US household income disparity

[Laurentius]

Originally Posted by CaptainMidnight

In fact, about 47% of households have been completely relieved of the income tax burden.

Then he completely fails to even mention the rise of free-trade globalism and the extensive de-industrialization of the U.S. economy. Discussing the issue of increasing income inequality without addressing that is about like ignoring a 500-pound gorilla sitting in the middle of your living room.

True.

Actually, as of 2008, I believe 51% of wage earners pay no net personal income tax.

Of course, this has serious implications in terms of voting when a huge proportion of voters have no stake in how high taxes may be.

[Sa_artman]

Large corporations have been around since before Carnegie. I don't see how you can blame the government for corporate greed. Shrinking average or mean household incomes are directly related to the lack of 'everyman' jobs. With the loss over 3 million jobs to overseas in the past 10 years, our middle America is shrinking.

Forrester Research Inc. predicts U.S. employers will move 3.4 million white-collar jobs and $136 billion in wages overseas by 2015. The outplacement firm Challenger, Gray and Christmas estimates the number of service-sector jobs moving overseas each year will hit 588,000 by 2005. A University of California at Berkeley report finds 14 million jobs are at risk of being sent offshore, and predicts job losses will exceed the Forrester study’s projections.

A loss of bottom level white collar leaves a large gap between the high paying white collar and average blue collar worker. Besides the fact our education system is sub par and we're raising a new generation of unskilled blue collar workers with no jobs waiting for them, we're on target for a wake up call.

http://www.mindfully.org/Industry/20...seas5oct03.htm

Solutions? Leave the corporations alone and let them continue to outsource hoping a laissez faire approach will somehow fuel their patriotism to bring jobs back home? I don't think so. If the Walmarts already control the government as you suggest, then letting them run free is like giving Jack the Ripper the keys the whorehouse. They already underpay their workers, fail on insurance and roughly only sell 2% of inventory manufactured in America.

John Smith started the day early,
having set his alarm clock (MADE IN JAPAN) for 6 am.

While his coffeepot (MADE IN CHINA) was perking,
he shaved with his electric razor (MADE IN HONG KONG),
and put on a dress shirt (MADE IN SRI LANKA),
designer jeans (MADE IN SINGAPORE) and
tennis shoes (MADE IN KOREA).

After cooking his breakfast in his new
electric skillet (MADE IN INDIA),
he sat down with his calculator (MADE IN MEXICO),
to see how much he could spend today.

After setting his watch (MADE IN TAIWAN)
to the radio (MADE IN INDIA),
he got in his car (MADE IN JAPAN),
filled it with GAS (from SAUDIA ARABIA)
to continued his search for a good paying AMERICAN JOB.

At the end of yet another discouraging and fruitless day
checking his Computer (made in MALAYSIA),
John decided to relax for a while.

He put on his sandals (MADE IN BRAZIL),
poured himself a glass of wine (MADE IN FRANCE)
and turned on his TV (MADE IN INDONESIA),

and then wondered why he can't find
a good paying job in AMERICA.

I left out the Obama punchline. As a moderate this is every Presidents problem which none have seemed to want to address.

Originally Posted by Laurentius

I don't believe that wealth redistribution via government is an answer to this problem; as there are fundamental issues that underlie income discrepancies to a certain extent that government cannot and perhaps should not address.

However, I believe the massive discrepancies we see today are actually caused by government in large measure. Particularly, they are caused by corporate welfare to favored sectors and/or companies and by regulations that favor companies already in a certain business but create an insurmountable barrier to entry for competitors.

Once government has the power to regulate something; it quite quickly finds itself on the receiving end of bribes in various forms. People use government authority as a means of circumventing the free market and attaining success otherwise unobtainable.

This situation started as far back as the dawn of the new Constitution when Alexander Hamilton told his cronies that IOUs that the government had issued to soldiers and suppliers would be redeemed at full value; but the people who held those IOUs were not informed. So Hamilton's cronies went all over convincing people that the paper was essentially worthless, bought it for pennies on the dollar, and then turned around and redeemed it at full face value a month later.

Nowadays, we find many representatives, when they retire, taking jobs as consultants or lobbyists paying millions yearly for the VERY INDUSTRIES they were regulating while in Congress. Anyone who can't smell a rat is insane.

