Well, income inequality has become news yet again. And that somehow it all started to be the fault of Ronald Reagan. Actually, he is largely at fault. Let's go ahead and blame him.
What is missing from these articles about income inequality is a very important fact. Those evil rich people are not the same people as were the rich 20 years ago. When people write about this, it always sounds like there are classes of people: the rich were always rich, the poor were always poor, and the middle is doomed to always be the middle. That is not how it works.
What really happens is that people get rich, but sometime thereafter their income levels off. Then other people become even richer. If you just barely made it into the top 1%, or top 0.1% of wealth, if your income stagnates, pretty soon enough other people become richer and knock you down. Well, down in terms of percentile, but you may still be getting richer.
What about the poor? IRS statistics indicate that of the people that were in the poorest 20% of the population 30 years ago, 95% have moved up to the middle class or even the rich. Isn't that exactly how it is supposed to work?
The poor have incomes and wealth roughly at zero. You have to start somewhere. Few of us get to start out in life millionaires. Eventually we become wealthier, maybe even make it into the top 1%. In order to get there, we have to pass the ones who are already there. For every person who gets into the top 1%, some other person gets knocked out. Did they get poorer? No, the bar to be in the top 1% just got raised.
So really, all the income inequality increase shows is that now it is possible to be far richer than it used to be, and lots more people are becoming rich. So go ahead and blame Reagan.
10 comments:
income equality (literally) means shoo and the homeless dude in the park should have equal incomes. which is completely ridiculous.
reagan has the distinction of having cut taxes more than any president in history (to boost the economy because the opec embargo was crushing it) and also of having raised taxes more than any president in history (to pay the bills and because opec crumbled and the leaner meaner america went nuts economically). the second part should make him my hero.
on the other hand, that whole fraud of supply side economics took hold under his watch. and he ran up the debt with a worthless military buildup. alas, nobody's perfect.
i'm with shoo. income equality is irrelevant as long as people have income mobility. that's harder than it used to be. but we're still in really good shape compared to the rest of the world.
actually, i think we need more income inequality. i explain. suppose shoo makes $1m building houses. and i make $1m pumping and dumping penny stocks. we have equal incomes. yet the value to society of our labors are very different. shoo's houses contribute to the gdp and create wealth that gets spread around. my stock scheme creates zero wealth and only benefits me at an equal expense of others. it's even worse, cause shoo pays regular tax rates. and i pay long term capital gains. the government rewards me for harming others and penalizes shoo for benefiting others. the tax structure is completely backwards.
income equality means equal pay for work of equal value to society. and unequal pay for work of unequal value to society. would be nice, eh? i can dream, can't i?
Income equality ranks as tempest in a teapot. President Reagan did attempt to cut domestic spending and was thwarted. I recall him asking the American people to send him a Congress he could work with.
The timmer example is laughable in the premise. He assumes the penney stock person hoards said capital, never letting it see the light of day.
Not to mention the nebulous "value to society"
the penny stock guy and the house builder guy have equal incomes, so they'd do the same amount of hoarding.
let me try a different tack. there are always going to be rich people. this is a good thing. let's pretend we can choose how rich people get rich. we want them to get rich because we gave them money for something we want and enjoy using. like houses, cars, phones, games, food, clothes, movies, electricity. we really don't want them to get rich by diverting what would be interest paid on our savings accounts.
We want them getting rich by producing things, investing, increasing the GDP.
It seems to me that timmers constant call for increased taxes on the rich are not at all what he really is after: it seems like what he really wants is increasing the capital gains rate to treat it the same as income instead of the favorable treatment it gets.
Surprisingly, I think I actually agree with him. There are strong arguments against raising the capital gains rate, but those arguments pretty much apply to taxes in general. Any taxes hurt the private economy.
On the other hand, I wonder where the hell the venom comes from. Capital gains accounts for a very small percentage of income taxes, and increasing the rate will not bring in much extra money. It seems to be the venom is nothing more than one of our favorite deadly sins: envy.
It is true that Reagan increased the deficit dramatically, but as usual, spending originates in Congress, which was under total control of Democrats. The increase in the military was a drop in the bucket compared to the increases in domestic spending. He very famously cut a deal to get his tax policy in place in exchange for domestic spending cuts later. Congress reneged on that deal. And "worthless military buildup"? Really? Like bringing down the Soviet Union without firing a shot was worthless?
venom?!?! heh. trust me. i filter most of the venom before posting. ;->
it comes from frustration. i feel like i'm the only who can see this con job that's stealing money from all of us. and i am unable to explain it so other people understand it much less get motivated to stop it.
i'm totally happy with 15% tax on actual honest to goodness long term capital gains. like say i give you $1m in exchange for a 10% share of your new house building business. several years later, it goes public and i recover my investment with a tidy profit. 15% tax sounds like a great way to reward us for boosting the economy.
on the other hand. the capital gains tax applies to things it shouldn't. like say i buy $1m worth of stock in your post-ipo house building business. you don't get that money. you can't use it to hire people or buy land or lumber. that money is just dancing around wall street. one year and one day later, after you've worked really hard to build up your business, i sell for a tidy profit. which effectively comes from everyone else's savings. i just made money without giving anything in return. that's stealing. and to compound the con, it's taxed at half the rate everyone else pays.
raising taxes on the rich is only half the mantra. raise taxes on the rich so we can lower taxes on everyone else.
"I see cons...."
When you see things nobody else does, you are either a genius or a deluded nut job.
Seriously, apparently you believe the work that investors do researching companies and the liquidity that they bring to capital markets has absolutely no value and is somehow a con on the rest of us.
As far as taxing the rich goes, I have a better mantra: reduce government spending so we can all be taxed less.
market research and liquidity are quite valuable. kinda like salt. we need a little. we're currently paying for way way way more than we need.
More than we need? Really? How do you know how much we need?
Sure capital markets look messy and grossly inefficient. Except that nobody has devised anything better. Is it possible to tinker with the rules and get better results? Of course. We will tinker, and very very slowly we will figure out what gets better results and what doesn't. But the idea that we are paying for more than we need is absurd.
You seem to have fallen into something similar to the creationist trap. When you look at capital markets, you are watching evolution in action: it is painfully slow, and fraught with dead ends and all manner of grotesque inefficiencies. Far better to have God or some really smart person just create the perfect system right off the bat.
Except you aren't smart enough to devise a better system. Nobody is smart enough. You don't need a 200 IQ: you need like a 20,000,000 IQ. It turns out that nobody is smart enough to second guess the decisions made by millions of people making independent decisions.
heh. okay now *i'm* wondering where the venom comes from. hrm. could it be cause i just said shoo's too stupid to realize he's being scammed? heh. fair 'nuff.
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