to go.

You never end up with someone that is either in line with your hopes, or simply is "moderate" enough to settle somewhere in the middle of both your line, and the line of extremist propagandist politics that seems to run our system these days.


So that is what we get, a bunch of people who are angry about taxes who voted for cuts in spending who now have teachers and cops being laid off (NJ/NY) and millionaires still able to keep their "temporary" tax break.

Lets just break the Unions while we are at it. There are, after all, at fault for everything that has gone wrong in the past 5 years....right?

ZippyTheChimp
April 17th, 2011, 12:25 PM
Super rich see federal taxes drop dramatically

By STEPHEN OHLEMACHER, Associated Press 6 mins ago

WASHINGTON – As millions of procrastinators scramble to meet Monday's tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.

The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.

President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.

In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.

More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.

Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."

Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.

Shoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.

"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.

Schoenberg said Hatch's suggestion misses the point.

"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"

The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.

The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.

The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.

In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.

About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.

"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."

Copyright © 2011 The Associated Press

Merry
April 18th, 2011, 05:51 AM
I hardly know what to say after reading that :eek:.

Perhaps suffice to say, this \/ says it all?


"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."

Based on that article, it seems the U.S. could never be accused of overtaxing its citizens' income.

But then, it's all about what they DO with it, really, isn't it?

Ninjahedge
April 18th, 2011, 08:25 AM
BTW, once you reach self sufficient middle class, you actually get penalized for having a kid.

Certain breaks and deductions have a limiting factor depending on the number of dependants. Outdated "averages" for the wages of women and the cost of raising a kid have made the tax rates for a middle class family of, say, 4 jump dramatically NOT because of the rates themselves, but because anybody earning more than, say, $160,000 a year (that is a family) is no longer elegable for anything, including, ironically, things like self funded retirement plans (ROTH IRA).

Many have no pity for this genre because they feel that that salary should be enough, but it truly is not, and increases the barrier between the classes even further as an invisible glass ceiling is formed that makes your next rais from your boss (after a masters degree and 20 years experience) turn to much less in the long run than you ever imagined.

The rich have paid off their "representatives" to make their life more secure, the poor are being takein advantage of in other ways, but their taxes have been the main issue that have gotten people elected as well. The middle class has just been too thinly spread to be able to come together on any of these issues and, as a result, is being squashed. A lucky few have shot out on the "good side", but many are either bearing the nations burden or are being slowly pushed further away from the "American Dream" that so many Republicans as their fallacious battle cry in the past few elections.

The tax code needs to be broken down and re-assembled, or it will be one of the mechanisms that eventually break us.

MidtownGuy
April 18th, 2011, 11:36 AM
Shouldn't we tax consumption instead of income? No income tax, but federal sales taxes. The more you consume resources and everything else, the more you would pay.

Ninjahedge
April 18th, 2011, 01:07 PM
Sounds good, but that stifled purchasing.

The amount they would need to tax would make consumption rates drop significantly (as well as trade/reuse and recycle going way up).

While that may work for some scenarios, that amount of reduction reduces development and progression....

Not that we all NEED SUVs and LCD TVs, but still.....

MidtownGuy
April 18th, 2011, 01:28 PM
^conjecture. perhaps not. some people believe it would create an economic boom. so everything you said is debatable. except you are right that most of the crap we buy makes no sense, and in fact this insane consumption is destroying the only planet we have. unless we're going to terraform Mars real soon, and start the whole destructive process over again, less consumption is what we need.

http://www.fairtax.org/site/PageServer

BBMW
April 18th, 2011, 01:43 PM
^
I keep hearing about this, and I keep thinking the same thing:

1) giant black markets will develop to evade it. If you can find a way to bleed merchandise around the tax wall, you would be able to make a lot of money. It would be a field day for the mob, especially.

2) If you make a lot of money, and you're getting hit with high taxes here, just spend your money somewhere else. For example, if I ship some money down to Costa Rica, build a house there, and run my business in the US via internet, I don't think I'm paying much in the way of taxes under this plan.

MidtownGuy
April 18th, 2011, 01:47 PM
because income tax evasion is no problem:confused:

giant black markets will develop to evade it.

BBMW
April 18th, 2011, 04:08 PM
^
The question is what would be more evadable by a larger number of people. I would guess it would be a sales tax. Complain as they might about the income tax, it's very hard for the vast majority to get around it in a meaningful way. If you work for someone else, you never actually see the tax money. It gets taken out before you can get to it.

MidtownGuy
April 18th, 2011, 06:30 PM
I would guess it would be a sales tax.I would guess not. With the labyrinthine system of deductions and exemptions I'm not going to take your word for that. It's actually hard to avoid paying sales tax, and I honestly don't see a "huge black market" being set up for every little thing. What, is everyone going to start keeping money in mattresses again and ditch their atm and credit cards? I don't think so. When they started taxing cigarettes more in New York, sure a few people began standing on 125th to sell 5 dollar packs, but the VAST VAST majority of NY smokers are still going into Duane Reade or some newsstand and ponying up the taxed amount. If you think stores are going to open up in alleyways selling black market SUVs and off-the-radar TV sets for cash I have a hard time imagining how that would work. Psstt...I have a duffel bag full of TV's at 50 bucks less than the store...meet me around the corner and I'll drop one in your hand...yeah right.

Ninjahedge
April 19th, 2011, 08:16 AM
MTG, I can see what he is saying, but I do not think he is phrasingit right.

The only issue is how much tax would be placed on sales to make it so a profit COULD be made from evading it?

Prohibition is one thnig. It made a $1 bottle of hooch go for $10 (don't quote me on those numbers). It was an easy profit worth the risk.

But if national sales tax is placed on all products coming INTO the country or sold in the country, it would depend on what that would be.

5%? Not worth risking arrest on anything large enough to gain a profit off the base price and still be lower than the original tax.

20%? Maybe, but we are still talking marginal. There are "sales" that offer more than that.

I think the only way that the "cash only" black market would ever go full swing would be if there was a LARGE tax, 40%/50%, on items. Anything less would just not be worth the risk/operating cost.


As for the first point, the economic boom, I think that would be a short boom. A whip crack, if you will. People will like the additional cash on hand, but if the price of their merchandise goes up by 30% you will see the same kind of reaction we had with cars and gas prices.

The percentage raise in gas was significant, but when you look at the overall increase in expenses, the % was relatively small. But people started selling their SUV's and pushing for more efficient vehicles. The hybrids that were only dinky little meow-meow cars (Prius) became SUV Hybrids.

The government would not be nimble enough to mold tax rates to what was sustainable and produced the revenue needed to maintain our services. The only other drawback would be that, besides food, there is no thing that we really REALLY need to buy at a constant rate. Our yearly tax revenue would not be a dependable predictable amount.

While the recession has shown that income can also fluctuate, when it does, that is not necessarily the worst of our worries. But consumer spending? Place your bets on that one.

MidtownGuy
April 19th, 2011, 08:48 AM
Income and spending are directly linked to each other.
---
Economists have weighed in on both sides with differing opinions. I'm no economist but my opinion is that I would prefer a sales tax to an income tax. IMO it's beneficial in several ways to tax consumption instead of income.

BBMW
April 19th, 2011, 10:19 AM
The cigarette this is more informative than you may think, and not in the way you present it. For decades, even before the big cig tax increases of the last decade, one of the mob's most dependably lucrative business has been bootlegging cigarettes. They buy them by the tractor trailer load down south where there are very low state cig taxes, haul them up here, counterfeit the tax stamps, and sell them to stores. So just because the end customer is buying them over the counter, don't assume that the state actually collected the tax on those cigs.

Also, the tax rate planned for the Fairtax proposal is 23% IIRC. That's a lot of margin for a black marketeer to work with.


I would guess not. With the labyrinthine system of deductions and exemptions I'm not going to take your word for that. It's actually hard to avoid paying sales tax, and I honestly don't see a "huge black market" being set up for every little thing. What, is everyone going to start keeping money in mattresses again and ditch their atm and credit cards? I don't think so. When they started taxing cigarettes more in New York, sure a few people began standing on 125th to sell 5 dollar packs, but the VAST VAST majority of NY smokers are still going into Duane Reade or some newsstand and ponying up the taxed amount. If you think stores are going to open up in alleyways selling black market SUVs and off-the-radar TV sets for cash I have a hard time imagining how that would work. Psstt...I have a duffel bag full of TV's at 50 bucks less than the store...meet me around the corner and I'll drop one in your hand...yeah right.

BBMW
April 19th, 2011, 10:22 AM
They could just get rid of the deductions. But that might not be so politically palatable. Think about trying to get rid of the mortage interest and property tax deductions.


I would guess not. With the labyrinthine system of deductions and exemptions I'm not going to take your word for that. It's actually hard to avoid paying sales tax, and I honestly don't see a "huge black market" being set up for every little thing. What, is everyone going to start keeping money in mattresses again and ditch their atm and credit cards? I don't think so. When they started taxing cigarettes more in New York, sure a few people began standing on 125th to sell 5 dollar packs, but the VAST VAST majority of NY smokers are still going into Duane Reade or some newsstand and ponying up the taxed amount. If you think stores are going to open up in alleyways selling black market SUVs and off-the-radar TV sets for cash I have a hard time imagining how that would work. Psstt...I have a duffel bag full of TV's at 50 bucks less than the store...meet me around the corner and I'll drop one in your hand...yeah right.

BBMW
April 19th, 2011, 10:27 AM
One other thing:

The top 1% now pay 38% of the personal income tax. If we went to a consumption tax, do the top 1% spend enough of their income (as opposed to reinvesting it) to maintain that. What % of income do people spend at varioius income levels? I can't see how a consumption tax isn't more regressive than the income tax, if that's what you care about.

Ninjahedge
April 19th, 2011, 11:04 AM
BBMW, the top 1% earn more than 38% of the money.

Careful how you play the #s.

You may be right in saying that they may not be as inclined to spend as much as they are currently taxed, but that is hard to say without some solid #s.....

ZippyTheChimp
April 19th, 2011, 11:59 AM
There are pros and cons for both tax systems (BTW, the US had used a consumption tax for revenue for most of its existence. A century ago more than half the revenue collected was from Port of NY taxes. Customs House was one of the most important buildings in federal government). But neither is a no-brainer. There are negative impacts if not properly anticipated.


Think about trying to get rid of the mortage interest and property tax deductions.Maybe not a good idea to mess with real estate. It basically fuels the industrial world. Look what we are going through now.


I can't see how a consumption tax isn't more regressive than the income tax, if that's what you care about.This is true, and one of the basic problems with a consumption tax.

BBMW
April 19th, 2011, 02:08 PM
That's not the point. The point is that if you change from income based taxation to consumption based taxation, and the top 1% don't use as large a % of their income for consumption as for investment, you're changing the demographic balance of tax payments in a way you may not want to.


BBMW, the top 1% earn more than 38% of the money.

Careful how you play the #s.

You may be right in saying that they may not be as inclined to spend as much as they are currently taxed, but that is hard to say without some solid #s.....

eddhead
April 19th, 2011, 02:50 PM
I believe that BBW is suggesting that consumption taxes are regressive (as opposed to progressive) in that the lower income strata consume a greater portion of their income than the upper income strata do. As a result, a consumtion based tax system would place a larger normalized tax burden on lower income groups than would a truly progressive personal income tax system.

I tend to agree with that. Because lower and middle income classes 'spend' a higher percentage of their income than the upper 1% do, consumption taxes are regressive. The problem with the tax code as it exists today it that it is also not as progressive as it was originally designed to be because of changes in the marginal tax rates, loop holes and shelters. The whole thing needs to be torn apart.

Ninjahedge
April 20th, 2011, 08:14 AM
It all depends on what you tax.

If food and clothing are left out of the mix, you are pushing the burden back up the ladder.

The problem now is not that we do not have enough taxes or where they are and all that, but too many loopholes and tax breaks that have been engineered over the years, wedged in place by political favors, and then left in the same spot as the economic infrastructure shifted around them.

Considering incomes over $160K/year (family) as "rich" and no longer able to contribute to things like Roth IRA's is just plain ridiculous. Those salary levels were devised 30-40 years ago and have not been adjusted with the times to match. (if you ignore the fact that excluding one socioeconomic bracket from a tax free earnings investment that is limited to $5K/year maximum contribution is rather stupid to begin with, simply scaling the applicable salary levels to what they were meant to represent when the regulation was written would help things a lot).

The basis we have is fine, we just have too many "alterations" and now our tuxedo has 15 sleeves.

ZippyTheChimp
April 20th, 2011, 10:24 AM
Keeping food and clothing out of the mix is a government subsidy to those industries.

Ninjahedge
April 20th, 2011, 11:42 AM
I guess.

But I would rather have the "necessities of life" untaxed than having certain questionable amenities subject to tax sheltering because of their legal associations (work vehicle, "truck", etc).

Taxing restaurant food, clothing over $X/item or certain "luxury" foods may get a bit more realistic, as well as complicated (I do not want to tax a can of beans, but a $12/lb steak? Yeppers).

Besides, right now tax exemption on that level is nothing compared to the actual subsidies paid to certain industries (corn, tobacco) that serve to stifle the development of our own agricultural base......

ZippyTheChimp
April 20th, 2011, 12:04 PM
Another problem is retired people, and to some extent, people at the midpoint of their working lives.

You spend all those years paying into an income-tax-based system. When you retire, your income is substantially cut, but mitigated by a corresponding decrease in taxes. Not so with a consumption tax.

Ninjahedge
April 20th, 2011, 03:02 PM
I guess, but that also depends on what we consider to be taxable for consumption.

Supposedly at that age you have most of what you need and will not be stocking up the household.

You will not need a bunch of new furniture, television sets, and the like. This has also changed a bit (TV's change almost daily now, and computers are entering the common "appliance" stage of home possessions).

The other thing to tack onto your list is that we have people at 65 that ARE NOT DYING. Although it is only a few years, once you look at all the numbers (like seeing the average lifespan of someone who has worked at least 10 years of their life, thus eliminating child deaths and the like). But the HEALTHY lifespan has expanded even more than the ultimate lifespan. You would think that would reduce the burden, but I guess prescriptions are partially to thank for that, and their prices have gone crazy....


I think the first step would probably be to reign in the "capitalistic" nature of prescriptions that are primarily subsidized by government funding. "What the market will bear" does not apply when the money is coming from a government agency and the seller can pretty much just shift their prices to absorb whatever funding the voter is willing to grant them.

If certain vital meds can be shifted to government licence more quickly (allow the pharms to get their research $$ back and encourage further development) then maybe we can reduce things like Medicare w/o HURTING anybody (but, possibly, the pharm execs.....)


Don't know. Should give it a try though!

lofter1
April 20th, 2011, 07:04 PM
Maybe this used to be true when things were built to last ...




Supposedly at that age you have most of what you need and will not be stocking up the household.

You will not need a bunch of new furniture, television sets, and the like.

Major household purchases used to be built to last decades. Now you're lucky if they still work (not to mention being compatible) after 5 years.

ZippyTheChimp
April 20th, 2011, 07:30 PM
Don't forget, consumption includes services, which would also be taxed.

A major pro of a consumption tax is that it taxes illegal activity. No matter how you make your money, you pay tax on the goods and services you buy. Of course, this could be offset by an increased opportunity for an underground economy.

I object to the name Fair Tax that is on the bill in Congress. It's very difficult to assemble a tax code that's completely fair. The best you can do is make it less inequitable; that could also be done with the present income tax code.

Ninjahedge
April 21st, 2011, 12:44 PM
Maybe this used to be true when things were built to last ...



Major household purchases used to be built to last decades. Now you're lucky if they still work (not to mention being compatible) after 5 years.


That's what the "supposedly" was for Loft! ;)

I know what you are saying, but unfortunately our models for taxes and retirement are all based on out-dated trends and practices. We then try to patch it one hole at a time and end up with a maze of twisted little loops that serve more to fund the tax assesment, review and collection "industries" than actually collect money.

The best way to look at all of this would be tomake two seperate models.

1. A model that would work most efficiently to asses and collect the taxes needed for a smooth operation of this nation and its industries.

2. A REALISTIC plan that has a chance of passing, and reveals some of the "why we did it this way" to the people who would question it.

Right now, we will never get #1, and #2 will only come out piece by piece, lagging behind its own temporal relevance, and without so much as a paragraph explaining the real rason it was done.

BBMW
April 21st, 2011, 04:27 PM
Right now, there's only limited opportunity for organized crime to profit off of the tax system. And were it is possible, they do, mostly in the realm of sales tax fraud (think tobacco and gasoline). A broad based national consumption tax would increase those opportunities exponentially.


Don't forget, consumption includes services, which would also be taxed.

A major pro of a consumption tax is that it taxes illegal activity. No matter how you make your money, you pay tax on the goods and services you buy. Of course, this could be offset by an increased opportunity for an underground economy.

I object to the name Fair Tax that is on the bill in Congress. It's very difficult to assemble a tax code that's completely fair. The best you can do is make it less inequitable; that could also be done with the present income tax code.

212
July 29th, 2011, 11:04 AM
Wealth Gaps Rise to Record Highs Between Whites, Blacks and Hispanics

http://pewresearch.org/assets/publications/2069-a.png

The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009.

These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.

The Pew Research Center analysis finds that, in percentage terms, the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009 took a far greater toll on the wealth of minorities than whites. From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households.

As a result of these declines, the typical black household had just $5,677 in wealth (assets minus debts) in 2009, the typical Hispanic household had $6,325 in wealth and the typical white household had $113,149.

http://pewresearch.org/assets/publications/2069-b.png

Moreover, about a third of black (35%) and Hispanic (31%) households had zero or negative net worth in 2009, compared with 15% of white households. In 2005, the comparable shares had been 29% for blacks, 23% for Hispanics and 11% for whites.

More: http://pewresearch.org/pubs/2069/housing-bubble-subprime-mortgages-hispanics-blacks-household-wealth-disparity

Ninjahedge
July 29th, 2011, 12:27 PM
The main problem was allowing many unqualified people to take out loans that they could never repay. When the bubble burst, they now have a debt that is not matched by the value of their house and they are stuck. Many white families also had this, but they were not taken advantage of in quite the same way...

eddhead
July 29th, 2011, 12:56 PM
^ That certainly explains some of it, but the wealth disparity has been growing since ther 80's and is mostly driven by supply side moneterary policies which include implementing drastic cuts to the marginal tax rate for the highest income earners. What you are seeing on that chart is just a continuation of a trend that began under the Reagan administration.

lofter1
July 29th, 2011, 01:04 PM
I guess stuff isn't trickling down like they predicted and promised, eh?

Gotta check that upper income filter -- looks like it's all clogged up.

lesterp4
July 29th, 2011, 01:11 PM
And the Republicans are fighting to keep this gap in place. The wealthy can afford to pay a little more in taxes!!!!!!!!!!

eddhead
July 29th, 2011, 01:21 PM
This is a bit dated, (2003) but it is a theoretical explanation of the wealth and income gap that has existed through 2003. Much of this still rings true today although some of it (tight money from the FED for instance) does not.

http://multinationalmonitor.org/mm2003/03may/may03corp1.html


May 2003 - VOLUME 24 - NUMBER 5 W e a l t h a n d I n c o m e I n e q u a l i t y i n t h e U S A
Inequality and Corporate Power



The last 30 years has seen a tremendous rise in income and wealth disparity in the United States, and around the world. This issue of Multinational Monitor is devoted to exploring the measures and causes of income and wealth inequality in the United States. In our July/August issue, we will focus on international inequality.

As Ed Wolff describes in these pages, the share of national wealth owned by the richest 1 percent has doubled during the past three decades. And as Jared Bernstein explains, income inequality has skyrocketed nearly as fast.

These are startling changes in the relative affluence of the country's population over a very short period. They leave the country more class bound, less democratic, less just and more riven by wealth and inequality gaps that mean people's basic life opportunities are unequal.

Most of the increased wealth created over the last three decades has been captured by a small sliver of the population.

While the well off have become better off and the rich have become opulently so, the middle and lower groups have struggled to stay in place. It took until the late 1990s for the inflation-adjusted average wage of the bottom 80 percent of the population to catch up with the levels of the early 1970s. Wealth of the richest 1 percent has skyrocketed, while personal and consumer debt has ballooned for those in the middle and bottom.

There was nothing inevitable about these trends, and no forces of nature prevent them from being reversed. Rather, the rise in wealth and income inequality is due to shifting power relationships and policy choices favoring the rich, each of which reinforce each other. Capital has grabbed power from labor, and corporations have taken power from citizens. The federal government, as well as state and local governments, have pursued policies -- from trade to labor law -- that have strengthened corporate power and weakened workers.

A vicious cycle has ensued, with corporations then better positioned to lobby and advocate for still more policy changes to shift income, wealth and power.
There are too many intertwined factors driving the growth in inequality to identify them all, or to separate out the relative contribution of each, but it is important to pinpoint specific contributing causes. Identifying these factors is a prerequisite to remedying or addressing each, and ultimately to reversing the trends of rising inequality. Focusing on the policies and trends driving inequality is important in order to dispense with the myth that growing inequality is inevitable (to this, it should be enough to cite Edward Wolff's point that wealth inequality in the United States actually fell steadily from the period of the Great Depression until the early or mid-1970s), or simply the outgrowth of new technologies. Detailing the causes of inequality is also important because it makes clear the many ways in which the recent era of enhanced corporate rule and corporate globalization has not led to broadly shared benefits, but to modest gains in wealth that have been appropriated by a relative few.

With that in mind, here are 10 of the more important contributing factors to surging inequality in the United States.

1. Falling Levels of Unionization
Unions now represent less than 10 percent of the workforce in the private sector in the United States. Yet they still represent the single best means for workers to improve their economic conditions. There is a more than 28 percent wage premium for union membership in the United States -- meaning the single fact of belonging to a union raises the average worker's wage more than 28 percent -- and it is far higher in the area of benefits.

But even reference to the dramatic wage premium understates the importance of unions. Union power is collective power. When unions represent a higher proportion of the workforce -- when there is greater "union density" -- in a particular industry, unions can raise the overall industry wage rate, including for non-union workers. When unions represent a higher proportion of the national workforce, they can raise the national wage rate.

Even more importantly, when there is greater national union density, unions can exert more political power, to ensure the benefits and pain in the national economy is more equally shared.

As Kate Bronfenbrenner describes, the erosion of the U.S. manufacturing base, vicious anti-union campaigns by employers and inadequate organizing efforts by labor has led to the drop-off in union representation in the United States.

2. Corporate Globalization
The corporate globalization trade regime -- manifested in the rules of the World Trade Organization and other trade agreements -- has freed corporations to locate production anywhere in the world for sale anywhere in the world. As Jared Bernstein recounts, millions of high-paying manufacturing jobs have been lost in the United States as a result.

Workers who remain in the manufacturing sector are forced to compete in the race to the bottom, with union demands for wage gains replaced by employer demands for wage givebacks. Sometimes the employers really are unable to compete with lower-wage producers in other countries (sometimes they are those lower-wage producers). Sometimes the employers simply use the threat to threat to enhance profitability. Either way, workers bargaining leverage is dramatically lessened. Workers lose. Owners win.

