Richest getting even richer

The fact that mobility is declining. . . boths me

Rocket River

 

The sad part is that the wealthiest people don't realize they're shooting themselves in the foot by taking these tax cuts, thereby prospering in and encouraging the status quo.

Wealth can only exist in stability. Once that stability is gone, the value of the dollar goes down, property can be potentially confiscated, etc.,.

When we have a massive underclass studded with highly intelligent/talented people with no hope for bettering their life, that's when the ****'s really gonna start hitting the wealthy folks - and, unfortunately, the rest of us are gonna get splattered too.

 

The article didn't do much to prove such a thing.

"Some recent studies suggest it has even declined over the last generation." The end. Very convincing.

I tend to agree with this:

Those who contend that the extraordinary accumulation of wealth is a good thing say that while the rich are indeed getting richer, so are most people who work hard and save. They say that the tax cuts encourage the investment and the innovation that will make everyone better off.

In this income data I see a snapshot of a very innovative society," said Tim Kane, an economist at the Heritage Foundation. "Lower taxes and lower marginal tax rates are leading to more growth. There's an explosion of wealth. We are so wealthy in a world that is profoundly poor."

 

I disagree with that. The hardest working people I know aren't the rich, but the working poor. They don't make enough to save. As for lower taxes meaning more to invest, it is a bunch of bull. It didn't work when Reagan tried it, and it hasn't worked at any other point. The problem is that the richest people in the U.S. don't need an incentive to invest more. If I have 8 million dollars but don't feel comfortable enough to start investing then I am either paranoid, or greedy. I don't need a tax cut that will give me an extra 200k a year in order to finally feel safe and start investing.

 

Well let''s have some facts instead of empty assertions from conservaties denying that the distriubtuion of welath has gotten less egalitarian.
*******
The Death of Horatio Alger

by PAUL KRUGMAN

[from the January 5, 2004 issue]

The other day I found myself reading a leftist rag that made outrageous claims about America. It said that we are becoming a society in which the poor tend to stay poor, no matter how hard they work; in which sons are much more likely to inherit the socioeconomic status of their father than they were a generation ago.

The name of the leftist rag? Business Week, which published an article titled "Waking Up From the American Dream." The article summarizes recent research showing that social mobility in the United States (which was never as high as legend had it) has declined considerably over the past few decades. If you put that research together with other research that shows a drastic increase in income and wealth inequality, you reach an uncomfortable conclusion: America looks more and more like a class-ridden society.

And guess what? Our political leaders are doing everything they can to fortify class inequality, while denouncing anyone who complains--or even points out what is happening--as a practitioner of "class warfare."

Let's talk first about the facts on income distribution. Thirty years ago we were a relatively middle-class nation. It had not always been thus: Gilded Age America was a highly unequal society, and it stayed that way through the 1920s. During the 1930s and '40s, however, America experienced what the economic historians Claudia Goldin and Robert Margo have dubbed the Great Compression: a drastic narrowing of income gaps, probably as a result of New Deal policies. And the new economic order persisted for more than a generation: Strong unions; taxes on inherited wealth, corporate profits and high incomes; close public scrutiny of corporate management--all helped to keep income gaps relatively small. The economy was hardly egalitarian, but a generation ago the gross inequalities of the 1920s seemed very distant.

Now they're back. According to estimates by the economists Thomas Piketty and Emmanuel Saez--confirmed by data from the Congressional Budget Office--between 1973 and 2000 the average real income of the bottom 90 percent of American taxpayers actually fell by 7 percent. Meanwhile, the income of the top 1 percent rose by 148 percent, the income of the top 0.1 percent rose by 343 percent and the income of the top 0.01 percent rose 599 percent. Those numbers exclude capital gains, so they're not an artifact of the stock-market bubble.) The distribution of income in the United States has gone right back to Gilded Age levels of inequality.

Never mind, say the apologists, who churn out papers with titles like that of a 2001 Heritage Foundation piece, "Income Mobility and the Fallacy of Class-Warfare Arguments." America, they say, isn't a caste society--people with high incomes this year may have low incomes next year and vice versa, and the route to wealth is open to all. That's where those commies at Business Week come in: As they point out (and as economists and sociologists have been pointing out for some time), America actually is more of a caste society than we like to think. And the caste lines have lately become a lot more rigid.

The myth of income mobility has always exceeded the reality: As a general rule, once they've reached their 30s, people don't move up and down the income ladder very much. Conservatives often cite studies like a 1992 report by Glenn Hubbard, a Treasury official under the elder Bush who later became chief economic adviser to the younger Bush, that purport to show large numbers of Americans moving from low-wage to high-wage jobs during their working lives. But what these studies measure, as the economist Kevin Murphy put it, is mainly "the guy who works in the college bookstore and has a real job by his early 30s." Serious studies that exclude this sort of pseudo-mobility show that inequality in average incomes over long periods isn't much smaller than inequality in annual incomes.

