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The Great Inequality Debate
Inequality Hasn’t Made Americans Support Redistribution
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  • qet

    I think Americans intuitively understand that you can only redistribute what has been produced, and that redistribution affects production. They have a reciprocal relationship, yet production antecedes redistribution. Production is a necessary condition of redistribution while the reverse is not the case. Americans perceive, even if the average (and above-average) American cannot articulate it in the idiom of doctoral dissertations and policy white papers, that a “just” distribution of nothing is worse for them than an “unjust” distribution of plenty. They see that countries formally dedicated to equal distribution–Cuba, Venezuela–have no production, and that therefore the people there are all equal in their misery (except for the leadership elite–I’ll bet Maduro has plenty of toilet paper), which is what redistribution mostly redistributes.

    • question?

      The idea of having the rich pay their fair share to support the infrastructure that benefits them, has great traction. The idea you can tax and regulate your way to prosperity has no traction, because every one knows it is a losing proposition.
      The real problem is the rise of the wall street grifter class, that produces nothing, but sucks the monetary life blood out of the economy for the benefit of a few.
      A perfect example is Mitch Romney’s company Bain Capital. Bain purchased mattress company Sealey. Sealey was a decades old and profitable company. Bain mortgaged the company to the hilt, pocketed the proceeds and spun the company off so loaded with debt that it could not survive. In addition to the 800 jobs lost at the company, the ripple effect would have eliminated jobs up and down the Sealey supply chain. More jobs would have been lost at the local level as former workers could no longer patronize many of the small businesses in their community.
      All of this damage was done to provide a one time profit to a few dozen people.
      A federal reserve bank controlled by former Goldman Sachs employees, on leave to help their employer game the fed, is not going to stop this type of abuse.
      A bought and paid for congress and executive branch is not going to stop this abuse
      The media long owned by Wall Street, is not going to honestly report on this type of abuse.

      A corrupt nation is an impoverished nation and that is where we are headed.

      • CapitalHawk

        I agree with virtually all of this, except that people do NOT understand that new taxes will fall on their backs and not on Wall Street (or the “rich”).

  • Anthony

    American ideas about income inequality/redistribution have as a benchmark reference (conscious or unconscious) framework from Enlightenment thinkers (whose ideas were key to creation of America as an independent nation – openness to opportunity, tolerance, economic and social mobility, fairness, democracy, etc.). Any “working paper” survey may or may not consider such factors influencing respondents’ answers. Time and place also may color respondents’ answers. Moreover, I would surmise that Americans of various generations may well answer survey’s thrust differently – the human value of productivity.

    To that end, “countries where living standards improve over sustained periods of time are more likely to seek and preserve an open, tolerant society, and to broaden and strengthen their democratic institutions. But where most citizens sense that they are not getting ahead, society instead becomes rigid and democracy weakens. What implications follow? Who should therefore act differently? And what should they do?”

    Finally as complex matrix of cultural and historical factors goes, “it seems to me that all social scientists, all journalists and commentators, all activists in the unions and in politics of whatever stripe, and especially all citizens should take a serious interests in money, its measurement, the facts surrounding it, and its history. Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off.”

  • FriendlyGoat

    People often have a “doesn’t-sound-right” attitude toward the idea of taxing the rich to give the money to the poor. Why should we penalize the “most productive” citizens?, they ask. Why should we “steal” their money and give it to a bunch of welfare bums?

    What people fail to realize is that the increasing share of income accruing to the very top segment IS COMING FROM SOMEWHERE.
    Since millionaires and billionaires do not simply get rich by out-trading EACH OTHER, the upward flow of money is actually coming from the people BELOW them. When the CEO (private or public) is raking in eight or nine figures, the customers, suppliers and employees are paying for that. The shareholders are NOT paying for that——BECAUSE—–boards do not generally overpay CEO’s UNLESS the CEO’s are over-screwing the customers, suppliers and employees.

    What very high marginal income tax rates do—–say a top one of 80% at some high level—— is dampen the tendency to over-compensation in the first place because NO ONE WANTS TO ACTUALLY BE IN THAT BRACKET. If you have an 80% tax on income over $10,000,000, then no board is going to give a CEO $30,000,000. Likewise no team is going to give a player $30,000,000.

    The tax cuts, starting in 1978 and drastically cut more in the decades thereafter both here and abroad, have caused the problem. The reason we are getting dumb poll results like those reported in the article is because people are getting less and less and less literate about what the hell happened.

