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Tilting at Windmills

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October 28, 2006
By: Kevin Drum

EXPLAINING INCOME INEQUALITY....It's worth reading Jon Chait's entire article about rising income inequality in the New Republic this week, but for my money here's the most important factoid to lodge firmly in your brain:

Over the last quarter century, the portion of the national income accruing to the richest 1 percent of Americans has doubled. The share going to the richest one-tenth of 1 percent has tripled, and the share going to the richest one-hundredth of 1 percent has quadrupled.

Whenever you hear someone propose an explanation for skyrocking income inequality over the past few decades, try to think about whether it explains the fact that inequality has gotten immensely worse not just between the top 20% and the bottom 20%, but between the top 1% and the 9% just below them. For example:

Greater returns to education? Do you really think that the top 1% are better educated on average than the next 9%?

Greater rewards for technical skills? Do you really think the top 1% have greater technical skills than the next 9%?

Globalization?

More stable families?

Race and gender?

A failure to take account of the growing value of health benefits?

Do any of these things plausibly seem like big differences between the top 1% and the next 9%? Pretty clearly they aren't. So why is the top 1% outpacing even the well-to-do who inhabit the next 9%? What's the big difference between these groups? If you're interested in reading more about this, it's below the fold.


Here's the answer: the top 1% have a lot more money. The rest is left as an exercise for the reader. Kevin Drum 8:12 PM Permalink | Trackbacks | Comments (141)

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Comments

Didn't Oregon State just beat USC?

Posted by: Beaver Nation on October 28, 2006 at 8:22 PM | PERMALINK

My own suggestion would be changes in cultural mores. Soieties with low levels of religious and ethnic diversity are highly egalitarian; societies with high levels of diversity are much more inegalitarian. For example, New York City has always been both very diverse and very inegalitarian, whereas most Midwestern towns have been homogenous and egalitarian. But American society as a whole has become much more diverse and so less egalitarian.

Anyway, I'm hoping that anyone who disagrees with this analysis will respond without using the word "repugs," which doesn't really advance the analysis.

Posted by: sean on October 28, 2006 at 8:26 PM | PERMALINK

Part of it is little stuff that you don't hear much about, such as: banks pay higher interest percentage to larger accounts. It's all in the same pot, so shouldn't they give us all the same interest rate? I noticed this trend increasing over the years. Then of course there's the reduction in rates for capital gains and interest ("flat tax" was supposed to mean the *same rate* on all income, wasn't it?....), the reduction of minimum wage in real terms (constant dollars as all price values must be rated), change in labor laws, etc. Biggest overall reason: rise of Republican power. The majority would never vote for 'pugs if they understood their own true economic interests, so the 'pugs *must* fake and misdirect to get elected.

Posted by: Neil' on October 28, 2006 at 8:29 PM | PERMALINK

I did it for you, sean (hannity?), even if not a response to your point, and at least I used an abbreviation. BTW, it doesn't advance the analysis to bother about people's put-downs if they really did analyze... BTW2 I prefer "Repiglicans."

Posted by: Neil' on October 28, 2006 at 8:32 PM | PERMALINK

It's hard not to analyze the disparity without mentioning the repugs. If you have a lot of money, you can improve your chances of fattening your bankroll even more if you buy yourself a political party. The super rich, did and the repugs were easier to buy. Check where that top one percent's money goes in donations.

Posted by: sparky on October 28, 2006 at 8:33 PM | PERMALINK

But, but, the Boskin Comission!
Hedonic adjustment!

Poor people have DVD players and plasma screens!

Posted by: osama_been_forgotten on October 28, 2006 at 8:37 PM | PERMALINK

Greater returns to education? Do you really think that the top 1% are better educated on average than the next 9%?

Greater rewards for technical skills? Do you really think the top 1% have greater technical skills than the next 9%?

Globalization?

More stable families?

Race and gender?

A failure to take account of the growing value of health benefits?

Do any of these things plausibly seem like big differences between the top 1% and the next 9%? Pretty clearly they aren't.

Do you have any actual data backing that up, or is Saturday "argue by assertion" day at Political Animal? Maybe the top 1% is much better educated; I don't know. Do you?

Posted by: American Hawk on October 28, 2006 at 8:38 PM | PERMALINK

Ignore last post, screwed up the tag:

Greater returns to education? Do you really think that the top 1% are better educated on average than the next 9%?

Greater rewards for technical skills? Do you really think the top 1% have greater technical skills than the next 9%?

Globalization?

More stable families?

Race and gender?

A failure to take account of the growing value of health benefits?

Do any of these things plausibly seem like big differences between the top 1% and the next 9%? Pretty clearly they aren't.


Do you have any actual data backing that up, or is Saturday "argue by assertion" day at Political Animal? Maybe the top 1% is much better educated; I don't know. Do you?