Moreover, the exact same threats are among the most effective at deterring workers from joining unions. Join a union, employers tell workers in the majority of organizing campaigns, and we'll have to close. We just can't compete if we are burdened by union wages and union bureacracy (read: protection for worker rights).

Nowhere is the intertwined nature of the causes of inequality made more clear: Corporate globalization diminishes the union base and worker power. Weaker unions are less able to defend their jobs, either in direct negotiations with companies or in policy-making disputes in Congress. And on and on.

3. Declining Minimum Wage
One way to place a floor on the downward push on wages is to maintain a respectable minimum wage. Because the minimum wage in the United States is set periodically, and not pegged to inflation, it is forever losing value, though periodically bumped up a bit when the drop gets severe and the political moment makes it hard for Republicans to defeat a minimum wage rise. There has been no progress whatsoever in the obvious solution to this problem, which is to raise the minimum wage and then peg it to the inflation rate, so that it rises along with the cost of living. Low-wage industries -- led by the restaurant association -- have led the Chamber of Commerce and the major national business lobbies to oppose minimum wage hikes.

Today's minimum wage of $5.15 has been stuck since 1997. In inflation-adjusted terms, its current value is almost a quarter less than at its peak in the late 1960s.

In one of the most vibrant economic justice campaigns in the United States today, many communities have passed living wage laws, requiring employers to pay not just a minimum wage, but a minimum wage sufficient to enable a family to survive. Unfortunately, these laws typically apply only to government contractors, or sometimes to recipients of government benefits, but not to the overall community. They are an important step forward, and provide some hope for the future; but for now have not managed to have broad nationally felt impacts on wage rates.

4. The Soaring Stock Market
Although the market has come back down to earth to more reasonable levels in the last couple years, it has grown dramatically over the last three decades. The "sustainable" part of this stock market rise -- meaning stock prices justifiable in relationship to earnings, or profits, and the prospect for future profits -- reflects spikes of very high profits, including in the mid-1990s. Those high profits themselves were due to a variety of factors, but among them were the increased reliance on overseas manufacturing and monopolistic markets enabling corporations to impose excessive prices on consumers.
Popular myth to the contrary, the stock market gains accrued overwhelmingly to the rich. Edward Wolff explains that stock holdings are as concentrated now as they have been historically.

5. Tax Cuts for the Rich
Although the federal tax code remains somewhat progressive -- meaning higher income earners pay a higher proportion of their income in taxes than lower earners -- it is less so than it has been historically. The Reagan and Bush II tax cuts have massively reduced the tax take from the rich, and the currently proposed Bush tax cut would reduce the level still further. More than a third of the value of the current Bush proposal would accrue to the richest 1 percent of taxpayers, according to Robert McIntyre of Citizens for Tax Justice. Nearly half of the benefit would go to the richest 5 percent of taxpayers.
State taxes, heavily reliant on sales tax, remain regressive; and the current state funding deficit is likely to lead states to increase regressive taxes.
The one very important offset in the gloomy tax story has been the Earned Income Tax Credit, a federal tax rebate for the lowest income earners, which has meaningfully raised the income level of the poorest.

6. Reduced Taxes on Corporations
As Robert McIntyre explains, thanks to tax code revisions and fancy tax sheltering, the corporate share of paid federal taxes is down to approximately 7 percent -- compared to 22 percent level in the 1960s.

7. Declining Welfare Payments to the Poor, Increased Payments to the Rich
The last three decades have seen a steady decline in traditional welfare payments to the poor, leaving them considerably worse off -- though again, this condition has been considerably offset by the Earned Income Tax Credit. At the same time as they have cut welfare for the poor, local, state and federal governments have become far more generous in making gifts to the corporate welfare kings. To take two indicators: in just the period from the 1970s to the 1990s, corporate bailouts have grown from the level of hundreds of millions of dollars to hundreds of billions of dollars. The defense budget, which serves corporate welfare as much as any other purpose, has soared under the Reagan and Bush II administrations -- a simple transfer from taxpayers to Lockheed, Boeing, Raytheon andtheir shareholders.

8. An out-of-whack Financial System
The banking system systematically deprives lower-income and minority communities of the credit they need to build up investments and wealth. The services that are provided come increasingly from shady and price-gouging check-cashing operations and payday lenders. Meanwhile, the super-aggressive marketing of credit cards to middle-income people has led many to fall deep into debt, and forced to pay off huge accumulated debts at usurious interest rates.

9. Tight Money from the Federal Reserve
Although it has loosened its grip on the money supply in recent years, at crucial periods over the last three decades the Fed has driven up interest rates and plunged the economy in recession. The resultant high unemployment rates diminished worker power and pushed down wages.

10. A Culture of Overcompensation and Acceptance of the Wealth Divide
Although the routinization of obscenely high executive pay directly affects too few people to meaningfully impact overall income inequality, it has created a culture in which professionals and people in upper-income groups expect to be paid very generously. New class-based social norms have emerged about what constitutes a reasonable salary, and how a much a person "needs" to get by -- what upper-income groups view as necessity is of course unavailable to most people in the country.

This culture, nurtured by new marketing campaigns advertising luxurious lifestyles and a media that more and more narrowly targets upper-income groups, has helped push up salaries broadly at the top.
But these riches are not available to all. Part of the culture has been the normalization and acceptance of a persistent and deepening income and wealth inequality, with the situation of middle and lower income groups largely absent from the news or popular culture.

212
July 29th, 2011, 04:05 PM
Excellent article, eddhead.

212
July 31st, 2011, 11:28 PM
This opinion piece is from June. Lately I've been thinking about it a lot.

http://graphics8.nytimes.com/images/2010/09/16/opinion/Krugman_New/Krugman_New-articleInline.jpg


Rule by Rentiers

By PAUL KRUGMAN (http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per)

The latest economic data have dashed any hope of a quick end to America’s job drought, which has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. Yet there is no political will to do anything about the situation. Far from being ready to spend more on job creation, both parties agree that it’s time to slash spending — destroying jobs in the process — with the only difference being one of degree.

Nor is the Federal Reserve riding to the rescue. On Tuesday, Ben Bernanke, the Fed chairman, acknowledged the grimness of the economic picture but indicated that he will do nothing about it.

And debt relief for homeowners — which could have done a lot to promote overall economic recovery — has simply dropped off the agenda. The existing program for mortgage relief has been a bust, spending only a tiny fraction of the funds allocated, but there seems to be no interest in revamping and restarting the effort.
The situation is similar in Europe, but arguably even worse. In particular, the European Central Bank’s hard-money, anti-debt-relief rhetoric makes Mr. Bernanke sound like William Jennings Bryan.

What lies behind this trans-Atlantic policy paralysis? I’m increasingly convinced that it’s a response to interest-group pressure. Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense.

Of course, that’s not the way what I call the Pain Caucus makes its case. Instead, the argument against helping the unemployed is framed in terms of economic risks: Do anything to create jobs and interest rates will soar, runaway inflation will break out, and so on. But these risks keep not materializing. Interest rates remain near historic lows, while inflation outside the price of oil — which is determined by world markets and events, not U.S. policy — remains low.

And against these hypothetical risks one must set the reality of an economy that remains deeply depressed, at great cost both to today’s workers and to our nation’s future. After all, how can we expect to prosper two decades from now when millions of young graduates are, in effect, being denied the chance to get started on their careers?

Ask for a coherent theory behind the abandonment of the unemployed and you won’t get an answer. Instead, members of the Pain Caucus seem to be making it up as they go along, inventing ever-changing rationales for their never-changing policy prescriptions.

While the ostensible reasons for inflicting pain keep changing, however, the policy prescriptions of the Pain Caucus all have one thing in common: They protect the interests of creditors, no matter the cost. Deficit spending could put the unemployed to work — but it might hurt the interests of existing bondholders. More aggressive action by the Fed could help boost us out of this slump — in fact, even Republican economists have argued that a bit of inflation might be exactly what the doctor ordered — but deflation, not inflation, serves the interests of creditors. And, of course, there’s fierce opposition to anything smacking of debt relief.

Who are these creditors I’m talking about? Not hard-working, thrifty small business owners and workers, although it serves the interests of the big players to pretend that it’s all about protecting little guys who play by the rules. The reality is that both small businesses and workers are hurt far more by the weak economy than they would be by, say, modest inflation that helps promote recovery.

No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios.

And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it’s the class that has personal access to policy makers — many of whom go to work for these people when they exit government through the revolving door. The process of influence doesn’t have to involve raw corruption (although that happens, too). All it requires is the tendency to assume that what’s good for the people you hang out with, the people who seem so impressive in meetings — hey, they’re rich, they’re smart, and they have great tailors — must be good for the economy as a whole.

But the reality is just the opposite: creditor-friendly policies are crippling the economy. This is a negative-sum game, in which the attempt to protect the rentiers from any losses is inflicting much larger losses on everyone else. And the only way to get a real recovery is to stop playing that game.

eddhead
August 1st, 2011, 12:10 PM
Well, the 'resolution' to the debt ceiling crisis is not going to make the situation any better.

BBMW
August 1st, 2011, 02:00 PM
Labor unionist blather.

No one (on either side of this issue, and not just here) is talking about the real problem. This is that the US has become economically uncompetitive. Because of that, we can't maintain the level of GNP that would be needed to sustain the lifestyle to which we've become nationally accustomed, and for the last 30 years or so have been borrowing to plaster over that fact.

Now our ability to do that is becoming diminished, reality is setting in. But still no one wants to deal with the core issue. As long as there's are $125/month workers in China who can and willl do what $2000/month workers in the US will (and probably work harder doing it), were pretty well screwed.


This is a bit dated, (2003) but it is a theoretical explanation of the wealth and income gap that has existed through 2003. Much of this still rings true today although some of it (tight money from the FED for instance) does not.

http://multinationalmonitor.org/mm2003/03may/may03corp1.html


May 2003 - VOLUME 24 - NUMBER 5 W e a l t h a n d I n c o m e I n e q u a l i t y i n t h e U S A
Inequality and Corporate Power


The last 30 years has seen a tremendous rise in income and wealth disparity in the United States, and around the world. This issue of Multinational Monitor is devoted to exploring the measures and causes of income and wealth inequality in the United States. In our July/August issue, we will focus on international inequality.

As Ed Wolff describes in these pages, the share of national wealth owned by the richest 1 percent has doubled during the past three decades. And as Jared Bernstein explains, income inequality has skyrocketed nearly as fast.

These are startling changes in the relative affluence of the country's population over a very short period. They leave the country more class bound, less democratic, less just and more riven by wealth and inequality gaps that mean people's basic life opportunities are unequal.

Most of the increased wealth created over the last three decades has been captured by a small sliver of the population.

While the well off have become better off and the rich have become opulently so, the middle and lower groups have struggled to stay in place. It took until the late 1990s for the inflation-adjusted average wage of the bottom 80 percent of the population to catch up with the levels of the early 1970s. Wealth of the richest 1 percent has skyrocketed, while personal and consumer debt has ballooned for those in the middle and bottom.

There was nothing inevitable about these trends, and no forces of nature prevent them from being reversed. Rather, the rise in wealth and income inequality is due to shifting power relationships and policy choices favoring the rich, each of which reinforce each other. Capital has grabbed power from labor, and corporations have taken power from citizens. The federal government, as well as state and local governments, have pursued policies -- from trade to labor law -- that have strengthened corporate power and weakened workers.

A vicious cycle has ensued, with corporations then better positioned to lobby and advocate for still more policy changes to shift income, wealth and power.
There are too many intertwined factors driving the growth in inequality to identify them all, or to separate out the relative contribution of each, but it is important to pinpoint specific contributing causes. Identifying these factors is a prerequisite to remedying or addressing each, and ultimately to reversing the trends of rising inequality. Focusing on the policies and trends driving inequality is important in order to dispense with the myth that growing inequality is inevitable (to this, it should be enough to cite Edward Wolff's point that wealth inequality in the United States actually fell steadily from the period of the Great Depression until the early or mid-1970s), or simply the outgrowth of new technologies. Detailing the causes of inequality is also important because it makes clear the many ways in which the recent era of enhanced corporate rule and corporate globalization has not led to broadly shared benefits, but to modest gains in wealth that have been appropriated by a relative few.

With that in mind, here are 10 of the more important contributing factors to surging inequality in the United States.

1. Falling Levels of Unionization
Unions now represent less than 10 percent of the workforce in the private sector in the United States. Yet they still represent the single best means for workers to improve their economic conditions. There is a more than 28 percent wage premium for union membership in the United States -- meaning the single fact of belonging to a union raises the average worker's wage more than 28 percent -- and it is far higher in the area of benefits.

But even reference to the dramatic wage premium understates the importance of unions. Union power is collective power. When unions represent a higher proportion of the workforce -- when there is greater "union density" -- in a particular industry, unions can raise the overall industry wage rate, including for non-union workers. When unions represent a higher proportion of the national workforce, they can raise the national wage rate.

Even more importantly, when there is greater national union density, unions can exert more political power, to ensure the benefits and pain in the national economy is more equally shared.

As Kate Bronfenbrenner describes, the erosion of the U.S. manufacturing base, vicious anti-union campaigns by employers and inadequate organizing efforts by labor has led to the drop-off in union representation in the United States.

2. Corporate Globalization
The corporate globalization trade regime -- manifested in the rules of the World Trade Organization and other trade agreements -- has freed corporations to locate production anywhere in the world for sale anywhere in the world. As Jared Bernstein recounts, millions of high-paying manufacturing jobs have been lost in the United States as a result.

Workers who remain in the manufacturing sector are forced to compete in the race to the bottom, with union demands for wage gains replaced by employer demands for wage givebacks. Sometimes the employers really are unable to compete with lower-wage producers in other countries (sometimes they are those lower-wage producers). Sometimes the employers simply use the threat to threat to enhance profitability. Either way, workers bargaining leverage is dramatically lessened. Workers lose. Owners win.

Moreover, the exact same threats are among the most effective at deterring workers from joining unions. Join a union, employers tell workers in the majority of organizing campaigns, and we'll have to close. We just can't compete if we are burdened by union wages and union bureacracy (read: protection for worker rights).

Nowhere is the intertwined nature of the causes of inequality made more clear: Corporate globalization diminishes the union base and worker power. Weaker unions are less able to defend their jobs, either in direct negotiations with companies or in policy-making disputes in Congress. And on and on.

3. Declining Minimum Wage
One way to place a floor on the downward push on wages is to maintain a respectable minimum wage. Because the minimum wage in the United States is set periodically, and not pegged to inflation, it is forever losing value, though periodically bumped up a bit when the drop gets severe and the political moment makes it hard for Republicans to defeat a minimum wage rise. There has been no progress whatsoever in the obvious solution to this problem, which is to raise the minimum wage and then peg it to the inflation rate, so that it rises along with the cost of living. Low-wage industries -- led by the restaurant association -- have led the Chamber of Commerce and the major national business lobbies to oppose minimum wage hikes.

Today's minimum wage of $5.15 has been stuck since 1997. In inflation-adjusted terms, its current value is almost a quarter less than at its peak in the late 1960s.

In one of the most vibrant economic justice campaigns in the United States today, many communities have passed living wage laws, requiring employers to pay not just a minimum wage, but a minimum wage sufficient to enable a family to survive. Unfortunately, these laws typically apply only to government contractors, or sometimes to recipients of government benefits, but not to the overall community. They are an important step forward, and provide some hope for the future; but for now have not managed to have broad nationally felt impacts on wage rates.

4. The Soaring Stock Market
Although the market has come back down to earth to more reasonable levels in the last couple years, it has grown dramatically over the last three decades. The "sustainable" part of this stock market rise -- meaning stock prices justifiable in relationship to earnings, or profits, and the prospect for future profits -- reflects spikes of very high profits, including in the mid-1990s. Those high profits themselves were due to a variety of factors, but among them were the increased reliance on overseas manufacturing and monopolistic markets enabling corporations to impose excessive prices on consumers.
Popular myth to the contrary, the stock market gains accrued overwhelmingly to the rich. Edward Wolff explains that stock holdings are as concentrated now as they have been historically.

5. Tax Cuts for the Rich
Although the federal tax code remains somewhat progressive -- meaning higher income earners pay a higher proportion of their income in taxes than lower earners -- it is less so than it has been historically. The Reagan and Bush II tax cuts have massively reduced the tax take from the rich, and the currently proposed Bush tax cut would reduce the level still further. More than a third of the value of the current Bush proposal would accrue to the richest 1 percent of taxpayers, according to Robert McIntyre of Citizens for Tax Justice. Nearly half of the benefit would go to the richest 5 percent of taxpayers.
State taxes, heavily reliant on sales tax, remain regressive; and the current state funding deficit is likely to lead states to increase regressive taxes.
The one very important offset in the gloomy tax story has been the Earned Income Tax Credit, a federal tax rebate for the lowest income earners, which has meaningfully raised the income level of the poorest.

6. Reduced Taxes on Corporations
As Robert McIntyre explains, thanks to tax code revisions and fancy tax sheltering, the corporate share of paid federal taxes is down to approximately 7 percent -- compared to 22 percent level in the 1960s.

7. Declining Welfare Payments to the Poor, Increased Payments to the Rich
The last three decades have seen a steady decline in traditional welfare payments to the poor, leaving them considerably worse off -- though again, this condition has been considerably offset by the Earned Income Tax Credit. At the same time as they have cut welfare for the poor, local, state and federal governments have become far more generous in making gifts to the corporate welfare kings. To take two indicators: in just the period from the 1970s to the 1990s, corporate bailouts have grown from the level of hundreds of millions of dollars to hundreds of billions of dollars. The defense budget, which serves corporate welfare as much as any other purpose, has soared under the Reagan and Bush II administrations -- a simple transfer from taxpayers to Lockheed, Boeing, Raytheon andtheir shareholders.

8. An out-of-whack Financial System
The banking system systematically deprives lower-income and minority communities of the credit they need to build up investments and wealth. The services that are provided come increasingly from shady and price-gouging check-cashing operations and payday lenders. Meanwhile, the super-aggressive marketing of credit cards to middle-income people has led many to fall deep into debt, and forced to pay off huge accumulated debts at usurious interest rates.

9. Tight Money from the Federal Reserve
Although it has loosened its grip on the money supply in recent years, at crucial periods over the last three decades the Fed has driven up interest rates and plunged the economy in recession. The resultant high unemployment rates diminished worker power and pushed down wages.

10. A Culture of Overcompensation and Acceptance of the Wealth Divide
Although the routinization of obscenely high executive pay directly affects too few people to meaningfully impact overall income inequality, it has created a culture in which professionals and people in upper-income groups expect to be paid very generously. New class-based social norms have emerged about what constitutes a reasonable salary, and how a much a person "needs" to get by -- what upper-income groups view as necessity is of course unavailable to most people in the country.

This culture, nurtured by new marketing campaigns advertising luxurious lifestyles and a media that more and more narrowly targets upper-income groups, has helped push up salaries broadly at the top.
But these riches are not available to all. Part of the culture has been the normalization and acceptance of a persistent and deepening income and wealth inequality, with the situation of middle and lower income groups largely absent from the news or popular culture.

eddhead
August 1st, 2011, 02:07 PM
Robber baron blather.

Would you have us all reduce our wages to $125 per month and live in a third world country in order compete in the labor market like the Chinese do? Make no mistake about it, the income gap is a serious problem. It impacts consumer consumption and in turn GNP. But most importantly, it is immoral.

BBMW
August 1st, 2011, 03:07 PM
And what are you going to do, tell the chinese they need to raise their wages to match ours? Not going to happen, especially since they still have several hundred million peasants waiting to come off the farms and get real jobs. Oh and India is out there also (with a different economic niche.)

Face it, no one needs American workers any more. Between offshoring and automation (don't forget about that either) Americans need to justify their economic existance on an equal playing field with the rest of the world. Right now, companies are build stuff all over the world for sale all over the world. If the US gives them crap, they'll simply go around us.

I think Americans are going to have to get used to living with a lot less.

ZippyTheChimp
August 1st, 2011, 03:14 PM
Not going to happen, especially since they still have several hundred million peasants waiting to come off the farms and get real jobs. Oh and India is out there also (with a different economic niche.)

Face it, no one needs American workers any more.So who buys the stuff, the peasants?

You don't know what you're talking about.

BBMW
August 1st, 2011, 03:18 PM
If a quarter of their population is consuming, that's more that our entire population. And their going from nothing to something. That alone is generating a lot of consuption on their side.

And, of course, if we threatened to cut trade with them, they could threaten to stop funding our debt.

ZippyTheChimp
August 1st, 2011, 03:22 PM
^
And the world economy collapses.

Like I said...

Nevermind.:rolleyes:

BBMW
August 1st, 2011, 03:34 PM
And, therefore, become scorpions in a bottle. Neither one is going to be the first to sting the other. So the status quo remains.


^
And the world economy collapses.

Like I said...

Nevermind.:rolleyes:

mariab
December 7th, 2011, 04:32 PM
Billionaires with 1% tax rates

By Jeanne Sahadi @CNNMoney (https://twitter.com/intent/user?screen_name=cnnmoney) December 7, 2011: 5:13 AM ET


http://i2.cdn.turner.com/money/2011/12/07/news/economy/obama_taxes/obama-economic-address.gi.top.jpg (http://money.cnn.com/news/economy/election_2012/?iid=EL) President Obama says it's the 'height of unfairness' that the very wealthy can pay a lower percentage of their income in federal taxes than many in the middle class.


NEW YORK (CNNMoney) -- In case you haven't heard, President Obama wants the wealthiest to pay more in taxes.
Noting the rise in income inequality (http://money.cnn.com/2011/11/08/news/economy/global_income_inequality/index.htm?iid=EL) in recent years (http://money.cnn.com/2011/10/26/news/economy/cbo_income/index.htm?iid=EL) and the need to reform the U.S. tax system, the president on Tuesday said that some of the wealthiest in America pay far less in federal taxes as a percentage of their income than many lower down the income scale.


