patrick.net

Why do you hate America?

First things first

INCOME inequality and WEALTH inequality, are two wholly different discussions.

Unionization is more effective than taxing the wealthy because in 1st case, the people will directly get more pay/benefits while with taxing the wealthy there's no way to ensure that the extra money will get to the people who are not making much at work due to not being unionized.

dublin hillz says

Unionization is more effective than taxing the wealthy because in 1st case, the people will directly get more pay/benefits while with taxing the wealthy there's no way to ensure that the extra money will get to the people who are not making much at work due to not being unionized.

Seems to have worked in the past.

CL says

That said, how can it be rectified? How are wages set in a capitalist society? Is it only through taxing the wealthy that we can achieve a more stable distribution of income and wealth?

Capitalism rewards one and only one thing: bargaining power. Capitalism does not reward wealth production, innovation, or good work. It's all about having the upper hand.

Wages are set based upon the bargaining power of capital vs labor, and labor has lost all its bargaining power due to government officials taking bribes from the capital class in exchange for laws that made labor lose all bargaining power. See "right to work states" for an example.

There may be many solutions to this problem, but all solutions must address the inequality of bargaining power or they are doomed to fail.

Taxing the wealthy is the worst and last ditch effort to provide equality and to right the wrongs. Better solutions would attack the problem itself and the wealthy wouldn't have gotten so wealthy to start with because they would not be able to siphon off so much of the wealth generated by labor. Unfortunately, despite being the last line of defense and the worst, taxation is the only mechanism used by the status quo to rectify this injustice.

If the fundamental problem of capital exploiting labor were fixed, there would be no need for an income tax.

Restrict (limit) intellectual property rights, reduce corporate protectionism. Raise taxes.

Simple enough - if private companies will not provide adequate wages, then tax them to kingdom come, hire more government workers and pay them higher wages.

Everyone would prefer to be a teacher if they made $100k while cubicle jockies make $30k.

CL says

It seems apparent to me that income inequality drags our economy down and limits its potential.

How did you figure that? It doesn't seem apparent even to Krugman.

dublin hillz says

Unionization is more effective than taxing the wealthy because in 1st case, the people will directly get more pay/benefits

Go ahead, unionize Foxconn.

control point says

Simple enough - if private companies will not provide adequate wages, then tax them to kingdom come, hire more government workers and pay them higher wages.

Everyone would prefer to be a teacher if they made $100k while cubicle jockies make $30k.

You mean kinda like they did it in USSR: everybody was a government worker and manual laborers were paid 3-5 times more than engineers and other "cubicle jockies"?

control point says

Simple enough - if private companies will not provide adequate wages, then tax them to kingdom come, hire more government workers and pay them higher wages.

What prevents flight then? Especially in an era where companies are multinational, and there are so many billions in China, India and so on that will work for less and tax them less?

Straw Man says

How did you figure that? It doesn't seem apparent even to Krugman.

Huh? I think it IS obvious to Krugman, Stiglitz, Reich et al. It's obvious the way the Laffer curve is obvious--if the system is rewarding the few at the expense of the many (consumers) then the bottom line of both classes gets impacted. There is a "best spot" on that curve where the balance would be better.

What is the right balance? Clearly, if the purchasing power of the huge majority of people is decreasing, the rewards they should be receiving due to their increasing productivity is not being shared properly.

A hallmark of a functioning society is mobility, isn't it? The rungs of that ladder have been destroyed.

What metric would you use to justify that the system is healthy?

Straw Man says

Go ahead, unionize Foxconn.

God, can you imagine how expensive our toys would be if we didn't enslave people? That's not the kind of world I want to live in.

The 2 greatest incidents of financial inequality were now and the 1930s. Why is that?

indigenous says

The 2 greatest incidents of financial inequality were now and the 1930s. Why is that?

Because Unchecked Capitalism is so vastly superior to communist New Deal Era Marxism, which saw the greatest expansion of material wealth, education, and health outcomes for the vast majority of the US population, 1945-1975.

CL says

What prevents flight then? Especially in an era where companies are multinational, and there are so many billions in China, India and so on that will work for less and tax them less?

It's a dream, but...

Seize the assets of those companies and remove their corporate charters. Then remove the U.S. citizenship of their executives and ship them to the country where their workers are. Forbid them entry into the U.S. and ban their companies from selling anything to U.S. citizens, you know like we do with Cuba but on a corporate level.