Posted by: American Hawk on October 28, 2006 at 8:39 PM | PERMALINK

If you have a lot of money, you can improve your chances of fattening your bankroll even more if you buy yourself a political party. The super rich, did and the repugs were easier to buy.

I'm sure the Libertarians would be easier to buy. But the Libertarians haven't sucessfully conned all the rednecks that they're the party of God, so the Libertarians don't ever get elected. If you're gonna buy a party, you've gotta buy one that can get elected.

Posted by: osama_been_forgotten on October 28, 2006 at 8:41 PM | PERMALINK

And while you're making comparisons, be sure to compare the top 1% from today with the top 1% from 25 years ago.

Is the top 1% of today better educated? Smarter? Wiser in its decision making? Isn't it pretty likely that the top 1% is the segment of the population that has LEAST changed in its overall skills? Surely it was, 25 years ago, pretty much at the peak of education, experience, and ability, having already, at the time, all possible advantages going its way.

And that's the REAL absurdity here: it's plausible that the top 20-30% of the population today is indeed better educated, and more highly skilled than it was 25 years ago; these are exactly the class of people who would have enhanced their background and knowledge, having had greater opportunities and pressures to do so. And yet they have lost, rather than gained, a vast stretch of ground to the top 1%.

What possible sense can that make? Why shouldn't we conclude that modern American capitalism is broken?

Posted by: frankly0 on October 28, 2006 at 8:47 PM | PERMALINK

Just to make my point a bit sharper: The top 20-30% of the population today has, in terms of knowledge, skill and education, only made up ground with the top 1%. Yet they are are only losing ground economically.

That is why modern American capitalism would seem to be broken.

Posted by: frankly0 on October 28, 2006 at 8:52 PM | PERMALINK

Some people are really good at making money. Some people are really interested in making money. Because our economy is both free and complex, those who want to make a lot of money and who are good at making a lot of money can become much richer than the rest of us.

Posted by: ex-liberal on October 28, 2006 at 9:00 PM | PERMALINK
Why shouldn't we conclude that modern American capitalism is broken?

Because, uh... GDP! Lookie! Big numbers!

Posted by: scarshapedstar on October 28, 2006 at 9:03 PM | PERMALINK

I generally fee very lost when thinking about income inequality, but I think Paul Krugman made a very important point: among labor economists, skill biased technical change, which is what Kevin is talking about when he refers to returns to education, is used to explain anything that we don't understand.

Now, economists do that for lots of things -- when there are things about GDP growth that we can't explain, we call them total factor productivity, which just means general technological progress. Solow referred to TFP as just being "the measure of our ignorance." Similarly, the stories about SBTC, saying, "well, highly paid people must just have benefitted from a specific [and yet usually unspecified] type of technology," are mainly just measures of our ignorance.

Posted by: Ian Dew-Becker on October 28, 2006 at 9:03 PM | PERMALINK

I don't know, Kevin. Its certainly possible that the top 1% are significantly better on some dimension than the next 9%. Think about professional athletes. The top 1% of basketball players are far better than the next 9%. The real question is do the top 1% DESERVE all that money, even if they are better at what they do -- and do they deserve it no matter what the cost to the rest of the distribution?

Posted by: TheFool on October 28, 2006 at 9:04 PM | PERMALINK

Some people are really good at making money. Some people are really interested in making money. Because our economy is both free and complex, those who want to make a lot of money and who are good at making a lot of money can become much richer than the rest of us.

Some people are really well-connected. Some people are really interested in making money. Because our economy is both corrupt and large, those who want to make a lot of money and who are good at bribery can become much richer than the rest of us.

Posted by: expatjourno on October 28, 2006 at 9:07 PM | PERMALINK

"Some people are really good at making money"

What does this really mean? Does this have any meaning other than the painfully obvious?

I'll grant you that the American economy is complex, but exactly how free is it? If it were free, the barriers to "being good at making money" wouldn't be so prominent. The notion that people are wealthy because of some exceptional skill or desire would make more sense if there were more extremely wealthy people falling down the economic ladder for lack of will or talent.

There are structures in the US economy, from tax law to the political system to networking, that make it easier for wealthy people to retain and gain wealth than for poorer people to do the same. To pretend that there's some sort of formula where talent + desire = wealth is to live in a tidy world, devoid of the complexity you claim.

Posted by: alex on October 28, 2006 at 9:21 PM | PERMALINK

So why is the top 1% outpacing even the well-to-do who inhabit the next 9%?

In an increasingly Godless world, it takes more and more money to indicate whom He has chosen as the elect from before all time, and whom He has chosen as the reprobate damned.