It is true, however, that America was once a place of substantial intergenerational mobility: Sons often did much better than their fathers. A classic 1978 survey found that among adult men whose fathers were in the bottom 25 percent of the population as ranked by social and economic status, 23 percent had made it into the top 25 percent. In other words, during the first thirty years or so after World War II, the American dream of upward mobility was a real experience for many people.

Now for the shocker: The Business Week piece cites a new survey of today's adult men, which finds that this number has dropped to only 10 percent. That is, over the past generation upward mobility has fallen drastically. Very few children of the lower class are making their way to even moderate affluence. This goes along with other studies indicating that rags-to-riches stories have become vanishingly rare, and that the correlation between fathers' and sons' incomes has risen in recent decades. In modern America, it seems, you're quite likely to stay in the social and economic class into which you were born.

Business Week attributes this to the "Wal-Martization" of the economy, the proliferation of dead-end, low-wage jobs and the disappearance of jobs that provide entry to the middle class. That's surely part of the explanation. But public policy plays a role--and will, if present trends continue, play an even bigger role in the future.

Put it this way: Suppose that you actually liked a caste society, and you were seeking ways to use your control of the government to further entrench the advantages of the haves against the have-nots. What would you do?

One thing you would definitely do is get rid of the estate tax, so that large fortunes can be passed on to the next generation. More broadly, you would seek to reduce tax rates both on corporate profits and on unearned income such as dividends and capital gains, so that those with large accumulated or inherited wealth could more easily accumulate even more. You'd also try to create tax shelters mainly useful for the rich. And more broadly still, you'd try to reduce tax rates on people with high incomes, shifting the burden to the payroll tax and other revenue sources that bear most heavily on people with lower incomes.

More broadly, you would seek to reduce tax rates both on corporate profits and on unearned income such as dividends and capital gains, so that those with large accumulated or inherited wealth could more easily accumulate even more. You'd also try to create tax shelters mainly useful for the rich. And more broadly still, you'd try to reduce tax rates on people with high incomes, shifting the burden to the payroll tax and other revenue sources that bear most heavily on people with lower incomes.

Meanwhile, on the spending side, you'd cut back on healthcare for the poor, on the quality of public education and on state aid for higher education. This would make it more difficult for people with low incomes to climb out of their difficulties and acquire the education essential to upward mobility in the modern economy.

And just to close off as many routes to upward mobility as possible, you'd do everything possible to break the power of unions, and you'd privatize government functions so that well-paid civil servants could be replaced with poorly paid private employees.

It all sounds sort of familiar, doesn't it?

Where is this taking us? Thomas Piketty, whose work with Saez has transformed our understanding of income distribution, warns that current policies will eventually create "a class of rentiers in the U.S., whereby a small group of wealthy but untalented children controls vast segments of the US economy and penniless, talented children simply can't compete." If he's right--and I fear that he is--we will end up suffering not only from injustice, but from a vast waste of human potential.

Goodbye, Horatio Alger. And goodbye, American Dream.



Krugman

 

It is certainly true that many of the richest people in Houston don't work and never have. The best part is when one rich person who doesn't work marries another rich person who doesn't work and then they pool their resources and pass it on to their kids who will never work. My favorite answer I have ever heard to "What does your husband do for a living?" "Oh, he likes to play golf." That couple was in their 30's.

And, of course, some of the worst people you will ever meet, in general, belong to this group.

 

How dare you disparage the idle rich! They are the backbone of this country! The backbone!

f-in commie

 

I think you are generalizing, some of the "rich" folks I know regularly works 70+ hours a week. I hope we can agree there are hard working people in all income brackets.

And those 200k extra a year usually means 200k extra invested a year, and yeah, that does mean more money goes into investment.

 

I agree there are hard working people at all income brackets. I was making a point about the quote that said the richest people are the hardest working ones.

As far as investing. Those people don't need an extra 200k to invest. They can already do that. But put enough of those extra 200k's together, and we might have healthcare for all children in this nation. We might be able to reduce govt. spending by starting to get rid of the debt, which would reduce the interest on it. The interest on our debt is the third most costly item on the govt. budget, and nobody gets any services from it. It doesn't make our military stronger, it doesn't feed the hungry, it doesn't improve education, highways, etc. It is just gone. If we really want to tackle govt. spending then let's pay down the debt. That could be an automatic investment of a lot of people's extra 200k. That would benefit us all. It would certainly benefit us more than someone investing an additional 200k into GE stocks.

If the govt. pays down the debt enough, we could all get a tax cut because the govt. wouldn't need the money to pay interest loans.

 

The rich will only be allow to prosper when there is a healthy middle class. When the middle class start shift towards the bottom class due to factors such as outsourcing , wage freeze and other factors, laws will get voted in to reduce the wealth of the rich eventually.

 

It's interesting some of the things being thrown around in this thread.