"A quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%," Obama said in a speech in Kansas (http://money.cnn.com/2011/12/06/news/economy/obama_income_inequality/index.htm?iid=EL).
Here are some of the facts behind the claim: In 2006 roughly 25% (http://money.cnn.com/2011/10/13/news/economy/buffett_rule/index.htm?iid=EL) of those with adjusted gross incomes over $1 million paid a smaller portion of their income in federal taxes -- income, payroll and corporate -- than 10% of those with AGIs below $100,000, according to a recent study from the Congressional Research Service.
Buffett rule could hit 25% of the very rich (http://money.cnn.com/2011/10/13/news/economy/buffett_rule/index.htm?iid=EL)

As for the president's assertion that some billionaires have a tax rate as low as 1%, Roberton Williams, a senior fellow at the Tax Policy Center, said that it's definitely possible but hard to verify.
"Billionaires are still rare enough that we cannot get data for them without running afoul of privacy rules," he said.
But for a lot of reasons, Chris Bergin, president and publisher of Tax Analysts, said, "It is certainly not implausible."
Last year, 4,000 households (http://money.cnn.com/2011/05/09/pf/taxes/millionaires_income_tax/index.htm?iid=EL) with incomes over a million dollars owed no federal income tax whatsoever, according to Tax Policy Center estimates.
What's more, of the top 400 federal tax returns with the highest adjusted gross incomes in 2008, 30 had an effective tax rate of less than 10%, noted Mark Luscombe, the principal federal tax analyst at CCH.
A big reason is that a large percentage of wealthy Americans' income comes from investments, which are often taxed at lower rates than ordinary wages and salaries.
What's more, some perfectly legal tax code provisions allow taxpayers to reduce their investment tax bills even further.
Bush tax cuts: The real end game (http://money.cnn.com/2011/11/28/news/economy/bush_tax_cuts/index.htm?iid=EL)

Of course, the wealthy aren't the only ones who enjoy what Obama refers to as "loopholes and shelters." Anyone who deducts their mortgage interest, saves money for retirement, realizes a capital gain or loss, or gets health insurance from their employer is enjoying a tax break.
The difference is that the rich use a broader array of tax-preferred investments, such as partnerships. Or they may invest in dividend-paying foreign stocks and can claim a foreign tax credit for the tax withheld from them by the foreign government.
Typically, too, the wealthiest are more likely to be retired or self-employed and are in a position to make big charitable contributions -- all of which come with distinct tax advantages.
And the wealthy can afford to be more risk-averse and park a lot of money in bonds, often tax-free.

Buffett: Tax my $62.9 M more! 0:00 / 8:38

To Obama, the fact that the wealthy can so whittle down their tax burden is "the height of unfairness."
Fairness in the tax code is a real issue, but there is no absolute answer to the question "what's fair?" (http://money.cnn.com/2011/05/09/pf/taxes/millionaires_income_tax/index.htm?iid=EL) And that's one reason why reforming the tax code will be a tough fight.
Earlier this fall, Obama proposed what he dubbed the Buffett Rule, named after billionaire investor Warren Buffett, who has urged Congress to tax the rich more.
The Buffett Rule (http://money.cnn.com/2011/12/07/news/economy/obama_taxes/2011/09/20/news/economy/buffett_rule_milllonaires/index.htm/?iid=EL) is intended as a guiding principle for tax reform to ensure that millionaires pay a higher percentage of their income in federal taxes than those who make less.
That may not be as easy to implement (http://money.cnn.com/2011/09/20/news/economy/buffett_rule_milllonaires/index.htm?iid=EL) as it sounds.
But one thing is a sure bet: The president will be sounding the theme many times over in his re-election bid.

http://money.cnn.com/2011/12/07/news/economy/obama_taxes/index.htm

BBMW
December 7th, 2011, 05:02 PM
Let's be honest about what's going on here. The tax system was intentionally designed to collect taxes from the easiest parties to collect from, individuals who are employees of companies they don't own. It's very easy to have a third party (the employer) collect the tax before the employee even gets their hands on it.

They knew that parties (this include, individuals, companies, and other tax paying entities) who pay their own taxes directly, have a strong incentive to underpay. Yes, they can chase these parties, but once you have to do that, you have problems. Either the tax collectors don't know what taxpayer made and what they've done with the money, or even if they can figure out what they should be collecting, they have to expend time, effort, and money to collect. They'd much rather have the employers collect the witholding for them.

The rich generally operated as businesses. The finances are more complex and obfuscated. They also can hire professionals to minimize their tax exposure and fight the IRS. They also tend to have better political connections to wheedle tax breaks. They're just always going to be more difficult to collect from.

stache
December 7th, 2011, 06:44 PM
That's government's job, to collect.

eddhead
December 7th, 2011, 07:20 PM
Let's be honest about what's going on here. The tax system was intentionally designed to collect taxes from the easiest parties to collect from, individuals who are employees of companies they don't own. It's very easy to have a third party (the employer) collect the tax before the employee even gets their hands on it.

They knew that parties (this include, individuals, companies, and other tax paying entities) who pay their own taxes directly, have a strong incentive to underpay. Yes, they can chase these parties, but once you have to do that, you have problems. Either the tax collectors don't know what taxpayer made and what they've done with the money, or even if they can figure out what they should be collecting, they have to expend time, effort, and money to collect. They'd much rather have the employers collect the witholding for them.

The rich generally operated as businesses. The finances are more complex and obfuscated. They also can hire professionals to minimize their tax exposure and fight the IRS. They also tend to have better political connections to wheedle tax breaks. They're just always going to be more difficult to collect from.

So what is your solution?

BBMW
December 8th, 2011, 10:04 AM
And they do it buy concentrating collections on those who are easiest to collect from. By percentage, they do quite well. But what they don't get is concentrated in sources that are the most difficult (and make themselves that way).


That's government's job, to collect.

BBMW
December 8th, 2011, 10:06 AM
To what problem?


So what is your solution?

stache
December 8th, 2011, 10:45 AM
^ Duh.

lofter1
December 8th, 2011, 04:57 PM
http://www.youtube.com/watch?v=ZaoGscbtPWU

BBMW
December 9th, 2011, 12:53 PM
Even if you accept income/wealth inequality as a problem (not necessarily a given) it's more a symptom than the disease itself. The disease in economic stagnation. The ones who are on the high side of the inequality equation are those that have figured out how to beat the stagnation, or make it work for them. The ones on on the bad side of it either haven't figured out how to beat it, or just don't have any opportunity to do so.

If we want to break the stagnation, raising taxes on the winners is at best irrelevant, more likely counterproductive (they'll move their money where the gov't can't get to it, likely pulling out of our economy.) Want to end the stagnation? Stop wasting money on the dead wood (direct payment social programs), and put the money into education, infrastructure, and research.


^ Duh.

stache
December 9th, 2011, 12:56 PM
Oh, ok. :rolleyes:

eddhead
December 9th, 2011, 01:31 PM
Even if you accept income/wealth inequality as a problem (not necessarily a given)

It is not a problem if you are a 1%er or the CEO of a large corporation. For everyone else, it is a problem in that it places a disproportionate and unfair financial burden on the middle and lower classes


it's more a symptom than the disease itself. The disease in economic stagnation.

It is not a symptom of economic stagnation, but an outcome of unfair tax policies put into place during the Reagan years. This was not a condition that existed prior to the reduction in marginal income tax rates for the highest income earners.


The ones who are on the high side of the inequality equation are those that have figured out how to beat the stagnation, or make it work for them. The ones on on the bad side of it either haven't figured out how to beat it, or just don't have any opportunity to do so.

Baloney. The deck has been staked in their favor for 30 years. Saying they have figured out how to beat stagnation is like being born on third base and acting like you hit a triple.


we want to break the stagnation, raising taxes on the winners is at best irrelevant, more likely counterproductive (they'll move their money where the gov't can't get to it, likely pulling out of our economy.) Want to end the stagnation? Stop wasting money on the dead wood (direct payment social programs), and put the money into education, infrastructure, and research.
See above. Unbelievable. The "winners" did not move their money where govt could not bet it prior to the 80's because we had responsible tax policies that prevented it. What is needed is a fair responsible approach to taxes that is progressive and eliminates these kind of shelters.

MidtownGuy
December 9th, 2011, 02:08 PM
^ thank you!!

stache
December 9th, 2011, 02:32 PM
Unfortunately, you're talking to a brick wall.

eddhead
December 9th, 2011, 03:03 PM
yeah, i know.

Ninjahedge
December 12th, 2011, 11:42 AM
At least he gets to hear his own voice reflected back at him..... sorta.

One of the easiest things to do is KEEP all the deductions and other "loopholes" in place, but require a MINIMUM tax % to be paid, regardless of donations, expenses, losses, foreign investments and taxes, etc.

The main problem in doing things like donating to "charities" like the "wildlife preservation fund" that takes care of the national park just around the corner from you (are there any of these areas near the Hamptons, perhaps?). "Donations" like that increase property value and are actually an investment.

You set some minimum % to be paid on income, regardless of source or other deductions, you will see more real money come in. No minimum and there will always be ways to juggle it so that less is actually given to care for the country.

BBMW
December 12th, 2011, 12:24 PM
I know I'm not changing your minds. You know you're not changing mine. Fine.

But if you think that changing how to slice a shrinking pie is going to fix the economy, you're not going to get anywhere. Europe does everything you want us to do, and they have even worse problems.

stache
December 12th, 2011, 12:31 PM
You've been waiting decades to say that, haven't you?

Ninjahedge
December 12th, 2011, 01:10 PM
"Slicing a shrinking pie".

Um, no. There ARE more problems than simple taxation inequalities, to be certain. But siting one and saying "hey, if you keep spending on X, it does not matter what you do" is no reason to not do anything about Y.

AAMOF, it will just make it happen even faster.

So, you find a way to cut out this leveraging, clean up the code so we get back to post depression-era policies (financial, at least) and THEN pursue rampant spending in things like the military (we are not the world's police), Medical spending (what use is increasing Medicaid/Medicare if you do not find a way to control the cost of what that money buys?) and general inefficiencies in the care, maintenance and improvement of our own infrastructure.

You do NOT say "hey things are bad here, but look at XXX!" and believe that to be an acceptable answer to the problem at hand.

BBMW
December 12th, 2011, 01:40 PM
^

Your not even talking about the real problem. The real problem is that for most Americans, and the reason there has been job loss and income stagnation over the last couple of decades, is that between offshoring and automation, many just can't be productive enough to justify their own employment, let alone increasing wages and benefits. The corporations (including Wall Street) have figured this out, adjusted for it, and make use of it. That's why they're doing well. It's also the source of most of the inequality, since they can get the work done cheaper, but sell the products at the same or higher prices (and sell it all over the world.) Most of the growth is not in the US any more. What impetus do the companies have to invest here, when there are cheaper workers and more growth to be had elsewhere?

And what happens if you throw higher taxes at the capitalist class on top of this? It makes it that much less attractive to do business here. So you get less middle class jobs.

eddhead
December 12th, 2011, 01:52 PM
OK, Let's try this again; explain to me how raising Jaime Diamon's personal income tax rate impacts JPMorgan's hiring practices. I mean what a line of bullshit.

Moving to the corporate space, try to justifying how GE who had profits in the multi-billions last year paid .00 corporate income taxes.

Income inequality is not the result of economic stagnation - quite the converse. Economic stagnation is the result if income inequality.

Ninjahedge
December 12th, 2011, 02:31 PM
If the middle class has no money to spend, you do not get any economic motion, hence you "stagnate".

BBMW, you are, again, siting X, Z, Q, and V as reasons why we should not handle Y. You find a solution for Y and take into account things like taxation of companies forcing them off shore, and introduce a sister bill that will increase tariffs for companies doing just that.

You find ways to tax the profit, so that an increase in that will only marginally effect the overall cost of manufacture and sale. Doubling the taxes on a company will NOT double the cost of the product, although they would like you to believe that. Conversely, "trickle up" actually works much better than "trickle down". You reduce the taxes of the ones that DO buy all this crap, they buy more, which comes right back in to the pockets of the companies that have to pay more.

Interesting how somehow "trickle down" can be swallowed so easily, but not something like this.

Also, continuously comparing the cost of labor overseas to here is also unfair. You CAN increase the cost of goods and make it more competitive, but companies balk at that, siting decreased sales (and unhappy voters). But seeing how those people LIVE in those countries and saying "well we can't compete with that!" is akin to saying that America should be like that.

It just don't work that way.

BBMW
December 13th, 2011, 12:15 PM
^
And what's to stop a US corporation from splitting off it's faster growing oversees operations into and spinning it's US operation into a separate company, and cutting it off. Then the US company only gets the US business (which isn't the growth sector), and the global profits never come here. The could even go into competition with the US spinoff using their lower cost of production.

Oh, and yes the US could throw up tarriffs, because we all know how much good a trade war does for the economy.

BBMW
December 13th, 2011, 12:25 PM
OK, Let's try this again; explain to me how raising Jaime Diamon's personal income tax rate impacts JPMorgan's hiring practices. I mean what a line of bullshit.



It doesn't, and I never said it does. What I did say is that income inquality is largely irrelevent issue, that economic stagnation is a much bigger issue, and that there's no causal relationship from income inequality toe economic stagnation. There causal relationships between some of the issues underlying economic stagnation and income inequality (or more directly unemployment and lack of middle class income growth).




Moving to the corporate space, try to justifying how GE who had profits in the multi-billions last year paid .00 corporate income taxes.



Where were the profits generated, here or abroad?



Income inequality is not the result of economic stagnation - quite the converse. Economic stagnation is the result if income inequality.

Sorry this is wrong. Just because you keep saying it, isn't going to change it. The economic conditions that allowed the US middle class to achieve the level of prosperity it had have changed, for reasons I've outlined above. And because you, or anyone else are jealous that there are people who have figured out how to use those changes and make a lot of money doing so, doesn't mean that trying to take away their profits is going to fix the bigger problems.

lofter1
December 13th, 2011, 12:35 PM
It's not about jealousy, it's about the social contract that makes America work. Can't just take, gotta give, too.

If those companies are so enamored of profits generated overseas, and love the laws on that side that allow them their gains, then how come those on top stay here? One might think they'd like to join those who help them make it to the top, instead of staying here where conditions are so onerous and unfair.

ZippyTheChimp
December 13th, 2011, 12:39 PM
The economic conditions that allowed the US middle class to achieve the level of prosperity it had have changed, for reasons I've outlined above.Check the economic conditions over the past thirty years. They've been posted in this thread and the OWS thread in several ways. How did you miss them?


And because you, or anyone else are jealousWhy do you assume Eddhead, or anyone else, is jealous? Does that make your argument more valid?

It's as silly and non-relevant as my saying that you're defending the wealthy because it makes you seem like you're one of them.

Ninjahedge
December 13th, 2011, 01:36 PM
^
And what's to stop a US corporation from splitting off it's faster growing oversees operations into and spinning it's US operation into a separate company, and cutting it off. Then the US company only gets the US business (which isn't the growth sector), and the global profits never come here. The could even go into competition with the US spinoff using their lower cost of production.

Oh, and yes the US could throw up tarriffs, because we all know how much good a trade war does for the economy.

Then we all die a horrible flaming death as debt spending and over commercialism eats its own tail.

I cry BS.

In order to "cure" cancer, you have to do a bit of cutting. We may have the "cure" to stop it in the future, but if we do nothing now a lot of people will end up dying in the meantime.

Thinking that we can somehow miraculously change our self-destructive course and stem the flow of coin from the middle class upwards, only to come trickling down at a fraction of what the upflow amounts to WITHOUT a bit of dissent or disruption is not a realistic mode of operation.

Things must change.

eddhead
December 13th, 2011, 02:59 PM
^^ and for the record, GE's profits were generated here. They took huge deductions for energy savings initiatives. It was outragous (I am sooo jealous :) )

ZippyTheChimp
December 27th, 2011, 12:24 PM
The Wealth Gap Between Congress and Voters Is Growing

Dashiell Bennett

Both The New York Times and The Washington Post have separate reports today about the widening wealth gap between members of Congress and the people they represent. Almost half of all Congresspeople are millionaires (http://www.nytimes.com/2011/12/27/us/politics/economic-slide-took-a-detour-at-capitol-hill.html?_r=1&hp&pagewanted=all) and their median net worth has climbed to $913,000, compared to $100,000 for the rest of America households. According to the Post, that number drops to $725,000 when excluding home equity (and adjusting for inflation) (http://www.washingtonpost.com/business/economy/growing-wealth-widens-distance-between-lawmakers-and-constituents/2011/12/05/gIQAR7D6IP_story.html), but the same median figure for American families is just $20,500. And that gap has only grown wider in recent years.

The biggest reason for the disparity is the sheer cost of running for office, which is both a full-time job and an expensive undertaking. The average successful House race costs $1.4 million to stage (the average Senate campaign is almost $10 million), and candidates are allowed — and often need — to donate as much as they want to their own effort. The costs of advertising and travel make it increasingly difficult for anyone who doesn't already have money to get their name out there. There have also been concerns raised recently about the ability of politicians to profit from their position, both through contacts made and the ability to trade stock based on privileged information.

Even putting aside the questions of influence and corruption, the biggest concern is that those elected to Congress are more out of touch with the world of their constituents than ever before. How can lawmakers be expected to look out for the interests of everyday citizens when the biggest issues facing them — unemployment, health care, wages — are unknown to most of those who are making the laws? Or worse when addressing those issues means directly contradicting their own interests, as when millionaires are asked to vote on a "millionaire's tax"? The biggest political movement of the last year, Occupy Wall Street, has been devoted almost exclusively to addressing the gap between rich and poor, but it's hard to see how any change becomes possible when that gap is greatest among those in a position to do something about it.

Copyright © 2011 by The Atlantic Monthly Group

lofter1
December 27th, 2011, 05:03 PM
From the January 2012 Harper's Index:

Percentage increase in total congressional net worth since 2008: 24

Number of Republicans who say the current economic order "favors a very small portion of the rich": 62

lofter1
December 27th, 2011, 09:03 PM
The Oligarchy We Live In, Ctd
[/URL]
[URL="http://andrewsullivan.thedailybeast.com/2011/12/the-oligarchy-we-live-in-ctd.html"]THE DAILY DISH (http://andrewsullivan.thedailybeast.com/2011/12/the-oligarchy-we-live-in-ctd.html)
27 Dec 2011

This chart (http://andrewsullivan.thedailybeast.com/2011/11/chart-of-the-day-1.html) is currently in the lead for Chart Of The Year (but voting is still open (http://andrewsullivan.thedailybeast.com/chart.html)):

http://dailydish.typepad.com/.a/6a00d83451c45669e20162fe8639d7970d-550wi (http://dailydish.typepad.com/.a/6a00d83451c45669e20162fe8639d7970d-popup)
The NYT had a story on these lines today (http://www.nytimes.com/2011/12/27/us/politics/economic-slide-took-a-detour-at-capitol-hill.html?_r=1&ref=politics). Their graphic - not as striking as the one above - is here (http://www.nytimes.com/interactive/2011/12/27/us/politics/a-growing-divide-between-congress-and-constituents.html?ref=politics). Along the same lines, the WaPo reported (http://motherjones.com/kevin-drum/2011/12/mr-smith-not-going-washington-any-more) yesterday that from "1984 and 2009, the median net worth of a member of the House has risen 2½ times ... rising from $280,000 to $725,000 in inflation-adjusted dollars." Kevin Drum's analysis (http://motherjones.com/kevin-drum/2011/12/mr-smith-not-going-washington-any-more):


It just costs too much to run for Congress today for anyone who's not fairly well off to do it. And that's no coincidence. As income inequality goes up, campaign funding from rich donors also goes up — partly because the rich have more money and partly because they're more motivated to use that money to influence the political process in order to protect their wealth. This creates an arms race that effectively precludes anyone who doesn't have either money of their own or access to wealthy donors from running.

ZippyTheChimp
December 28th, 2011, 09:10 AM
A seating chart for plutocrats.

lofter1
December 28th, 2011, 10:02 AM
At first glance it could be read that the chart delineates Repubs (RED) and Dems (Blue) when in fact the colors shown are for Wealth Distribution by Value.

It would be interesting to see how Congressional accumulation of wealth breaks down along party lines.

Ninjahedge
December 28th, 2011, 10:17 AM
I think they are more concerned with Uranus.

ZippyTheChimp
December 28th, 2011, 11:46 AM
It would be interesting to see how Congressional accumulation of wealth breaks down along party lines.

For year 2010, the Center for Responsive Politics reported:
37 Senate Democrats and 30 Senate Republicans reported net worth over $1 million.
73 House Democrats and 110 House Republicans reported net worth over $1 million.

Wealthiest members of Congress

Rep Diane Lynn Black (R-Tenn).........................$31,272,000
Rep Rick Berg (R-ND)......................................$33,562,0 00
Rep Trent Franks (R-Ariz).................................$33.925,000
Rep Mike Kelly (R-PA)......................................$34,612,0 00
Rep Nita Lowey (D-NY)....................................$41,210,000
Rep Jim Renacci (R-Ohio).................................$42,060,000
Rep Rodney Frelinghuysen (R-NJ).....................$42,900,000
Rep Gary Miller (R-CA)....................................$46,000,000
Rep Kenny Marchant (R-Texas).........................$49,340,000
Rep James Risch (R-Idaho)..............................$54,088,000
Sen Bob Corker (R-Tenn).................................$59,550,000
Sen Dianne Feinstein (D-CA)...........................$69,000,000
Sen Richard Blumenthal (D-Conn)....................$73,151,000
Sen Frank Lautenberg (D-NJ)..........................$85,572,000
Sen Jay Rockefeller (D-WV).............................$99,057,000
Rep Nancy Pelosi (D-CA)................................$101,123,000
Rep Vern Buchanan (R-FL)..............................$136,152,000
Rep Jared Polis (D-CO)...................................$143,218,000
Sen Herb Kohl (D-WI)....................................$173,538,00 0
Sen Mark Warner (D-VA)................................$192,730,000
Sen John Kerry (D-MA)..................................$231,722,000
Rep Michael McCaul (R-TX)..............................$380,411,000
Rep Darrell Issa (R-CA)...................................$448,125,000

Ninjahedge
December 28th, 2011, 02:19 PM
It would be nice to cross reference this and see what "representatives" are truly, well, representative of their constituency.

Making $1M in Iowa is probably a bit more rare than $1M in some districts in NY/NJ/CT....

lofter1
December 28th, 2011, 02:35 PM
For year 2010, the Center for Responsive Politics reported:
37 Senate Democrats and 30 Senate Republicans reported net worth over $1 million.
73 House Democrats and 110 House Republicans reported net worth over $1 million.


The goods are split between House Republicans and Democratic Senators.

I should run for office. Anybody want to back my campaign? I'm easy, and will support whatever you want. I'll even switch parties.

stache
December 28th, 2011, 11:39 PM
i'm easy,


^ lol -

BBMW
December 29th, 2011, 12:20 AM
How much does it take to buy a seat in the house? In the senate? Either you gotta have it, or be able to raise it. So it's somewhat logical that you'd see a lot of high net worth on capital hill.

How which ones do you have to worry about more, the ones that have to go begging for the money to run (and will owe favors in return), or the ones that can just write the checks?

lofter1
December 29th, 2011, 02:21 AM
If a candidates interests are not in line with what I want then it matters little if someone else pays him to do the bidding or if the candidate writes his own check. We still end up with crap coming out of the Capitol. Or, depending on the politician, City Hall.

hbcat
December 29th, 2011, 11:10 AM
Forgive -- don't know how to paste this in -- if you follow this Washington post link, there's a slide show of --

"The 25 members of Congress with lowest net worth"
http://www.washingtonpost.com/business/economy/25-members-of-congress-with-lowest-net-worth/2011/12/27/gIQAOJApKP_gallery.html#photo=25

lofter1
December 29th, 2011, 12:21 PM
Now I see I'm completely qualified to take a legislative seat. Still waiting for those PM's (and checks) to get my campaign moving ...

