Your Lying Eyes

Dedicated to uncovering the truth that stands naked before your lying eyes.

E-mail Me

Twitter: yourlyingeyes

05 February 2007

Income Inequality Increasing, Bush Says

"The fact is that income inequality is real; it's been rising for more than 25 years." Didn't he just say the same thing about global warming? His policy prescription is just about as off the mark. To fight global warming and energy independence, he wants to make more ethanol (which is unlikely to help with the latter and irrelevant to the former). The only policy proposals he has to address income inequality are his health insurance tax deduction and increasing Pell grants for education, two pretty useless proposals.

Growing income inequality is unstoppable without radical measures (kind of like global warming). The greatest contributions to the economy come from a few (about a million or so) extremely talented individuals. These people are getting better and better at figuring out how to keep more and more of the wealth they generate for themselves and at finding other equally talented people to help them make more and more money (as well as finding more and more people to work real cheap). Plus, as our society becomes more stratified (more gated communities, more bad schools and elite schools) the elite become less restrained in their lifestyles.

The frustrating thing is it's hard to see what these people are doing that's worth so much money. If we were seeing dramatic improvements in our lifestyles from innovative new products, we'd feel a lot better. There was a time when people were treated to the introduction of one amazing technology after another: Automobiles, airplanes, tractors, electrification, vast railroad networks, telephones, washing machines, vacuum cleaners, powered lawn mowers, refrigerators, dishwashers, air conditioners - things that made people's lives orders of magnitude better than they were decades earlier.

The television was perhaps the first major invention that gave people something they didn't know they needed. Since then that's about all we've had - industry is not only inventing things but inventing the need for them. Home computers, personal audio devices, video games - these have not improved people's lives in any objective sense as, say, a washing machine did - they perhaps add to life's enjoyment, but that is surely debatable. The one industry that has without a doubt brought substantial improvement to people's lives over the last 50 years is probably the most despised - pharmaceuticals.

Granted, the remarkable advances of the first half of the century have not sat stagnant - all those things have been continuously improved. And, sure, it's great to have information at your fingertips and be able to make phone calls from anywhere to anywhere and to have all nine Beethoven symphonies on a device the size of a piano key (a black one) and be able to program a GPS device rather than have to write down directions. But is that all we get these days from our overlords, tinkering and trinkets?

Perhaps a return to the old steeply progressive income tax is in order. Something like a 30% rate from 100k thru 500k, then a 1% increase in the rate on each 50k after that. Someone making $2 million would pay 60 cents in FIT for each additional dollar made. How bad would that be? We had such rates in the past, and it didn't kill us. One thing seems clear - tax cuts this decade were followed by continued erosion in our manufacturing base, so that ain't working.

19 Comments:

Anonymous Anonymous said...

Other than microwave ovens, computers, and mobile phones...................I cant really say things have improved all that much since 1985 for Joe America.

Kevin Phillip's book on the history of great wealth in America tracked nation's on the decline hisotrically like Egland and the Netherlands and Spain before their "falls". Increasing infome disparity, increasing financialization of the economy, were both big factors in all three.


Public health is down because of atrocious processed gunk food full of high fructose corn syrup (which inhibits two chemicals in your body that tell you when you are full and tell you when your stomach is full), and aspartame, and pro-internal inflammatory substances in pastas, white flour products and other assorted "man-made" foods. High Fructose Corn Syrup is in all colas that aren't diet, and aspartame is in all diet colas. Our need for pharmaceuticals has increased in all probability because of these changes.

You can thank Donald Rumsfeld in particular for strong-arming aspartame through the FDA. You can think the corn lobby for pushing the FDA to outlaw safe sweeteners and to cast dubious aspersions against ones like saccharine (still in Sweet and Low). {Side note on saccharine----it was "shown" to give a higher incidence of cancer in some lab rats......yup, some very sick-ass lab rats that got cancer from water injections.......a rigged study in other words}.


Lower housing costs are the biggest factor keeping people poor in my opinion. If you have to get a loan for a home that is four times your yearly income, much of your life's earnings will be spent paying interest. Our very nice three bedroom, two living room, two car garage, large dining room, large kitchen, two full bath house on almost AN ACRE AND A HALF only cost us 65K in 1978. The same house, older now, would be listed at about 180-190 according to my dad. Incomes simply have NOT risen this fast.

You can buy a compact car for pretty cheap, but home prices are not something that one can evade. They are the biggest single impediment to young couples in my opinion. Apartment rents in my city have gone through the roof. My first apartment I got in 1988 was a luxury apartment for 410 a month at a really nice place. The same place is largely hispanic now, kinda run down, and renting at almost 750. The part of town its in is no longer considered exclusive and the mall that is the anchor of the whole area has been known to be "on the decline" since the late 90's as whites have fled.