The solution, then, however paradoxical it may seem -- is NOT to give government more power; but rather to give it less.

In the absence of the ability to do that; an alternative would be to enact legislation based upon distributist principles -- that is, create an upper-limit to the size of any enterprise that cannot be exceeded without it having to split into smaller unrelated enterprises; as well as favoring the creation of ESOP (employee stock ownership) companies.

[TexTushHog]

Originally Posted by Laurentius

I don't believe that wealth redistribution via government is an answer to this problem;

Why not? Government actions that resulted in redistribution upwards is what has largely caused it.

Originally Posted by CaptainMidnight

The guy obviously suffers either from ideological bias or complete ignorance of the history of tax bracket structures (or both). Successive rounds of tax-cutting over the last 30 years have lessened the tax burden on the middle class, not increased it. In fact, about 47% of households have been completely relieved of the income tax burden.

No, you're the one mired in ignorance, or more likely deception. Yes, fewer people are paying income taxes. But instead, they are paying much higher payroll taxes than they ever had to, and their payroll taxes are more than their combined income taxes and pay roll taxes were in the 60's and 70's.

But personally, I don't give a shit what the ignorant fools do. I'm getting the benefits of the shifting policies even though I don't support them and they are disastrous for the country. Ya'll are fucking yourselves, not me.

[..]

Originally Posted by CaptainMidnight

Then he completely fails to even mention the rise of free-trade globalism and the extensive de-industrialization of the U.S. economy. Discussing the issue of increasing income inequality without addressing those factors is about like ignoring a 500-pound gorilla sitting in the middle of your living room.

No, increasing income inequality (esp. btwn. poor and super-super rich; not so much btwn. poor and rich) is something very specific to the US. (and similar to the trends we see in Russia, India and China)

The nordic / scandinavian countries (Sweden, Norway, Finland, Denmark, Iceland) also face the challenges of globalized free-trade, but have a very strong consenus for some income equality, or as they would see it: income fairness.

And indeed these countries don't have these excessive income disparity.

[..]

Originally Posted by ..

yup, this would be interesting; unfortunately there's no data about it AFAIK.

ok, at least the Median Before-Tax and After-Tax Household Income is available.

Thus a good way to plot this, is 10th, 20th, 80th, 90th and 95th percentiles relative to median on log normal scale with 50th percentile being 1:1 (by definition):



source: http://en.wikipedia.org/wiki/Income_..._United_States

IMO this shows the trend very nicely too. esp. if one is aware that it's plotted log normal.

[pjorourke]

I'm sure you'll correct me if I'm wrong, but that graph looks to me like the lower level lines (i.e., "the poor") have stayed relatively constant in relation to the median, while the upper lines have drifted up. In other words, the rich have gotten richer, but the poor haven't gotten poorer. And even the rich's increase has been moderate -- from 3x the median in 1970 to about 4x in 2000 -- about 1% per year trend. Not exactly "hell in a hand basket".

And btw, that graph is pre-tax. After-tax (even including payroll taxes which primarily increased for upper income folks over this period -- and ignoring the value of the accruing benefits) would be a lot flatter and would probably show an upward drift for the 10th & 20th percentile lines too.

[Texas Contrarian]

Originally Posted by TexTushHog

No, you're the one mired in ignorance...

TexTushHog, just a suggestion, if I may:

Before accusing someone of being "mired in ignorance", it's a good idea to make sure you have some idea of what you're talking about! That way you'll avoid embarrassing yourself.

You can take a quick look at tax bracket history here:

http://www.taxfoundation.org/publications/show/151.html

For instance, a quick glance will show you that in 2010 you have to have an income (married filing jointly) exceeding about $68K to transition from the 15% to the 25% bracket. The latter bracket carries you up to about $137K, and you don't graduate to the next bracket (28%) until you make about $209K.

Then you can scroll down and take a look at the 1980 (pre-tax cut) table. Be sure to adjust for inflation (in 1980, a dollar had about the purchasing power of $2.65 today). You'll see that an income of only about $32K (in 2010 dollars) already starting introducing you to a 21% bracket, and if your income exceeded $53K (again, in 2010 dollars) you entered the 28% bracket. Quite a dramatic contrast!

