Wealth Distribution

[Steelgrave]

I need to clarify as well. My issue is not who is rich or not. My issue is the effect of such massive amounts of wealth being concentrated in so few that it warps our democracy out of shape and helps to flatten the middle class. The middle class is under assault from the left, who want to increase dependency on the government with resultant voter loyalty, and from the right, where corporations manipulate the laws to further enrich themselves while treating middle class workers as disposable. Companies will replace you in a heartbeat for someone fresh out of college who will work for $5-10 dollars less an hour, all while the top management rakes in a fortune as they lobby congress for more favorable tax shelters.

As a former restaurant manager, I honestly have little sympathy for people working fast food jobs who demand $15 an hour....every economy needs "starter" jobs and those positions were never intended to raise a family. Blame the fact that those jobs are filled with adults now on the economy in general, not on the restaurant industry. If people working at McDonalds are on food stamps, it's because they are working a minimal skill job intended for a 16 year old who doesn't have a family to raise. I don't want to sound coldhearted....as a young man, I started off washing dishes and then waiting tables as I worked myself up to a management job, and once found myself washing dishes and waiting tables between management jobs when things were tough. There is no shame in labor and in doing what you have to do.

No. The problem with wealth inequality is that it corrupts our political system and takes away from the American dream of upward mobility. A middle class with the cash to buy new things and power the economy is something we take for granted, but in truth it only dates back to the post-WWII boom. The rich have always been among us and the poor have always been among us, but the middle class, not so much. If we sit back and allow it to disappear, how will our grandchildren ever forgive us?

As for political power, this is a good (and quick) read. http://washingtonexaminer.com/when-is-inequality-harmful-when-its-caused-by-cronyism/article/2540338 If you're lazy and don't want to read it, the bottom line is that when the ultra rich use their fortune to buy up political favors in order to become even richer, it's at our expense. That's pretty much my take on the issue as well.

[GDS_Starfury]

[LongBlade]

No. The problem with wealth inequality is that it corrupts our political system and takes away from the American dream of upward mobility.

I'm not sure I believe that, but I appreciate your position.

[Windigo]

You mean the rules and regulations that these big companies lobbied for to stifle competition from smaller businesses with less capital and the rules and regulations that they will lobby to dismantle just as quickly once they achieve their goals of monopoly status.

Some of the rules work that way.  Dems never, ever cut government regulations since Jimmy Carter deregulated the transportation industry in the USA (one of the best things he ever did).

I hate crony capitalism.  Dems are the worst at it but the Republicans share a lot of the blame.

But still, most of the government regulations come from democrats.  They are done both to help their buddies (green energy) or because there is some "wrong" that needed to be righted.

The more powerful government is, and the more it interferes with the economy, the better the payoff for insiders of any type to pay off the politicians or the regulators to get the "law" written in a manner that benefits their special interest.  But facts are facts.  The bigger the government and the more it meddles, the more opportunities you have for this sort of thing to occur.

I totally agree about the wrongs being righted... there is no rational reason to have spiteful laws

Totally disagree with the green energy buddies innuendo, not because it isn't true, but is only one of hundreds of interests the benefit, it's also true that dems, especially at the state level, get gobs of money from fossil fuel interests and relaxing of state laws for their efforts.

Also totally agree about govt. power and 'negative' economic interference... it really primes the political money support drive pump

[Windigo]

I agree with this 100% non-sarcastic comment on steelie's post

[GDS_Starfury]

But no one here has made a case that "the system" is rigged against you/me/us/whoever.

how about this...  Im currently bidding on 3 jobs.  2 of them are getting really fucking annoying because Im getting underbid by people who use mostly illegal workers who get paid shit money.  these assholes are allowed to stay and work here because our politicians want there votes.  meanwhile Im bidding way under my pay grade.  the last job was a $2000 budget and a week of work and when it was all said and done I got to put $300 in the bank.  thats bullshit!  I could stay home all week and bartend one night and make the same money.