    • f1b0nacc1

      As usual, your historical and economic illiteracy (as well as an unfortunate addiction to the caps-lock key) is on full display….
      The increasing share of incoming accruing to the very top segment is indeed coming from somewhere, but a better question might be as to why it is coming from there, since any potential remedies to this problem (if it is a problem) would have to be conditioned upon what the causes are. The increasing role of finance is a big part of it, but the decline of unskilled and semi-skilled labor (inevitable as information technology, automation, robotics, etc. advance, though massively accelerated by global trade and mass immigration) is likely an even bigger contributor. The declining dynamism in western economies as the Blue Model regulatory regimes choke the life out of them is an even bigger factor, since as the growth rates slow down, it is more and more difficult for a rising tide to lift all (or even any) boats. In a stagnant, or shrinking, economy, those at the top are likely to be best prepared to survive or benefit, and that is precisely what we are seeing.
      With these things in mind, it would seem that our priorities should be to restore dynamism (and growth) to the economy. Attempts to redistribute a stagnant pool will only benefit those with the best political connections and the most money to use to buy more influence….wait….could that be the current situation? So what do you propose? Lets soak the rich! Sure…that is going to work…. In fact we should look at how it HAS worked in the past, perhaps that can give us some ideas….
      The US had a sky-high income tax rate in the 50s, and we remember that as a Golden Age, right? Wrong….we also locked women out of most good jobs (or jobs in general), and as for minority participation in the workplace, well, you know that story. We had a very low-regulatory state, and even in the case of income taxes, the number of deductions were enormous, so only a very small number of people actually paid those rates. We also enjoyed the advantage of a lack of any viable economic competition on the world stage, as we had busily bombed most of the rest of the developed world (and a good part of the undeveloped part) into dust during the previous decade. Even then, we experienced two nasty recessions during the 1950s, so nasty that Eisenhower seriously considered not running in 1956 as a result. Oddly enough, when Kennedy decided to lower income tax rates after assuming office, we saw a noticeable change in economic dynamism that ushered in a sustained expansion.
      Of course we could consider looking overseas for inspiration, but the results are not encouraging. The German ‘economic miracle’ was a triumph of the Blue State, right?….oh wait, it wasn’t, largely because it was mostly keyed to rebuilding an already destroyed economy and selling into a rapidly expanding market. Even then, it was only made possible internally because much of the adult male population had been killed off a couple of decades earlier, and there was an enormous labor shortage. The Japanese might be a better (and more sustained) example, but the corporatist tactics of their various industrial combines aren’t anything that I believe anyone wants to emulate, plus their own recent history doesn’t lead us any particular reason for optimism. I know! The Scandinavians!….good socialists all! Yes, except that they actually have very poor workplace participation (women don’t work much), significant restrictions (until VERY recently) on immigration, and fairly low (from the point of view of the rest of the world) taxes. They are also far less regulated than the rest of the west, and in fact offer a useful model to learn from in that area.
      Still, perhaps we should embrace the ‘soak the rich’ rhetoric anyway…we might get some juvenile pleasure out of punishing the successful (you know, the ones who produce nothing?…try running a business without finance sometime, see if you still think that it is nothing…) anyway. Lets raise those income tax rates, but not to the paltry 80% you suggest (coward!), we will take it to…oh, lets say 95%! After all, what could go wrong?
      Turns out that we have a great example of exactly what goes wrong when you try that…Great Britain. To finance their Blue State, they did precisely what I just described, they set their income tax to 95% (read the lyrics of the Beatles song ‘Tax Man’ sometime) and added a ton of regulation on their economy to boot. The nationalized most of their industries (you have said repeatedly that government creates good jobs, so you must approve of this!), and they encouraged a tremendous wave of immigration at the same time through their winding down of the empire. The results were, sadly enough, not encouraging for your master plan. Anyone whose wealth was not immediately tied up in non-moveable assets (i.e. land) got the heck out of there and took their skills with them. But this isn’t a problem you say….the productive members of society stayed behind after all, and the wise leaders in the government were running industry! Inexplicably it just didn’t work. Numerous signature industries crashed and burned, Labor costs skyrocketed amid almost constant strikes, and overall economic growth in the UK ran about 1-1.5% BEHIND the rest of Europe (which was having its own experiments with Eurosocialism) from 1960 through the late 70s.
      We need only look at the British example to see why soaking the rich doesn’t work. You can tax income, but those with valuable skills (valuable being what the market will pay for, not what a government bureaucrat decides is worthy) will demand (and get) compensated for their services. You cannot pay $30,000,000? fine, pay them $100,000, and give them stock options (which is, by the way, what really happens in most cases these days), or let them use company owned cars and houses for free as a benefit. If you really think that accountants and lawyers cannot outthink and outmaneuver the IRS, or simply buy enough congressthings to write a few loopholes into the tax code, a very common practice) you are fooling yourself. You might be able to catch a few marginal cases (professional athletes, for instance), but even there I doubt it, and in any event, you are more likely to just get them to pick up and move to more welcoming climates.
      This will have the worst impact on the economy in general however, as it will discourage any useful investment. Why risk your money investing in new companies (biotech, the internet, etc.) when you will lose 95% of it even if you win? If you lose you get nothing, after all, so your best bet is to buy some land and sit on it. Since the same folks who want high income tax rates also want heavy regulation, you aren’t likely to make much money in anything, so staying in the high tax, high regulation environment is a non-starter…you simply take your capital elsewhere…. No capital investment, no economic growth, actually economic shrinkage over time. Take a look at France right now, and you will see what I am talking about.
      If you don’t have enough economic dynamism, you drop penalties on those who invest (lower marginal tax rates), simplify (and largely eliminate where possible) regulation, and encourage dynamism as an end in and of itself. It isn’t without its tradeoffs, some obnoxious people are going to get very, very rich (Trump immediately comes to mind, though interestingly enough most of his money comes from a highly regulated market….), but everyone else’s income/wealth/standard of living will increase as well. If the 1% get the lion’s share of the benefits (and when in history was this NOT the case?), the rest of us will benefit as well, so I can live with that.

