This may be a stretch, but I think you could tie #2 to another of your favorite subjects, the cost of healthcare.

With the cost of healthcare and insurance being so high, more middle class families need two incomes. More families with two working parents translates to more competition for jobs which depresses wages.

I don't think that the Republican'ts have any interest in serving the interests of the middle class or for that matter any economic class other than the top 1%.

So, the solution to the problem that you raise and the impossibility of achieving it are both painfully obvious.

What we want is for Republicans to deliver what they've promised for 30 years; a rising tide that lifts all boats.

I think fingering the Fed is a good, and generally overlooked, point. They certainly ignore their legal mandate to advance full employment.

I guess I still don't understand Kevin's concern. why does Kevin care that wages for someone at the bottom are stagnant... if we assume that the person at the bottom has "enough"? If a person has "enough" why do we care the extent to which that person is participating in the overall growth of the economy?

Oh, and as to whether persons at the bottom really are stagnant, Virginia Postrel has some relevant things to say.

I agree that institutional changes are responsible for some of the change in wage disparity, but fignering the Fed is wrong, wrong, wrong. There is vast economic literature showing that monetary policy has little control over long-run unemployment, but it's almost tautological that the Fed has control over inflation. For a number of reasons, it's not really possible to use Fed policy to squeeze out extra employment figures without, as they say, "shifting the Phillips Curve" and causing much worse long-run problems. In fact, the pre-Volcker Fed did more or less exactly that.

I know you've mentioned before that the Fed is too ocncerned with labor costs, but this simply isn't true (and I work there and attend high-level policy meetings). The Fed is only worried about labor costs when "unit labor" costs, or labor adjusted for productivity, is rising quickly, and even then, they wouldn't make contractionary moves unless other indicators of inflation were also rising.

Al:
Kevin's concern, it seems to me, is not with stagnation at the bottom, but stagnation in the middle. Quakers point about healthcare and the disproportianately rising costs of higher education both point to not only a future of growing income inequality but also reduced opportunities for mobility within the income group levels.

I actually think its #1, and I think it also relates to the last decade or so's run up in housing prices in the desirable urban areas where the rich like to reside.

Basically, 15 or so years ago, the relative earnings of a partner at a top law firm and the president of one of his large corporate clients was comparable.

Right about that same time, lawyers, especially young lawyers like me then, started noticing that there was no way in the world we could afford the type of houses senior partners bought right out of law school. Then, it began to sink in that we might not EVER be able to buy some of the mansions some of the very senior partners had.

Unless you are a top-flight contingency fee lawyer, there is virtually nothing to be done about this. Like everyone else, you get accostomed to living a lifestyle slightly worse (in material terms) than the generation before you. You realize, after a while, that this is driven my macro forces (only so many large residences exist in L.A., N.Y, Chi., S.F, etc. McMansions built out in the middle of bumfuck Egypt to you no good) and that is that.

However, if you are the president of a large corporation, there is quite a bit you can do about it, provided you have a willing board and perhaps even the availablity of stock options.

The mansion the president of the company owned in the 1950's (purchased for $50K) is on the market for $5 million? Simple, $20M in stock options will do the trick after tax, no problemo. Cost of college or graduate school is around $100K+ per kid, presto, another $5M in options ought to cover it.

I posit that it may be a simple equation: (i) the price of maintaining the same (not a facsimile) upper-class lifestyle as your predecessors, especially the housing portion keeps on rising, (ii) as an executive, you are in a position to do something about it, and (iii) you do it.

The fact that this results in rising income inequality may not be an initial goal, but the number of company executive, even Democratic liberal company executives, willing to sacrafice their mansion or their lifestyle is not a large one.

"Focus government policy like a laser on improving the wages of the middle class, and reductions in income inequality will follow."

Um, Kevin? Just how is it that this fantasy is ever expected to be realized given the entirety our bought & paid for 'elected' officials?

Kevin, speak for yourself. This liberal is concerned about income inequality because it hurts people who really, really hurt...and whether a niddle-class family can afford to move out of their condo into a single-family detached is less important, morally, than whether a lower-class family can afford to move out of a dangerous neighborhood into a decent one. Your discussion sounds suspiciously close to the supply-siders' "rising tide lifts all boats" argument. We see how well that has proven out over time. The really relevant cliche here is "them that's got shall get".

Yes, it's important to have a healthy middle class. But it's more important to establish a humane floor beneath which no person or family is allowed to drop, because when everyone can participate in the economy, there really is competition for goods and services, and there really is an engine to drive the interdependent train in which we all ride.

fignering the Fed is wrong, wrong, wrong.
cure

Isn't it true that price stability is only one of the Fed's mandates, cure? And that the Fed ignores the other[s]? Looks that way to me.

---
if we assume that the person at the bottom has "enough"? If a person has "enough" why do we care the extent to which that person is participating in the overall growth of the economy?
---

if we assume that the person at the TOP has "enough"? If a person has "enough" why do we care the extent to which that person is participating in the overall growth of the economy?

One way to solve this problem is to send those on welfare to third world countries where they will live like kings and queens on $1K a month. I don't know what you would call this, but some it is some sort of outsourcing of welfare.

Don't forget about the massive drive towards privatization of both military and non-military government functions. Given that the majority of corporate stock is owned by the already-wealthy, these programs amount to vast and long-term wealth redistribution schemes from the middle-class (in terms of tax dollars) to the wealthy (in terms inflated stock prices from lucrative government contracts).