Now take a look at historical payroll tax rates:

http://www.ssa.gov/OACT/ProgData/taxRates.html

You can see that the payroll tax rate increased from 6.13% to 7.65%. Double the increase to include the employer's contribution and you can see that the increases amount to about 3% of the taxable range. This obviously pales in comparison to the income tax cuts of the last 30 years, and I'm not talking about cuts for the "rich!"

Originally Posted by TexTushHog

But instead, they are paying much higher payroll taxes than they ever had to, and their payroll taxes are more than their combined income taxes and pay roll taxes were in the 60's and 70's.

So as anyone can plainly see, that's not just a statement with which I disagree; it's flatly wrong.

By the way, since you used the phrase "mired in ignorance", aren't you the guy who actually said he agrees with Paul Krugman that the $862 billion "stimulus package" was too small? (Yes, I do believe you were!)

Originally Posted by TexTushHog

But personally, I don't give a shit what the ignorant fools do...

To which group of ignorant fools are you referring?

Obviously there are plenty of candidates, but somehow I suspect that you're not referring to the folks who would have us travel a long way down the path to a European-style social democracy while paying for it with tax hikes only on the top 2% of the income strata!

Originally Posted by ..

The nordic / scandinavian countries (Sweden, Norway, Finland, Denmark, Iceland) also face the challenges of globalized free-trade, but have a very strong consenus for some income equality, or as they would see it: income fairness.

And indeed these countries don't have these excessive income disparity.

Yes, but they reduce inequality largely by creating extensive social welfare structures and employing much higher levels of unionization. We could obviously reduce inequality by allowing workers in large swaths of private industry to aggressively organize, but at the cost of a higher unemployment rate and dimished opportunity for entrepreneurs. For those reasons, I'm not sure the idea would sell very well in the U.S. today.

Here's another issue that I feel affects inequality in the US:

Someone mentioned data skewness in the distribution within the top 1% of the strata. I think there might be a lot of skewness at the low end as well. Too many Americans in the bottom quintile are, to say the least, manifestly dysfunctional. I haven't seen any recent reports, but I suspect that rates of such things as criminality, substance abuse, and illiteracy are much higher here than in many other wealthy countries.

Another serious concern is the precipitous decline in the quality of our school systems, especially those serving kids whose families are in the bottom couple of quintiles. As a nation, we're already paying a high price for that. I'm afraid we'll pay a still higher price in years to come.

[atlcomedy]

Tushy, If you really believe in "Income Equality" why don't you live on $50K/year (including your hooker bill)? Seems fair, right?

[atlcomedy]

Early in my career I had a boss scream at me (a day before a review with the Board) , "Just get me some God Damn data that I can cite. I can make it say whatever the hell I want!"

We are looking at soundbites here. Dot Dot/No Name started a provocative thread, but all we are looking at are soundbites or headlines. Give me the full data set, and in the spirit of my old boss, I can tell whatever story I want

Originally Posted by pjorourke

I'm sure you'll correct me if I'm wrong, but that graph looks to me like the lower level lines (i.e., "the poor") have stayed relatively constant in relation to the median, while the upper lines have drifted up. In other words, the rich have gotten richer, but the poor haven't gotten poorer. And even the rich's increase has been moderate -- from 3x the median in 1970 to about 4x in 2000 -- about 1% per year trend. Not exactly "hell in a hand basket".

And btw, that graph is pre-tax. After-tax (even including payroll taxes which primarily increased for upper income folks over this period -- and ignoring the value of the accruing benefits) would be a lot flatter and would probably show an upward drift for the 10th & 20th percentile lines too.

Originally Posted by CaptainMidnight

Someone mentioned data skewness in the distribution within the top 1% of the strata. I think there might be a lot of skewness at the low end as well. Too many Americans in the bottom quintile are, to say the least, manifestly dysfunctional. I haven't seen any recent reports, but I suspect that rates of such things as criminality, substance abuse, and illiteracy are much higher here than in many other wealthy countries.

Another serious concern is the precipitous decline in the quality of our school systems, especially those serving kids whose families are in the bottom couple of quintiles. As a nation, we're already paying a high price for that. I'm afraid we'll pay a still higher price in years to come.