      • Andrew Allison

        Count me among the refugees from pre-Thatcher Britain.

        • f1b0nacc1

          I was a student there, and did some work in Thatcher’s Britain in the 80s….what a difference a decade makes!

      • FriendlyGoat

        The lower half of Americans and citizens in all other countries really don’t give a rats’ A$$ about what “you” think you “can live with”. Neither do I.

        • f1b0nacc1

          Perhaps, but given that the upper half of citizens in these countries get a vote too, both they (and you, though I despair at that prospect) might wish to educate themselves and start a dialog. the notion that there is some sort of populist revolt of the poor ready to institute the millennium of equality and freedom is a childish conceit that even a casual student of history could easily debunk. Typically such revolutions end up with mass executions and tyranny, see The French/Bolshevik/Chinese/Cuban/Venuzuelan/Zimbawean revolutions for examples…

    • Anthony

      FG, some numbers: in 2014, a household at the 90th percentile was making nearly 13 times as much money as a family at the 10th percentile. In the 1990s, that ratio hovered between 10 and 11, but started to go up in the 2000s. Meanwhile, the nation’s gross domestic product is up nearly 9 percent from its high water mark just before the recession, while corporate profits have grown 25 percent. So America is more prosperous than ever. All the money simply isn’t reaching the hands of average Americans.” http://www.washingtonpost.com/news/wonkblog/wp/2015/09/16/lower-wages-for-whites-higher-wages-for-immigrants-and-inequality

      • FriendlyGoat

        True. And a similar effect is going on in most other countries. I have my own theory what went wrong—-as above. Other people have other theories as are usually expressed by TAI and its comment writers. We are at the point where we need to put the pressure on voters to decide what THEY think about this “most important political issue of our time”. Otherwise, we do know which side will be trying to keep elections focused on guns, abortion, gays, e-mails, Benghazi, and immigrants.

        • Anthony

          I saw a hedge fund manager on Charlie Rose yesterday and he made a point that I had overlooked: the middle class would be much worse off (relatively speaking) today if primarily essentials of life have not become cheaper – deflation in their relative costs. Something certainly merit of consideration as issue continues to be topical.

          • f1b0nacc1

            Very interesting insight….thanks for sharing it.
            With that said, I wonder about WHY this deflation has occurred? After all, the argument that has been made by many (including myself) is that capitalist-driven innovation and free(ish) markets have driven down these prices, which if correct (and certainly reasonable people can disagree as to whether it is correct) means that part of the price of this deflation is the inequality….