Governments have taken all kinds of actions that have increased income inequality:

• "free trade" agreements that make it easier for capital to cross borders to seek the best return, but forbidding workers to do the same (unless they go illegally, subjecting them to exploitation).
• union-busting, and making it harder for workers to organize by repeatedly changing the rules (the NLRB now plans to take away the right of senior nurses to join unions by classifying them as supervisors, even though they lack power to hire, fire, and discipline).
• shifting the tax burden away from the wealthy and towards the middle class and poor. In California, this shows up as cutting property taxes, freezing income taxes, and raising sales taxes; at the Federal level, the poor pay Social Security taxes on every dollar of income, while the rich don't, but the current Social Security surplus is helping to fund tax cuts to the rich.
• allowing the minimum wage to lose value with respect to inflation (which is higher than the official numbers indicate because of tricks like "hedonics", which discount price increases because all products are assumed to be getting better and better).
• states competing against each other to shower tax subsidies on companies, ballclub owners, or the like to set up shop;
• Allowing the state of public education to decay, especially in poorer areas, reducing the chances that people can trancend their humble beginnings.
• A huge encarceration rate, throwing a whole generation of young black and Latino men in jail, many for using relatively harmless drugs.

I could go on and on.

I may be missing something big here, but isn't it possible that the effects are small from year to year, but fairly large over longer periods, like ten years? In other words, let's say that government policies simply cause a lot of smaller shifts that look very big after a long period of time?

There's a strong need to nail a lot more white-collar criminals and corporate fraudsters, instead of the token big-names they're going after today. Enron-style fraud is widespread, particularly among real-estate and dotcoms.

Also, someone has to get a spine and tell these companies to stop merging and buying eachother like a redneck family reunion. You can't be a fan of Capitalism and the Free Market, and sit idly by while monopolies, oligopolies, collusion, and price-fixing is so rampant.

On the other hand - if you want to control that kind of thing in the oil industry (which is the wellspring from which our entire economy flows - the ENERGY INPUT to the system) - then you'd have to kill OPEC. Either that, or nationalize the distribution chain to try to sheild consumers from the price fixing and collusion that goes on inside OPEC and it's bastard demon spawn (ExxonMobilShellAmocoBPzebub).

Only with either REAL competition, or REAL regulation, will we have a market that gives people a REAL opportunity to improve their lives.

Al

Who exactly is it, besides Bush and Co, who assumes the people at the bottom have "enough?" Tell, you what, have your boss cut your salary to the poverty level and report back in a year if you have "enough."

David,
Right, the Fed has a triple mandate: price stability, full employment, uphold the financial system. But, essentially, our *only* control over unemployment is that we can "push out the Phillips curve" by changing inflations expectations, which means higher unemployment at every level of inflation. So today, "full employment" is essentially read to mean, "don't let inflation expectations get out of control." There are a lot of people who want the Fed to strictly perform inflation targeting (as the Bank of England and others do), but there's a legislative can of worms to open if that's truly desired.

I think another reason to be worried about income inequality is the vast accumulation of wealth the top 1-5% amass, which creates a political obstacle impossible for the other 95-99% of the people to overcome.

The Washington Monthly and all other political media combined are unable to compete in the public square of ideas and political discourse with a Scaife, who brought a presidency to a halt with his wealth. Regular folks cannot do that. The Fed and the SEC were not created to protect middle class wealth, they were created to protect millionaires' wealth. Now these institutions are being used to protect billionaires' wealth.

The government is the ony protection from this vast accumulation of wealth the people have. When the accumulation of wealth becomes so great that it can purchase the government, there is no longer any defense against it. I think that is where we are now, and I think the wealthy know it. The ideology of capitalist power was hinted at in the Project for the New American Century, where they figured out the US economy and the owners of its profits were to become so wealthy nothing could stand in their way. Without proper governmental controls on the distribution of wealth, nothing can prevent the wealthy from doing whatever they want, which is to have ever increasing returns and absolute power over useless eaters.

Kevin:

The problem is not "free markets" - it's rigged markets. If we had truly free markets, you wouldn't have aberrations like William Maguire of United Health collecting in excess of $1 billion in stock options or the retiring CEO asshole from Exxon getting a $400 million retirement package. It's because the fucking game is rigged by these white elitist Republican pricks that the guy (or gal) in the middle and on the low end of the socioeconomic scale are getting screwed in the ass. We need an American-made French revolution where vultures like them get hung in the public square, to restore truly free markets.

I think the decline of unions probably has the biggest effect. Whether you go with scenario 1 or 2, the fundamental dynamic remains that the very rich have far more resources at their disposal to advance their interests than the middle class does. When it comes to dividing the wealth, a single rich person has far more leverage than a host of middle-income people. No surprise, then, that the rich come out with a larger slice of the pie.

The only way for middle-income Americans to compete with the rich on a an equal basis is if they pool their resources and use their collective leverage to balance out their richer competitors. That's exactly what a Union does, and why their decline means the middle class will continue to lose ground to the rich.

Osama_Been_Forgotten: You can't be a fan of Capitalism and the Free Market, and sit idly by while ...

This is a common misunderstanding. The word "free" in "free market" is meant ironically.

Government policies simply don't seem to have a big enough direct impact on the pretax income of high earners to explain the vast shift we've seen over the past few decades.

Its clearly a mistake to take activity in the economy as an independent variable, and only look at the direct distributional effects of government policy to see what effects policy may be having. You also have to consider what activities may be encouraged or discouraged by the government policies, and the distributional effects of those induced changes in behavior.