CL says

Straw Man says

How did you figure that? It doesn't seem apparent even to Krugman.

Huh? I think it IS obvious to Krugman, Stiglitz, Reich et al.

This point of view is promoted by Stiglitz, but Krugman disagrees. Read his response to Stglitz article on the subject of inequality and recovery.

PS.
Stiglitz's article: http://opinionator.blogs.nytimes.com/2013/01/19/inequality-is-holding-back-the-recovery/

Krugman's response: http://krugman.blogs.nytimes.com/2013/01/20/inequality-and-recovery/

Straw Man says

Krugman's response: http://krugman.blogs.nytimes.com/2013/01/20/inequality-and-recovery/

"It’s worth noting that two of Joe’s four points aren’t really about the current recovery. He argues that high inequality is causing huge waste of human talent, because the poor and increasingly the middle class lack access to good education; and I agree. He also argues that inequality fosters financial crisis, and I agree with that too."

Krugman isn't disagreeing with the fact me, really. If you aren't living up to your potential, it is a waste for society as a whole. You can hire a doctor to be your janitor, and he'll do it if the disparities are bad enough and if the economy no longer rewards people who actually contribute.

Worse yet would be people who COULD be Doctors, but can't get access to education to become one.

Even worse, would be a Doctor who doesn't see the point any more, since he/she can't afford to pay their student loans, and so on, when it's just easier to go push paper on the Street.

What we don't see is all the technological and theoretical developments that don't get developed (yet), because so many mathematicians and former engineering majors are going into Finance.

CL says

Krugman isn't disagreeing with the fact me, really. If you aren't living up to your potential, it is a waste for society as a whole.

what Krugman is also missing is that the 5%'s income isn't coming from the Mines of Zanzibar or among themselves but from from the 95%.

It's a real one-way street, pulling trillions out of the paycheck economy, and why we're fucked.

http://research.stlouisfed.org/fred2/series/GINIALLRH

You should see my rants at DeLong's.

Dan8267 says

Capitalism

Can't "Like" that enough. Perfectly stated.

CL said: God, can you imagine how expensive our toys would be if we didn't enslave people?
Motorola's MotoX will be assembled at a Flextronics plant in Texas. BTW, come November, you'll be able to by a MotoX smartphone and get unlimited text&talk with Republic Wireless for $10 a month (data available using WiFi).

Edit: change to CL said:

CL says

What else can be done?

Tax land rents (site values actually)

http://research.stlouisfed.org/fred2/series/DHUTRC1Q027SBEA

and that's only residential. Imagine how much we pay for commercial real estate that's embedded in consumer prices, too.

Tax imports and give tax-breaks for exports.

Forcibly reform our health system to work along Canadian/German/Japanese lines.

Work on "free" energy for everyone. (Not free per se but some sort of rationed access to a renewable system such that if you are efficient with energy usage it disappears as a life cost).

Mass transit that didn't suck (max 15 minute wait) would be a good start, too.

That would eliminate the major rent taps that are sucking the life out of the middle-quintile economy.

Probably should convert college education to the nominal cost model too. People are graduating $30,000 in debt now, that sucks.

Then again when it was nominal cost I took 7 years to graduate, going half-time a lot since I was working so much.

EBGuy says

Motorola's MotoX will be assembled

final assembly though. Not a great % of the actual labor is being done in Texas, but it's a start.

Bellingham Bill says

Mass transit that didn't suck (max 15 minute wait) would be a good start, too.

But that only works well in high population densities, no? How's that possible in suburban USA?

freak80 says

But that only works well in high population densities, no? How's that possible in suburban USA?

80/20 rule -- get 80% of the people served first, and a good start.

People wouldn't have to live in BFE if our urban cores were actually functional like other countries.

Whenever I go to LA I marvel at the deadspace in the center. A hundred square miles where I dare not get off the freeway.

You visit other countries? How un-American. ;-)

EBGuy says

curious2 said:

Really? I hadn't even commented in this thread. Learn to use the quote function.

Here's the last word: everybody knows that greater wealth disparity is good for us. The greater the wealth and income concentration, the better off we all are. All of the worlds' most prosperous and peaceful nations have huge wealth disparity. When 99% of the populace lives in poverty, and the 1% control all of the natural resources, the government, the police, the military, the media...that's the definition of prosperity.