Thankfully I'm nowhere near this guy from Florida, who really takes the cake:

Rep. Alcee Hastings (D-Fla.)
Hastings had an average net worth of -$4,732,002 in 2010.

Merry
December 29th, 2011, 10:28 PM
Fun With Games: Match the GOP Hopeful to His/Her House!

by Sarah Firshein

http://curbed.com/uploads/29CANDIDATES1-articleLarge.jpg
House collage via the New York Times (http://www.nytimes.com/2011/12/29/garden/the-houses-of-the-gop-hopefuls.html?partner=rss&emc=rss)

Today the New York Times Home & Garden section publishes (http://www.nytimes.com/2011/12/29/garden/the-houses-of-the-gop-hopefuls.html?partner=rss&emc=rss) a lengthy piece on the personal residences of the seven GOP hopefuls, culling interviews and thoughts from folks like House Beautiful editor in chief Newell Turner and interior designer Thad Hayes. (For a quick refresher, Curbed ran (http://curbed.com/archives/2011/06/16/the-personal-hqs-of-the-2012s-gop-presidential-hopefuls.php) a similar piece in June.) From the photo slivers above, and some brief descriptions below, can you match each property to its owner (Michele Bachmann, Newt Gingrich, Jon Huntsman, Ron Paul, Rick Perry, Mitt Romney, or Rick Santorum)?



Owned by the candidate who's worth $200M, here's a stone-and-wood estate on Lake Winnipesaukee.
This home came with a brochure that "reads like a synonym finder for nouveau suburban glory, touting the home’s arched stone entry, hand-scraped walnut plank flooring, and a fully paneled library with see-through fireplace."
The Times calls this the most traditional of the lot, "a yellow center-hall 1970s colonial with a gabled dormer and a portico that could easily be recreated using blocks from a nursery school."
Interior designer Thad Hayes has this to say about this property: “It feels like it’s coming from a more authentic place.” And: “It says family.”
Here's a Federal-style townhouse was once home to the contestants on the seventh season of Top Chef.
This 5,200-square-foot "mansionette" has a master bathroom "sheathed" in mirrors. "His house sits so awkwardly on its site,” says Turner.
Some features of this home: "a marble-countered kitchen that would be at home in any one of the Real Housewives shows, a wood-paneled study, a marble bathroom, and balconies overlooking the well-kept lawn."


The Houses of the Hopeful (http://www.nytimes.com/2011/12/29/garden/the-houses-of-the-gop-hopefuls.html?partner=rss&emc=rss) [NYT]
The Personal HQs of the 2012's GOP Hopefuls (http://curbed.com/archives/2011/06/16/the-personal-hqs-of-the-2012s-gop-presidential-hopefuls.php) [Curbed National]



Answers: 1/D (Mitt Romney); 2/F (Michele Bachmann); 3/E (Rick Santorum); 4/B (Ron Paul); 5/A (Jon Huntsman); 6/G (Newt Gingrich); 7/C (Rick Perry)

Merry
December 30th, 2011, 05:30 AM
What would happen to US politics if these people (not just from Highland Park) stopped making political donations?


Inside The 1 Percent's Texas Enclave

Howdy from Highland Park, where taxes are low, the gun store's booming, and donations to the GOP are way, way above average.

By Josh Harkinson

At a strip mall clogged with Ferraris and fashion boutiques, Beretta Gallery salesman Chris Cope shows me a framed photo of one of his best clients, an oilman posing next to a bounty of elephant tusks. In addition to selling massive safari rifles, this high-end Italian weapons emporium in the Dallas suburb of Highland Park supplies $130,000 Imperiale Montecarlo shotguns as well as petite .22s and chic, lockable handbags to conceal them. All told, it sells more firearms than any other Beretta outlet in the world. Last year, the store presented George W. Bush with a $250,000 shotgun engraved with the presidential seal, a picture of his Scotty dog, and "43" on the lever. The gun, which required more than a year to assemble, was a thank-you from Mr. Beretta for a military order of a half-million pistols.

It's fair to call 75205, the zip code for most of Highland Park, the most enthusiastically Republican enclave in the country. Among the two-dozen zip codes that donated the most money to candidates and political parties last year, 75205 gave the highest share—77 percent—to Republicans, according to the Center for Responsive Politics. It also gave Republicans more hard cash, $2.4 million, than all but four other zips nationwide. Affluent, insular, and intensely sure of itself, Highland Park is the red-state counterpart of, say, Berkeley. It's a place where, one native son half-jokes, friends might ask one another, "Do you want to come over for barbecue after we go vote for Mitt Romney?" People in the surrounding city of Dallas, where I grew up, call it the Bubble.

"We don't need the government to do things for us—that's why the town is very, very independent," says Ray Washburne, a co-owner of the Highland Park Village mall and a native "Parkie." In 2004, Washburne and George Seay III (pronounced "see"), a grandson of Texas' first 20th-century Republican governor, cofounded Legacy, a group of 200 families that "have been successful in their careers and want to be involved in the political process." The group hosts aspiring GOP presidential candidates at a yearly summer retreat in Colorado, where they "network with other people who have been trying to push along the conservative, free-enterprise cause." Washburne befriended former Minnesota Gov. Tim Pawlenty at an event in 2008 and later joined his short-lived presidential campaign.

https://motherjones.com/files/images/berkeley_zipcodes_400x617.png

Other big Republican donors here include the Hunt oil family, the children of Ross Perot, and venture capital heiress Dianne Cash, who bought Dick Cheney's Highland Park residence in 2000. Billionaire Robert Rowling, the owner of the Gold's Gym and Omni Hotel chains, gave, along with his holding company, $5 million to Karl Rove's super-PAC last year. Real estate mogul Harlan Crow often hosts party fundraisers at his $24 million spread. He's presented numerous gifts to Clarence Thomas, including funding for a library project dedicated to the Supreme Court justice, a bust of Abe Lincoln, and, according to Politico, $500,000 in seed money for Thomas' wife, Virginia, to start a tea party group.

It's no secret why Highland Park attracts so many rich conservatives. It has a prime location near Dallas' financial center and one of the lowest property tax rates in a state with no income tax. Yet it has one of the nation's best school systems and an average emergency response time of 2.5 minutes. "Highland Park is safe," says Mary Bosworth, a local GOP precinct chair. "You call the fire department and they'll be there in three minutes, versus 'Are you dead yet?' in Dallas."

Wilbur David Cook, the urban planner who designed Beverly Hills, drew up the plan for Highland Park a few years before it was incorporated in 1913. One of the community's first (if factually dubious) slogans, "It's 10 degrees cooler in Highland Park," reflected its attractiveness to the elite, as did its restrictions prohibiting property sales to minorities. A friend who is a descendant of one of Highland Park's founding families was discussing this history over lunch at Washburne's Mi Cocina restaurant when a black acquaintance, a successful loan broker, stopped by our table. Answering before I could ask, my friend said, "He does not live in Highland Park."

No African Americans owned homes there until 2003, when mortgage officer Karen Watson purchased a house on ritzy Beverly Drive. "Guess who's coming to dinner—and staying for awhile?" wrote the local paper, Park Cities People. According to the 2010 census, Highland Park is 94.4 percent white (PDF). In 2005, Highland Park High School students celebrating "thug day" and "fiesta day" came to class dressed in Afro wigs and traditional Mexican dresses stuffed with pillows. (The previous year, some had celebrated "trailer trash day" by dressing as their teachers.)

Lambasted as recently as last year for not admitting African Americans, Highland Park's 117-year-old Dallas Country Club revealed, after repeated calls, that it does in fact have black members but wouldn't say how many or when they joined. A Parkie friend whose family belongs to the club told me he has never seen a black member.

Over the years, the Highland Park police has been repeatedly accused of racial profiling. A 2007 report by the Texas Criminal Justice Coalition (PDF) found that the town's officers searched black drivers four times more often than whites. The cops are also known for stopping people who, as a former officer testified in a civil rights suit against the town, "did not blend in." Daniel Kanter, a local Unitarian minister, believes he was pulled over because he drives a battered Toyota Corolla. "Beyond racial," he says, "it's profiling by the make and model of your car."

Defenders of the Bubble say it's unfair to brand it as exclusionary, self-absorbed, or materialistic. A friend cites the story of Charles E. Seay, a.k.a. "Big Charlie," a self-made insurance millionaire and George Seay III's great-uncle. On a 1989 trip to Acapulco, Seay's van tumbled off a cliff but was caught by a lone madrona tree. Seay concluded that God had put him on earth for a purpose. By the time he died in 2009, he'd given away tens of millions of dollars to local hospitals, museums, and the YMCA. "Because he did, other people did too," my friend said. Today, many big Highland Park social events are charity balls.

Of course, the Parkies would much rather comfort the afflicted than afflict the comfortable. In 2006, Garrison Keillor, host of the public radio program A Prairie Home Companion, visited the Highland Park United Methodist Church. "Within 10 minutes was told by three people that this was the Bushes' church and that it would be better if I didn't talk about politics," Keillor later wrote in an indignant op-ed. "I was there on a book tour for [I]Homegrown Democrat, but they thought it better if I didn't mention it."

As a senior at Highland Park High in the mid-'90s, Butler Looney hung out with the only black girl in class and grew his curly hair slightly longer than average. He thinks that's why his class voted him "Most Liberal." (He later designed the seal for the George W. Bush Presidential Library.) "People in Berkeley are kind of the same," says Looney, who, like me, eventually moved from Texas to the San Francisco Bay Area. "It's like, 'I can't believe that you would associate with those other kinds.'" Yet he's not offended by liberal friends who diss his hometown or Parkies who can't comprehend why he left. "It's not out of malice. They just have no concept of the other side."

http://motherjones.com/politics/2011/12/highland-park-texas-gop-stronghold

eddhead
January 5th, 2012, 09:05 AM
January 4, 2012

Harder for Americans to Rise From Lower Rungs

By JASON DePARLEWASHINGTON — Benjamin Franklin did it. Henry Ford did it. And American life is built on the faith that others can do it, too: rise from humble origins to economic heights. “Movin’ on up,” George Jefferson-style, is not only a sitcom song but a civil religion.

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.

Former Senator Rick Santorum of Pennsylvania, a Republican candidate for president, warned (http://www.catholicvote.org/discuss/index.php?p=24443) this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America.” National Review, a conservative thought leader, wrote (http://www.nationalreview.com/articles/282292/mobility-impaired-scott-winship) that “most Western European and English-speaking nations have higher rates of mobility.” Even Representative Paul D. Ryan, a Wisconsin Republican who argues that overall mobility remains high, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

Liberal commentators have long emphasized class, but the attention on the right is largely new.

“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”

One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project (http://ftp.iza.org/dp1938.pdf) led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent) — a country famous for its class constraints.

Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research (http://www.economicmobility.org/assets/pdfs/EMP_FamiliesAcrossGenerations_ChapterI.pdf) by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.

By emphasizing the influence of family background, the studies not only challenge American identity but speak to the debate about inequality. While liberals often complain that the United States has unusually large income gaps, many conservatives have argued that the system is fair because mobility is especially high, too: everyone can climb the ladder. Now the evidence suggests that America is not only less equal, but also less mobile.

John Bridgeland, a former aide to President George W. Bush who helped start Opportunity Nation (http://www.opportunitynation.org/), an effort to seek policy solutions, said he was “shocked” by the international comparisons. “Republicans will not feel compelled to talk about income inequality (http://topics.nytimes.com/top/reference/timestopics/subjects/i/income/income_inequality/index.html?inline=nyt-classifier),” Mr. Bridgeland said. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.”

While Europe differs from the United States in culture and demographics, a more telling comparison may be with Canada, a neighbor with significant ethnic diversity. Miles Corak, an economist at the University of Ottawa, found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

“Family background plays more of a role in the U.S. than in most comparable countries,” Professor Corak said in an interview.

Skeptics caution that the studies measure “relative mobility” — how likely children are to move from their parents’ place in the income distribution. That is different from asking whether they have more money. Most Americans have higher incomes than their parents because the country has grown richer.
Some conservatives say this measure, called absolute mobility, is a better gauge of opportunity. A Pew study (http://www.economicmobility.org/assets/pdfs/Family_Structure.pdf) found that 81 percent of Americans have higher incomes than their parents (after accounting for family size). There is no comparable data on other countries.

Since they require two generations of data, the studies also omit immigrants, whose upward movement has long been considered an American strength. “If America is so poor in economic mobility, maybe someone should tell all these people who still want to come to the U.S.,” said Stuart M. Butler, an analyst at the Heritage Foundation.

The income compression in rival countries may also make them seem more mobile. Reihan Salam, a writer for The Daily and National Review Online, has calculated that a Danish family can move from the 10th percentile to the 90th percentile with $45,000 of additional earnings, while an American family would need an additional $93,000.

Even by measures of relative mobility, Middle America remains fluid. About 36 percent of Americans raised in the middle fifth move up as adults, while 23 percent stay on the same rung and 41 percent move down, according to Pew research. The “stickiness” appears at the top and bottom, as affluent families transmit their advantages and poor families stay trapped.

While Americans have boasted of casting off class since Poor Richard’s Almanac, until recently there has been little data.

Pioneering work in the early 1980s by Gary S. Becker, a Nobel laureate in economics, found only a mild relationship between fathers’ earnings and those of their sons. But when better data became available a decade later, another prominent economist, Gary Solon, found the bond twice as strong. Most researchers now estimate the “elasticity” of father-son earnings at 0.5, which means if one man earns $100,000 more than another, his sons would earn $50,000 more on average than the sons of the poorer man.

In 2006 Professor Corak reviewed (http://ftp.iza.org/dp1993.pdf) more than 50 studies of nine countries. He ranked Canada, Norway, Finland and Denmark as the most mobile, with the United States and Britain roughly tied at the other extreme. Sweden, Germany, and France were scattered across the middle.

The causes of America’s mobility problem are a topic of dispute — starting with the debates over poverty. The United States maintains a thinner safety net than other rich countries, leaving more children vulnerable to debilitating hardships.

Poor Americans are also more likely than foreign peers to grow up with single mothers. That places them at an elevated risk of experiencing poverty and related problems, a point frequently made by Mr. Santorum, who surged into contention in the Iowa caucuses. The United States also has uniquely high incarceration rates, and a longer history of racial stratification than its peers.

The bottom fifth in the U.S. looks very different from the bottom fifth in other countries,” said Scott Winship, a researcher at the Brookings Institution, who wrote the article (http://www.nationalreview.com/articles/282292/mobility-impaired-scott-winship) for National Review. “Poor Americans have to work their way up from a lower floor.”

A second distinguishing American trait is the pay tilt toward educated workers. While in theory that could help poor children rise — good learners can become high earners — more often it favors the children of the educated and affluent, who have access to better schools and arrive in them more prepared to learn.
“Upper-income families can invest more in their children’s education and they may have a better understanding of what it takes to get a good education,” said Eric Wanner, president of the Russell Sage Foundation, which gives grants to social scientists.

The United States is also less unionized than many of its peers, which may lower wages among the least skilled, and has public health problems, like obesity and diabetes, which can limit education and employment.

Perhaps another brake on American mobility is the sheer magnitude of the gaps between rich and the rest — the theme of the Occupy Wall Street protests, which emphasize the power of the privileged to protect their interests. Countries with less equality generally have less mobility.

Mr. Salam recently wrote (http://www.nationalreview.com/agenda/284379/should-we-care-about-relative-mobility-reihan-salam) that relative mobility “is overrated as a social policy goal” compared with raising incomes across the board. Parents naturally try to help their children, and a completely mobile society would mean complete insecurity: anyone could tumble any time.

But he finds the stagnation at the bottom alarming and warns that it will worsen. Most of the studies end with people born before 1970, while wage gaps, single motherhood and incarceration increased later. Until more recent data arrives, he said, “we don’t know the half of it.”


http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html?_r=1&hp=&pagewanted=print

Fabrizio
January 5th, 2012, 09:15 AM
These studies for the US mean nothing if it's not broken down along racial lines. It would be interesting to see the statistics for upward mobility of whites and those of blacks.

lofter1
January 5th, 2012, 10:52 AM
You thinking there isn't a huge stalled / stagnating white underclass that fits into the categories provided?

eddhead
January 5th, 2012, 10:55 AM
I do not agre with that at all.

While true, lower income groups are disproporatiately comprised of racial minorities, the ability of ANY lower income person, regardless of race, to move into the middle or upper classes is compromised by an econcomic system that favors the well-to-do. The deck is stacked, and something needs to change.

Fabrizio
January 5th, 2012, 11:01 AM
I just think if you are going to choose to compare the US to Denmark...

http://www.nytimes.com/interactive/2012/01/04/us/comparing-economic-mobility.html?ref=us&gwh=DC6C8F60F0D78D026B8CB70BE9E0481C

Oh please. Divide it along racial lines... and then let's see what the situation looks like.

ZippyTheChimp
January 5th, 2012, 11:07 AM
Denmark isn't ethnically diverse.

Fabrizio
January 5th, 2012, 11:28 AM
Well, that is my point. Choosing Denmark (of all places) to make a point about the upward mobility of men (see the NYTime graph) between the US and another country is ridiculous: "American men born in the bottom quintile are more likely to stay there than the Danish, according to a study of earnings across generations."

-----

According to wikipedia:

Demark

Ethnic groups (2010)
90.1% Danes (http://en.wikipedia.org/wiki/Danes),




Population:

2011 estimate
5,564,219

ZippyTheChimp
January 5th, 2012, 11:44 AM
I wasn't disagreeing with you.

I could dig up figures, but off the top of my head:
Upward mobility is low across all ethnic groups in the US, but of the children born in the lowest quartile, the percentage of black children who remain there is twice that of white children.

The numbers I remember are like - 30% white, 60% black.

Ninjahedge
January 5th, 2012, 12:57 PM
If you wanted a true comparison, there are many other factors besides race that would need to be taken into account.

Region, the relative density of ethnicity, the proximity of relatives both in location and income, all play a part.

You put a black man in a successful neighborhood, he stands a better chance than a white man in a bad neighborhood.

The same goes for family. If your family is all in town and nobody is motivated to move, you are less likely to move than if your uncle such-and-such was a successful Yackety Schmacker that moved into a "nicer neighborhood".

Problem is, we are, literally as well as racially, a black/white race that likes to see things as cut and dry appelations to one characteristic or another. We want a bar graph, when even a 3D surface map does not give us the full picture.

Odd for a race where so many facial characteristics influence our opinion of the attractiveness, and even ABILITY of the individual observed, that we resort to "well the bottom fifth only goes here" and "Well, I wonder what it is like for Blacks compared to Whites?".

We just do not have the patience, or sadly, the intelligence as a society to put up with more than the "bare facts". :p

BBMW
January 5th, 2012, 01:51 PM
As usually, you guys are focusing on the wrong issue. This isn't about race, or even income. What had driven class mobility in the US in the path was economic growth and innovation. The birth and growth of any number of industries, starting out somewhat randomly with the railroads in the mid 1800's and going straight through to the internet boom, created the need for a vast number of workers. At first they were poorly paid cogs in the machines, but the one good thing the unions did was to get them a piece of the action as the growth continued.

But as I've stated before that's now changed. Where large amounts of unskilled labor is necessary for manufacturing, it's largely been moved to low wage countries. What hasn't been able to be moved has be automated to a large, and growing, extent. This has even extended into skilled jobs (think IT outsourcing to India).

Without the growth in these jobs here, there isn't an engine to lift the members lower classes up the economic ladder. Europe plastered over this by building vast civil services sectors (we've dabbled in this too), and using high taxes and deficit spending to pay for it. But those methods are now hitting the wall (n. Note what's happening in Greece, Italy, Portugal, Spain, Ireland, etc..

eddhead
January 5th, 2012, 02:07 PM
Than how do you explain the fact that in terms of emploment growth, the US manufacturing sector remains one of the bright spots in our otherwise dismal economy?

http://www.nytimes.com/2012/01/06/business/us-manufacturing-is-a-bright-spot-for-the-economy.html?hp

Fabrizio
January 5th, 2012, 02:08 PM
As usually, you guys are focusing on the wrong issue. This isn't about race, or even income. What had driven class mobility in the US in the path was economic growth and innovation. The birth and growth of any number of industries, starting out somewhat randomly with the railroads in the mid 1800's and going straight through to the internet boom, created the need for a vast number of workers. At first they were poorly paid cogs in the machines, but the one good thing the unions did was to get them a piece of the action as the growth continued.

But as I've stated before that's now changed. Where large amounts of unskilled labor is necessary for manufacturing, it's largely been moved to low wage countries. What hasn't been able to be moved has be automated to a large, and growing, extent. This has even extended into skilled jobs (think IT outsourcing to India).

Without the growth in these jobs here, there isn't an engine to life the members lower classes up the economic ladder. Europe plastered over this by building vast civil services sectors (we've dabbled in this too), and using high taxes and deficit spending to pay for it. But those methods are now hitting the wall (n. Note what's happening in Greece, Italy, Portugal, Spain, Ireland, etc..

Fine. Now within that reality, who (statistically) will be most likely to fair better and who worse?

Fabrizio
January 5th, 2012, 02:25 PM
Than how do you explain the fact that in terms of emploment growth, the US manufacturing sector remains one of the bright spots in our otherwise dismal economy?

http://www.nytimes.com/2012/01/06/business/us-manufacturing-is-a-bright-spot-for-the-economy.html?hp

From the article:

"In total exports, including manufactured goods as well as other commodities like agricultural products, the United States ranked second in the world in 2010, behind China but just ahead of Germany. For the first 10 months of 2011, Germany is slightly ahead of the United States."

So in exports, the US is losing ground to Germany.

Population Germany? 81,799,600 (vs 312,896,000 USA)

And also from the article:

"Certainly there has been a long decline in manufacturing employment, which peaked in 1979 at 19.6 million workers. Now even with hiring over the last two years, the figure is 11.8 million, a decline of 40 percent from the high."

A decline of 40 percent.

And the US population in 1980? 226,545,805

Fabrizio
January 5th, 2012, 02:58 PM
Also: I remember something about the fact that the US labour department considers the "assembly of hamburgers" as manufacturing.

How's that for padding statistics?

I cannot find a definite documented answer from a reliable source... but there is this from the NYTimes in 2004:

http://www.nytimes.com/2004/02/20/business/in-the-new-economics-fast-food-factories.html

BBMW
January 5th, 2012, 02:59 PM
A minor blip in a major trend. From the article:


Certainly there has been a long decline in manufacturing employment, which peaked in 1979 at 19.6 million workers. Now even with hiring over the last two years, the figure is 11.8 million, a decline of 40 percent from the high.

I also stated that a lot of the job loss was to automation. So the may ship the same or more product, but with less workers.