For instance, tax cuts on capital have a direct effect that favors existing capital holders (and, therefore, disproportionately the wealthy), but have a potentially larger indirect effect in the same direction, as they increase the attractiveness of capital income, and thus (all other things being equal) increase capital prices, which rewards those who invested earlier.

If you looked only at the direct effects (the difference in tax liability) to determine how much of the shift to the wealthy was the result of government policy, but ignored the indirect effect (presuming that actual changes in pre-tax income must be independent of the tax policy), you would be overlooking a potentially substantial part of the effect of the policy shift.

(Of course, because other factors do effect capital income, it can be very hard to assess the magnitude of the indirect effects, whereas the "direct" effects are often simply assessed. But that one number is much easier to measure reliably than another does not mean it is more significant.)

Candidates should keep it simple and say it the way Kevin did in hi July 7 Blog Gem. Oh, and HAMMER the "riddle me this" line!!

From Washingtonmonthly.com:

July 7, 2006

LOOKING GLASS ECONOMICS....The Federal Reserve, we are told, is likely to be disturbed over the fact that average hourly wages are down this year:

(snip)

Sorry, did I say down? Yes: inflation over the past 12 months has clocked in at about 4.1%, so a 3.9% rise in nominal wages is a decrease in real wages. This is the "wage spike" the Fed is supposed to be concerned about.

Riddle me this: if the Fed tries to put the brakes on wages every time they creep up from negative to zero, what will hourly wages look like over the long term?

Answer: consistently down. Which is exactly what they've looked like over the past several decades.

The overall economy is doing fine. Growth is strong, productivity is strong, corporate profits are strong, CEO compensation is stratospheric. There's plenty of new wealth being created. The problem is that financial markets and the Federal Reserve are bound and determined to make sure that none of this new wealth makes its way into the hands of the middle class. That's why, in our looking-glass world, a real wage decline of -0.2% is described as an increase.

what we're really concerned about is stagnant middle class wages.

Middle class wages are not stagnant.

"After all, the income from economic growth has to go somewhere, and if it's not going to the middle class it's going to end up going to the rich. Where else can it go?"

Is this really the economic theory that smart liberals are going to latch onto -- that wealth, and in this case specifically income growth, is a phenomena that is independent of individuals and their actions? Is it really your view that income growth is like a natural spring bubbling up from the ground, and a few piggy people have staked out places by the well and take all the water before the rest of us can get any.

I don't particularly have a problem with the question: "Why aren't middle class incomes growing faster?" My answer is probably opposite of yours - I don't think the labor market is turning over and restructuring fast enough to keep up with changing technologies and global opportunities, and wages may be stagnant until this restructuring is over. You presumably want to lock in the status quo (unions, regulation, more security) which in my mind only delays the restructuring.

Never-the-less, I just don't see how rich people's wages are even relevent. Unless of course you want to posit that wealth is zero-sum, and if you do, you have a real challenge explaining the last 100 years of history

cmdicely,

For instance, tax cuts on capital have a direct effect that favors existing capital holders (and, therefore, disproportionately the wealthy), but have a potentially larger indirect effect in the same direction, as they increase the attractiveness of capital income, and thus (all other things being equal) increase capital prices, which rewards those who invested earlier.

Tax cuts on capital may have many direct and indirect effects that benefit both the wealthy and the non-wealthy. It's not at all clear that they "disproportionately" benefit the wealthy through either direct or indirect effects. Even if they do disproportionately benefit the wealthy, and that effect considered in isolation is deemed undesirable, the cuts may still be desirable if they benefit the non-wealthy also. A larger but less equally divided pie may be preferable to a smaller but more equally divided pie if most people get a bigger slice from the larger pie than they do from the smaller one.

Now, there's certainly no reason to reduce marginal tax rates on the hyper rich in an effort to make inequality even worse than it otherwise would be.

Of course there is. Reduced tax rates may promote investment and economic growth.

And what is the basis for your claim that the current level of inequality is bad and that greater inequality would be "even worse," anyway? What would be a "good" level of inequality? What standards or principles or rules are you using to make that determination?

Coyote: I don't think the labor market is turning over and restructuring fast enough to keep up with changing technologies and global opportunities

Which specific "changing technologies and global opportunities" are you talking about?

BTW, check the current account deficit lately?

wages may be stagnant until this restructuring is over

Prosperity is just around the corner! I'll take my slice now. Don't worry, you'll get yours in the long term.

Social inequality, including but not limited to income inequality, kills people.

There's an increasing amount of epidemiological evidence that low social position and financial struggles cause all kinds of diseases. Literally all kinds: nearly every disease is more prevalent in people of low social position. This was shown in the Whitehall study, and has been replicated elsewhere. There's also substantial evidence that increases in inequality lead to higher morbidity and mortality.

Growing the economy is great, and I strongly prefer a more middle-class society where we don't have to hear Paris Hilton singing through a computer.

But killing people is a concrete harm, and is a prima facie argument for decreasing inequality.

Does anyone have statistics on what percentage of the assetts of companies are held by the different classes (or quintiles if you prefer)? If you had it over time that would be better. I've heard anecdotally that the middle class owns more than before beacuse of 401ks etc., but is this true?

"It's nearly impossible to see a mechanism that could allow this to happen."

I really don't understand this preconception.

Politics is not one policy -- it is literally tens of thousands of choices. And, because the Parties divide neatly on questions such as aid to the poor , and the estate tax, and environmental protection, and student loans, and SEC supervision of corporations, and and and, politics tends to be like a prevailing wind blowing over a field of grass.