[WTF]

Originally Posted by CaptainMidnight

Here's another issue that I feel affects inequality in the US:

Someone mentioned data skewness in the distribution within the top 1% of the strata. I think there might be a lot of skewness at the low end as well. Too many Americans in the bottom quintile are, to say the least, manifestly dysfunctional. I haven't seen any recent reports, but I suspect that rates of such things as criminality, substance abuse, and illiteracy are much higher here than in many other wealthy countries.

That is your argument? That we as a nation have more poor , ignorant criminials than other rich nations?

Why the fuc then, do we not look at those other nations and see what they are doing right in regards to preventing so God Damn many poor ignorant criminal fuckers! Talk about circular logic.....

Have you thought about that? What they do in those other rich nations to prevent this skewing at the bottom are things you are totally against! They actually try to eliminate the huge disparity in incomes to keep from being compared to a Banana Republic, something we are headed for because of people like you.

We have a concetration of wealth at the very top that is horrible for this nation...........at least for the middle class and poor.

Originally Posted by atlcomedy

Give me the full data set, and in the spirit of my old boss, I can tell whatever story I want

[discreetgent]

Originally Posted by CaptainMidnight

By the way, since you used the phrase "mired in ignorance", aren't you the guy who actually said he agrees with Paul Krugman that the $862 billion "stimulus package" was too small? (Yes, I do believe you were!)

That statement by Krugman is defendable. I do believe we needed a larger package that would keep priming the pump beyond this December. I will quibble with what they put into the package, but think on the whole it was too small. For example I would have put in A LOT more money into upgrading infrastructure; gets people working and gives something of lasting value. More money into education. You may disagree with this but it is not "mired in ignorance."

Since you brought the topic up (lol) my real fear is that tightening of money supply will hearken back to 1937 and lead the economy into another dip. Problem is we can get double-dip recession in more than one way and I don't believe any of the policy makers (Liberal, Conservative, Democrat, Republican) really have a handle on how to protect against it.

[Texas Contrarian]

Originally Posted by atlcomedy

Early in my career I had a boss scream at me (a day before a review with the Board) , "Just get me some God Damn data that I can cite. I can make it say whatever the hell I want!"

LOL!

Know what you mean. Along a similar vein, I was in a meeting a few years ago with some partners looking at an equity-participation financing package for a commercial real estate deal. A couple of guys were more than a little bit skeptical of the loan package's attractiveness.

This was during the time when there were a lot of news stories about harsh "interrogations" of terror suspects. The guy pitching the loan package left the room for a minute, and one of the partners said he was taking a break to massage the numbers. Another said, "Hell, that's not going to do the trick. He'll have to waterboard 'em to get them to look good enough to me!"

Speaking of waterboarding numbers, I think they had to do something like that to come up with this:

http://money.cnn.com/2010/07/14/news...port/index.htm

People often ask how they come up with stuff like that. The main way is that they use biased or flawed macro models that spit out a number of "jobs created" for each dollar of input, paying too little heed to what the money is actually spent on. They talk about jobs "created" or "saved", but they really ought to add a third category: Jobs imagined!

Originally Posted by WTF

...They actually try to eliminate the huge disparity in incomes to keep from being compared to a Banana Republic, something we are headed for because of people like you...

Oh, I see. The problem is my fault!

I've created many thousands of jobs over the years. How about you?

Originally Posted by discreetgent

That statement by Krugman is defendable. I do believe we needed a larger package that would keep priming the pump beyond this December. I will quibble with what they put into the package, but think on the whole it was too small. For example I would have put in A LOT more money into upgrading infrastructure; gets people working and gives something of lasting value. More money into education.

Krugman does mention (almost in passing) the desirability of investing in much-needed infrastructure and development. However, most of his statements have addressed primarily the amount of spending and his belief that we need to fill what is called the "output gap." He clearly believes that government spending of almost any kind "stimulates" the economy.

But history strongly suggests that the reverse is the case. Japan tripled its debt/GDP ratio over the last 20 years, indulging in one "stimulus" effort after another in order to try to boost the economy. It hasn't worked.

Britain's attemts to do the same failed in the 1950s, '60s, and '70s.

But the experience with which we're most familiar, of course, is that of the U.S. in the 1970s.

Many people forget this, but Nixon declared himself a Keynesian during his first term. And here's an excerpt from his 1971 State of the Union address:


"This is not good enough for the man who is unemployed in the seventies. We must do better for workers in peacetime and we will do better.