Than how do you explain the fact that in terms of emploment growth, the US manufacturing sector remains one of the bright spots in our otherwise dismal economy?

http://www.nytimes.com/2012/01/06/business/us-manufacturing-is-a-bright-spot-for-the-economy.html?hp

ZippyTheChimp
January 5th, 2012, 05:13 PM
As usually, you guys are focusing on the wrong issue. This isn't about race, or even income.As usual, you ignore the figures and just say it isn't about that. Saying so doesn't make it true.

So how do you explain that white and black people in the same lower economic group have widely different levels of upward mobility?

See table 1:
http://www.americanprogress.org/kf/hertz_mobility_analysis.pdf

Mobility of children born in the bottom quartile

Race.......% remaining at the bottom.......% attaining the top level

Black...................62.9...................... ..........3.6
White..................32.3....................... ........14.2
All.......................46.6.................... .............9.3

Ninjahedge
January 5th, 2012, 05:25 PM
I know you are (legitimately) flame baiting BB, but to answer your question:

It is from attitudes and prejudices on both sides. We have offered reparations to wrongs done by slavery, but not uniformly and not the kind of aid that helps an entire demographic come OUT of that kind of repression. Basically it has been varied amounts of "100 acres and a mule" that seems like a payoff that does not really give anything that will stimulate any kind of progression.

The Welfare state is a band-aid on an open wound in that it actually discourages people from doing things. I am not advocating its removal, but there needs to be some incentive to improve w/o having to give up so much for working harder than your neighbor. COMBINE that with the still-present discrimination that is just below the surface in many places (born of many things, including family ties, familiarity, racism and xenophobia) and you have a strong detriment to equal achievement.

I am not condoning the attitude that seems prevalent in some "hip" cultures validating high spending on low earnings ("bling") and the attitude that working "for the man" is somehow a disgrace. I am saying that there is a root of this, not based on ethnicity, that cannot be dealt with by simply paying reparations or offering favors. Attitudes may have changed and their change can be credited or blamed on whoever you want, but until they change again to something that is more productive on one end and less repressive on the other, we will get the same for years to come.

eddhead
January 5th, 2012, 06:56 PM
I also stated that a lot of the job loss was to automation. So the may ship the same or more product, but with less workers.

But the point is that employment in this sector increased for 2 years running

BBMW
January 21st, 2012, 02:26 PM
Interesting, worrying, and very important article. Hits on a lot of the themes that have been running though a number of threads (income inequality, shrinking middle class, loss of manufacturing jobs, etc.)

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=1&_r=1&hp

January 21, 2012

How U.S. Lost Out on iPhone Work

By CHARLES DUHIGG (http://topics.nytimes.com/top/reference/timestopics/people/d/charles_duhigg/index.html?inline=nyt-per) and KEITH BRADSHER (http://topics.nytimes.com/top/reference/timestopics/people/b/keith_bradsher/index.html?inline=nyt-per)

When Barack Obama (http://topics.nytimes.com/top/reference/timestopics/people/o/barack_obama/index.html?inline=nyt-per) joined Silicon Valley’s top luminaries for dinner in California (http://dealbook.nytimes.com/2011/02/18/obamas-summit-in-the-valley/) last February, each guest was asked to come with a question for the president.
But as Steven P. Jobs (http://topics.nytimes.com/top/reference/timestopics/people/j/steven_p_jobs/index.html?inline=nyt-per) of Apple (http://topics.nytimes.com/top/news/business/companies/apple_computer_inc/index.html?inline=nyt-org) spoke, President Obama (http://topics.nytimes.com/top/reference/timestopics/people/o/barack_obama/index.html?inline=nyt-per) interrupted with an inquiry of his own: what would it take to make iPhones in the United States?
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.
However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.
Apple employs 43,000 people in the United States and 20,000 overseas (http://investor.apple.com/secfiling.cfm?filingID=1193125-11-282113&CIK=320193), a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost every electronics designer relies upon to build their wares.
“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.
“If it’s the pinnacle of capitalism, we should be worried.”
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone (http://topics.nytimes.com/top/reference/timestopics/subjects/i/iphone/index.html?inline=nyt-classifier) manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.
“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”
Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.
To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers — including G.M. and others — that have shrunk as nimble competitors have emerged.
Apple was provided with extensive summaries of The New York Times’s reporting for this article, but the company, which has a reputation for secrecy, declined to comment.
This article is based on interviews with more than three dozen current and former Apple employees and contractors — many of whom requested anonymity to protect their jobs — as well as economists, manufacturing experts, international trade specialists, technology analysts, academic researchers, employees at Apple’s suppliers, competitors and corporate partners, and government officials.
Privately, Apple executives say the world is now such a changed place that it is a mistake to measure a company’s contribution simply by tallying its employees — though they note that Apple employs more workers in the United States than ever before.
They say Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.
“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”
‘I Want a Glass Screen’
In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.
Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.
People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”
After one executive left that meeting, he booked a flight to Shenzhen (http://travel.nytimes.com/frommers/travel/guides/asia/china/shenzhen/frm_shenzhen_3391010001.html), China (http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html?inline=nyt-geo). If Mr. Jobs wanted perfect, there was nowhere else to go.
For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?
The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.
In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was “a machine that is made in America.” (http://www.nytimes.com/1984/03/25/jobs/new-plants-may-not-mean-new-jobs.html) In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that “I’m as proud of the factory as I am of the computer.” (http://money.cnn.com/magazines/fortune/fortune_archive/1990/02/26/73121/index.htm) As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company’s iMac (http://nytimes.com.com/desktops/apple-imac-core-2/4505-3118_7-32065020.html?tag=api&part=nytimes&subj=re&inline=nyt-classifier) plant in Elk Grove, Calif.
But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook (http://www.apple.com/pr/bios/tim-cook.html), who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.
In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.
For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.
The impact of such advantages became obvious as soon as Mr. Jobs demanded glass screens in 2007.
For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc. (http://www.corninggorillaglass.com/), to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.
Then a bid for the work arrived from a Chinese factory.
When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
In Foxconn City
An eight-hour drive from that glass factory is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.
That’s because nothing like Foxconn City exists in the United States.
The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.
Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.
Foxconn Technology (http://www.foxconn.com/) has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.
“They could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”
In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.
Foxconn, in statements, declined to speak about specific clients.
“Any worker recruited by our firm is covered by a clear contract outlining terms and conditions and by Chinese government law that protects their rights,” the company wrote. Foxconn “takes our responsibility to our employees very seriously and we work hard to give our more than one million employees a safe and positive environment.”
The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.
Foxconn employees, in interviews, have challenged those assertions.
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
In China, it took 15 days.
Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt (http://web.mit.edu/manufacturing/amp/event/bios/schmidt.pdf), associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.
Some aspects of the iPhone are uniquely American. The device’s software, for instance, and its innovative marketing campaigns were largely created in the United States. Apple recently built a $500 million data center in North Carolina. Crucial semiconductors inside the iPhone 4 and 4S are manufactured in an Austin, Tex., factory by Samsung, of South Korea.
But even those facilities are not enormous sources of jobs. Apple’s North Carolina center, for instance, has only 100 full-time employees. The Samsung plant has an estimated 2,400 workers.
“If you scale up from selling one million phones to 30 million phones, you don’t really need more programmers,” said Jean-Louis Gassée, who oversaw product development and marketing for Apple until he left in 1990. “All these new companies — Facebook, Google, Twitter — benefit from this. They grow, but they don’t really need to hire much.”
It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.
But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.
Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple’s designs. Its strengthened glass sales have grown to more than $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.
But as that market has expanded, the bulk of Corning’s strengthened glass manufacturing has occurred at plants in Japan and Taiwan.
“Our customers are in Taiwan, Korea, Japan and China,” said James B. Flaws, Corning’s vice chairman and chief financial officer. “We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas.”
Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass domestically. But it would “require a total overhaul in how the industry is structured,” Mr. Flaws said. “The consumer electronics business has become an Asian business. As an American, I worry about that, but there’s nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years.”
Middle-Class Jobs Fade
The first time Eric Saragoza stepped into Apple’s manufacturing plant in Elk Grove, Calif., he felt as if he were entering an engineering wonderland.
It was 1995, and the facility near Sacramento employed more than 1,500 workers. It was a kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy-colored iMacs in various stages of assembly. Mr. Saragoza, an engineer, quickly moved up the plant’s ranks and joined an elite diagnostic team. His salary climbed to $50,000. He and his wife had three children. They bought a home with a pool.
“It felt like, finally, school was paying off,” he said. “I knew the world needed people who can build things.”
At the same time, however, the electronics industry was changing, and Apple — with products that were declining in popularity — was struggling to remake itself. One focus was improving manufacturing. A few years after Mr. Saragoza started his job, his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren’t the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.
“We were told we would have to do 12-hour days, and come in on Saturdays,” Mr. Saragoza said. “I had a family. I wanted to see my kids play soccer.”
Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.
But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class.
Even Mr. Saragoza, with his college degree, was vulnerable to these trends. First, some of Elk Grove’s routine tasks were sent overseas. Mr. Saragoza didn’t mind. Then the robotics that made Apple a futuristic playground allowed executives to replace workers with machines. Some diagnostic engineering went to Singapore. Middle managers who oversaw the plant’s inventory were laid off because, suddenly, a few people with Internet connections were all that were needed.
Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as “Silicon Valley North,” had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.
There were employment prospects in Silicon Valley, but none of them panned out. “What they really want are 30-year-olds without children,” said Mr. Saragoza, who today is 48, and whose family now includes five of his own.
After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.
Paydays for Apple
As Apple’s overseas operations and sales have expanded, its top employees have thrived. Last fiscal year, Apple’s revenue topped $108 billion, a sum larger than the combined state budgets of Michigan, New Jersey and Massachusetts. Since 2005, when the company’s stock split, share prices have risen from about $45 to more than $427.
Some of that wealth has gone to shareholders. Apple is among the most widely held stocks, and the rising share price has benefited millions of individual investors, 401(k)’s (http://topics.nytimes.com/your-money/retirement/401ks-and-similar-plans/index.html?inline=nyt-classifier) and pension plans. The bounty has also enriched Apple workers. Last fiscal year, in addition to their salaries, Apple’s employees and directors received stock worth $2 billion and exercised or vested stock and options worth an added $1.4 billion.
The biggest rewards, however, have often gone to Apple’s top employees. Mr. Cook, Apple’s chief, last year received stock grants (http://files.shareholder.com/downloads/AAPL/1640544083x0xS1193125-12-6704/320193/filing.pdf) — which vest over a 10-year period — that, at today’s share price, would be worth $427 million, and his salary was raised to $1.4 million. In 2010, Mr. Cook’s compensation package was valued at $59 million, according to Apple’s security filings.
A person close to Apple argued that the compensation received by Apple’s employees was fair, in part because the company had brought so much value to the nation and world. As the company has grown, it has expanded its domestic work force, including manufacturing jobs. Last year, Apple’s American work force grew by 8,000 people.
While other companies have sent call centers abroad, Apple has kept its centers in the United States. One source estimated that sales of Apple’s products have caused other companies to hire tens of thousands of Americans. FedEx and United Parcel Service, for instance, both say they have created American jobs because of the volume of Apple’s shipments, though neither would provide specific figures without permission from Apple, which the company declined to provide.
“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”
What’s more, Apple sources say the company has created plenty of good American jobs inside its retail stores and among entrepreneurs selling iPhone and iPad (http://topics.nytimes.com/top/reference/timestopics/subjects/i/ipad/index.html?inline=nyt-classifier) applications.
After two months of testing iPads, Mr. Saragoza quit. The pay was so low that he was better off, he figured, spending those hours applying for other jobs. On a recent October evening, while Mr. Saragoza sat at his MacBook and submitted another round of résumés online, halfway around the world a woman arrived at her office. The worker, Lina Lin, is a project manager in Shenzhen, China, at PCH International, which contracts with Apple and other electronics companies to coordinate production of accessories, like the cases that protect the iPad’s glass screens. She is not an Apple employee. But Mrs. Lin is integral to Apple’s ability to deliver its products.
Mrs. Lin earns a bit less than what Mr. Saragoza was paid by Apple. She speaks fluent English, learned from watching television and in a Chinese university. She and her husband put a quarter of their salaries in the bank every month. They live in a 1,080-square-foot apartment, which they share with their in-laws and son.
“There are lots of jobs,” Mrs. Lin said. “Especially in Shenzhen.”
Innovation’s Losers
Toward the end of Mr. Obama’s dinner last year with Mr. Jobs and other Silicon Valley executives, as everyone stood to leave, a crowd of photo seekers formed around the president. A slightly smaller scrum gathered around Mr. Jobs. Rumors had spread that his illness had worsened, and some hoped for a photograph with him, perhaps for the last time.
Eventually, the orbits of the men overlapped. “I’m not worried about the country’s long-term future,” Mr. Jobs told Mr. Obama, according to one observer. “This country is insanely great. What I’m worried about is that we don’t talk enough about solutions.”
At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a “tax holiday” so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple’s skilled manufacturing in the United States if the government helped train more American engineers.
Economists debate the usefulness of those and other efforts, and note that a struggling economy is sometimes transformed by unexpected developments. The last time analysts wrung their hands about prolonged American unemployment, for instance, in the early 1980s, the Internet hardly existed. Few at the time would have guessed that a degree in graphic design was rapidly becoming a smart bet, while studying telephone repair a dead end.
What remains unknown, however, is whether the United States will be able to leverage tomorrow’s innovations into millions of jobs.
In the last decade, technological leaps in solar and wind energy (http://topics.nytimes.com/top/reference/timestopics/subjects/w/wind_power/index.html?inline=nyt-classifier), semiconductor fabrication and display technologies have created thousands of jobs. But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive.
“New middle-class jobs will eventually emerge,” said Lawrence Katz, a Harvard economist. “But will someone in his 40s have the skills for them? Or will he be bypassed for a new graduate and never find his way back into the middle class?”
The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Mr. Jobs. G.M. went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay.
Before Mr. Obama and Mr. Jobs said goodbye, the Apple executive pulled an iPhone from his pocket to show off a new application — a driving game — with incredibly detailed graphics. The device reflected the soft glow of the room’s lights. The other executives, whose combined worth exceeded $69 billion, jostled for position to glance over his shoulder. The game, everyone agreed, was wonderful.
There wasn’t even a tiny scratch on the screen.
David Barboza, Peter Lattman and Catherine Rampell contributed reporting.

Fabrizio
January 21st, 2012, 05:23 PM
The article is entitled: "How U.S. Lost Out on iPhone Work"

I think the "how" can be summed up here:

"New screens began arriving at the plant near midnight. A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames."

lofter1
January 21st, 2012, 05:57 PM
Exactly ^

Although Newt might opt for having grade school kids do some Apple assembly as good training for the future.

The writer of the article sums up the Apple USA problem: our workers' lack of "diligence" :cool:

Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.



If only we were all more "flexible" (and could stomach those Apple biscuits) we'd be kicking Asia's ass.

eddhead
January 21st, 2012, 07:06 PM
It would also help if we were willing to live in 6 to a room dormitories with complete strangers and work 35 hour shifts for .60 an hour.

lofter1
January 21st, 2012, 08:07 PM
Precisely. What is WRONG with us that we can't see that?

It's working great for south east Asian laborers in Dubai ...

Gotta start putting those excess shipping containers to use (one answer to foreclosures):

http://inhabitat.com/wp-content/blogs.dir/1/files/2010/07/Dubai-Worker-Shipping-Container-Homes-2.jpg

BBMW
January 21st, 2012, 11:46 PM
the problem being that there are people who will do this (several hundred million at least), and they're getting jobs that previously would have likely gone to Americans. so how do we compete on a national level?


It would also help if we were willing to live in 6 to a room dormitories with complete strangers and work 35 hour shifts for .60 an hour.

Fabrizio
January 22nd, 2012, 03:32 AM
For starters, instead of saying:

"the problem being that there are people who will do this"

Perhaps it would better to say:

"the problem being that there are governments who allow this"

And let's proceed from there.

BBMW
January 22nd, 2012, 01:41 PM
The governments of the places where it's happening have no incentive to stop it. Places like Europe and the US who are largely the customers of these places, don't really have the power to stop it. They're too dependent on these countries, for a number of reasons.

Ninjahedge
January 23rd, 2012, 11:03 AM
The way you stop it is what we are starting to see in some areas of China.

You get the workers spoiled and materialistic.

As soon as they can start affording their own TV, their own car, or some other item we consider "normal" by our own standards, then we will start to see their COL go up and their demanded wages.


But when you have an intelligent, diligent, hungry group of people willing to work for, literally, peanuts... you will NOT be able to compete.

So maybe the key here is not to compete with them, but "help" them get on their feet so they can start demanding more from life....

Fabrizio
January 23rd, 2012, 11:14 AM
That's it! That's exactly what China wants.... for the West to help it's workers get on their feet so they can start demanding more from life....

I hope the US government gets on this right away.

BBMW
January 23rd, 2012, 11:52 AM
What will keep this in check is the fact that they still have several hundred million peasants on the land who are just dying (in some cases literally) to get those factory jobs.


The way you stop it is what we are starting to see in some areas of China.

You get the workers spoiled and materialistic.

As soon as they can start affording their own TV, their own car, or some other item we consider "normal" by our own standards, then we will start to see their COL go up and their demanded wages.


But when you have an intelligent, diligent, hungry group of people willing to work for, literally, peanuts... you will NOT be able to compete.

So maybe the key here is not to compete with them, but "help" them get on their feet so they can start demanding more from life....

Ninjahedge
January 23rd, 2012, 12:08 PM
BBMW, unless something is done to expose them to the things they do not know about.

Some areas of China have had dramatic increases in sales of things like automobiles. Places like Japan and Korea are no longer the hubs for electronic and plastic manufacturing (when they once were).

Even India is starting to show signs of "luxury" purchases in some districts previously not interested.

Tariffs and other measures only work as good as you want them to. We, as a country, are not willing to pay double for our television sets, so we have to find some other way to get it so that our bottom line, and in deed product quality, can compete again.

Otherwise it is just a matter of time before we see a crunch happen. How we come out of it is debatable. As a more dedicated industrial/information society like Germany, a failing indebted socialistic government like Italy or Greece, or as a newly reformed slave labor state like India or China?

BBMW
January 23rd, 2012, 12:41 PM
Some people in China are getting over the hump. But even if there are a 100,000,000 of those, it's well less then 1/10 of the population.

eddhead
January 23rd, 2012, 12:44 PM
The governments of the places where it's happening have no incentive to stop it. Places like Europe and the US who are largely the customers of these places, don't really have the power to stop it. They're too dependent on these countries, for a number of reasons.

What incentives did the US govt have at the turn of the 20th century when child labor laws, work week mandates, and safetly standards were established? Oh yeah. Labor unions. But those are bad, right?

BBMW
January 23rd, 2012, 12:47 PM
^
And being a democracy. China doesn't have to worry about either of those.

eddhead
January 23rd, 2012, 12:51 PM
They have to worry about Public unrest. Right now as an issue it is managable. But it won't stay that way forever.

BBMW
January 23rd, 2012, 01:36 PM
The Chinese government has proven quite effective in dealing with civil unrest.

Be that as it may, I'm more interested in how this is affecting the US, and what, if anything should be done about it. I posted this article because it was applicable, and it backs up what I posted here:

http://wirednewyork.com/forum/showthread.php?t=21910&p=385520&viewfull=1#post385520

The fact remains that this is probably the largest problem we face as a society (lack of economic competitiveness.) A lot of the problems we've been talking about, not in the least the income inequality issue, can trace back to this.

What can be done to increase US competitiveness, especially without trashing our standard of living (if anything?)

Fabrizio
January 23rd, 2012, 02:04 PM
Germany has the economic strengths America once boasted

Germany with its manufacturing base and export prowess is the U.S. of yesteryear, an economic power unlike any of its European neighbors. It has thrived on principles America seems to have lost.

By Don Lee, Los Angeles Times
January 21, 2012, 7:33 p.m.

Reporting from Elz, Germany— Every summer, Volkmar and Vera Kruger spend three weeks vacationing in the south of France or at a cool getaway in Denmark. For the other three weeks of their annual vacation, they garden or travel a few hours away to root for their favorite team in Germany's biggest soccer stadium.

The couple, in their early 50s, aren't retired or well off. They live in a small Tudor-style house in this middle-class town about 30 miles northwest of Frankfurt. He's a foreman at a glass factory; she works part time for a company that tracks inventories for retailers. Their combined income is a modest $40,000.Yet the Krugers have a higher standard of living than many Americans who have twice that income.

Their secret: little debt, frugal habits and a government that is intensely focused on high production, low inflation and extensive social services. That has given them job security and good medical care as well as well-maintained roads, trains and bike paths. Both of their adult children are out on their own, thanks in part to Germany's job-training system and heavy subsidies for university education. For instance, Volkmar's out-of-pocket costs for stomach surgery and 10 days in a hospital totaled just $13 a day. College tuition for their son runs about $260 a semester.

Germany, with its manufacturing base and export prowess, is the America of yesteryear, an economic power unlike any of its European neighbors. As the world's fourth-largest economy, it has thrived on principles that the United States seems to have gradually lost. It has tightly managed its budget and adopted reforms — such as raising the retirement age — that some other Eurozone nations are just now being forced to undertake. And few countries can match Germany's capabilities for producing and exporting machinery and other equipment, or its infrastructure for research, apprenticeships and financing that support manufacturing.

"German industry is strong," said Volkmar, speaking in halting English as he occasionally looks up translations on a laptop. "People work good. That's why the German economy is best in Europe." Indeed, Germany was the only major Eurozone nation to escape the credit downgrades that have hit its neighbors. And the country continues to anchor the continent's economy.

Still, Germany has its share of challenges. Income inequality, while less pronounced than in the U.S., is rising. Most workers, including the Krugers, have seen little or no real wage gains in recent years. And the nation's population is declining. And now, with Europe on the ropes, Germany faces both a declining market for its exports and the prospect of having to cough up tens of billions of dollars more to help bail out profligate Eurozone neighbors. Even so, German business and consumer confidence has held up well. The nation's jobless rate fell last month to a two-decade low of 6.8%, considerably lower than in much of Europe and the U.S. And though its industrial production is starting to soften, Germany so far has maintained an impressive trade surplus with the rest of the world, including China.

Germany's economy looks like that of the U.S. a generation ago. In 1975, manufacturing accounted for about 20% of the United States' economic output, or gross domestic product, about the same as in Germany today. Since then, U.S. manufacturing's share of GDP has slid to about 12%. In 1975, the U.S. budget deficit was a manageable 1% of the economy, about the same as Germany's now. Last year, the U.S. deficit was about 10%.