The wealth and power of the 1% will eventually trickle down to the 99% when the 1% invests their money in the creation slave-labor jobs for the 99%. The fact that the 99% won't make enough money to buy the stuff they are producting doesn't matter.

The 1% will invest in education because an educated 99% is absolutely no threat whatsoever to the established 1%.

sbh says

freak80 says

The fact that the 99% won't make enough money to buy the stuff they are producting doesn't matter.

Even with a broke population it's no problem since supply creates its own demand: if you make it they will buy.

Exactly right, credit cards will facilitate this.

zzyzzx,

It's easier to pick on the weak than it is to pick on the strong, isn't it?

You defend your overlords without giving it a second thought. And then you blame our national problems on people who can barely feed themselves.

The poor don't have enought money to buy a law to turn you into a slave. But the ultra-wealthy sure do.

Who should you be worried about?

zzyzzx says

Which is way more then 47% of the population.

freak80 says

You defend your overlords without giving it a second thought. And then you blame our national problems on people who can barely feed themselves.

It's a broken record.

Call it Crazy says

Ha Ha.... he has a better accountant then you do!!

And so that makes it fair?

I don't understand.

"It's fair that the super-rich pay a lower tax rate than I do, but it's not fair that poor people pay a lower tax rate than I do."

Where does that mentality come from?

freak80 says

Call it Crazy says

Ha Ha.... he has a better accountant then you do!!

And so that makes it fair?

He has better lobbyists, and no that doesn't make it fair, or rational economic policy (except from the lobbyists' POV). BTW, while people blame Romney for the low tax rates on "carried interest", and I'm not going to defend him, he isn't the one who wrote those rules. Pat Robertson campaigned unsuccessfully for the Republican nomination, but his mentality took over the party, and the Democrats have often operated as a "Lite" version of the same thing.

curious2 says

Pat Robertson campaigned unsuccessfully for the Republican nomination, but his mentality took over the party, and the Democrats have often operated as a "Lite"
version of the same thing.

I don't understand.

Call it Crazy says

Just as a side note, like I mentioned in the other thread, some people like to throw around "percentages".... Do some quick math to see true "dollars"...

Any measure of fairness looks at percentages, not dollars.

If I make a billion dollars a year, paying 1 million in taxes is nothing. If I make $20,000 a year, paying 1 million in taxes requires a lifetime of debt slavery.

Are you done defending our overlords yet? Why do so many peons (which is 99% of us) defend extreme wealth and power? Is it Stockholm Syndrome?

freak80 says

I don't understand.

In 1986, Pat Robertson launched his unsuccessful campaign for the 1988 Republican Presidential nomination. His candidacy symbolized the rise of Christian fundamentalism in the Republican party, which even Barry Goldwater had complained about years before. Robertson's promises included eliminating the Department of Education and the Department of Energy. He lost the battle but may have won the war within that party; Pat Buchanan declared a "culture war" and Rick Perry and other Republicans often sound like him.

The Democrats have often been only slightly "left" of the Republicans, and as the Republicans have marched "right," the Democrats are often to the "right" of where the Republicans used to be. For example, President Nixon proposed a plan similar to Obamacare, but emphasized it would be voluntary. Nixon also proposed a negative income tax, i.e. a guaranteed minimum income, which instead became the "earned income tax credit" that enables Walmart to underpay workers; today we get ZIRP for TBTF banks and QE to keep housing prices elevated.

freak80 says

Where does that mentality come from?

Probably from seeing taxes as payment for government services.

Call it Crazy says

I wish you made 20 million last year... would you share it with us??

Shit, making 20M a year, and having to pay 2.8M for the privilege of living in a country that lets you pocket about $17M+ in cold hard cash?

curious2 says

EBGuy says

curious2 said:

Really? I hadn't even commented in this thread. Learn to use the quote function.

My apologies. I fixed it in the original. (Now how about selecting a unique icon...)

EBGuy says

My apologies. I fixed it in the original. (Now how about selecting a unique icon...)

Thanks. Done:

@curious2 Nice!

sbh says

reak80 says

The fact that the 99% won't make enough money to buy the stuff they are producting doesn't matter.

Even with a broke population it's no problem since supply creates its own demand: if you make it they will buy.

Paraphrasing Steve Jobs:

We don't ask the people what they want as they don't know until we tell them.

Yup the Keynesians along with most things have this ass backwards...