id="blog-title">The Edge of the American West

Riffing on the blogosophere’s many riffs on this wonderful Robert Samuelson column in which it is explained that

the poor and middle class do have powerful advocates. To name three: the AARP for retirees; the AFL-CIO for unionized workers; the Center on Budget and Policy Priorities for the poor.

we find Drum noting

The top 400 taxpayers, a group so rich and elite that I’d need scientific notation to properly represent their proportion of the population, have doubled their share of income in the past decade or two but have decreased their tax burden by nearly half. Nice work! As you can see, Warren Buffett wasn’t exaggerating when he said his secretary paid a higher tax rate than he does.

Which refers to one of the most remarkable trends of recent history, of which Lane Kenworthy has the best graph, in which incomes shown “include government transfers and subtract taxes”:

There’s some discussion over which comes first, the political polarization of recent years or the income polarization of recent years. Krugman says [in the pdf linked here] “it looks as though the political polarization is the lead on the economic changes”—which is to say, people don’t vote Republican/Democrat because they’re rich/poor, rather, the rich have gotten richer because of Republican policies.

[...] Disparity Rising By Doug This strikes me as a [...]

(1) Is there anything inherently wrong with income inequality? Or with increasing inequality (without respect to the tax burden)?

(2) The top n% is not a static group of people.

(3) I seem to recall, the total taxes paid by decile almost follow a power-law. And that the top 40% of taxpayers by income pay more than 80% of all taxes; that fraction’s been increasing since watergate.

(4) It seems like you’d expect the top 1% to grow away from the middle 60 & bottom 20 (where’s the rest, btw?) anytime the overall income grows.

(5) Political polarization correlates to economic status in “poor” states but not in rich, coastal, “elite” America.

“the rich have gotten richer because of Republican policies”—this is a good thing, right, we want to get richer and “the rich” isn’t a static set of people, but just the slice off the top for any given period. If the implication is that the “rich are getting richer, but the poor are getting poorer” that’s only in relative terms—if the pie is getting bigger fast enough even a smaller slice of the pice %-wise is still more pie.

It seems like you’d expect the top 1% to grow away from the middle 60 & bottom 20 (where’s the rest, btw?) anytime the overall income grows.

I think you left out the argument here.

yes, there is something really inherently wrong with such obscene disparities in income — particularly when so very many people are struggling even to supply the basics to their families, and when the richest are growing still richer not by their own labor, but by the fortuity of being rich and having policies that favor the concentration of wealth.

Is there anything inherently wrong with income inequality? Or with increasing inequality (without respect to the tax burden)?

There is a book about this question. I can’t say I’ve read it. I have read some of the evidence that inequality kills people dead.

The top n% is not a static group of people.

But it’s more static the more unequal America is.

“the rich have gotten richer because of Republican policies”—this is a good thing, right, we want to get richer and “the rich” isn’t a static set of people, but just the slice off the top for any given period

Even if there were evidence that Republican policies lead to overall faster growth (the opposite seems to be true) it remains true that the very rich are a small slice of the country; what’s good for them isn’t necessarily good for the rest of us.

The problem with the Bush “boom”, for example, is that median wages actually declined; the vast majority of people weren’t doing any better. Given the choice, I’d much rather see, for example, 1.5% GDP growth with most of the gains going to the bottom 60 percent of earners than 2.5% growth with gains concentrated at the top.

Vance, if we keep the same income distribution but multiply the overall income by some factor then the differences between us will scale too. Say our income doubles every day, so you get $2 on day one and I get $1; on day two you get $4 and I get $2. My income has doubled, but so has our income disparity.

According to Senator Bernie Sanders, the richest 400 taxpayers have increased their wealth by $600 billion dollars during the Dubya administration. With that kind of wealth-flow dynamic, the top few percent is going to be an *extremely* static group of people.

By my math, that $1.5 billion each. I, on the other hand had three small raises in seven years.

The reason the rich pay more taxes is they have all the wealth. Again, according to Sanders, the top (I forget what fraction of a percent) either own more or have more income (I was driving and couldn’t take notes) than the bottom 50%.

Isn’t it also true that for people at the poverty level, the standard of living has actually been declining at 1 to 2% per year, for decades? (not sure where I got that.)

And isn’t it true that gross income disparity is a contributing factor to severe economic downturns?

I skimmed the Samuelson article. Is there any single point in it that is not a naked assertion, a gross distortion, nor an outright lie?

Stinky, but in that example our income shares remain constant — proportionally, the disparity is the same. Eric is pointing out (and it’s not original with him) that in the real world, income shares have grown more unequal recently.

kathy, that’s not an inherent problem with income disparity. imagine a situation where the disparity is even greater than it is now but the poor are not struggling, they are well off; is that situation preferable? if so, then disparity per se isn’t a problem.

that’s not an inherent problem with income disparity.

You’re putting a lot of weight on the word “inherent.” Even if it were possible to design a situation of increasing inequality in which very many people were struggling to get along and the vast majority of people were seeing their real incomes stagnate while the very very very richest piled up boodle, that’s not the increasing inequality we actually have. The kind we have is the kind that kills people dead.

jazzbumpa, I can think of one of those taxpayers (Bernie Madoff) that won’t be in the top 400 next year :)

Plus, we don’t know the richest 400 taxpayers are the same as the 400 highest-earners. These are likely different groups of people, which is what Warren Buffet was talking about. He probably pays the same top rate as his secretary on income (if she’s compensated well), but a lower overall rate because he’s making his money on capital gains. So overall he pays less; there’s nothing wrong with that, he’s got capital at risk and the policy says putting capital at risk is worth promoting.

Top 400 Taxpayers: Sources of Income 2005

“Number one source of income is Capital Gains, which accounts for more than 50% of their income in 2005.”

Moron.

Matt, if everyone were paid exactly the same amount and it was more than sufficient to live on, they’d just worry about some other ranking system. Look at public universities with their (somewhat) fixed salary scales—all of a sudden office-space, parking spaces, and h-factor are the cause of ulcers, anxiety, and irritable bowel syndrome. Prestige proxies for salary when salaries are fixed.

I don’t understand the moron comment, Matt. I guess I should have differentiated between “income from wages” and “income from capital gains”?

Or do you mean that the 400 wealthiest (which I take to mean highest-net-worth) also paid the most taxes on income (from wages and capital gains)?

Shit. I thought it was having to chose between buying groceries and paying medical bills. Losing your house is pretty trivial, too. Thanks for straightening me out on that.

That was pretty much my point. Yes.

What always amazes me is the bootlickers. Have any discussion on economic inequality, and some fanatic lickspittles show up. And they always post voluminously, like they’re getting paid for it - the funny thing is, they’re doing it for free.

Being a bootlicking moron, I’m going to finish this off. Then I’ll go away.

Shit. I thought it was having to chose between buying groceries and paying medical bills.

I was being glib—and trying not to “post voluminously”, although strangely enough I am getting paid for this. As a society we’re rich enough that no-one need starve. Food stamps and medicaid benefits are available to the impoverished. However, the quality of the food and care that are readily available to the urban and rural poor is extremely low. Combined with poor general education and physical education and a lack of safe, public spaces and that leads to obesity and the complications thereof, including diabetes, infertility, heart disease, and cancer. As a society we created an abundance of wealth that has lifted everyone above what would have been considered base subsistence-levels, only to end up with a significant number of people who are still malnourished and prone to die early.

As for losing one’s house to foreclosure, I guess I don’t think of that as a problem that’s unique or common to the poor.

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