American families in the 1970s and early '80s typically saved about 10% of their take-home pay, about the same as in Germany today. The U.S. savings rate these days is in the low single digits. Germany, like China, fiercely promotes its exports and has been reluctant to ramp up domestic spending, frustrating Washington, which wants to sell more American goods abroad. That may be good for Germany, but many critics say the country's lack of consumption causes unhealthy imbalances for the regional and global economies, much the way America's overconsumption and borrowing does. But Germany's economic practices and lifestyle are deeply ingrained in a culture that fears debt and inflation. In many ways, for instance, the nation discourages consumerism. Its streets aren't plastered with the billboards that dot the U.S.. Taxes on goods and services are high. Many shops and restaurants in Germany are closed Sundays.

Many smaller stores don't even take credit cards. Volkmar laughed about how consumers in other countries pull out plastic for the smallest of purchases. "In France you pay for your croissant with your credit card. In Germany, they don't like it," he said, referring to both merchants and consumers. Since paying off their home loan recently, the Krugers have almost no debt. They sock away money for old age and summer trips, and they rarely eat out.

Household liabilities in Germany have been rising, but remain lower than those in other developed countries. By one common measure, Germany's household debts were 97.5% of total after-tax income in 2010, compared with 125% for the U.S. Still, the Krugers and other Germans are seeing a rise in freewheeling spending, especially among the young. Volkmar said he gets a lot of credit card offers. More marketing, however, doesn't mean that a lot of consumers are getting credit. "In truth, it's not easy credit," said Fasun Batmaz, a manager at a TeamBank consumer unit whose name, Easy Credit, belies the rigorous process and strict requirements. "Only a handful come in and may get it."

Easy doesn't describe the Krugers' lives either. On weekdays and every few Saturdays, Volkmar is out the door by 5 a.m., driving 45 minutes to his factory. Vera also works some Saturdays. But neither gets paid more when they work additional hours, nor do they get paid less when they work fewer hours. Over time, the hours balance out. A similar idea is behind a work-sharing system that many experts said helped Germany avoid the mass layoffs that swept the U.S. during the Great Recession. A company might reduce the hours of all workers to avert laying off an employee.

Germany's lower unemployment rate also reflects its orientation toward formal vocational training. The Krugers' older child, Thorsten, was interested in books from an early age, and prepared for a university education. Their daughter, Nadine, got a vocational diploma in social work that included three years of schooling after high school, with the final year being on-the-job training at half pay.

About one-fourth of all German businesses take part in this apprenticeship program; six of 10 apprentices end up getting hired permanently, said Dirk Werner of the Cologne Institute for Economic Research. The practice, he said, is a key reason why Germany has one of the lowest unemployment rates for 15- to 24-year-olds, about 9.7%, according to the Organization for Economic Cooperation and Development in Paris. In the U.S., the comparable rate is about twice that. Volkmar and others attribute part of the lower unemployment rate to the German work ethic. Yet Germans, on average, work far fewer hours a year than Americans, thanks partly to five or six weeks of vacation.

The amount of the Krugers' vacation time is typical for most Germans. When they go to France, the Krugers take an old Volkswagen camper, but still expect to spend about $3,000 over three weeks. Over the recent winter holiday, they took the 45-minute train ride into Frankfurt to buy Christmas presents. They picked up practical gifts: a breakfast tray, cutting board and sleeping gown for Nadine. For Thorsten, the couple bought a tool kit made in Germany. Volkmar laughed when asked why he bought tools for his son. Thorsten asked for them, he said, adding a bit sheepishly, "The Volkswagen camper needs repair."

BBMW
January 23rd, 2012, 02:25 PM
^
I agree with this (well some, not all), but I've looked at the German model, and there could be lessons here. They've created a global brand for their country as producing premium good. The US once had that, but not so much any more. And we definitely need more vocationally oriented education. The concept that every US student should go to college is not feasible or necessary, but a standard HS diploma doesn't mean anything.

One issue is that Germany is a lot smaller than the US. You may be able to sell enough premium exports to keep it's population going, but we may be too big for that trick.

Fabrizio
January 23rd, 2012, 02:28 PM
Sell enough? Germany exports more than the US.

A list of countries by exports. And compare exports per population:

http://en.wikipedia.org/wiki/List_of_countries_by_exports

BBMW
January 23rd, 2012, 03:07 PM
What I'm saying is that if we tried to play Germany's game (high end exports) we'd have to produce and export so much (to soak up all our excess labor) that there would not be enough global demand for the goods.


Sell enough? Germany exports more than the US.

A list of countries by exports. And compare exports per population:

http://en.wikipedia.org/wiki/List_of_countries_by_exports

Ninjahedge
January 23rd, 2012, 03:11 PM
Some people in China are getting over the hump. But even if there are a 100,000,000 of those, it's well less then 1/10 of the population.

That is my point.

Oddly enough, helping China may be one way to help weaken it. People are less willing to die for a country on anything but the most dire of circumstances if they actually have something to live for.

It is also a lot harder to keep information from people that have more ways to get it. If these guys are kept in the villages, it will be a lot easier to keep them in the dark.

Ninjahedge
January 23rd, 2012, 03:19 PM
What I'm saying is that if we tried to play Germany's game (high end exports) we'd have to produce and export so much (to soak up all our excess labor) that there would not be enough global demand for the goods.

The problem is more than that. We would need to produce stuff that WE would want to buy rather than others. WE are the largest consumers in the world right now, if we produced better stuff, we would be feeding ourselves.

But we undersold our own vested interests and made companies like "Ford" a curse word rather than a compliment.

Add to it our best "industries" are non-productive leeches that drain us of our funding to do no more than simply funnel it up the ladder.

Why do Insurance companies do so well? Why do we have private industry controlling that when it has been shown that our health care is worse than most other countries at our level of development? Why are they ALLOWED to charge so much, and how is it we are still so stupid that one drum-beating hypocrite can shout "socialized medicine" and we are all afraid that Karl Marx is going to jump out of the closet and take our women and children?

We do not need the exact same model, but training our youths to be PROFESSIONALS in a field, whether that be Plumbing, Dentistry or Automotive Engineering, is good for our long run, and is something we should pursue.

Being a good student should not be viewed as something to be ashamed of.

BBMW
January 24th, 2012, 01:27 AM
The problem is more than that. We would need to produce stuff that WE would want to buy rather than others. WE are the largest consumers in the world right now, if we produced better stuff, we would be feeding ourselves.


People would have to be willing to pay the price. So far, they haven't, and many now don't have the money to do so.



But we undersold our own vested interests and made companies like "Ford" a curse word rather than a compliment.


Ford (and GM and Chrysler also) did that to themselves. "Found On Road Dead", "Fix Or Repair Daily" were reality for a long time. For a decade or three, they made junk. They've only recently gotten their act together.



Add to it our best "industries" are non-productive leeches that drain us of our funding to do no more than simply funnel it up the ladder.

Why do Insurance companies do so well? Why do we have private industry controlling that when it has been shown that our health care is worse than most other countries at our level of development? Why are they ALLOWED to charge so much, and how is it we are still so stupid that one drum-beating hypocrite can shout "socialized medicine" and we are all afraid that Karl Marx is going to jump out of the closet and take our women and children?


This can be (and has been) it's own thread or several. Health care has to change, but many (probably most) people don't want socialized health care, so it's a dead issue.



We do not need the exact same model, but training our youths to be PROFESSIONALS in a field, whether that be Plumbing, Dentistry or Automotive Engineering, is good for our long run, and is something we should pursue.

Being a good student should not be viewed as something to be ashamed of.

Agree.

stache
January 24th, 2012, 08:21 AM
Health care has to change, but many (probably most) people don't want socialized health care, so it's a dead issue.



Can you provide any supporting documentation/polling to support this theory?

Ninjahedge
January 24th, 2012, 10:13 AM
No, he can't.

They are afraid of the term "socialized" because of just what I said. If it can be shown that the majority of Americans, in the same demographic as they are, would be paying (net) less money than they are now for better all-around health care, they would have something different to say.

Like I said, the terms Socialism (Damn Chinese!!!!!) and Communism are thrown about willy-nilly like they were satanic while Capitalism (in its truest form a very unforgiving and cruel system) is praised on high like it will save the world.

The world has never worked on pure academic socio-economic definitions. You need a blend to run the real world. The blend we have now is showing its weaknesses, and shouting "tradition" and "heritage" to a country still in its teens is just laughable.

BBMW
January 24th, 2012, 10:28 AM
The fact that it's been run up the political flagpole numerous times over the last half century and has gotten shot down every time.


Can you provide any supporting documentation/polling to support this theory?

Ninjahedge
January 24th, 2012, 10:46 AM
Can you provide any supporting documentation/polling to support this theory?
The fact that it's been run up the political flagpole numerous times over the last half century and has gotten shot down every time.

IOW, no.

eddhead
January 24th, 2012, 10:57 AM
Germany has the economic strengths America once boasted

Germany with its manufacturing base and export prowess is the U.S. of yesteryear, an economic power unlike any of its European neighbors. It has thrived on principles America seems to have lost.

By Don Lee, Los Angeles Times
January 21, 2012, 7:33 p.m.

.

Their secret: little debt, frugal habits and a government that is intensely focused on high production, low inflation and extensive social services. That has given them job security and good medical care as well as well-maintained roads, trains and bike paths. Both of their adult children are out on their own, thanks in part to Germany's job-training system and heavy subsidies for university education. For instance, Volkmar's out-of-pocket costs for stomach surgery and 10 days in a hospital totaled just $13 a day. College tuition for their son runs about $260 a semester.


Not to mention relatively low defense spending.

lofter1
January 24th, 2012, 11:55 AM
Ford (and GM and Chrysler also) did that to themselves. "Found On Road Dead", "Fix Or Repair Daily" were reality for a long time. For a decade or three, they made junk. They've only recently gotten their act together.


How did they do that? Oh, yeah, with a push by the government and help from taxpayer $$.

The other option -- let them die, as pushed by many in the GOP -- would have been a terrible and stupid choice.

GordonGecko
January 24th, 2012, 01:36 PM
Not to mention relatively low defense spending.

IMO Germany's biggest advantage is their focus on apprenticeship and holding trades in high value

BBMW
January 24th, 2012, 02:06 PM
If it was so damn popular, it would have been done. Both Clinton and Obama tried, while the Democrats holding both houses of Congress, and failed miserably, which largely led to the democrats losing one or both houses in next election (the most definitive poll of all.)

Yeah, is REEEEAAAAALLLLYYYYY popular out there


IOW, no.

BBMW
January 24th, 2012, 02:11 PM
and an obsession with engineering excellence (to the point of overengineering stuff) and quality.


IMO Germany's biggest advantage is their focus on apprenticeship and holding trades in high value

BBMW
January 24th, 2012, 02:16 PM
Ford, to it's credit, didn't take government money. GM and Chrysler did, and there still the weakest. They probably should have have been allowed to fail (they certainly deserved to), but the UAW wanted payback for it's support of Obama.


How did they do that? Oh, yeah, with a push by the government and help from taxpayer $$.

The other option -- let them die, as pushed by many in the GOP -- would have been a terrible and stupid choice.

lofter1
January 24th, 2012, 02:20 PM
And then what would have become of all those workers and folks who supply and sustain the automakers? Lots more unemployed is just what we didn't need.

BBMW
January 24th, 2012, 02:28 PM
This I acknowledge. The timing would have been terrible. On that basis, I could see it somewhat justified.

However, I think it's just postponing the inevitable. They'll perk up for a while, then get themselves in trouble again.


And then what would have become of all those workers and folks who supply and sustain the automakers? Lots more unemployed is just what we didn't need.

GordonGecko
January 24th, 2012, 02:31 PM
and an obsession with engineering excellence (to the point of overengineering stuff) and quality.

Absolutely, they're really Nazis about it! ;)

Ninjahedge
January 24th, 2012, 02:54 PM
This I acknowledge. The timing would have been terrible. On that basis, I could see it somewhat justified.

However, I think it's just postponing the inevitable. They'll perk up for a while, then get themselves in trouble again.

Wrong answer.

You do not refuse to help someone just because "It's only a mater of time before they are right back where they are now".

That is a piss-poor defeatist attitude that many nay-sayers LOVE to profess and is, ironically, why many ventures prophesized end as such. The surest way to help someone fail is to discourage them from start to finish.

Having a program that helps out a company and prove to be a success is NOT compromised by that company failing due to other circumstances.

BBMW
January 24th, 2012, 03:06 PM
I don't know if I need a rimshot smiley or a facepalm smiley.


Absolutely, they're really Nazis about it! ;)

BBMW
January 24th, 2012, 03:08 PM
Why?

The British propped up their declining auto manurfacturers for decades, most of them died anyway. Remember BMC?

The weak should die, the strong should take their place. We've forgottent that, at our own peril as a society.


Wrong answer.

You do not refuse to help someone just because "It's only a mater of time before they are right back where they are now".

That is a piss-poor defeatist attitude that many nay-sayers LOVE to profess and is, ironically, why many ventures prophesized end as such. The surest way to help someone fail is to discourage them from start to finish.

Having a program that helps out a company and prove to be a success is NOT compromised by that company failing due to other circumstances.

Fabrizio
January 24th, 2012, 03:25 PM
The US gov gave a huge push to the big 3 American auto manufacturers during WW2 giving them mega-millions in contracts and even building new plants for them. Certainly it was neccessary for the war effort, but it set them up nicely for retooling in the late 40's and early1950's, flush with cash.

Ninjahedge
January 24th, 2012, 03:51 PM
The weak should die is a death sentence for the US, it just don't work that way.

You do not give them money for nothing, but you do not just sit there and let your own nation be cannibalized by foreign AND domestic corporations.

GordonGecko
January 24th, 2012, 04:03 PM
I don't know if I need a rimshot smiley or a facepalm smiley.
facepalm, Germans are das good people. I just couldn't resist

Merry
January 25th, 2012, 08:37 AM
How about for starters, removing all avenues for people on high incomes to benefit from the tax system to the exclusion of everyone else? They really don't need the money.


The political battle between the Democrats and Republicans has generally taken the form of Democrats seeking to address and upgrade the economic status of the poor and middle class with Republicans defending the rights and privileges of the wealthy.

Right, so if this is accurate, the rich get richer, and the poor get poorer under the Republicans. But hang on a minute, isn't that the case under the Democrats, too? :confused:

The self-interest of politicians of all flavours wins every time. The Labour Party in Oz hasn't been the defender of the working class for quite some time.


The Flatter Tax

by Ed Koch

I don't believe class conflict is harmful to our country, as long as it is limited to elections. It is also helpful if the charges made by both sides in this conflict are factually correct.

The Republicans are the party of the wealthy. Its membership, however, is made up primarily of people who do not fit that description and are not in the 1 percent of our population with an income of $380,000 and above. Those people, not part of the 1 percent, have an expectation of someday becoming part of that small group which pays just over a fourth of all federal taxes, according to the Tax Policy Center. It also may be that even if they don't expect to be part of it, they hope their children will be, and they want to protect the prerogatives that come with wealth. The major political tenet of these people is -- success comes to those who strive to make it and do on their own. I truly believe that is the meaning of Newt Gingrich's statement that President Obama is "the most effective food stamp president in history," and "I would like to be the best paycheck president in American history." Mitt Romney decries criticisms of Republican philosophy as "the bitter politics of envy."

The Democrats, on the other hand are the party of the poor and middle class. Rich people also play a leading role in the party, but that role is to decry the lack of a level playing field seeking changes in the law that if executed would be damaging to their own economic condition. The best example of a wealthy person heading the Democratic fight is F.D.R., whose policies as president were decried by his social peers and who was condemned by the Republican elite as a betrayer of his own class. Today, that role is held by Warren Buffet. The Times of January 14, 2012 reports (http://www.nytimes.com/2012/01/15/business/the-1-percent-paint-a-more-nuanced-portrait-of-the-rich.html?ref=planning):


The top 1 percent of earners in a given year receives just under a fifth of the country's pretax income, about double their share 30 years ago... In 2007, they accounted for about 30 percent of philanthropic giving, according to Federal Reserve data. They received 22 percent of their income from capital gains, compared with 2 percent for everybody else.



The political battle between the Democrats and Republicans has generally taken the form of Democrats seeking to address and upgrade the economic status of the poor and middle class with Republicans defending the rights and privileges of the wealthy. The I.R.S. code has conferred special privileges for different groups. Today, most people, even many Republicans, would agree that the most glaring example of special and unfair favorable treatment is given to those whose income comes primarily from Wall Street, with capital gains taxed at 15 percent.

Income described as "unearned," as opposed to "earned," the latter consisting primarily of salaries paid to employees or professional fees, e.g., lawyers, doctors, architects, etc., which are taxed at different rates depending on the amounts, with the highest rate on "earned" income currently being 35 percent. Contrast that with the income of hedge fund operators - their income described by the I.R.S. as "unearned" -- which is taxed at 15 percent, no matter the millions they receive in the conduct of their business.

I am not an economist and don't pretend to be an expert on the I.R.S. code or the many loopholes carved out allowing the privileged and wealthy in some cases to be pay nothing. The media has told us of oil companies, very successful in their profits, using available deductions and ending up in some cases paying zilch in corporate income taxes. When you have middle class taxpayers paying up to 35 percent of their earned income subject to taxes, and well-known businessman Warren Buffet paying 15 percent on most of his income, why shouldn't there be anger in the country taking the form of class warfare dominating the pending election? What should the Democrats be offering as one of their top priorities to deal with the enormous inequities in our tax code?

I believe it should be a form of the flat tax, but not the traditional flat tax. The traditional flat tax excludes from any tax "unearned income," taxing only "earned income." Now you will understand why Steve Forbes when he ran for president in 1996 and 2000 supported as his top issue the adoption of a flat tax. If adopted, he would have paid nothing, since he and many others can manipulate their income so it is only "unearned" coming from Wall Street investments. Instead, I call for the "flatter tax." I believe all income from whatever source should be taxable.

As many deductions as possible, now available to us, should be eliminated. Realists believe that at least two deductions will remain: the mortgage interest deduction, the impact of which the New York Times of January 20th described (http://www.nytimes.com/2012/01/20/us/politics/why-americans-think-the-tax-rate-is-high-and-why-theyre-wrong.html) as follows: "The average family in the top 1 percent saves more than $5,000 from the mortgage deduction." The Times also points out, "The mortgage interest deduction, widely considered a middle class benefit, actually saves a typical middle-income household only about $200 a year, because so many families claim the standard deduction, rather than itemized ones." The charitable deductions allowed have a huge support base. The deduction in my opinion really should be eliminated and certainly at the very least be far more limited. Why should the public pay a significant part of someone's charitable contribution? Indeed, when the government is involved, it isn't, in my view, charity anymore. Nevertheless, probably at least these two deductions will be kept.

Finally, I believe three rates, depending on income, should be retained so as to keep progressive taxation a part of the code, and, voila, we've leveled the playing field.

http://www.huffingtonpost.com/ed-koch/the-flatter-tax_b_1224385.html?ref=new-york

BBMW
January 25th, 2012, 12:23 PM
For a more social take on the divisions in this country:

http://online.wsj.com/article/SB10001424052970204301404577170733817181646.html?m od=googlenews_wsj

The New American Divide

The ideal of an 'American way of life' is fading as the working class falls further away from institutions like marriage and religion and the upper class becomes more isolated. Charles Murray on what's cleaving America, and why.

By CHARLES MURRAY (http://wirednewyork.com/search/term.html?KEYWORDS=CHARLES+MURRAY&bylinesearch=true)

America is coming apart. For most of our nation's history, whatever the inequality in wealth between the richest and poorest citizens, we maintained a cultural equality known nowhere else in the world—for whites, anyway. "The more opulent citizens take great care not to stand aloof from the people," wrote Alexis de Tocqueville, the great chronicler of American democracy, in the 1830s. "On the contrary, they constantly keep on easy terms with the lower classes: They listen to them, they speak to them every day."
Americans love to see themselves this way. But there's a problem: It's not true anymore, and it has been progressively less true since the 1960s.
View Interactive (http://wirednewyork.com/forum/#)


http://s.wsj.net/public/resources/images/OB-RM037_Review_D_20120120194202.jpg (http://wirednewyork.com/forum/#)



People are starting to notice the great divide. The tea party sees the aloofness in a political elite that thinks it knows best and orders the rest of America to fall in line. The Occupy movement sees it in an economic elite that lives in mansions and flies on private jets. Each is right about an aspect of the problem, but that problem is more pervasive than either political or economic inequality. What we now face is a problem of cultural inequality.
When Americans used to brag about "the American way of life"—a phrase still in common use in 1960—they were talking about a civic culture that swept an extremely large proportion of Americans of all classes into its embrace. It was a culture encompassing shared experiences of daily life and shared assumptions about central American values involving marriage, honesty, hard work and religiosity.
Over the past 50 years, that common civic culture has unraveled. We have developed a new upper class with advanced educations, often obtained at elite schools, sharing tastes and preferences that set them apart from mainstream America. At the same time, we have developed a new lower class, characterized not by poverty but by withdrawal from America's core cultural institutions.
Previous Saturday Essays

Cocaine: The New Front Lines (Jan. 14) (http://online.wsj.com/article/SB10001424052970204331304577145101343740004.html)
Terror on Trial (Jan. 7) (http://online.wsj.com/article/SB10001424052970203513604577140671297550142.html)
A Year Without Fear by Scott Adams (Dec. 31) (http://online.wsj.com/article/SB10001424052970204720204577126950573894974.html)
How to Ace a Google Interview (Dec. 24) (http://online.wsj.com/article/SB10001424052970204552304577112522982505222.html)


To illustrate just how wide the gap has grown between the new upper class and the new lower class, let me start with the broader upper-middle and working classes from which they are drawn, using two fictional neighborhoods that I hereby label Belmont (after an archetypal upper-middle-class suburb near Boston) and Fishtown (after a neighborhood in Philadelphia that has been home to the white working class since the Revolution).
To be assigned to Belmont, the people in the statistical nationwide databases on which I am drawing must have at least a bachelor's degree and work as a manager, physician, attorney, engineer, architect, scientist, college professor or content producer in the media. To be assigned to Fishtown, they must have no academic degree higher than a high-school diploma. If they work, it must be in a blue-collar job, a low-skill service job such as cashier, or a low-skill white-collar job such as mail clerk or receptionist.
People who qualify for my Belmont constitute about 20% of the white population of the U.S., ages 30 to 49. People who qualify for my Fishtown constitute about 30% of the white population of the U.S., ages 30 to 49.
I specify white, meaning non-Latino white, as a way of clarifying how broad and deep the cultural divisions in the U.S. have become. Cultural inequality is not grounded in race or ethnicity. I specify ages 30 to 49—what I call prime-age adults—to make it clear that these trends are not explained by changes in the ages of marriage or retirement.
In Belmont and Fishtown, here's what happened to America's common culture between 1960 and 2010.
Marriage: In 1960, extremely high proportions of whites in both Belmont and Fishtown were married—94% in Belmont and 84% in Fishtown. In the 1970s, those percentages declined about equally in both places. Then came the great divergence. In Belmont, marriage stabilized during the mid-1980s, standing at 83% in 2010. In Fishtown, however, marriage continued to slide; as of 2010, a minority (just 48%) were married. The gap in marriage between Belmont and Fishtown grew to 35 percentage points, from just 10.
Single parenthood: Another aspect of marriage—the percentage of children born to unmarried women—showed just as great a divergence. Though politicians and media eminences are too frightened to say so, nonmarital births are problematic. On just about any measure of development you can think of, children who are born to unmarried women fare worse than the children of divorce and far worse than children raised in intact families. This unwelcome reality persists even after controlling for the income and education of the parents.
In 1960, just 2% of all white births were nonmarital. When we first started recording the education level of mothers in 1970, 6% of births to white women with no more than a high-school education—women, that is, with a Fishtown education—were out of wedlock. By 2008, 44% were nonmarital. Among the college-educated women of Belmont, less than 6% of all births were out of wedlock as of 2008, up from 1% in 1970.
Industriousness: The norms for work and women were revolutionized after 1960, but the norm for men putatively has remained the same: Healthy men are supposed to work. In practice, though, that norm has eroded everywhere. In Fishtown, the change has been drastic. (To avoid conflating this phenomenon with the latest recession, I use data collected in March 2008 as the end point for the trends.)
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Ryan Collerd for The Wall Street Journal Fishtown, a neighborhood in Philadelphia, stands in as a symbol of America's white working class in Charles Murray's new book.