To my mind, ONLY government and politics could account for the apparently sudden and massive shifts we see in the data.

Technological changes, like computerization, do affect the distribution of income, but in complex, cross-cutting ways, both undermining the value of old skills and increasing the productivity of the low-skilled and creating new occupations with great reach and productivity. Those kinds of changes do not have the sudden massive changes, which can be brought about Reagan presiding over the largest tax cut in history (on the rich) followed by the largest tax increase (FICA, on the working), accompanied by massive deficits and the Volker squeeze, setting the stage for massive creation of wealth in the corporate takeover/junk bond go-go days, and the S&L deregulation catastrophe that shoveled massive amounts of money into the hands of a wealthy few, and breaking the PATCO union, and, and, and.

Social inequality, including but not limited to income inequality, kills people.

So does a lack of wealth. A policy that both increases wealth and increases inequality may "kill" fewer people than one that reduces inequality at the expense of reducing wealth.

In any case, we value things other than minimizing death, like the right to work hard and get rich.

The real problem with income inequality has to do with the fact that certain aspects of the cost of living grow at the rate that incomes grow rather than the rate of inflation. Conventional economic thinking would lead one to think that so long as one's income is rising faster than the rate of inflation, life is getting better. This is true with respect to most goods that would be covered under inflation; for example, most of the poor in this country can afford food as well as a TV, however there are other costs that are becoming more difficult to afford. Let me give a few examples:

One of the biggest economic problems facing the nation right now is declining health care coverage. Health care is a service, not a good, and is not something measured by inflation. Most of the cost is labor costs. Improvements in technology do not lead over time to the ability to treat significantly more people with fewer doctors. If you track health care costs over the long run, they grow at the rate incomes grow, not generally becoming more affordable over time. And what if incomes don't all grow at the same rate? If income inequality is growing, then fewer people are able to afford health care.

A similar case could also be made about college education -- the costs grow as wages grow, so when inequality worsens it becomes harder to afford. The same is true of housing, although for different reasons. Housing costs are largely driven by land costs, which grow both with income and population. Of course, larger plots of land get subdivided into smaller plots of land over time, but the new housing is built to cater to the needs of higher wage earners, and existing housing tends to go to whoever can pay the most for it, so housing in an area experiencing average population growth tends to rise in cost at the same rate that wages rise.

Housing, college education, and health care are three of the biggest costs we run into in life. They don't get more affordable as a result of economic growth, and they get less affordable for most when income inequality worsens.

OOOoooooooh! AAaah, that feels good!

Boy, I had to take a shit something wicked. Good thing I found this thread, and just in the nick of time.

Which is why the middle need MORE reductions in taxes!
Posted by: Thomas1 on August 23, 2006 at 6:12 PM | PERMALINK

ONLY If it's paid for by spending cuts. If you borrow that money, you're just screwing the next generation. The "Borrow and Scam" party has spent us into virtual slavery to the ChiComms.

I have watched many posts of Kevin's on median income go by with out commenting , but he keeps harping on it and so I will respond.

1.) Thou shalt not covet is not just an interesting religious law, but a great boon to an economy. If people would not worry about relative wealth and just worry about overall prosperity, everyone would be better off. Why should I care that A-Rod makes millions of dollars??? Why not just go out and earn my income that I deserve? Who cares if the rich are out making oodles of money - because of the laws of free enterprise most of the activity that generates this oodles of money generates wealth that is shared by all.

2) If people like Kevin were really concerned with wage earners being able to make it, and not concerned with their pseudo intellectual utopian worldview, they would honestly face the debacle for the lower middle class that women's entrance into the job market has been: Rich married women with no kids and husbands making six figure incomes take away good jobs from
heads of households ( both men and women ) trying to get good jobs to raise their kids. I have never understood why some people think it a "good" when a married women who is already living a good life because of her husband's upper middle class salary beats out some head of household man for a job. Oh, but I'm sorry, its not PC to point out the unintended bad consequences of public policies supported by the intellectual left. In their PC world, women ( even already rich women) getting jobs must always be a "good". To vote in favor of biasing hiring toward those trying to support a family would certainly be unPC.

I love how John Hansen is blithely unaware that his pts 1 and 2 contradict each other.

"For example: Appoint members to the Federal Reserve who are obsessed with inflation and act to cool down the economy at the least sign that average hourly wages are rising. Make it harder to form unions in new industries, thus reducing the bargaining power of the working class. Support free trade agreements that put downward wage pressure on low-income workers. Support tax and deregulation policies that make middle class jobs less secure."

It's this kind of dishonesty by omission that cripples the left's message in this country. What about your side's ironclad support for illegal aliens, don't they impact wages? What about the unholy alliance between trial lawyers, insurance companies and doctors that make American healthcare very good for the guilds but not so good for the consumers. What about the public employee unions, and especially the quasi-public politically connected contractors, that have been allowed to become rentseekers on the backs of private sector workers.
I've read that up until about 1969 a married breadwinner with a wife and two kids making the minimum wage could get a mortgage to buy a house in this country. I remember the guy across the street from my childhood home was a milkman, and he owned his own home. How many 7-11 clerks could buy a house today?

How many 7-11 clerks could buy a house today?

Obviously Clinton's fault.

Either one. Take your pick.

In any case, we value things other than minimizing death, like the right to work hard and get rich.
Posted by: GOP on August 23, 2006 at 8:11 PM | PERMALINK

Or the right to be born Paris Hilton's sibling, and get rich?

