Frightening Mentality

[JohnStOnge]

We talk about it all the time but Senator Tom Harkin really articulated it the other day:

http://cnsnews.com/news/article/harkin- ... ion-wealth" onclick="window.open(this.href);return false;

Is it a spending problem? No, it’s because we have a misallocation of capital, a misallocation of wealth. All of this wealth that’s been built up by hard-working Americans has been accumulated into fewer and fewer and fewer hands all the time,” Harkin said.

Though I don't see it in that article, he also said that the tax code is "skewed" in favor of the wealthy. What he said is so wrong on so many levels that It's hard to know where to begin. But a good starting point is to note that, in my opinion, it reflects the mentality that wealth is something that belongs to the collective and should be "allocated" by government. Also the idea that it is the "hard working" people...code for "labor" basically...that create wealth. It's not. The people who assemble personal computers, for example, are not the ones who created the wealth associated with commerce in personal computers. It's the people who conceived of them, put the business infrastructure together to sell the public on them and distribute them, etc. Though there may be some exceptions the wealthy in America are not wealthy because they took wealth that rightfully belongs to the "hard working people."

Another thing: I haven't been able to find information on how different percentiles of the population have done in terms of total wealth over the years. But if it's done the same thing as income has the portion of the population that would reasonably be called the "Middle Class" is WAY wealthier than it was 30 years ago. And the "poor" are somewhat wealthier. They have more income and I think that just looking around us it's reasonable to think they have more stuff. Someone, some how needs to get the truth out there. The fact that the "Wealthy" now control a higher percentage of total wealth than it did in the past does not have to mean that the rest of the population has to have less wealth than it did in the past. It does not mean the "rich" have to have gotten "rich" at the expense of the rest of the population.

[psychoCAT]

People who work should support those who choose not to work is the new mantra of the United States of America JSO. It is utterly sickening! I like you. You and myself are the only 2 people on this damn board who still retain the God given common sense that sees the world is best governed by white, Christian western civilization. Deo Vindice my friend!

[kalm]

We talk about it all the time but Senator Tom Harkin really articulated it the other day:

http://cnsnews.com/news/article/harkin- ... ion-wealth" onclick="window.open(this.href);return false;

Is it a spending problem? No, it’s because we have a misallocation of capital, a misallocation of wealth. All of this wealth that’s been built up by hard-working Americans has been accumulated into fewer and fewer and fewer hands all the time,” Harkin said.

Frightening? Nice hyperbole SuperHornet.

It's a balancing act and of course someone should be rewarded handsomely for innovation. But it can't be done without labor either and the corresponding wages and consumption that mostly drive the economy.

Here's a decent riff from Stiglitz on some these issues:

Gardels: And the cause of that inequality is what? Trade? Technological innovation? Tax policy?

Stiglitz: Certainly the US faces the same challenges of globalization and technological job displacement as other advanced economies. But much of the US problem is that it has rising inequality because of policy choices that allow, and even encourage and incent, “rent-seeking” economic behavior at the top.

Rent-seeking distorts the efficient operation of markets. When financial gains from speculation are taxed at a lower rate than innovation, resources that would support productivity-boosting activities are diverted into, well, legalized gambling. Predatory lending policies and abusive credit-card practices fit in this same rent-seeking category.

There are plenty of other examples: Executive compensation packages that come at the expense of the stakeholders and employees. Drug companies have successfully lobbied to stop the federal government – the largest purchaser of drugs – from negotiating lower drug prices. Bankruptcy laws in the US are given a higher priority in a workout than student loans, which can’t be discharged even under bankruptcy!

Gardels: What policy choices, then, can start to reverse growing inequality?

Stiglitz: You can start with the tax code. Since so much of the rising income at the top comes from rent-seeking, more progressive taxation – particularly on capital gains – is necessary. Better-enforced antitrust and bankruptcy laws are policy choices that will make a difference. Limiting the power of CEOs to set their own pay is another obvious corrective.

Gardels: A recent book by Daron Acemoglu and James Robinson, “Why Nations Fail,” argues that the US is losing its famous inclusiveness and social mobility. “The problem is that economic inequality often comes bundled with political inequality,” they have written. “Those with great wealth and easy access to politicians and policymakers will try to increase their power at the expense of society. That sort of hijacking of politics is a surefire way of undermining inclusive political institutions, and it is already under way in the US.”

In short, beyond a certain threshold, inequality threatens a governing system that works for all.

Stiglitz: I agree completely. Their thinking and mine are very much along the same lines.

Economic inequality begets political inequality and vice versa. Then the very vision that makes America special – upward mobility and opportunity for all – is undermined. One person, one vote becomes one dollar, one vote. That is not democracy. That is political decay.

http://www.csmonitor.com/Commentary/Glo ... -Stieglitz" onclick="window.open(this.href);return false;

In other words, there's a good chance we over reward political and economic position when compared to hard work and innovation.