[Mr. Bigglesworth]

That's Star everytime somebody else gets laid.

[Windigo]

@star

very true, not enforcing rules and regulations (willingly or not) is still part of the system that is rigged by those with influence.

[LongBlade]

@star

very true, not enforcing rules and regulations (willingly or not) is still part of the system that is rigged by those with influence.

I'm not trying to say that the economy is great. It's not.

But I think we should try to parse out the politically dicey problem of illegal immigration from some kind of argument about wealth accumulation. Sure, at some point some rich guy is going to have an opinion and some money. But let's face it: Hispanics are a huge voting block, and ignoring them just cost Romney the election. That plays out in miniature all over the US each election cycle.

[Windigo]

@LB,
that indeed is the rub. How do you parse out these variables and get to the meat within the political and economic systems? The critical area where they intersect, both apparent and inapparent.

Given that politicians make many promises, most of which they don't keep, I am thinking that appeasement promises will have little inpact on that area of intersection until incumbents no longer get in regardless of their performance

[FarAway Sooner]

I view the wealth distribution issue not just in terms of fairness, but more in terms of what's best for national prosperity and security.  America is at its healthiest--politically and economically--when there is a vibrant, engaged middle class that's participating vigorously in our society.  I want a meritocratic American economy, where the best and brightest--rather than the most fortunate and most-connected--can get ahead.  Again, this isn't just about fairness.  I want my kids to grow up working for the best, rather than the best-connected.  That's what will keep America strong, economically, politically, and socially.

I was born into a solidly middle class family, but my father didn't have that same luxury (neither of his parents had college degrees).  My wife grew up in a very lower class family and embodies the American dream.  She's kicked ass professionally for 15 years now, using all the lessons she learned working 40-hour weeks at Dairy Queen when she was 16 to climb the corporate ladder.  She was an IT Director before she was 30 and she was offered a VP slot before she was 35 (she turned it down to raise a family, but that's another story). 

I want my kids to be able to work for self-made people like their mom when they grow up!

Viewed through that lens, looking at changes to the distribution of income and wealth in American society seems more alarming to me.  The top 1% of Americans earned 11.3% of total income in 1979, but by 2007 that number had increased to 20.9%.  While I understand most of the causes for that trend, I don't view that as a good thing.  You see similar trends when you look at the Top 5%.  American incomes rose together until about 1979, when The Great Divergence began.



Another graphical illustration that looks at CEO pay in comparison to what others are paid is also revealing:



It's unclear to me what the wealthiest 5%, or 1%, or CEOs have done in the last 30 years to deserve so much more of the economic growth than their middle-class counterparts.  They work hard, they're bright men and women, they get paid well and they get all the status that comes with being The Boss.  I bear them no ill will or envy, and I applaud them for managing enterprises that employ lots of Americans.

But I don't understand what they've done to earn a bigger share of the pie in the last quarter century?

Airboy, I agree with most of the conclusions in your last post, and the article that you cited is factually correct (as I'd expect from you).  But it ignores the historical dimension, which looks at the fact that overall tax rates for the wealthiest have been steadily declining for a while now.  A lot of this is due to much more favorable rates for long-term capital gains taxes, which are priced significantly lower than income taxes. 

And, if the wealthiest 1% earned roughly 20% of American income, the wealthiest 0.1% earns as much as 40% of American capital gains.  The net result on this is a declining tax rate for the wealthy...



which severely mitigates the extent to which redistribution results in massive plundering of the coffers for the wealthiest Americans.



All of this is driving wealth concentration in America, which is even more top-heavy than income distribution.



There will always be a tug of war between the haves and the have-nots, and there are folks on both sides deserving and not-deserving of their current situations.  Fuel that with the seemingly human inability to easily reach compromise or understanding on political issues, and it's a recipe for more than heat than light. 