Franchiseblade said that some of the hardest working people he knows are the working poor and tries to use that to defend his position. So are you saying that you can take the few people you know and extrapolate it to the entire country? That they represent the "norm"? Everyone I know personally works their butts off but are doing quite well. Should I assume they represent the majority? Or just people I know?

Also, rimbaud implies that (some of the) the non-working rich you are "some of the worst people you will ever meet". To me he's saying that the non-working rich are bad people. As if only bad people come from the non-working rich! I don't think Jeffery Dahmer was a non-working rich person but I wouldn't want to meet him. Neither were the people who kidnapped Amy Smart (or ANY of the people who kipnapped and killed those little girls in Flordia that were in the recent news). Plus I've met lots of jerks who were both rich and poor. How can you make a statement like that with a straight face? You may have met some bad people and they may have been non-working rich but to assume that being a non-working rich person is bad is a real stretch. It's like saying you know a lot of asian people and some of them are the worst people you will ever meet (implying asians are bad).

You guys realize that what you're doing with your examples is taking a small sample and extrapolating selective behaviour onto the whole group. That is the same thing as stereotyping or, in rimbaud's case, bigotry or racism as he is taking the negative traits of a few people in his example and applying them to all people of his example.

 

The Economist proposes impementing a flat tax and increasing tax rates on consumable goods. Some former Soviet bloc nations have done it and been successful at it.

But the potential gains are not negligible. In a typical year, the IRS estimates that for every dollar it collects, another 19 or 20 cents is owed, but not paid. This shortfall amounted to between $312 billion and $353 billion in 2001. Small businesses fail to report about 30% of their earnings. Babysitters and gardeners fail to report 80%, says the IRS.
http://www.economist.com/displaystory.cfm?story_id=3860731

The emphasis on taxes to close the wealth gap is a bit overrated. It's a highly visible symptom but it isn't the root. Tax breaks and subsidies are far more serious but are concealed at the core of politics. Whenever you see a fat head like Rush claiming to promote for free enterprise or capitalism or whatever drivel his overlords implant in him, he only means taxes for the wealthy. He doesn't mean the socialist government hand protecting entrenched corporations and the employees working under them. It wouldn't sound so bad if those corporations were playing both angles and dicking their employees with high turnover and reducing legacy costs.

 

You guys realize that what you're doing with your examples is taking a small sample and extrapolating selective behaviour onto the whole group. That is the same thing as stereotyping or, in rimbaud's case, bigotry or racism as he is taking the negative traits of a few people in his example and applying them to all people of his example.

The principle point of the thread is that the current economic policies are creating more rich and more poor. Changing the subject to the non-threatening truism that not all rich are bad, is sort of like changing the subject from the treatment of prisoners at Guantanamo to whether Newseek was correct that our guys flushed the Koran, rather than pissed on it.




The rich will only be allow to prosper when there is a healthy middle class. When the middle class start shift towards the bottom class due to factors such as outsourcing , wage freeze and other factors, laws will get voted in to reduce the wealth of the rich eventually.

Unfortunatley not really true. As we see in the third world, the rich can do quite well without the middle class. This isn't compatible with democracy, and hopefull the interest of the majority will be eventually reflected at the ballot box. This may not happen any time soon with media control and the unwitting cooperation of still middle class conservatives who will deny the increasing inequality, or even spout semi-religious econ theories in defense of income inequality. as they view this as defending W or the GOP.

I'm not sure you can count on the voters to vote to reduce the increasing income stratification. Most voters consider these issues beyond their comprehenison and prefer to focus on Michael Jackson, lost white girls etc.

 

isn't the Heritage Foundation one of the most conservative economy think-tanks?

 

Does a bear--well, you know...

 

You are absolutely correct in your logic, about the examples given. But you are mistaken about my intent. I wasn't trying to use the examples of people I know and use that to prove that the hardest working people are the working poor. I think rimbaud also narrowed his comments to a few people. They were examples, and not meant to show that all people fit what I have encountered.

But I will say that statistics from teachers and working families from title I schools show that many of these families are poor but working more than one job.

I know some wealthy people who at one time worked incredibly hard to make their money. Now, they don't work nearly so hard. I'm not saying they are the prime example either.

The point I was trying to make is that the contention initially thrown out was that the wealthiest people in this country are the hardest working. That simply isn't true. I was giving my own personal examples to address that, but not all poor or wealthy people in general.

 

If that is the best you can do as far as reading and understanding (and logic), then you are a bit of a lost cause. I was speaking specifically to a small group in the Houston community. Obviously, nowhere did I say that the only bad people in the world are the idle rich. I was saying that the large percentage in this city (and I have dealt with all of them) are not great people. I think the lifestlye and environment fosters their personality and allows them to treat most around them like dirt. So, thanks for your amusing reaction (Amy Smart?). As long as you can try to feel superior, right?