To achieve this, I will submit an expansionary budget this year--one that will help stimulate the economy and thereby open up new job opportunities for millions of Americans.
It will be a full employment budget, a budget designed to be in balance if the economy were operating at its peak potential. By spending as if we were at full employment, we will help bring about full employment."

(Yes, he actually said that!)

Also in 1971, Nixon closed the "gold window" so that the dollar could float. Together with that, he pressured the Burns Fed to plump up the money supply in order to maximize his re-election chances in 1972.

What did this weak-dollar/expansionary monetary policy and expansionary fiscal "stimulus" give us. Well, apparently not much -- it didn't prevent the 1973-75 recession from being the worst (up until that time) since the Great Depression!

Big-spending politicians love economic doctrine undergirding arguments in favor of stimulus spending. It gives them a ready excuse to do what they love most -- spend other people's money to buy votes!

The sad fact is that today's spending on favored political constituencies, public employee unions (by way of sending states hundreds of billions of dollars with no accountability), and entitlement expansion sharply reduces our ability to spend on things we might really need (such as useful or needed infrastructure).

Originally Posted by discreetgent

Since you brought the topic up (lol) my real fear is that tightening of money supply will hearken back to 1937 and lead the economy into another dip...

I see no evidence that the Federal Reserve is likely to tighten the money supply any time soon. In fact, I think the reverse is the case. They've announced that they will keep ZIRP in place for an extended period of time and are already discussing additional quantitative easing efforts.

As you noted, the Fed did tighten the money supply in 1937 (by means of big adjustments in bank reserve requirements). That led to a severe double-dip in 1937-38.

Originally Posted by discreetgent

Problem is we can get double-dip recession in more than one way...

Yes, we sure can!

There are a lot of ways to inflict damage on an economy.

My main point is that we certainly have needs, especially in the area of deferred infrastructure maintenance -- but we need to spend more wisely, not just more liberally. We've been rapidly increasing government spending for at least 7-8 years now. In fact, the federal budget has more than doubled in nominal terms since 2001.

Some very difficult, painful choices are going to have to be made. As part of that, the tax burden on the middle class is going to greatly increase during this decade. There's just no way around that unless we run deficits of close to 10% of GDP until we suffer a calamitous fiscal bust.

I believe that within the next couple of years we'll see serious proposals for a VAT.



BTW, discreetgent, I love a good, spirited policy discussion with those who disagree with my viewpoints. I just prefer that folks refrain from telling me I am "mired in ignorance", as TexTushHog did. (Even though he obviously didn't understand the issue he was addressing!) Thanks for bringing politeness and a nice, civil tone to the discussion.

It sure would be a more pleasant place if everyone would follow that example.

[discreetgent]

Originally Posted by CaptainMidnight

I see no evidence that the Federal Reserve is likely to tighten the money supply any time soon. In fact, I think the reverse is the case. They've announced that they will keep ZIRP in place for an extended period of time and are already discussing additional quantitative easing efforts.

As you noted, the Fed did tighten the money supply in 1937 (by means of big adjustments in bank reserve requirements). That led to a severe double-dip in 1937-38.

My most immediate concern is not the Fed. It is that deficit hawks will gain enough momentum that serious cuts will happen now which is what we don't need. Extending unemployment benefits seems to be a no-brainer at the moment, the entire fight over it - aside from the political hay each side wanted to make - in terms of deficit was IMHO simply absurd but indicative of a big potential problem if that view gains the upper hand.

[TexTushHog]

Krugman and I are still right on the stimulus. And the ignorant fools I'm referring to are the ones who keep cutting my taxes by large amounts, raising their own or cutting them by pennies, and destroying the social services that they and their children need. But I can live with it. It's horrible for the country. It's horrible social policy. But they're only fucking themselves.

[WTF]

Originally Posted by CaptainMidnight

Oh, I see. The problem is my fault!

Yes you have a problem when you discuss other countries success in avoiding huge % of low income people and oppose policy in this country that would emulates their success.

Originally Posted by CaptainMidnight

I've created many thousands of jobs over the years. How about you?

Oh , I don't know a couple of hundred. Is this now going to turn into who has the biggest dick discussion? I'm mean we can do that Red Herring if ya want. How about the most pussy? The fairest would be a combo! LOL