It's absolutely disgusting!

[HI54UNI]

Tom Harkin. You can stop right there because that is all you need to know. Fortunately we will be done with this lying POS in two years.

[JohnStOnge]

But much of the US problem is that it has rising inequality ...

But in general I think that's a false premise. Saying that inequality is increasing isn't saying that all involved can't be better off. We've talked about it before. If I made $25,000 last year and neighbor made $1,000,000 then next year I make $50,000 and my neighbor makes $1,000,000 then the gap between us has increased but we are both nevertheless better off. And that's basically what the trend has been since 1979 (as far back as I've seen numbers). In general, middle class incomes are way higher in inflation adjusted terms than they were in 1979. Upper class incomes have risen at an even faster rate so that the gap is bigger. But so what? The author says it leads to political inequity but I don't see any evidence that there's more political inequity than there was 34 years ago. By what measure? If the poor and middle class don't have political power how come the Party that panders to class envy...that seeks to bleed the rich in order to pass out goodies...is the one that's had the advantage for most of the past 80 years or so? Why is Obama President if the majority of the people in the upper half of the income distribution voted for the other guy?

Yeah you can say that on a one to one basis the "rich" can afford to buy ads. But the bottom line is that the political Party that depends on overwhelming support among lower income groups is in power now and has, on balance, had the advantage since FDR was elected to his first term.

This kind of stuff, to me, is just stirring up envy. Appealing to the most vile aspects of human nature to gain power. Resent those who have more than you. They stole something from you. They're not paying their fare share (even though in reality they're paying way more than that). On and on.

[houndawg]

But much of the US problem is that it has rising inequality ...

But in general I think that's a false premise. Saying that inequality is increasing isn't saying that all involved can't be better off. We've talked about it before. If I made $25,000 last year and neighbor made $1,000,000 then next year I make $50,000 and my neighbor makes $1,000,000 then the gap between us has increased but we are both nevertheless better off. And that's basically what the trend has been since 1979 (as far back as I've seen numbers). In general, middle class incomes are way higher in inflation adjusted terms than they were in 1979. Upper class incomes have risen at an even faster rate so that the gap is bigger. But so what? The author says it leads to political inequity but I don't see any evidence that there's more political inequity than there was 34 years ago. By what measure? If the poor and middle class don't have political power how come the Party that panders to class envy...that seeks to bleed the rich in order to pass out goodies...is the one that's had the advantage for most of the past 80 years or so? Why is Obama President if the majority of the people in the upper half of the income distribution voted for the other guy?

Yeah you can say that on a one to one basis the "rich" can afford to buy ads. But the bottom line is that the political Party that depends on overwhelming support among lower income groups is in power now and has, on balance, had the advantage since FDR was elected to his first term.

This kind of stuff, to me, is just stirring up envy. Appealing to the most vile aspects of human nature to gain power. Resent those who have more than you. They stole something from you. They're not paying their fare share (even though in reality they're paying way more than that). On and on.

Because the upper half of the income distribution is not a majority of voters?

[kalm]

But in general I think that's a false premise. Saying that inequality is increasing isn't saying that all involved can't be better off. We've talked about it before. If I made $25,000 last year and neighbor made $1,000,000 then next year I make $50,000 and my neighbor makes $1,000,000 then the gap between us has increased but we are both nevertheless better off. And that's basically what the trend has been since 1979 (as far back as I've seen numbers). In general, middle class incomes are way higher in inflation adjusted terms than they were in 1979. Upper class incomes have risen at an even faster rate so that the gap is bigger. But so what? The author says it leads to political inequity but I don't see any evidence that there's more political inequity than there was 34 years ago. By what measure? If the poor and middle class don't have political power how come the Party that panders to class envy...that seeks to bleed the rich in order to pass out goodies...is the one that's had the advantage for most of the past 80 years or so? Why is Obama President if the majority of the people in the upper half of the income distribution voted for the other guy?

Yeah you can say that on a one to one basis the "rich" can afford to buy ads. But the bottom line is that the political Party that depends on overwhelming support among lower income groups is in power now and has, on balance, had the advantage since FDR was elected to his first term.

This kind of stuff, to me, is just stirring up envy. Appealing to the most vile aspects of human nature to gain power. Resent those who have more than you. They stole something from you. They're not paying their fare share (even though in reality they're paying way more than that). On and on.

Because the upper half of the income distribution is not a majority of voters?

From the Census Bureau:



Wages have been pretty much flat for the non-professional, working class John and for quite some time. And when we are discussing these things, that's really who we should be talking about.