Immigration has of course, stymied wages by setting an absolute low point for introductory jobs way down at the minimum wage level. Minimum wage was not a consideration for most 15 years ago, because very few jobs paid it (couldn't get anyone for it). Now that "they" can............lots of jobs only pay a couple of bucks over it to start, and dont pay more than they paid 20 years ago. Construction jobs are the biggest example of this if you have any old pals from high school that went into that. It just doesn't pay to stay in it, so all the white and black guys who arent contractors have left it.


Demographics will "fix this" in about 30 years however. When the Mexicans and blacks outnumber whites, I image the upper class will be horrified at the tax levels for the rich they are very willing to support. Ive beat the hell out of this drum by using Memphis, Tennessee as an example. They elect kooky leftists over and over despite numerous scandals. They simply dont care, and vote for who keeps the benefits comin'.



.

February 06, 2007 2:35 AM  
Anonymous scottynx said...

Our lives our pretty good. We have plenty of good tasting, cheap food. Most can afford the toothpaste, shampoo, and soap to allow them to attract an at least tolerable sex partner. The computer is not something to be dismissed lightly, especially since all of its uses have not been fully exploited or even thought of. It took many decades for the benefits of the electricity revolution to fully benefit america as well. That is normal.

It's hard to think of what you would want. Look, when the airplane was first invented, it had been dreamed of in a way for thousands of years (icarus). No doubt Devinci had heard that story. Computers had been dreamed of in a way. The analogues do we have today for things we haven't accomplished include mass space travel, Under water colonies, Personal transporters? living forever, self-driving cars, Artificial intelligence, nano-technology, genetic engineering of smarter children. etc. I guess the low hanging fruit has been picked. Our dreams are the substrate from which inventions are made, and the only things left in our dreams to fulfill are collosal projects.

I think more and incrementaly better stuff for more and more people alone is worth keeping a non-progressive tax code, but rest assured that those you want to tax will one day accomplish humanities remaining collosal dreams, but sooner if don't use your plan).

February 06, 2007 1:30 PM  
Anonymous Derek Copold said...

Home computers, personal audio devices, video games - these have not improved people's lives in any objective sense as, say, a washing machine did...

I agree with the bit about entertainment systems, but our home computer has become a vital tool in tracking finances, printing photos* and finding information on things like fence repair, wood staining, and just about anything else you can name. Before computers, most of these tasks would have been excessively laborious, if done at all.

*Yes, a lot of our photos are personal, but we also use them to track inventory and document home repairs.

February 07, 2007 9:38 AM  
Anonymous gcochran said...

You know, I know a bit about the real wellsprings of progress - technological progress, there not being any other kind underway - and I have to say that I don't think you're right.

February 08, 2007 3:04 PM  
Blogger ziel said...

Not right about what? I guess my main point is that there's tremendous income inequality, and I don't see that there's a tremendous payoff to society from people making so much money. Do you feel that there are indeed important technological developments that wouldn't be happening (or much less likely to happen) if Americans didn't have the opportunity to make millions of dollars at a 39% marginal tax rate?

February 08, 2007 7:33 PM  
Anonymous gcochran said...

My bad. I didn't read the whole thing: I thought you were starting to say that most of the super-rich _deserved_ their money, which is of course silly.

I apologize.

February 08, 2007 8:12 PM  
Blogger ziel said...

I do confess to this naive notion that if we taxed high incomes really heavily, making money doing things like investment banking and law wouldn't be so alluring and people would get back to doing real work.

February 08, 2007 10:42 PM  
Anonymous Kurt9 said...

Income inequality in and of itself is not a problem. It is the lack of opportunity for upward mobility that is the real problem. The real problem is a lack of real economic opportunity. Taxing the rich is not going to solve this problem at all.

If anything, tax rates are too high. We definitely have way to much regulation.

Low tax rates are good because the money that would otherwise go to government bureaucrats instead goes into productive enterprize which, in turn, generates more technological innovation and more economic growth. This, in turn, creates more opportunity for those of us who do want to make it.

It is true that many of the superrich play zero-sum speculation games with their money, like speculation in real estate and the like. However, there are other superrich people who really are driven to do the bright, creative human endevours, like getting us into space and curing the aging process.

Examples of this are Jeff Bezos and the other entreprenuers who made it big in the 90's and who are now developing commercial space technology. There is also the Methuselah Mouse Prize (for curing human aging) that is also entirely privately financed.

The idea of punitively taxing the "rich" in order to create "benefits" to society is completely off the wall.

A flat rate tax of 25% would be perfectly reasonable.