          • FriendlyGoat

            Certainly we know there has been a Wal-mart effect which both trimmed some of the fat out of retailing and offered a flood of less expensive goods from China. Beyond Walmart, we know there are certain products which have simply become cheaper, period. Basic shoes are an example. Automobiles, not so much. We went from 36-month car loans to 60, 72 and even 84 months.

          • Anthony

            Yea, I’ve often pondered that 60-84 month car loan.

        • CapitalHawk

          FG – It is comical to me that you think that economic inequality is the “most important political issue of our time” and then turn around and dismiss immigration as not important. What do you think is driving much of the inequality? The answer is supply and demand – the demand for low skill workers has gone down, but the political establishment decided that wasn’t good enough, so they have allowed/encouraged the importation of millions more low skill workers. This has driven the bottom 15-20% of Americans into poverty or kept them there.

          I’m sure you are aware of the fact that incomes for middle and low income Americans have been essentially stagnant since the early 70s. You know what else happened in the early 70s? Immigration into the US started to skyrocket from prior levels. In 1970, there were roughly 10 million immigrants in the US and they represented 4.7% of the population. Since then those number have done nothing but go up. In 2013, those numbers were 41.3 million immigrants in the US representing 13.1% of the population. Go check the Migration Policy Institute if you doubt me.

          And let’s not pretend that immigrants are “doing jobs Americans won’t do”. You are old enough to know that is a lie. Think back to the 60s and 70s. Who were the landscapers and construction workers and meat packing plant and other factory workers? They were primarily black and white Americans. I remember watching the meat packing plants break the unions by importing illegals and seeing the primarily white union meat packers on strike and the “scabs”, who were almost all Hispanic, cross the picket lines.

          Virtually none of the jobs currently done by Hispanics are jobs that didn’t exist in the 70s. And those jobs somehow magically got filled.

          • FriendlyGoat

            It is “comical” to ME that you believe Republicans want to drive the low-wage immigrants out of the United States. Yes, I’ve heard Mr. Trump.
            And, no, Congress and the U.S. Chamber of Commerce ARE NOT going to permit any dwindling supply of immigrants to drive up wages.
            Sure, this all sounds fine in economic theory, and no, the business community is not going to permit it to happen. If Trump got elected and somehow deported some immigrants you can be absolutely sure that another group of them would be permitted back as legalized “temporary guest workers” before the sun sets. Donald’s wall will either have a guest worker door in it or there will never be any funds to build it.

          • CapitalHawk

            So apparently you think what I said is correct and your response is: It’s too hard. We’re going to lose anyway. Don’t bother fighting on this issue.

            Either that or you agree but you don’t want to be associated with Republicans, even though you agree with many of them on this issue, because they are not in your in group. Plus racist.

          • FriendlyGoat

            No, what I think is that high-end tax cuts are ruining the American middle class and YOU brought up all this immigration stuff as what YOU believe to be the most important thing. I’m just telling you that Republicans in power are NOT going to deport enough people (net) to raise any wages in the USA—-no matter what Mr. Trump says.

            As for racist, I have no idea what your last sentence means. If you’re calling me a racist, you can shove that one.

          • CapitalHawk

            They aren’t my political side. I’m a registered Democrat and have been for nearly 20 years. Many of my friends are Republicans and many are Democrats. I think that both parties are bought and paid for by the extremely wealthy in this country. Which is why I like Trump. And which is why you see the elites falling all over themselves to tear him down. Notice how every media outlet all, virtually simultaneously, decided that Fiorina won the debate last night? That doesn’t seem possible without coordination. The elites have apparently decided she is their best bet to take the Trump down.

            As to deporting people – you don’t need to, you just need to implement an employee checking system to make sure they are legal residents before hiring and illegal immigrants will leave the country all by themselves. And I completely agree with your idea to fine and/or tax those that break the rules (although I think prison time would probably do the trick even more effectively).

            My last sentence was simply a reference to what is the knee jerk reaction of many whenever a person suggests we should curb immigration (legal or illegal), which is to point at that person and proclaim them a racist. I wasn’t saying you are racist.

          • FriendlyGoat

            Sorry I misinterpreted your last sentence in post above. Glad to hear you are a Democrat, at least until now.

            I like Trump too. Not that I want ANY Republican president (for dozens of policy reasons), but I believe he, if nominated, will enhance the prospect of not electing any Republican. I believe if we’re fortunate enough to get him nominated that he will scare general-election voters away in droves. If we do accidentally elect him, he’s a better choice than the others because he will be more a pragmatist than an ideologue.