As for how Obama got elected, sure there's a certain degree of truth to what you say. But in the end it's still about the money and access. Not just during elections but how it affects legislation and regulation. This is a corporatist state, where lobbyists not only gain greater access, but often times literally right the rules. You can pine on all you want about pandering to the lower classes, but there's really very little difference between the two parties. Think big picture, the class warfare meme is for partisan knuckle draggers. You're better than that.

[JohnStOnge]

I think I dealt with that graph in another thread. It creates the impression that the lower four qunitiles' income growth was flat because of the scale. You get a better perspective by looking at the actual numbers. I'll use a 1979 - 2005 spreadsheet I downloaded from the CBO site. The numbers are reported in inflation adjusted terms, in 2005 dollars. This is how it went 1979 vs. 2005 (average income of each quintile):

Lowest 20%: $15,700 in 1979 to $15,900 in 2005 (up 1.3%)
Second 20%: $34,000 in 1979 to $37,400 in 2005 (up 10%)
Third 20%: $51,000 in 1979 to $58,500 in 2005 (up 14.7%)
Fourth 20%: $69,000 in 1979 to $85,200 in 2005 (up 23.4%)
Top 20%: $132,100 in 1979 to $231,300 in 2005 (up 75.0%)

The spreadsheet also has numbers on "After Tax Income:"

Lowest 20%: $14,400 in 1979 to $15,300 in 2005 (up 6.3%)
Second 20%: $29,100 in 1979 to $33,700 in 2005 (up 15.8%)
Third 20%: $41,500 in 1979 to $50,200 in 2005 (up 21.0%)
Fourth 20%: $54,300 in 1979 to $70,300 in 2005 (up 29.5%)
Top 20%: $95,700 in 1979 to $172,200 in 2005 (up 79.9%)

So you can see that, especially in terms of "After Tax Income," every quintile was doing better in 2005 than it was in 1979. It was not "flat" for any quintile; though it was fairly close to that for the lowest 20%. I think it's reasonable to say that incomes were up substantially for the second, third, fourth and top 20% groups.

I downloaded the spreadsheet from the CBO web page at http://www.cbo.gov/publication/20374" onclick="window.open(this.href);return false;. I use this one because it has more detailed information than any subsequent report I can find. I think we all agree that all income groups have suffered a decline since 2005. But I am confident that if and when we get all the detailed data through the current time it'll be the same general picture. Over the long term, the trend has been towards increasing income in inflation adjusted terms for every income group. The second through fifth quintile groups will all still have incomes that are substantially higher in inflation adjusted terms than they were in 1979. It's possible that the lowest quintile will have a lower inflation adjusted income in 2013 than it did in 1979 because that one was close. But it's likely it'll still have a higher average "After Tax" income. That's what my bet would be.

[kalm]

I think I dealt with that graph in another thread. It creates the impression that the lower four qunitiles' income growth was flat because of the scale. You get a better perspective by looking at the actual numbers. I'll use a 1979 - 2005 spreadsheet I downloaded from the CBO site. The numbers are reported in inflation adjusted terms, in 2005 dollars. This is how it went 1979 vs. 2005 (average income of each quintile):

Lowest 20%: $15,700 in 1979 to $15,900 in 2005 (up 1.3%)
Second 20%: $34,000 in 1979 to $37,400 in 2005 (up 10%)
Third 20%: $51,000 in 1979 to $58,500 in 2005 (up 14.7%)
Fourth 20%: $69,000 in 1979 to $85,200 in 2005 (up 23.4%)
Top 20%: $132,100 in 1979 to $231,300 in 2005 (up 75.0%)

The spreadsheet also has numbers on "After Tax Income:"

Lowest 20%: $14,400 in 1979 to $15,300 in 2005 (up 6.3%)
Second 20%: $29,100 in 1979 to $33,700 in 2005 (up 15.8%)
Third 20%: $41,500 in 1979 to $50,200 in 2005 (up 21.0%)
Fourth 20%: $54,300 in 1979 to $70,300 in 2005 (up 29.5%)
Top 20%: $95,700 in 1979 to $172,200 in 2005 (up 79.9%)

So you can see that, especially in terms of "After Tax Income," every quintile was doing better in 2005 than it was in 1979. It was not "flat" for any quintile; though it was fairly close to that for the lowest 20%. I think it's reasonable to say that incomes were up substantially for the second, third, fourth and top 20% groups.

I downloaded the spreadsheet from the CBO web page at http://www.cbo.gov/publication/20374" onclick="window.open(this.href);return false;. I use this one because it has more detailed information than any subsequent report I can find. I think we all agree that all income groups have suffered a decline since 2005. But I am confident that if and when we get all the detailed data through the current time it'll be the same general picture. Over the long term, the trend has been towards increasing income in inflation adjusted terms for every income group. The second through fifth quintile groups will all still have incomes that are substantially higher in inflation adjusted terms than they were in 1979. It's possible that the lowest quintile will have a lower inflation adjusted income in 2013 than it did in 1979 because that one was close. But it's likely it'll still have a higher average "After Tax" income. That's what my bet would be.