Besides, why would anyone right in the head think that government bureaucracy is capable of any kind of productive achievement at all?

February 09, 2007 6:34 PM  
Blogger dougjnn said...

Ziel--
I do confess to this naive notion that if we taxed high incomes really heavily, making money doing things like investment banking and law wouldn't be so alluring and people would get back to doing real work.

The most basic problem is globalization. That tends to give the economic efforts of the economically focused IQ elite a global market to sell to, hence enormously leveraging their differential talents, while forcing the more ordinary and below average to compete with a mostly poorly paid middling skilled workforce worldwide.

In the first group you’ve got top honchos at Microsoft, Google, Hollywood, the music industry, Wall Street, and international commercial banking, among others. In the second group you’ve got not only the withering base of industrial workers in the US, but also increasingly outsourced middle level clerical or routine production programming jobs outsourced to India, etc.

The European response is to maintain higher walls of protectionism that many other developed areas, and suffer the lowest levels of economic growth over the last 25 years in the OECD. This has somewhat helped slow the growth in income inequality there, together with many quasi socialist government transfer and labor regulation policies.

The American policy has mostly been to go for growth and let “creative destruction” rip, and income inequality – but not any decrease in absolute living standards in the lower half – proceed.

I generally think the US approach is better, but that it’s gone overboard in some respects.

Eliminating the inheritance tax entirely was unjustifiable. I’m in favor or it not only as a revenue raiser, but perhaps even more to thwart the increase in the idle rich. As a sort of (limited) leveling effect each generation. Return to go. Well, not really, but somewhat of a push in that direction. That’s the first thing to do. Least effect on motivating the super able and economically focused.

Yeah the threshold of it’s first application hadn’t been increased in decades and that was wrong. It used to kick in at about 550k total estate split however many ways. That was too low. But it should have been retained and at high levels for amounts over 5 mill or so. Yes you should be able to help your kids, but I don’t see why you should be able to guarantee that they be rich regardless of their own efforts, beyond such things as education and influence.

As for much higher tax rates on very, very high earners I’m of two minds. Mostly I think it’s a bad idea. Somewhat higher is ok. But one of the real engines of American economic and technical growth is that you can get rich here if you’re a brilliant and hard driving entrepreneur (especially in a tech related area, but not only) and use your talents that way instead of in competing in literary criticism say.

February 09, 2007 7:34 PM  
Blogger dougjnn said...

Anonymous--
Other than microwave ovens, computers, and mobile phones...................I cant really say things have improved all that much since 1985 for Joe America.

I just really disagree. The widespread penetration of cable TV since then and then it’s proliferation of channels has greatly expanded entertainment options.

There may be more junk food than ever before, but there’s also more quality ethnically based and other dining at the middle and barely above level (not to mention upper middle class and up) in many far flung places around America than there was in the early 80s, and especially more than ten or so years before that.

The computer/internet phenomenon is huge. At least for all but the lowest 1/3 or so in IQ who may not much appreciate the kinds of mental stimulation it provides, outside video games.

Video games are big for youth, and thirty somethings today have not entirely outgrown them often enough. They love them.

I do see rain clouds ahead though. Housing costs have gotten so great in many areas that those who haven’t already participated in the rapid escalator have huge hurdles.

And you are saying that the those rains clouds are here right now. I mean really dark, serious clouds. I can’t disagree on the housing costs problem. It’s big.

February 09, 2007 7:45 PM  
Blogger dougjnn said...

As for much higher tax rates on very, very high earners I’m of two minds. Mostly I think it’s a bad idea. Somewhat higher is ok. But one of the real engines of American economic and technical growth is that you can get rich here if you’re a brilliant and hard driving entrepreneur (especially in a tech related area, but not only) and use your talents that way instead of in competing in literary criticism say.

Maybe actually greatly inflated housing costs are THE overriding squeeze on middle class America today, especially those in their 30s and 20s (who participated much less or not at all in the great housing price boom so far – which I think may be over for a long time).

Part of the boom of the roaring twenties, in addition to electrification and radio and all the appliances that went with, was the widespread spread of the automobile – which made possible more far flung suburban existence, with greatly decreased housing costs for young families, relative to living space. They helped railroads reach the height of their potential, as the last few miles method to the suburban home often enough, and sometimes the sole means, though often roads were spotty then.

Cheaper large and comfortable housing for a larger portion of the population was even more important in the post war 40s and 50s boom, as roads were built with abandon (well that had been occurring in the 30s as well as a government employment project, but people had trouble buying more cars then).