            As for media, I watch NBC a lot. It is now owned by Comcast which is NOT liberal. Chuck Todd, the new political director and host of Meet the Press almost falls over himself every day with stealth partisanship in favor of Republicans—-always stealth, and to me, always noticeable. He does not like Mr. Trump for the same reason many conservatives don’t. They think he is going to blow their chances.

        • Anthony
          • FriendlyGoat

            Thanks for the link. Here’s the meaty clip from it:

            “The restructuring of inefficient companies did create substantial value, but that value did not flow to the now laid-off workers. Some might flow to the remaining workers, but much of it went to the engineers who restructured the companies and the investors they represented. Statistics reveal that, since 1947 (when the data was first compiled), corporate profits as a percentage of gross domestic product are now at their highest level, while wages as a percentage of GDP are now at their lowest level. It was not a question of making the economy more efficient — it did do that — it was a question of where the value accumulated. The upper segment of the wage curve and the investors continued to make money. The middle class divided into a segment that entered the upper-middle class, while another faction sank into the lower-middle class.”

            How that author or any author can write these kinds of articles without even mentioning tax policy beats me. It’s the one thing which explains “the problem” which is why I rail about it all the time.

          • Anthony

            I hadn’t thought about omission of tax cuts fiscally but you’re right; nevertheless, it may be area of which some authors are less sure handed.

          • FriendlyGoat

            I think the real problem is that nearly no politicians or professional writers want to call for tax increases because they do not want the negative blow-back even if the idea might be correct.

            Those of us with no real reputations (or even identities) here in the comment sections can discuss these things without offending our bosses, sponsors, advertisers, etc.—-because we don’t have any.
            People with real words in real lives have to be careful, so nearly all of them will pay a little homage to “tax cuts create jobs” just because it is a widely-held (even though erroneous) belief. Maybe a few, like Piketty or Krugman, will dare to be contrarian, but most can’t. I think this is a huge problem with respect to discrediting the myth.

          • Anthony

            “I have no quarrel with wealth per se. Many wealthy individuals are highly creative, talented, generous. and philanthropic. My quarrel is with poverty. As long as there is both widespread poverty and booming wealth at the top, and many public investments (in education, child care, training, infrastructure, and other areas) that could reduce or end the poverty, then tax cuts for the rich are immoral and counterproductive.” Just a quote by someone with a reputation (not Piketty or Krugman) to let you know there have been other voices arguing said proposition.

            Two points: 1) you’re on to something as relates to economic sanctions mitigating “dissident critics” – our system generally is socialized to reward the political conformists (to get along, one learns to go along with things as they are and avoid the espousal of views that conflict with the operative economic interests); 2) it’s not a belief held by the majority – the public desires to tax the rich more heavily but the overpowering role of money in politics has lead to the “bipartisan” consensus you rail about – tax cuts for the rich over past thirty years.

          • FriendlyGoat

            Well, I don’t have any quarrel with wealth per se, either. Nor do I want to punish anyone for success. The main reason for maintaining very high tax rates on very high incomes is to discourage excess in the first place. We all remember when CEO’s were reasonably compensated at 25 times a worker’s pay, not 300-400 times as sometimes now occurs. We remember when entertainers (including sports) were merely wealthy, not pulling several dozen million out of society per year from their ticket-buying fans. We all remember when it was not necessary for a plaintiff attorney to take 33% – 40% of a liability judgment, no matter how large the award. Most of all, we all remember a time when opaque traders were not pulling hundreds of billions of dollars out of what are supposed to be “investment” markets.

            A lot of “little” people have been lured into the idea that OF COURSE employers would hire more and pay more if only the government was not taking so much of their money away in taxes. Reality is actually the reverse. Employers would not be paying the high tax rates if only they were hiring and paying more in DEDUCTIBLE wages to hold the taxable income down and avoid the high taxes. When there ARE NO high tax brackets, the old incentive to spend deductible money on people and growth to avoid taxes simply no longer operates as it once did. The lower the taxes on corporations and shareholders, the greater the pressure on any manager to run the company as lean as possible. Workers get squeezed more in a low-tax business climate than in a high-tax climate, as a result. It seems that very few people “get” this and it drives me nuts (as you know).

          • Anthony

            Keep fighting despite the dizzying affect!

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