I think Al and John Hansen bring up some relevent points: we need to articulate why income inequality is a concern, or good for the society overall, or bad.

I'd argue that a strong middle class is a good connector between the upper and lower classes, and in this society people need to be able to envision themselves climbing up socially, economically, etc. Inner-city kids caught up in the summer gunfire often say they have no dreams, and assume they won't live past 30.

There are many reasons why a strong middle class, and less extreme income inequality good be good for society overall. But still I think the benefits need to be brought to light a little more. Next is where do you stop? How much income inequality is too much? How much is just enough?

In any case, we value things other than minimizing death, like the right to work hard and get rich.

That has to be fake GOP. The real one wouldn't be that stupid to be that honest. Would he?

John Hansen - why is there a fixed number of jobs to be split up among working men and women? Why can't women in the workplace gain business skills, start businesses and create jobs themselves?

GOP:

So does a lack of wealth. A policy that both increases wealth and increases inequality may "kill" fewer people than one that reduces inequality at the expense of reducing wealth

I don't think it would, at least not for a country as far from being a third world country as this one. We're the richest country in the world, but only, what, the 22nd longest living? Really, we're at the bottom of the developed world, living on average two months longer than Cubans. Within any given country, wealth is a good predictor of lifespan, but when comparing coutries as a whole, it is not a good predictor, at least for developed countries. More to the point, health care costs in this country have been growing faster than average incomes. So if incomes grow across the board, but they grow faster for those of already high incomes, then those of below average incomes will see their incomes grow more slowly than health care costs. That means fewer people with health insurance -- in spite of their rising wages. In fact this is what we have seen. The growing number of people without health insurance in this country does not result from insufficient wealth, it results from growing inequality.

Reduced tax rates may promote investment and economic growth.

GOP - at what point do you stop reducing taxes? Should we just elimnate them all?

Inner-city kids caught up in the summer gunfire often say they have no dreams, and assume they won't live past 30

Yes AF,

And part of the reason they have no dreams is they are told that the way to a good life is lots of money, and the reason they can't get good money is the mean old republicans and the white men are keeping it all to themselves. Don't you see that part of the mental depression of the lower class is the economic falsehoods perpetuated by the left intellectual communities.

The best way to stay out of poverty is to:

1. Get an education. 2. Be willing to work hard and always learn. 3. Be willing to start at the bottom and work your way up. 4. Don't get someone or get pregnant before finishing school. 5. Get married and have a stable home.

Not waiting around for some nice government man to take money from the rich so he can give it to you.

All I know is that I don't want to wake up one morning to discover that the only way I can feed myself is to become the love slave of the feudal lord in the castle overlooking our slum.

The über-wealthy may be capabable of producing many jobs. I'm just not sure whether they are fun, worthwhile, or helpful to humanity.

The increase in health care costs is most definitely a type of inflation, and is included in standard measures of inflation such as the CPI. But the CPI most likely overstates inflation, and thus understates the true growth in wages and benefits and understates the true growth in people's standard of living.

I will take your word that it is included in the CPI. Nonetheless, it grows faster than CPI, and in fact over the long run (you can measure this in any economy) tends to grow at roughly the rate incomes grow, meaning that economic growth does not generally make it more affordable. The same applies to the other examples I gave, and they are a large part of the cost of living for most people.

It's this kind of dishonesty by omission that cripples the left's message in this country. What about your side's .....Posted by: minion of rove on August 23, 2006 at 8:35 PM | PERMALINK

Oh yes, by all means, let's have a little honesty here:

ironclad support for illegal aliens, don't they impact wages?

The left supports the RIGHTS of those illegal aliens, as constitutionally defined (god-given rights) - these people should have full American rights, not based on whether it's convenient for American Citizens. Not based on whether we think they're going to invite our kids to their kids' birthday parties, and make them speak spanish and break pinatas. But based on the fact that GOD gave them rights at birth. If "illegals" aren't illegal, then they have the rights of normal citizens, and only depress wages to the extent that they increase the low-end labor supply.

The right, on the other hand, wants to keep these guys illegal, but not give them rights. This makes it possible for employers to get away with illegally exploiting them, which has an even worse effect on depressing, not only wages, but employment standards (safety, etc.)

Would it be nice if we had the resources to box them all up and ship them home, and keep them from coming back? Let's imagine we're for that. In Fantasy-Land. But our real choice is: Illegals are here, we can't stop them, we can either protect them, or exploit them. We know which side the right is on. Cheap, exploitable, labor.

What about the unholy alliance between trial lawyers, insurance companies and doctors that make American healthcare very good for the guilds but not so good for the consumers.

What about the unholy alliance between religious dogma, patent-system abuse, and the health insurance oligopoly? It's been demonstrated in many, many discussions on this blog that the whole "trial lawyers", "malpractice insurance", and "defensive medicine" - is not a significant contributor to increased health costs.
Predatory pricing, patent-system abuse, and the consistent destruction of consumer's ability to take a free-market approach to buying drugs, and negotiating prices, is a much larger contributor to increases in these costs.

What about the public employee unions, and especially the quasi-public politically connected contractors, that have been allowed to become rentseekers on the backs of private sector workers.

Are you claiming that Halliburton is a "Democratic Party" issue? Please.

If you're bitching about Teacher's Unions - nobody has claimed that their protections and rules are perfect. So fix the system. Duh!

I've read that up until about 1969 a married breadwinner with a wife and two kids making the minimum wage could get a mortgage to buy a house in this country. I remember the guy across the street from my childhood home was a milkman, and he owned his own home. How many 7-11 clerks could buy a house today?