The primary indicator of the erosion of industriousness in the working class is the increase of prime-age males with no more than a high school education who say they are not available for work—they are "out of the labor force." That percentage went from a low of 3% in 1968 to 12% in 2008. Twelve percent may not sound like much until you think about the men we're talking about: in the prime of their working lives, their 30s and 40s, when, according to hallowed American tradition, every American man is working or looking for work. Almost one out of eight now aren't. Meanwhile, not much has changed among males with college educations. Only 3% were out of the labor force in 2008.
There's also been a notable change in the rates of less-than-full-time work. Of the men in Fishtown who had jobs, 10% worked fewer than 40 hours a week in 1960, a figure that grew to 20% by 2008. In Belmont, the number rose from 9% in 1960 to 12% in 2008.
Crime: The surge in crime that began in the mid-1960s and continued through the 1980s left Belmont almost untouched and ravaged Fishtown. From 1960 to 1995, the violent crime rate in Fishtown more than sextupled while remaining nearly flat in Belmont. The reductions in crime since the mid-1990s that have benefited the nation as a whole have been smaller in Fishtown, leaving it today with a violent crime rate that is still 4.7 times the 1960 rate.
Religiosity: Whatever your personal religious views, you need to realize that about half of American philanthropy, volunteering and associational memberships is directly church-related, and that religious Americans also account for much more nonreligious social capital than their secular neighbors. In that context, it is worrisome for the culture that the U.S. as a whole has become markedly more secular since 1960, and especially worrisome that Fishtown has become much more secular than Belmont. It runs against the prevailing narrative of secular elites versus a working class still clinging to religion, but the evidence from the General Social Survey, the most widely used database on American attitudes and values, does not leave much room for argument.
For example, suppose we define "de facto secular" as someone who either professes no religion at all or who attends a worship service no more than once a year. For the early GSS surveys conducted from 1972 to 1976, 29% of Belmont and 38% of Fishtown fell into that category. Over the next three decades, secularization did indeed grow in Belmont, from 29% in the 1970s to 40% in the GSS surveys taken from 2006 to 2010. But it grew even more in Fishtown, from 38% to 59%.
***

It can be said without hyperbole that these divergences put Belmont and Fishtown into different cultures. But it's not just the working class that's moved; the upper middle class has pulled away in its own fashion, too.
If you were an executive living in Belmont in 1960, income inequality would have separated you from the construction worker in Fishtown, but remarkably little cultural inequality. You lived a more expensive life, but not a much different life. Your kitchen was bigger, but you didn't use it to prepare yogurt and muesli for breakfast. Your television screen was bigger, but you and the construction worker watched a lot of the same shows (you didn't have much choice). Your house might have had a den that the construction worker's lacked, but it had no StairMaster or lap pool, nor any gadget to monitor your percentage of body fat. You both drank Bud, Miller, Schlitz or Pabst, and the phrase "boutique beer" never crossed your lips. You probably both smoked. If you didn't, you did not glare contemptuously at people who did.
When you went on vacation, you both probably took the family to the seashore or on a fishing trip, and neither involved hotels with five stars. If you had ever vacationed outside the U.S. (and you probably hadn't), it was a one-time trip to Europe, where you saw eight cities in 14 days—not one of the two or three trips abroad you now take every year for business, conferences or eco-vacations in the cloud forests of Costa Rica.
You both lived in neighborhoods where the majority of people had only high-school diplomas—and that might well have included you. The people around you who did have college degrees had almost invariably gotten them at state universities or small religious colleges mostly peopled by students who were the first generation of their families to attend college. Except in academia, investment banking, a few foundations, the CIA and the State Department, you were unlikely to run into a graduate of Harvard, Princeton or Yale.
Even the income inequality that separated you from the construction worker was likely to be new to your adulthood. The odds are good that your parents had been in the working class or middle class, that their income had not been much different from the construction worker's, that they had lived in communities much like his, and that the texture of the construction worker's life was recognizable to you from your own childhood.
Taken separately, the differences in lifestyle that now separate Belmont from Fishtown are not sinister, but those quirks of the upper-middle class that I mentioned—the yogurt and muesli and the rest—are part of a mosaic of distinctive practices that have developed in Belmont. These have to do with the food Belmonters eat, their drinking habits, the ages at which they marry and have children, the books they read (and their number), the television shows and movies they watch (and the hours spent on them), the humor they enjoy, the way they take care of their bodies, the way they decorate their homes, their leisure activities, their work environments and their child-raising practices. Together, they have engendered cultural separation.
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M. Scott Brauer for The Wall Street Journal Belmont, an archetypal suburb of Boston, stands in for the white upper middle class.



It gets worse. A subset of Belmont consists of those who have risen to the top of American society. They run the country, meaning that they are responsible for the films and television shows you watch, the news you see and read, the fortunes of the nation's corporations and financial institutions, and the jurisprudence, legislation and regulations produced by government. They are the new upper class, even more detached from the lives of the great majority of Americans than the people of Belmont—not just socially but spatially as well. The members of this elite have increasingly sorted themselves into hyper-wealthy and hyper-elite ZIP Codes that I call the SuperZIPs.
In 1960, America already had the equivalent of SuperZIPs in the form of famously elite neighborhoods—places like the Upper East Side of New York, Philadelphia's Main Line, the North Shore of Chicago and Beverly Hills. But despite their prestige, the people in them weren't uniformly wealthy or even affluent. Across 14 of the most elite places to live in 1960, the median family income wasn't close to affluence. It was just $84,000 (in today's purchasing power). Only one in four adults in those elite communities had a college degree.
By 2000, that diversity had dwindled. Median family income had doubled, to $163,000 in the same elite ZIP Codes. The percentage of adults with B.A.s rose to 67% from 26%. And it's not just that elite neighborhoods became more homogeneously affluent and highly educated—they also formed larger and larger clusters.
If you are invited to a dinner party by one of Washington's power elite, the odds are high that you will be going to a home in Georgetown, the rest of Northwest D.C., Chevy Chase, Bethesda, Potomac or McLean, comprising 13 adjacent ZIP Codes in all. If you rank all the ZIP Codes in the country on an index of education and income and group them by percentiles, you will find that 11 of these 13 D.C.-area ZIP Codes are in the 99th percentile and the other two in the 98th. Ten of them are in the top half of the 99th percentile.
Similarly large clusters of SuperZIPs can be found around New York City, Los Angeles, the San Francisco-San Jose corridor, Boston and a few of the nation's other largest cities. Because running major institutions in this country usually means living near one of these cities, it works out that the nation's power elite does in fact live in a world that is far more culturally rarefied and isolated than the world of the power elite in 1960.
And the isolation is only going to get worse. Increasingly, the people who run the country were born into that world. Unlike the typical member of the elite in 1960, they have never known anything but the new upper-class culture. We are now seeing more and more third-generation members of the elite. Not even their grandparents have been able to give them a window into life in the rest of America.
***

Why have these new lower and upper classes emerged? For explaining the formation of the new lower class, the easy explanations from the left don't withstand scrutiny. It's not that white working class males can no longer make a "family wage" that enables them to marry. The average male employed in a working-class occupation earned as much in 2010 as he did in 1960. It's not that a bad job market led discouraged men to drop out of the labor force. Labor-force dropout increased just as fast during the boom years of the 1980s, 1990s and 2000s as it did during bad years.
Top 10 SuperZIPs

In 'Coming Apart,' Charles Murray identifies 882 'SuperZIPs,' ZIP Codes where residents score in the 95th through the 99th percentile on a combined measure of income and education, based on the 2000 census. Here are the top-ranked areas:
1. 60043: Kenilworth, Ill. (Chicago's North Shore)
2. 60022: Glencoe, Ill. (Chicago's North Shore)
3. 07078: Short Hills, N.J. (New York metro area)
4. 94027: Atherton, Calif. (San Francisco-San Jose corridor)
5. 10514: Chappaqua, N.Y. (New York metro area)
6. 19035: Gladwyne, Pa. (Philadelphia's Main Line)
7. 94028: Portola Valley, Calif. (S.F.-San Jose corridor)
8. 92067: Rancho Santa Fe, Calif. (San Diego suburbs)
9. 02493: Weston, Mass. (Boston suburbs)
10. 10577: Purchase, N.Y. (New York metro area)
As I've argued in much of my previous work, I think that the reforms of the 1960s jump-started the deterioration. Changes in social policy during the 1960s made it economically more feasible to have a child without having a husband if you were a woman or to get along without a job if you were a man; safer to commit crimes without suffering consequences; and easier to let the government deal with problems in your community that you and your neighbors formerly had to take care of.
But, for practical purposes, understanding why the new lower class got started isn't especially important. Once the deterioration was under way, a self-reinforcing loop took hold as traditionally powerful social norms broke down. Because the process has become self-reinforcing, repealing the reforms of the 1960s (something that's not going to happen) would change the trends slowly at best.
Meanwhile, the formation of the new upper class has been driven by forces that are nobody's fault and resist manipulation. The economic value of brains in the marketplace will continue to increase no matter what, and the most successful of each generation will tend to marry each other no matter what. As a result, the most successful Americans will continue to trend toward consolidation and isolation as a class. Changes in marginal tax rates on the wealthy won't make a difference. Increasing scholarships for working-class children won't make a difference.
The only thing that can make a difference is the recognition among Americans of all classes that a problem of cultural inequality exists and that something has to be done about it. That "something" has nothing to do with new government programs or regulations. Public policy has certainly affected the culture, unfortunately, but unintended consequences have been as grimly inevitable for conservative social engineering as for liberal social engineering.
The "something" that I have in mind has to be defined in terms of individual American families acting in their own interests and the interests of their children. Doing that in Fishtown requires support from outside. There remains a core of civic virtue and involvement in working-class America that could make headway against its problems if the people who are trying to do the right things get the reinforcement they need—not in the form of government assistance, but in validation of the values and standards they continue to uphold. The best thing that the new upper class can do to provide that reinforcement is to drop its condescending "nonjudgmentalism." Married, educated people who work hard and conscientiously raise their kids shouldn't hesitate to voice their disapproval of those who defy these norms. When it comes to marriage and the work ethic, the new upper class must start preaching what it practices.
Changing life in the SuperZIPs requires that members of the new upper class rethink their priorities. Here are some propositions that might guide them: Life sequestered from anybody not like yourself tends to be self-limiting. Places to live in which the people around you have no problems that need cooperative solutions tend to be sterile. America outside the enclaves of the new upper class is still a wonderful place, filled with smart, interesting, entertaining people. If you're not part of that America, you've stripped yourself of much of what makes being American special.
Such priorities can be expressed in any number of familiar decisions: the neighborhood where you buy your next home, the next school that you choose for your children, what you tell them about the value and virtues of physical labor and military service, whether you become an active member of a religious congregation (and what kind you choose) and whether you become involved in the life of your community at a more meaningful level than charity events.
Everyone in the new upper class has the monetary resources to make a wide variety of decisions that determine whether they engage themselves and their children in the rest of America or whether they isolate themselves from it. The only question is which they prefer to do.
That's it? But where's my five-point plan? We're supposed to trust that large numbers of parents will spontaneously, voluntarily make the right choice for the country by making the right choice for themselves and their children?
Yes, we are, but I don't think that's naive. I see too many signs that the trends I've described are already worrying a lot of people. If enough Americans look unblinkingly at the nature of the problem, they'll fix it. One family at a time. For their own sakes. That's the American way.
—Mr. Murray is the W.H. Brady Scholar at the American Enterprise Institute. His new book, "Coming Apart: The State of White America, 1960–2010" (Crown Forum) will be published on Jan. 31.



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Fabrizio
January 25th, 2012, 12:58 PM
The best thing that the new upper class can do to provide that reinforcement is to drop its condescending "nonjudgmentalism."

Oh, I dropped that ages ago. I much prefer condescending judgmentalism.

Fabrizio
January 25th, 2012, 01:07 PM
Also from the article:

"Life sequestered from anybody not like yourself tends to be self-limiting. Places to live in which the people around you have no problems that need cooperative solutions tend to be sterile. America outside the enclaves of the new upper class is still a wonderful place, filled with smart, interesting, entertaining people."

Oh really? Where?

Every time I go back to the US and try to visit those wonderful average "middle-class" places that I remember from my youth... well... today it's a sea of fat asses and bad food.

Ninjahedge
January 25th, 2012, 01:42 PM
The article is a bit... skewed.

many valid points, but stating that "Increasing scholarships for working-class children won't make a difference" is BS.

Just throwing money at a problem NEVER works, but having those programs available AND encouraging people to use them DOES work.

Also, somehow saying that the rich do not pass judgement on the poor is another load. Most of the criticism I hear is from people who believe they are "morally better' than their counterparts and are never shy when it comes to expressing their dislike of anything they believe is not "The American Way".

Blaming everything on the release of some ephemeral moral code of responsibility in the 1960's is hogwash. Maybe the responsibility lies more in the widespread portrayal of what is the goal of life in America as portrayed by the media is a more reasonable scapegoat. Maybe the increase of superficial luxury items and easy financing brought on by international outsourcing and unscrupulous banking policies has more to do with our problem than Unwed Mothers not going to church.

just maybe, you think?

:mad:

BBMW
January 25th, 2012, 01:43 PM
Try the upper class places, the food's better.


Also from the article:

"Life sequestered from anybody not like yourself tends to be self-limiting. Places to live in which the people around you have no problems that need cooperative solutions tend to be sterile. America outside the enclaves of the new upper class is still a wonderful place, filled with smart, interesting, entertaining people."

Oh really? Where?

Every time I go back to the US and try to visit those wonderful average "middle-class" places that I remember from my youth... well... today it's a sea of fat asses and bad food.

eddhead
January 25th, 2012, 01:46 PM
Every time I go back to the US and try to visit those wonderful average "middle-class" places that I remember from my youth... well... today it's a sea of fat asses and bad food.

Therein exhibiting the "condescending judgmentalism" behavior you previously noted. ;)

Fabrizio
January 25th, 2012, 01:57 PM
Try the upper class places, the foods better.

Well, that's my point. The author suggests I should choose to live "outside of the enclaves". It would be better for me ...and for them:

"Life sequestered from anybody not like yourself tends to be self-limiting. Places to live in which the people around you have no problems that need cooperative solutions tend to be sterile. America outside the enclaves of the new upper class is still a wonderful place, filled with smart, interesting, entertaining people."

Sorry...but outside of the "enclaves" the US is mostly a horror show.

But I'm supposed to live there... after I've dropped my "nonjudgmentalism".

Oh boy.... I'm sure that would go over well....

Ninjahedge
January 25th, 2012, 03:01 PM
Actually Fab, they are not "horror shows" but you do have a point.

Growing up in Bergenfield NJ, with an extended blue-collar family all within walking distance, I can see both good and bad from those neighborhoods.

Willingness to be a part of "volunteer" fire departments, men out mowing the lawns on a sunday afternoon, kids playing in each others yards on swing-sets or above ground pools. There are more community events and gatherings, more people willing to come out and watch the fire trucks and ambulances go by on the main road on Labor Day or other holidays.

What we DIDN'T have any exposure to was culture. I did not have decent Chinese food until college. I never had Hummus, Falafel, Pita bread, Sushi, Kimchi, or any one of a dozen different culinary genres not contained within typical anglo-saxon/germanic roots.

Even moving to a more "affluent" suburb, my musical exposure remained stifled to what I heard on a few radio stations (which, even with their limited range, were much better than todays purchased stations) which were expanded greatly on entrance into college.

There are merits to the different castes we have in society today, but shoving it all into one category "needed", or qualifying it as a "horror show" is just not fair, or accurate.

Bottom line is, people are stupid, no matter how well educated they are. We have our own little comfort zone based on our own "pack" evolution and tribal socio-economic development. We will always divide into little groups of people we feel comfortable with, for whatever reason. But as our communities get more densely packed and our awareness (due to modern media and communication) gets more widespread, we will become more and more aware of the differences that have been further exaggerated by world commerce.

This article points out the social striation that is coming about that, ironically, has little to do with the actual problems we are experiencing in regards to our power and wealth structure. It is nice to point out that Joe Schmoe STILL wont eat quiche, but the fact that 90% of the "flakes" that do ALSO have little voice in how this country is being run is the important fact that most of these stories dance around like the elephant in the room.

ZippyTheChimp
August 2nd, 2012, 09:54 PM
Americans Want to Live in a Much More Equal Country (They Just Don't Realize It)

We asked thousands of people to describe their ideal distribution of wealth, from top to bottom.
The vast majority -- rich, poor, GOP and Democrat -- imagined a far more equal nation. Here's why it matters.

Dan Ariely

Aug 2 2012, 12:41 PM ET

The inequality of wealth and income in the U.S. has become an increasingly prevalent issue in recent years. One reason for this is that the visibility of this inequality has been increasing gradually for a long time--as society has become less segregated, people can now see more clearly how much other people make and consume. Owing to urban life and the media, our proximity to one another has decreased, making the disparity all too obvious. In addition to this general trend, the financial crisis, with all of its fall out, shined a spotlight on the salaries of bankers and financial workers relative to that of most Americans. And on top of these, and most recently, the upcoming presidential election has raised questions of social justice and income disparities, bringing the issues into focus even more.

It is relatively easy to think about inequality as being too great or too little in abstract terms, but ask yourself how much you really know about wealth distribution in the U.S. For example, imagine that we took all Americans and sorted them by wealth along a line with the poorest on the left and continuing as wealth increases until on the right we have the richest. Now, imagine that we divide them into five buckets with an equal number of citizens in each. The first bucket contains the poorest 20% of the population, the next contains the second wealthiest tier, and so on down to the wealthiest 20% (see Figure 1).

Figure 1 (http://cdn.theatlantic.com/static/mt/assets/business/Figure1.png)

With this in mind, from the total pie of wealth (100%) what percent do you think the bottom 40% (that is, the first two buckets together) of Americans possess? And what about the top 20%? If you guessed around 9% for the bottom and 59% for the top, you're pretty much in line with the average response we got when we asked this question of thousands of Americans.

The reality is quite different. Based on Wolff (2010), the bottom 40% of the population combined has only 0.3% of wealth while the top 20% possesses 84% (see Figure 2). These differences between levels of wealth in society comprise what's called the Gini coefficient, which is one way to quantify inequality.

Figure 2 (http://cdn.theatlantic.com/static/mt/assets/business/Figure2.png)

This is the level of wealth inequality that exists in America, and it is clearly higher than people think, but in Goldilocks-esque fashion, we can ask: Is the real level of inequality too high, too low, or just right? When economists consider the desirable level of inequality, they usually define the ideal inequality from the perspective of economic efficiency: What level of inequality will motivate people to be the most productive and move up the wealth ladder? What level of inequality will allow those at the top to lift up society as a whole (say, by having the resources to invent new technologies)? What level of wealth will keep salaries low and competition high? And so on.

This is one approach to assessing the desirability of wealth inequality, but Mike Norton and I wanted to examine this question from a different perspective--that of regular (non-economist) people--and we wanted to examine inequality in terms of its effect on society as a whole, not just in terms of economic efficiency. After all, inequality is not just about economic efficiency. It's also about our day-to-day experience as citizens, the influence of envy, our social mobility, the importance of equal opportunity, our mutual dependency on each other, etc.

But what does it mean to ask people what level of inequality they want? And how do we get people to respond to such a question without being influenced by their current state of wealth? After all, wouldn't the rich want a higher degree of inequality and the poor want a more even distribution of wealth?

HOW MUCH INEQUALITY DO YOU WANT?

We took a step back and examined social inequality based on the definition that the philosopher John Rawls gave in his book A Theory of Justice. In Rawls' terms, a society is just if a person understands all the conditions within that society and is willing to enter it in a random place (in terms of socio-economic status, gender, race, and so on). In terms of wealth, that means that people know everything about the wealth distribution and are willing to enter that society anywhere along the spectrum. They could be among the poorest or the richest, or anywhere in between. Rawls called this idea the "veil of ignorance" because the decision of whether to enter a particular society is disconnected from the particular knowledge that the individual has about the level of wealth that he or she will have after making the decision.

With this definition in mind, we did two things. First, we asked 5,522 people to create a distribution of wealth among the five buckets such that they themselves would be willing to enter that society at a random place. Their answers could range from a perfectly even distribution with 20% of wealth in each quintile to a fully biased distribution with 100% of wealth in one and 0% in the rest.

We found that the ideal distribution described by this representative sample of Americans was dramatically more equal than exists anywhere in the world, with 32% of wealth belonging to the wealthiest quintile down to 11% by the poorest (see Figure 3).

Figure 3 (http://cdn.theatlantic.com/static/mt/assets/business/Figure3.png)

What was particularly surprising about the results was that when we examined the ideal distributions for Republicans and Democrats, we found them to be quite similar (see Figure 4). When we examined the results by other variables, including income and gender, we again found no appreciable differences. It seems that Americans -- regardless of political affiliation, income, and gender -- want the kind of wealth distribution shown in Figure 3, which is very different from what we have and from what we think we have (see Figure 2).

Figure 4 (http://cdn.theatlantic.com/static/mt/assets/business/Figure4.png)

We understood that setting up an ideal wealth distribution is a rather difficult proposition, so in another task, we made things simpler (see Figure 5) and asked people to choose between two unidentified distributions (again under the veil of ignorance). The first option, unbeknownst to participants, reflected the distribution of wealth in America. For the second option we modified the distribution found in Sweden, making it substantially more equal (we referred to this fictional nation as "Equalden").

