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.