Before moving onto the question of whether there's anything we can or should do about it, it's worth asking one fundamental question:  Are the current trends in the distribution of wealth and income in American society something that we see as a problem?

We can talk about how if we want to (that's the hard part of the discussion), but it seems like we at first should try to find some common ground on whether we think we have a problem or not.

[FarAway Sooner]

One other tidbit, if we want to compare America to other countries in the world.   In terms of equality of income distribution, the US today ranks #33, sandwiched between Portugal (#31), Israel (#32), Turkey (#34), and Mexico (#35).  Among OECD countries, who have reasonably "modern" economies, we rank 32nd out of 38. 

Those rankings are based on the Gini coefficient, which is the statistical measure of income equality used by organizations like the World Bank and the CIA.

Again, I ask, is this a good thing for the future of our country?  I don't think it is.  Can we at least agree on that much?

[Mr. Bigglesworth]

The best way to decentralize wealth, stabilize the country and help your family is to start a small business.

[airboy]

FarAwaySooner:
Excellent factually based post!

Lets talk about what caused this divergence since 1979.  There are multiple factors which occured relatively close together which drove this trend in the USA.
1] Reduced trade barriers.  Manufacturing technology became readily available world-wide which means that a lot of manufacturing jobs left the USA.
2] A Technological Revolution - Information technology really got going with the invention of the transister by Shockly.  When you have a major new
    technology that hits an economy it takes 20 - 40 years for it to get readily applied.  This has occured before (steam power, electricity) and had similar
    effects on employment while it happened.  Many, many "white collar" jobs in the USA were managing information.  Those jobs are now gone forever
    because we are far more efficient.
3] Fall of Communism & Modification of Communism (China) - A huge part of the world economy was grossly inefficient or had next to no world trade if
    you compare the world in 1913 through the fall of the USSR.  This greatly increased world demand, but also greatly increased world competition.
4] Flood of low skill workers into the USA.  Low skill jobs have had flat pay levels in part because there is a huge increase in the supply of low skill labor. 
    If you greatly increase supply, price falls.  This occurs with products and in the labor market.
5] Huge growth in government regulation - The barriers to entry for new firms, and especially for firms to expand are massive.  This is in part due to the
    massive regulatory costs imposed on business by State and Federal government. 

One more comment about technology.  Have any of you been inside a modern factory in the last 5 years?  There are a very few number of workers needed compared to 1980 for the same level of production output.

All of these factors have worked together to lower incomes in the bottom 75% of the income scale.  In many ways the US and World economy is undergoing structural changes to a great degree.  The USA is starting to get wealth and income concentration like that which existed in the 1900s when Roosevelt was President (TR not FDR).

In these situations about the only thing that really works is the inheritance tax if you want to keep your economy working.  But the US Inheritance tax is now 45%.  The only long term solution in my mind that would work is if you put the inheritance tax at say 90% for wealth over $500,000,000 dollars which is adjusted for inflation.  You can pick any number you want for the top inheritance tax - but if you get under $100 million you will break up a lot of small corporations and big family farms due to the asset values.

What I would do is:
1] Cut government regulation so there is less crony capitalism.
2] Massively raise inheritance taxes at the very, very top of the scale.

[FarAway Sooner]

The best way to decentralize wealth, stabilize the country and help your family is to start a small business.

I don't disagree.  My brother's been a highly successful entrepreneur for 20 years now.  I myself have spent the last 15 years at a firm trying to bring more transparency and consumer value to the financial services sector.  We've done great by our shareholders, but are only slowly chipping away at the market imperfections that have so many people overpaying their financial firms without even knowing that they're doing it.

But you aren't responding to the data I put up there or the questions I posed. 

Are you saying, "No, I don't care about those data or those trends.  They're not a problem in America."  Or are you saying, "I don't like those trends, but the best way to fix them is to start a small business." 

I'm not trying to score points here debate-style.  I'm just trying to determine if there's common ground.