Figure 5 (http://cdn.theatlantic.com/static/mt/assets/business/Figure5.png)

We discovered that 92% of Americans preferred the distribution of "Equalden" to America's. And if one were to assume that the 8% who preferred America's distribution was made up of wealthy Republican men, he or she would be mistaken. The preference for "Equalden" was slightly different for Republicans and Democrats, and in the expected direction, but the magnitude was very small: 93.5% of Democrats and 90.2% of Republicans preferred the more equal distribution. While this 3.3% difference is substantial when we think about the economy of an entire country, if we look at it from the perspective of the gap between Equalden and the U.S., it's clear that the similarity across the political spectrum is far more substantial than the differences. And once again, participant's gender and income level did not produce any appreciable difference in this preference.

LEARNING FROM (THE VEIL OF) IGNORANCE

There are a few lessons that we can learn from this. The first is that we vastly underestimate the level of inequality that we have in America. Our society is far more uneven in terms of wealth than we believe it is. Second, we want much more equality than both what we have and what we think we have. Apparently, when asked in a way that avoids hot-button terms, misconceptions, and the level of wealth people currently possess, Americans are actually in agreement about wanting a more equal distribution of wealth. In fact, the vast majority of Americans prefer a distribution of wealth more equal than what exists in Sweden, which is often placed rhetorically at the extreme far left in terms of political ideology--embraced by liberals as an ideal society and disparaged by conservatives as an overreaching socialist nanny state.

A third lesson concerns the political gap between Democrats and Republicans: Given the extraordinarily polarized and derisive rhetoric flying back and forth between Democrats and Republicans, one would think there was an insurmountable gap between their positions. So how is it possible that we found so little difference between them in our study? One reason for this could be our inability to separate our ideology from our current state of wealth. Our interests tend to color our view both of how things are and how they should be. Another reason could be politicians, who, in order to rally people to their side, try to generate feelings of greater difference and opposition--and therefore conflict--than actually exist. From this perspective one could claim that politicians obfuscate similarities by using galvanizing but elusive terms like "small government," "tax relief," and "freedom."

Rawls' veil of ignorance deals with such superficial and irrelevant influences on what we think by prompting people to consider all possible socio-economic situations rather than just their own and the interests and ideologies that come along with that. The veil of ignorance accomplishes something similar to blind taste testing. Take wine, for instance. If a person knows the appellation and price, and realizes that French wine is usually preferable to Finnish, his or her perception and opinion of how good each wine tastes will be influenced by these preconceived notions. Similarly, when we express opinions about politics and life in general, we can't help but be influenced by our own varying degrees wealth and ignorance of others' lives. The veil of ignorance works to separate our core beliefs from the biases and prejudices we develop over time and through the subjective experience of being part of a certain class and demographic.

As for what this means about changing the level of inequality, which from our study seems almost unanimously objectionable, there are essentially two paths: education and taxation. Improving education works in a sense to change the input into the economy--better-educated workers are more resourceful and employable, and can move up the economic ladder. Changing taxation deals with the output--those who prosper pay more into the system than those without the same benefits. Our study doesn't tell us anything about which of these two approaches to reducing inequality would be preferable, but in practical terms, bridging the huge gap between what we currently have and what we want to have would require a mixture of both. Our study also doesn't deal with how to bring what people say they want under the veil of ignorance into line with what they're willing to do when it's their money and resources that are about to be distributed. It is one thing to get people to tell us what kind of society the would want to join, and another to get them part with their money in order to create that society.

With all these objections in mind, it still seems that the political discourse could benefit from a Rawlsian approach. Taking this path could help us understand what it is that we really want and then allow us to consider ways to get there. If our politicians also accepted this starting point, they might argue less about ideology and differences and more about paths to get closer to our common goal--a much less extreme level of inequality.

Social justice and optimal wealth distribution are highly complex topics, and it's hard to imagine that any study could dramatically change opinions about education, welfare, or tax reform. But consider this. When we ran the same basic experiment in Australia, we found Australians did not differ much from Americans in their views of the ideal distribution. When we ran another version of it with NPR listeners, and then readers of Forbes Magazine, the results were still basically the same. And most likely, if you participated in one of our tests, your response too would have fallen in line with these findings.

So whatever you think the current state of wealth distribution is, and whatever you believe the ideal level of wealth distribution to be under the veil of ignorance, there probably is a gap, and a large one, between the two. Awareness of the disparity between what we have and what we want implies that, ultimately, we as a society need to face the problem and find a solution.


Dan Ariely is a best-selling author and the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. His latest book is The Honest Truth About Dishonesty

Copyright © 2012 by The Atlantic Monthly Group

BBMW
October 24th, 2012, 11:58 AM
As could be expected, most of the election rhetoric is about the wrong issues. As I've stated before, here is the right one.

http://www.nytimes.com/2012/10/24/us/politics/race-for-president-leaves-income-slump-in-shadows.html?pagewanted=1&_r=0&hp (http://www.nytimes.com/2012/10/24/us/politics/race-for-president-leaves-income-slump-in-shadows.html?pagewanted=1&_r=0&hp)

Standard of Living Is in the Shadows as Election Issue By DAVID LEONHARDT (http://topics.nytimes.com/top/reference/timestopics/people/l/david_leonhardt/index.html)WASHINGTON — Taxes and government spending. Health care. Immigration. Financial regulation.
They are the issues that have dominated the political debate in recent years and have played a prominent role in this presidential campaign. But in many ways they have obscured what is arguably the nation’s biggest challenge: breaking out of a decade of income stagnation (http://economix.blogs.nytimes.com/2012/07/23/a-closer-look-at-middle-class-decline/) that has afflicted the middle class and the poor and exacerbated inequality.
Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken as successive generations worry about the prospect of declining living standards. No question, perhaps, is more central to the country’s global standing than whether the economy will perform better on that score in the future than it has in the recent past.
The question has helped create a volatile period in American politics, with Democrats gaining large victories in 2006 and 2008, only to have Republicans return the favor in 2010. This year, economic anxiety, especially in industrial battlegrounds like Ohio, is driving the campaign strategies of both President Obama and Mitt Romney.
The causes of income stagnation (http://economix.blogs.nytimes.com/2012/08/20/the-14-potential-causes-of-the-income-slump/) are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate.
At the top of the list (http://economix.blogs.nytimes.com/2012/08/21/globalization-and-the-income-slowdown/) are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.
Not much further down the list is education (http://www.nytimes.com/2011/06/26/sunday-review/26leonhardt.html), probably the country’s most diffuse, localized area of government policy. As skill levels have become even more important for prosperity, the United States has lost (http://www.google.com/hostednews/afp/article/ALeqM5juGFSx9LiPaur6eO1KJAypB2ImVQ) its once-large global lead in educational attainment.
Some of the disconnect between the economy’s problems and the solutions offered by Washington stem from the nature of the current political debate. The presidential campaign has been more focused on Bain Capital and an “apology tour” than on the challenges created by globalization and automation.
But economists and other analysts also point to the scale of the problem. No other rich country — not Japan, not any nation in Europe — has figured out exactly how to respond to the challenges. “The whole notion of the American dream,” said Frank Levy (http://web.mit.edu/flevy/www/), an M.I.T. economist, “described a mass upward mobility that is just a lot harder to achieve right now.”
For the first time since the Great Depression, median family income has fallen substantially over an entire decade. Income grew slowly through most of the last decade, except at the top of the distribution, before falling sharply when the financial crisis began.
By last year, family income was 8 percent lower than it had been 11 years earlier, at its peak in 2000, according to inflation-adjusted numbers from the Census Bureau. On average in 11-year periods in the decades just after World War II, inflation-adjusted median income rose by almost 30 percent.
Matching the growth rates of the postwar period — when the country was poorer, when harsh discrimination against women and minorities was receding and when the rest of the world was weaker — is probably impossible. Yet there is still a vast difference, both economically and politically, between incomes that are rising modestly and not at all.
Historically, periods of economic stagnation have tended to bring pessimism, political turmoil and a lack of social progress, said Benjamin Friedman, an economic historian and the author of “The Moral Consequences of Economic Growth.” (http://www.nytimes.com/2005/11/27/books/review/27easterbrook.html?pagewanted=print) The political volatility and partisan rancor (http://www.people-press.org/2012/06/04/partisan-polarization-surges-in-bush-obama-years/) of the last several years seem to fit the pattern.
The recent stagnation has also led, economists say, to confusion and even scapegoating about the real sources of the problem. The causes that can seem obvious, and that often shape the political debate, are not necessarily the correct ones.
Take immigration, especially illegal immigration. Whatever other problems it may cause, evidence suggests that it has not played (http://economix.blogs.nytimes.com/2012/10/19/immigration-and-american-jobs/) a significant role in the income slump.
It may have caused a slight decline in the wages of native-born workers without a high school diploma (and maybe not even that). But most illegal immigrants lack the skills to compete with the bulk of native workers, according to research by Giovanni Peri, Chad Sparber and others. Notably, incomes in some states with large immigrant populations, like California, have risen faster than in states (http://www.nytimes.com/2006/04/16/business/yourmoney/16view.html) with relatively few immigrants, like Ohio.
The minimum wage, similarly, appears to play only a minor role in the income slump. It has risen faster (http://economix.blogs.nytimes.com/2012/09/05/why-the-minimum-wage-doesnt-explain-stagnant-wages/) than inflation since 2000, even as overall pay at the bottom of the income distribution has not. And the size of the federal government also looks like a dog that is not barking: Washington collected taxes equal to 15.4 percent (http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200) of gross domestic product last year, down from 20.6 percent in 2000.
A second group of much-cited forces have indeed played a role in middle-class stagnation and inequality, many economists argue, just not as big a role as automation, globalization or education.
Health care costs have grown sharply over the last decade, leaving employers with less cash to use on salaries. Labor unions have shrunk; all else equal, unionized workers earn more, often at the expense of corporate profits. Tax rates (http://www.cbo.gov/publication/43373) have fallen more for the affluent than for anyone else, directly increasing the take-home pay of top earners and indirectly giving them more incentive to earn large amounts.
But many of these factors are particular to the United States, while globalization and automation are obviously universal forces.
One of the more striking recent developments in economics has been economists’ growing acceptance of the idea that globalization has held down pay for a large swath of workers. The public has long accepted the idea, but economists resisted it, pointing to the long-term benefits of trade. “That is starting to change only in the face of very strong evidence (http://economix.blogs.nytimes.com/2012/08/29/changing-views-of-globalizations-impact/) over the past decade,” said Edward Alden of the Council on Foreign Relations.
In particular, job growth and wage growth have been weaker in sectors exposed to global competition — especially from China — than in sectors that are more insulated.
Automation creates similar patterns. Workers whose labor can be replaced by computers, be they in factories or stores, have paid a particularly steep price. The American manufacturing sector produces much more than it did in 1979, despite employing almost 40 percent fewer workers.
Workers with less advanced skills have also suffered disproportionately. The pay gap between college graduates and everyone else is near a record. Despite the long economic slump — and the well-chronicled struggles of some college graduates — their unemployment rate is just 4.1 percent (http://www.bls.gov/news.release/empsit.t04.htm).
What is the solution to this thicket of economic forces?
That question is the one that Mr. Obama and Mr. Romney are trying to convince voters that they can best answer. They both accept that the government and the market have a role, but they put a different emphasis on those roles.
It is hard to see how either globalization or automation can be stopped. The proposed solutions instead tend to involve managing them.
If the economy can be made to grow fast enough, incomes can still rise across the board, as they did when the unemployment rate fell below 5 percent in the 1990s and briefly below 4 percent in 2000. If educational attainment rises, more people will be able to get jobs that benefit from technology and global trade, rather than suffer from it. And if inequality continues to soar, the government could choose to use the tax code to ameliorate it — a solution that Democrats favor and Republicans say will hurt economic growth.
Maybe the biggest reason for optimism is that there is still a strong argument that both globalization and automation help the economy in the long run. This argument remains popular with economists: Trade allows countries to specialize in what they do best, while technology creates opportunities to extend and improve life that never before existed.
Previous periods of rapid economic change also created problems that seemed to be permanent but were not. Neither the cotton gin nor the steam engine nor the automobile created mass unemployment.
“When technology reduces the need for certain kinds of labor, we know that some inventive people will one day come along and find a way to use that freed-up labor making things that other people want to buy,” said Mr. Friedman, the economic historian. “That’s what in the long run made the Luddites wrong.”
He added, “How long does it take the Luddites to be wrong — a few years, a decade, a couple of decades?”
Perhaps just as important, what happens to the workers who happen to be living during a time when the Luddite argument has some truth to it?

ZippyTheChimp
October 24th, 2012, 12:21 PM
^
The author above is talking about income stagnation over the last decade.

The main point of this thread is that income and wealth inequality, the difference in share of national wealth owned by the not-rich and very-rich has been widening for more than 30 years. And the conditions described above should also exist in countries similar to the US, yet the US is unique among industrialized countries as to the scale of income inequality.

Do we have to drag out the charts from previous posts?

And when did this election become about issues? Since one candidate doesn't even seem to have a position on issues, the election has been mostly a horse race.

BBMW
October 24th, 2012, 12:32 PM
The issue is that inequality isn't the issue. At most its a symptom of what the author is talking about. Many people already, and many more to come, are economically irrelevent. The ones who end up on high end of the income spectrum are the ones who figure out how to stay relevent.

eddhead
October 24th, 2012, 12:45 PM
The ones who end up on high end of the income spectrum are the ones who figure out how to stay relevent.

Oh, is that what the article is suggesting. Somehow i missed that.

Growth and income inequality began to spread in the 80's coinciding with the Reagn Revolution and drastic changes to tax rates on high income earners. Coincidence?

The fact is that most of the rich were born into wealth, they did nothing to 'figure out how to stay relevent'. And since the 80's, it is more and more the case that if you are born into the underprivledged class the deck is stacked against you. The single greatest predictor of wealth, is the wealth of your parents.

ZippyTheChimp
October 24th, 2012, 12:47 PM
@BBMW:

I repeat. The author doesn't explain why the inequality is so much more in the US than similar economies.

Maybe it's a tax rate and governmental assistance that's more favorable to rich people in the US than in these other countries.

That's an election issue.

Ninjahedge
October 24th, 2012, 01:21 PM
The issue is that inequality isn't the issue. At most its a symptom of what the author is talking about. Many people already, and many more to come, are economically irrelevent. The ones who end up on high end of the income spectrum are the ones who figure out how to stay relevent.

Not really.

Inequality IS an issue. How can the haves NOT be stagnated when the have not's (or the have some's) are? Why are we not seeing a UNIVERSAL STAGNATION of incomes. That gap has become wider and wider due to the people with money writing all the rules.

Add to that the cannibalistic globalization of our own capitalization and you have a country where the few are not working the many, they are EATING them.

Now, the article you posted does have some good points about how the global stagnation of the middle class is a difficult issue to address directly (and thusly almost impossible to successfully soundbyte), it is also, as Zip has pointed out, not a controling factor in the widening gap.

If EVERYONE were stagnant, if growth fell for everyone, maybe it would be the latest phase of the subject of this thread. But since the rich are still outpacing the middle class....

Ninjahedge
October 24th, 2012, 01:23 PM
edd,

Has there ever been a study to compare rated of entrepreneurial or other financial success that was achieved by those that were not strongly connected to wealth in the first place?

We have exceptions like Facebook, but even that has its own incongruities.

I think a true measure would be what percentage of Americans have been able to achieve "the dream" in the past 10 years, as opposed to previous decades...

BBMW
October 24th, 2012, 01:39 PM
Oh, I do think other countries try to forcibly level the playing field (most of Europe comes to mind.) But on an overall basis, they're not doing any better, and much of Europe is doing worse. Looking at Europe, if you want to consider income redistribution as a way of stimulating economic growth, it seems like a significant failure.


@BBMW:

I repeat. The author doesn't explain why the inequality is so much more in the US than similar economies.

Maybe it's a tax rate and governmental assistance that's more favorable to rich people in the US than in these other countries.

That's an election issue.

ZippyTheChimp
October 24th, 2012, 01:56 PM
Oh, I do think other countries try to forcibly level the playing field (most of Europe comes to mind.)Europe didn't really change the playing field; we did, decades ago.


But on an overall basis, they're not doing any better, and much of Europe is doing worse."Overall" isn't the point of this thread.


Looking at Europe, if you want to consider income redistribution as a way of stimulating economic growth, it seems like a significant failure.You're confusing two separate issues. One is about societal fairness, whether or not the economy is advancing or declining. There have been upturns and downturns in the past, and some people made it and some didn't; that has always been accepted. What has happened over the last 30 years is that the opportunity has been skewed by government interference.

The other issue - what is addressed in the article you posted - is about economic stagnation. That's an election issue, but not the same as the topic of this thread.

Ninjahedge
October 24th, 2012, 03:48 PM
I guess the key here is that it is always good to have a bit of an upward slope when it comes to socioeconomic development, but that slope should not be vertical at any point along the way.

What we have now is a break in the slope. "fair share" has been removed. Reasons have been given for these changes, like "trickle down" which have proven as false as ballerina hippos. The changes that have been enacted in the past 30 years have removed many of the checks and balances that encouraged fair growth, innovation, competition and production. They have been further leveraged to the point where many have made it almost impossible to compete against.

How can you come up with a better widget when someone not owns all the other factories, but the transportation to get it out, and the advertisement to let people know you are around?

And if that fails, try to buy them out. And if THAT fails, sue them for Widget Infringement. Even if it can't be proven, the legal cost can kill a startup very effectively.

BBMW, it is not that our system is better or worse than anybody elses. If your car only blows up once in 100 models, it does not matter that anothers' blows up twice as often. What we have to do is try to be better rather than justify our own failures by the failures of others.

BBMW
October 25th, 2012, 11:35 AM
I put this article here because this seems to be the generalized "things are gettting worse for the average worker" thread. It also ties in with the article I posted back in the thread here:

http://wirednewyork.com/forum/showthread.php?t=21910&page=12&p=386861&viewfull=1#post386861

How this ties into inequality is that I see this as a major source of it.


Europe didn't really change the playing field; we did, decades ago.

"Overall" isn't the point of this thread.

You're confusing two separate issues. One is about societal fairness, whether or not the economy is advancing or declining. There have been upturns and downturns in the past, and some people made it and some didn't; that has always been accepted. What has happened over the last 30 years is that the opportunity has been skewed by government interference.

The other issue - what is addressed in the article you posted - is about economic stagnation. That's an election issue, but not the same as the topic of this thread.

Ninjahedge
October 25th, 2012, 12:12 PM
The only problem BBMW is that your article seems to focus on the recent exacerbation of a condition that was sewn many years before the crash.

Then your direction on it seems to defend the very things that do not directly apply to the original thread. No biggie there, except it is a classic move to take an argument off center to put it on ground that is more easily contended than to address it directly. Your article, and your points, are not on center and beg to shift the center of argument to follow suit.

When you do not have the answer to something, change the question.

BBMW
October 25th, 2012, 01:03 PM
^
This isn't recent. This trend started in the '70s. Think all the industries that had no foreign competition, in which we now either slug it out with oversees manufactures (cars for example), or have just ceded to them (consumer electronics, textiles, etc.). Think about all job types that have been automated and/or internetted out of existence.

How does this effect income distribution? Look at Walmart. Do you think this company hasn't benefited hugely from both offshoring (in their sourcing, in this case) and automation (Walmart is known for their use of technology especially in ther logistics chain.) You don't think this has had the effect of transferring a lot of wealth from other companies and individuals around the country that Walmart has outcompeted, into the pockets of the Walton family? Lower tax rates at the high end of the spectrum allow them to keep more of this, but that hasn't helped them make it. And, in point of fact, I'd bet most of their weath is in unrealized capital gains (think the Walmart stock they hold), which has never been subject to taxation.

Ninjahedge
October 25th, 2012, 01:22 PM
Your article sites the changes in the past 10 years as one of the first points:


But in many ways they have obscured what is arguably the nation’s biggest challenge: breaking out of a decade of income stagnation (http://economix.blogs.nytimes.com/2012/07/23/a-closer-look-at-middle-class-decline/) that has afflicted the middle class and the poor and exacerbated inequality.

I am not saying that that is its only point, but you come out with a statement like "they have not been talking about the past 10 years", you have set the tone of your argument (the article's author, not YOU "you").

Then you site WalMart... The point you avoid, regardless of the outsourcing of the manufacturing, is the acknowledgement of the way it PAYS ITS OWN EMPLOYEES. Regardless of where it GETS its goods, it scores outstanding profits that its workers DO NOT SEE. they g out of their way to not only profit by outsourcing, but by jumping around the regulations (like "full time" benefits) by working people for 37 hours rather than 40 and the like.

So, oddly enough, your siting of WalMart is a good example, but not for the reasons you sited. Income inequality is not an international boogeyman. If you can make so much of a profit by buying overseas, why aren't you (WalMart) sharing this with the people that work for you, and not just those that own you?

BBMW
October 25th, 2012, 01:38 PM
How they pay and otherwise compensate their employees is a red herring. Why? Because they have the same legal and regulatory obligations as any other company they compete against. They've just had better (and harder nosed) management, better technology, and made better use of cheaper offshore suppliers. They have no obligation to pay their workers more then they currently do. Until the new rule under Obamacare kicks in (if they ever do, depending on what happens with the election), they have no obligation to give their employees benefits. Also, no one has any obligation to work for Walmart. If they can find a better job, they're free to take it at any time. But somehow they seem to be able to stay staffed up, so a lot of people must find what they're paying acceptable.

Ninjahedge
October 25th, 2012, 02:52 PM
It is not a red herring.

Just because something is legal does not mean it is moral. They bent the law to whatever extent they could to actuate their goals. If a mom-and-pop tried the same, nobody would work for them. But once a Wal-mart comes in, dominates the local market so that they are the ONLY place you can buy a squeegee, and drive all compeditors out, it begins to limit your employment opportunities.

And they are not the only ones to do this. BJ's, Home Depot and other chains are not exactly known for their corporate magnanimity.

Somehow you think that your argument strengthens your position, when the whole point of my thrust was to say that these companies ARE THE PROBLEM. The fact that they find, and exploit (and in some cases, finance the legislation of) these laws says that our system, as was the brunt of the WHOLE ARGUMENT, is skewed and fostering a wider separation between the have's and have nots.

ZippyTheChimp
October 25th, 2012, 07:35 PM
If this has been happening since the 70s, why is the inequality difference so much greater in the US than in other similar industrialized countries.


Think all the industries that had no foreign competition in which we now either slug it out with oversees manufacturesIndustries in the UK, France, Germany, are under the same pressures. Like us, they call it foreign competition and overseas manufacturing.

You keep saying that the main reason for this widening gulf in wealth is economic stagnation. See my post #142.

BBMW
October 26th, 2012, 11:23 AM
And so it continues. May be a bit sensationalistic, and would be a big ding on the brand, but it may be worth it to them. I'm a little skeptical, but given the growth in China, it may make sense for them.

http://washingtonexaminer.com/jeep-an-obama-favorite-looks-to-shift-production-to-china/article/2511703#.UIl4z0bCz8B

Ninjahedge
October 26th, 2012, 12:36 PM
What the hell does that have to do with income inequality?

If you have to leap too many times to make a connection, you might as well pull a Kevin Bacon.