Who is shooting for a minimum wage increase? Not the Republicans, that's for damn sure.

From the end of WWII through the 70s the middle class saw real wages on a constant rise with wage increases that exceeded the cost of living. The majority of the working class--factory workers, construction workers, small business owners/employees were moving up, albeit sometimes slowly. Then they decided they were too prosperous to be Democrats anymore and they became Reagan democrats. The rest is history. Progress stopped, the disparity in the incomes between the top and the bottom grew greater each year and that gap continues today. The trend was reversed during the Clinton years which may explain why the Republicans did everything they could to undermine his presidency. The economy that we have is the result of the government that we have which we elected. No in depth analysis needed--as long as the needy vote like the greedy the middle class will continue to shrink and slide backwards.

More on the insurance company lobbyist/trial lawyer/healthcare conglomerates issue:

I would obviously rather have a doctor make medical decisions on what treatment is best for me.

However, the way the system is set up now, I've got health insurace company accountants, lobbyists, and drug company marketers making these medical decisions.

If I can't have the doctor make these decisions, I'd like to at least get a lawyer whose on my side helping out.

Again - the choice is:
1. Doctors and Lawyers (in a lawfully regulated, sane system).
2. Drug company marketing execs, health insurance industry lobbyists, and healthcare company spreadsheet jockeys (in the anarcho-capitalist, national-healthcare-policy-for-sale-to-the-highest-bidder system).

I'll choose #1.

The best way to stay out of poverty is to:
Posted by: John Hansen on August 23, 2006 at 8:51 PM | PERMALINK

Get born rich, so you can use your inheritance to buy politicians to tax the middle class, to pay for the public infrastructure (highways, training of workers, defense, police) that keeps your industrial empire running, so you can make more money.

why is there a fixed number of jobs to be split up among working men and women? Why can't women in the workplace gain business skills, start businesses and create jobs themselves?

AF,

You misunderstand me. I think that wealth creation is the key to the economy, but if you consider distribution of wealth per family unit and not per person you can see why Disputo was wrong and their is no contradiction in my above post.

To simplify let's say the economy generates the following 3 jobs:

1. 200,000
2. 100,000
3. 50,000

Furthermore lets say that the work force only consists of 3 people.

Mr. and Mrs. A - married and no kids
Mr. B. - married, with 3 kids.

Mrs. A and Mr. B are both trained to do job 2, and Mr. B is actually a little better qualified, but because of "progressive" hiring practices, job 2 goes to Mrs. A. Mr. B takes job 3, because he can not find a good job in his field.

Family income
Mr. and Mrs. A - 300,000 - part of the super rich.
Mr. B - 50,000 struggling to get by.

I know this is extremely simplified, but I hope it helps to jar some of your liberal sensibilities when place in this simple of context.

If you think this is not relevant you should study the plight of the black man who is getting displaced from high paying jobs by black women.

John Hansen:

3. Be willing to start at the bottom and work your way up.

This is fine advice and we all understand that there should be a difference between the bottom and the top, and that way there is an incentive for us to work our way up. But surely you recognize that if the difference between the "bottom" and "up" continuously grows over time, this step only gets harder and harder to follow and opportunity gets worse?

It is not a given that the gap between the bottom and top always grows. Throughout the 40s-60s, incomes became much more equal while the economy boomed. There was a study done back around 1980 or so of economic mobility that found that, out of those in the top 25% by income, about 25% started their life in the bottom 25%, which is a great testament to the economic mobility of those times. A more recent study found this to be under 10%, meaning that as inequality has grown it has become more difficult to work your way from the bottom to the top.

My question for you is that, how much inequality is really desirable? If a certain amount of inequality is good in society, is more inequality always better? Do we want nothing but continued inequality growth, or is there a point at which things could be so unequal as to be undesirable?

John Hansen: 1. Get an education. 2. Be willing to work hard and always learn. 3. Be willing to start at the bottom and work your way up. 4. Don't get someone or get pregnant before finishing school. 5. Get married and have a stable home.

All excellent advice, but nothing to do with this thread. Following that advice should put you into a higher income percentile than you would be otherwise, but this thread is about the increasing income ratio between percentiles.

All excellent advice, but nothing to do with this thread. Following that advice should put you into a higher income percentile than you would be otherwise, but this thread is about the increasing income ratio between percentiles.

You're confusing me with your big words.

Huh? That doesn't follow at all. The disparity in the growth of incomes between people at different income levels, and the disparity in growth between below average incomes and health care costs are two different things. They may be related in some way, but any such link must be demonstrated. It cannot be assumed.

Because health care costs are driven by rises in income. This is partly because health care is a service, so the cost of providing health care is largely paying for wages. Doctors have yet to be automated. This is being a little simplistic, but then we seem to agree on how fast health care costs rise so no need to belabor the point.

Let's say we have a person who is at the 30th percentile in terms of income. Say that person make 25% of the average wage. Now lets say a decade later, the average wage has doubled, but income inequality has increased, so now someone at the 30th percentile is only making 20% of the average wage. So the income at the 30th percentile grew by 60% over that decade. However, you and I both agree that health care costs grow at the rate of income growth or slightly faster, so it stands to reason that the cost of health care more than doubled over that period of time, thus getting less affordable for those at the 30th percentile.

This is the kind of economic growth you say you want, and what we have been experiencing, but if we take it as given that health care costs rise in proportion to rising incomes (all evidence supports this) then it is clearly going to get harder for those at the bottom to afford health care even if their incomes do rise.