Rising housing costs were not such a problem for the boomers (or actually even more so in some ways for their parents) since they were in the middle of the escalator and riding it up. Yeah when trading up there were additional financing costs but there was considerable help from rolling over the previous gains, and there was also strongly increasing housing net worth. It’s simply a net win when empty nester or otherwise trading down for my group.

But the hurdles for those entering the housing market in many coastal areas now for the first time (albeit better than 18 months ago), who don’t have big parental help, is pretty daunting. Unless you’re in the top 5 or 10% of income earners whose relative share keeps increasing.

February 09, 2007 8:01 PM  
Blogger Glaivester said...

The television was perhaps the first major invention that gave people something they didn't know they needed.

What about the movies and radio? Also, I would think that once someone had the movies and radio, the diea that it would be nice to have one's own little private movie theater at home must have started to creep up.

February 09, 2007 11:26 PM  
Blogger ziel said...

Yes, the radio was a harbinger of the tv age. But tv's were major investments, costing multiple week's wages. People used to save up for a year to buy them - which is another quaint concept, saving up.

February 10, 2007 11:01 AM  
Anonymous SFG said...

Anybody ever mentioned the effect of income inequality on housing costs? If James Morton Banker the Third has 200 grand a year instead of 100 grand, he can afford to buy twice as many houses and drive up prices in 2 regions.

The New York Times never mentions this in any of its articles on inequality. Hmmm, wonder why...

February 11, 2007 10:58 AM  
Anonymous SFG said...

I also appreciate the previous commenter's comment on "finding information on things like fence repair, wood staining, and just about anything else you can name". As a big city boy, I've never even heard of wood staining and never had any fences to repair.

February 11, 2007 11:00 AM  
Anonymous LEB said...

The idea of implementing a progressive income tax (especially when it essentially already exists in the United States) is simply not best means to solve the issue of income inequality. As fellow blogger Kurt9 had mentioned, income inequality itself is not a problem. The main issue lies in unequal opportunities. America has an obligation to ensure that there is not a lack of equal opportunity for all Americans to achieve wealth. And, in that regard, it is higher education that is the main enabler of economic success in this country. However, over the past twenty-five years, the wages of the skilled and educated workers have grown faster than the wages of the less educated. For instance, in 2003, according to the U.S. Census Bureau, four-year college graduates in America earned an average paycheck nearly double that of high school graduates; moreover, holders of doctoral and professional degrees earned three to four times that of a high school graduate.
Federal Reserve Chairman Ben Bernanke said “disparities in education and training are likely the single greatest source of the long-term increase in inequality.” Thus, “policies that boost our national investment in education and training can help reduce inequality while expanding economic opportunity,” he said.
The key to income “fairness” is to make sure that the tools necessary for wealth (i.e., higher education) are available to all equally. Don’t look to tax the rich more for what they have earned. Instead, the poor should raise hell about a government-run school system that does an appalling job in educating children, and the high cost of university-level education. Bush has attempted to solve this issue by putting forth two distinctive programs, No Child Left Behind and American Competitiveness Initiative, which serve as vital steps into helping create equal opportunity among Americans. But it is not enough. Dramatic changes in education are needed, and fast. Or the income gap will just widen.

February 11, 2007 11:37 PM  
Blogger nzconservative said...

There does seem to a diminishing returns thing going on with technology these days.

Some time in the 1970s technology seemed to stop making our lives easier and started making them more complicated.

One problem is that products come with too many extra features, talk too long to learn to use, are marketed in a childish, gimmicky way, and new products are coming out too fast. hence, we are constantly losing money on depreciating computers and so forth.

February 13, 2007 9:56 PM  
Anonymous Udolpho said...

The notion of restoring "equality" by confiscatory taxation is completely insane. For one thing, it will lead to a massive explosion of tax loopholes, offshoring, and other types of income shelter. Also the return of grand perquisites for the executive class even at relatively small companies. This is really not thoroughly though through, Ziel.

A more realistic approach is to stop undermining the working class with massive unskilled immigration, to place more emphasis on trade shools over universities (which are greatly overpopulated with students who have no idea what they are doing there), and to remove encouragements to underclass behavior (welfare reform being one example of policy change that worked).

I have nothing against i-bankers. Investment is essential to creating new wealth and new jobs. I don't see what you have against them either. Other than that some of them are quite wealthy. But so are some basketball players, actors, and hotel heiresses. So what?

The few super-rich people aren't the problem. It's madness to think that taking their money away is a solution.

February 16, 2007 1:16 PM  
Anonymous james Francis (the other one) said...

don't see what you have against them either. Other than that some of them are quite wealthy. But so are some basketball players, actors, and hotel heiresses. So what?

Yeah, yeah, yeah, so what?

February 18, 2007 7:44 AM  

Post a Comment

<< Home