IOW there has been massive income inequality. The top 20th percentile can't spend enough on their own to drive the economy.

Question, don't items experience different rates of inflation? If so, it would be interesting to see the different rates of inflation for family's core expenditures like healthcare, education, groceries etc.

[JohnStOnge]

Question, don't items experience different rates of inflation? If so, it would be interesting to see the different rates of inflation for family's core expenditures like healthcare, education, groceries etc.

I think there is something to that. But in a qualitative way think about what it was like in 1979. What did the middle class family have? Right now more US families "own" homes. More go to and graduate from college. They have way more stuff. They have flat screen TVs. They have PCs or Macs. They have hundreds of channels to choose from on cable, fiber optic, or satellite TV. They have cell phones (in many cases Iphones).

It's like I've said before. I remember what it was like growing up in a middle class family in the 70s. We had an 8 person family living in a 2 bedroom house that'd been modified to have 3 bedrooms. We had a Black and White Zenith TV on which we could watch five channels. When we turned to one channel somebody had to go outside and turn an antenna to get the best signal. We had two used cars (they didn't call them "previously owned" back then). We ate stuff like canned tuna fish mixed with macaroni and cheese to make ends meet. It just wasn't the lifestyle the "typical" middle class household is accustomed to today. WAY less.

And my Dad had what people would consider a good "middle class" job. He was an Operator at a petrochemical refinery. The kind of job people who talk about the "decline of the middle class" wax nostalgic about. As far as "middle class" jobs went back then, it didn't get any better than working at a petrochemical refinery in an oil State.

[JohnStOnge]

Because the upper half of the income distribution is not a majority of voters?

No, what I mean by the "upper half of the income distribution" is the 50% of the population that has the highest incomes. 50:50.

It's not broken down like that in exit polls. However, you can look at exit polling and see the the majority of the 59% of voters from households that made more than $50,000 per year voted for Romney while the majority of the 41% of the voters from households that made less than $50,000 per year voted for Obama. The problem for Romney is that the voters in that 41% from households who made less than $50,000 per year voted for Obama by an overwhelming margin (60% to 38%).

But the point is this: It's ridiculous to say that "the rich" are controlling politics when a Party that panders to "the poor" is the dominant Party and has been for the past 80 years or so. If "the rich" controlled politics the Republican Party would be in total power. Obviously that's not the case. Nor has it ever been since FDR.

[houndawg]

Because the upper half of the income distribution is not a majority of voters?

No, what I mean by the "upper half of the income distribution" is the 50% of the population that has the highest incomes. 50:50.

It's not broken down like that in exit polls. However, you can look at exit polling and see the the majority of the 59% of voters from households that made more than $50,000 per year voted for Romney while the majority of the 41% of the voters from households that made less than $50,000 per year voted for Obama. The problem for Romney is that the voters in that 41% from households who made less than $50,000 per year voted for Obama by an overwhelming margin (60% to 38%).

But the point is this: It's ridiculous to say that "the rich" are controlling politics when a Party that panders to "the poor" is the dominant Party and has been for the past 80 years or so. If "the rich" controlled politics the Republican Party would be in total power. Obviously that's not the case. Nor has it ever been since FDR.

That's why corporate profits are at an all time high.


When those living wage jobs we've been hearing about with the passage of every new tax break, loophole, and give back start trickling down you'll see plenty of nouveau-conk voters.

[houndawg]

Question, don't items experience different rates of inflation? If so, it would be interesting to see the different rates of inflation for family's core expenditures like healthcare, education, groceries etc.

I think there is something to that. But in a qualitative way think about what it was like in 1979. What did the middle class family have? Right now more US families "own" homes. More go to and graduate from college. They have way more stuff. They have flat screen TVs. They have PCs or Macs. They have hundreds of channels to choose from on cable, fiber optic, or satellite TV. They have cell phones (in many cases Iphones).

It's like I've said before. I remember what it was like growing up in a middle class family in the 70s. We had an 8 person family living in a 2 bedroom house that'd been modified to have 3 bedrooms. We had a Black and White Zenith TV on which we could watch five channels. When we turned to one channel somebody had to go outside and turn an antenna to get the best signal. We had two used cars (they didn't call them "previously owned" back then). We ate stuff like canned tuna fish mixed with macaroni and cheese to make ends meet. It just wasn't the lifestyle the "typical" middle class household is accustomed to today. WAY less.

And my Dad had what people would consider a good "middle class" job. He was an Operator at a petrochemical refinery. The kind of job people who talk about the "decline of the middle class" wax nostalgic about. As far as "middle class" jobs went back then, it didn't get any better than working at a petrochemical refinery in an oil State.

Today the typical middle class family is one illness or injury away from bankruptcy, John.