The post at 9:23 is not mine, but must be from someone so stupid he can't even sign his own name. Unbelievable.

Hostile is right. This is not a question of living standards. It's a question of power and autonomy. Rich people have power over less rich people, and rich classes of people use that power to order society to make it comfortable and secure for themselves, regardless of how it is for others. And, when there is a crisis, the government will intervene to protect the rich, not you and me. Look at Argentina for a case in point.

The instrumentalities of this power are varied - control of the media by magnates, of local government by developers, of political parties by corporate interest groups. But the greater the income inequality, the less power ordinary people have over their own lives - regardless of how much they may be able to consume at the moment.

Actually, when I said this is what we have been experiencing (income growth rise) that's not really quite right. Under Clinton, incomes grew for the bottom 20%, while growing faster for those at the top. Under Reagan and both Bushes, income inequality grew even faster, but a much smaller percentage of boats have been lifted, not even half under this administration.

Anyway, it's way past time to address income inequality as a problem in and of itself, or find ways to guarantee health care, a college education, and housing to those at the bottom and in much of the middle.

Presumably, the answer to the question "What is the proper level of taxation?", just like the question "What is the proper level of inequality?", should be based on rational argument from rules or principles rather than simply being an arbitrary declaration.

Agreed. On the issue of taxation, for me the obvious way to argue this is to start from the question "what should government do?" and then proceed to the question of how much it costs to do those things, provided the price is reasonable, and from that you get the amount you need to tax. Yet it is quite clear that those currently in power follow no such logic. When you come into office with a surplus and you believe government shouldn't be doing any more than it already is, it makes sense to call for tax cuts. When you're running a deficit, you've got an expensive war you insist we need to fight, and an all GOP government can't find cuts they are willing to make, or at least none on the same order of magnitude as the deficit, then the same reasoning doesn't really apply. However, if you look at the politics of taxes, nobody runs on what the level of taxation is, they run on which direction they went to get there (were they cut or were they raised?), so the politics of taxation can lead to bad policy where taxes should only ever go down, not up.

Back to inequality, it's harder to say what the right level is, but I think the best way to answer is to ask how much is necessary for strong economic growth. The 70s weren't our best time economically, we had low productivity and high inflation, so a reasonable argument could be made that the level of inequality then was too low. However, inequality has grown a lot since then, and we saw economic booms in the post war period and the 60s, and the 80s and late 90s when inequality was lower than it is today, so it would seem to be high enough. Inequality is as high as its ever been. More generally, though, would you agree that if inequality continues to grow, at some point soon (if it hasn't already) it will reach that point where it is no longer beneficial? After all, this whole discussion has been about which direction inequality is going, not what it is, much as Bush's tax policies focus solely on what direction they're going, but income inequality has been growing for 25 years and has grown considerably. At some point, we agree, Republican policies stop making sense?

Health care costs are driven by many things, not least the scientific and technological advances that have created an enormous new range of costly pharmaceutical drugs, diagnostic devices, surgical procedures, and other things that were not available in the past.

Sure, there are other factors at work. Doing things we weren't doing before causes costs to rise even faster than incomes. However, rising incomes do lead to rising health care costs, all evidence from any country show that health care costs rise as fast or faster than incomes, and that is sufficient. If health care costs rise faster than incomes, and those whose budgets are most strained by health care have incomes grow more slowly than incomes generally are growing (hence more slowly than health care costs grow) then more of them will be unable to afford health care.

it would take titanic amounts of government action to swim against that tide and direct the money instead to the rich. It's nearly impossible to see a mechanism that could allow this to happen.

Hmmm, how about public debt and the taxes to pay it?

Okay let's say you're a crooked Congressman. [But I repeat myself.] You and your buddies give every single corporate industry you can name (pharma, chemicals, communications, contracting, oil, military, ...) huge oversight-free contracts, huge tax breaks, deregulation, and who knows what-all? Add hundreds of billions to non-oversight Super-Duper Secret adventures, so top secret you go to jail for mentioning it exists. That you don't have the money to pay for all this is no problem. You've got the people who pay taxes guaranteeing they'll make up the deficit, eventually.

One instance: in the last 3 years, $300 interest-bearing billion for Iraq alone has been freshly printed by our friends at the Federal Reserve. That's money that's being skimmed all up and down the line. And being spent and invested right now. If you are in the circles getting this juice, your personal economy is through the roof!

(You and I had to borrow the printed money because Congress had spent the year's Social Security income a while ago. They take it out of the famous "Open-Lid Box," and replace it with worthless IOUs.)

Literally trillions taken in public debt, which is then handed to a certain range of people, which they use today in concrete and definite ways. And which the taxpayer will repay later. With interest. Hey, the system works.

But certainly no system of measurement is going to allow for the reality of all-enveloping corruption. So at certain points, the "data" will throw up conundrums and potential issues. All of which are effectively meaningless.

The finding that inequality leads to adverse health outcomes for those at the lower end of the ladder is pretty robust. It seems to be independent of the absolute wealth of the population. The reasons for it are somewhat obscure, but it's one good reason to prefer less inequality.

It doesn't seem to be doing Americans much good. A recent study compared British and American white males, and found that the health of Americans in the top wealthiest third was comparable to that of British in the poorest third.

There's less inequality in British society than in the U.S., but more than in other European countries, which tend to exhibit better health and longer life spans.

It appears that, healthwise at least, inequality is bad for almost all Americans.

it would be useful for someone to address income inequality issues on a broader, global platform.
consider: in the UK just a few years ago, there was a public outcry when it was learned that the CEO of British Gas was earning 400k sterling a year. today, CEOs in UK are earning 2m plus. clearly the pro-business propaganda machine successfully created a culture of entitlement among british management. (one that has had no real positive impact on earnings and share prices, BTW).
is it possible that this kind of casual acceptance of massive inequality is also at play when politicans systematically plunder the national accounts for their own benefit? Is the US greed culture, therefore, guilty of legitimising a global trend of oppression and, to be blunt, theft?

Why is the middle class getting squeezed out?
Why are labor unions declining?
Why are govt deficits almost impossible to fix?

Simple: GLOBALIZATION

Someday Americans will realize that providing good jobs for our citizens is worth more than the benefits of free trade.

GOP:

On taxes, my point was on how to distinguish between tax policies that was based on some logic based on intended outcome (based on what taxes should be), and tax policies based on politics. Contrast Bush's tax policy with Reagan. The tax changes during Reagan's presidency could be explained by such a logic: He felt taxes were too high, so he lowered them. He decided he had gone a little too far, so he raised them considerably the next year. He tweaked taxes just about every year of his presidency after that, but generally not downward, and the one other time he did enact significant tax cuts he raised other taxes. So what's the logic behind the Bush cuts? He thought they were too high, so he cut them. But he realized he had set them still too high, so he cut them some more. And each time he cut them, he discovered that he had in fact set taxes too high. He chose to put expiration dates on some of his cuts. He then pushed to eliminate those very expirations he himself proposed. What is the logical explanation of that? What exactly does Bush think is the right level of taxation? Hard to say, but if you look at in in terms of politics, it all makes perfect sense.

As for the right level of income inequality, no easy answers there, I was hoping to see what your way of reasoning on that would be. Anyway, I've wasted too much time that I was supposed to be working and it's time for me to go home, so I'm signing out. Good talking to you, GOP.

I don't see the need to distinguish between #1 and #2 as the best explanation for what's happening in the economy. For one thing, there's plenty of evidence that both are occurring (exec compensation and recent tax policy, for #1; Fed policy for #2). But the assumption behind #2 that "vast amounts of money" are freed up and gee, "it has to go somewhere," sounds too benign. It's intentional. The powers that be, to a great degree, know what they're doing.

Fringe benefits as a percantage of compensation:

1960: 8%
2000: 16.5%
2005: 19.7%

That's where the economic growth has been going.

Probably Kevin knows this, but would prefer that others not. Instead he talks about wages all the time, to hide these facts.

Old research doesn't invalidate new results. The fact remains: Inequality kills.

Even moderately well-to-do Americans do worse than lower-class Brits who do worse than the average French, and the Swedes clean up. It isn't diet or smoking or driving or gun violence (not that these don't matter.) Maybe it's time spent on the job or jobs, time spent on the road, why you eat dinner at the wheel. The cause is murky, but the results are clear.

In some ways this is a tiresomely old debate. The conservatives who comment here insist that jobs ought to be crappy, that even median level jobs, like working at a grocery store, deserve no pay and no benefits. Labor alone deserves no respect.

That attitude has no place in a democracy.

I think entrepreneurship should be the route to economic prosperity for middle class society.

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"Where else can it go?"

Well, it could go to the government in form of taxes, at least part of it. What's missing from many of the discussions on this important topic is the differentiation between taxed and untaxed income. While the government has a more indirect role in the distribution of wealth between wages and capital profits, its policy of taxation directly affects how much money the different parts of the population will have left to spent. Well, I don't have to elaborate on the dismal result of the Bush approach that worsens an already unequal distribution for the middle class, it is obvious. But it should be ephasized that his has negative implications for the whole of the nation. Since the middle class would directly consumate a much larger part of any additioal income, this would fuel the economy, leading to a higher turnaround of money. The rich, on the other hand, already own most consumer goods and it takes longer until they find a use for additional income. They don't have Picassos or race horses at WalMart, you know. This leads to a slowing down of the economy. Imho it would not only be an ethical adavatage, but an economical one, too, to put a higher share of national wealth into the hands of middle and low wage earners, the people who have an immediate use for the money. And this isn't only true for the US, but for all nations of the world.

Hmm, scrolling through comments I'm not surprised to see that part of the discussion has already mifrated to totally off topics. Maybe I'm becoming a bit paranoid but I since a long time I have the suspicion that this is a deliberate tactic by some right wing trolls to diverge the attention from matters where the Bush gang isn't looking good. But I'm mildly puzzled that the talk is about british health policy instead of, say, Kissingers handling of the Vietnam peace negotiations...
:(

"One way to solve this problem is to send those on welfare to third world countries where they will live like kings and queens on $1K a month. I don't know what you would call this, but some it is some sort of outsourcing of welfare."

The troll level of some of the comments here makes my head ache...
Aside from the dubious ethical values displayed here (only the afluent should have the right to live in the US), the author obviously doesn't have a clue on the consequences of such a plan for the national economy.
You don't know how to call this, Gregory? I do. I call this BS.

"They take it out of the famous "Open-Lid Box," and replace it with worthless IOUs."

Rah! This nonsense again. There should be a law against such spin, doesn't this directly affect national security? :P

If the millions of foreigners investing in those "worthless IOUs" would believe this and withdraw their hundreds of billions of dollars, the US would be broke. Simple as that.

Happily for the US, those foreign investors don't care for this right wing spin.

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