Posted by: Davis X. Machina on October 28, 2006 at 9:26 PM | PERMALINK

I believe that David Cay Johnson's "Perfectly Legal" is exhibit A here. For those of you interested in how politics and government policy interact, it's a must read. The premise of the book is there are two tax systems - one for the political donor class and one for the rest of us. Johnson lays this out in devastating detail; it caused me to seriously doubt our political economy.

The top 1% can defer taxes until they aren't paid and shelter income in ways that none of us W-2 and 1099 rubes can. The result is that they are able to accumulate wealth in ways that would have been unimaginable in the days prior to Ronald Reagan.

Furthermore, the CEO's of this nation are in a club that allows their pals to set their compensation and benefits while corporate governance is a joke. A recent economic paper demonstrated that the market for CEO's isn't actually a free market.

My word for it is neo-feudalism.

Posted by: sluggo on October 28, 2006 at 9:36 PM | PERMALINK

Lord Acton has the answer to this puzzle.

Posted by: dj on October 28, 2006 at 9:41 PM | PERMALINK

Although I suspect this sort of idea won't fly here, it is interesting to note that over the last 30 years or so, American capitalism has looked an awful lot like Marx's analysis of how capitalism works in Capital vol. 1. You could argue that Marx was right all along; we've missed this (and Marx has of course been thoroughly discredited by the cold war and the failure of the USSR, despite the fact that he had little to do with them) because the various 20th century reforms of capitalism limited its destructive power and masked its fundamental dynamics. The reforms of the Progressive Era reforms (anti-trust, income tax), the New Deal (Social Security, labor-owner truce), the Great Society (healthcare, housing) all stabalized capitalism. But since the 1970s, many of these reforms have been weakened if not destroyed, giving capital new wings and greatly expanded power. The results are all around us. The most noticeable result is the staggering growth of inequality in the US and globally (China is another powerful example).

I'm by no means suggesting that we're heading for a revolution. Neither did Marx. Das Kapital does not end with revolution, but with poverty and despair amidst ruling class splendor. That seems a more likely outcome.

Posted by: mdr3000 on October 28, 2006 at 9:44 PM | PERMALINK

TheFool, if you think the top 1 percent is made up of basketball players, you're aptly named.

Posted by: nolo on October 28, 2006 at 10:06 PM | PERMALINK

Money is power; power, money.

Posted by: Mike on October 28, 2006 at 10:10 PM | PERMALINK

My idea is fairly simple. Most of us know someone who carrys a wad with him at all times, and the same person is the one we know that is always finding the deals. When people know you have the money, they are attracted much like a magnet. Those with the cash usually get 1st crack at all the best deals, it doesn't matter if it's a DVD player off the back of a truck, or a IPO.

Posted by: OCD on October 28, 2006 at 10:23 PM | PERMALINK

Sean,

I'll stop using the term "repugs" when the Republican party stops acting like a repugnant gang of thugs. (See: Guantanamo, Abu Gihrab, Florida 2000, and other handy references.)

Posted by: cosmo on October 28, 2006 at 10:34 PM | PERMALINK

If we just continue that "tenth of a percent, hundredth of a percent" thing, it suggests that maybe there's just one really, really rich guy skewing the averages. In other words, it's all Bill Gates' fault.

Posted by: DonBoy on October 28, 2006 at 10:35 PM | PERMALINK

George W. Bush and Limp Dick Cheney were sitting in a bar. A guy walked in and asked the bartender, "Isn't that Bush and Cheney?"

The barman said, "Yep, that's them."

So the guy walked over and said, "Hello. What are you guys doing?"

Bush said, "We're planning World War III."

The guy asked, "Really? What's going to happen?"

Bush said, "Well, we're going to kill 10 million Iranians and one bicycle repairman."

The guy exclaimed, "Why are you gonna kill a bicycle repairman?!"

Bush turned to Cheney and said, "See, I told you no one would worry about the 10 million Iranians!"

Posted by: The Liberal Avenger on October 28, 2006 at 10:37 PM | PERMALINK

the Libertarians haven't sucessfully conned all the rednecks that they're the party of God

I guess I stumbled upon the Democrat Outreach meeting by mistake.

Anywhoo, the idea that somehow those in the top tiers are somehow automatically conservative or Republican is certainly interesting, but wrong. Many of those who hold the levers of power and who own the means of production (comrade) are on the "liberal" side. That's why the "priests" of the elite (media, academia, etc.) are "liberal"; if those who own and fund such sources didn't think the same way we'd see more WashTimes. You might want to go to a library and pick up a copy of one of FerdinandLundberg's books.

On a side note, good ol' Ned Lamont is supposedly an heir to the J.P. Morgan fortune; perhaps that explains some of his policies.

As for the Democrats, almost all of their leaders support an economy based on low wage labor. Not satisfied with our current proletariat, many of those leaders strongly support importing a new group of low-wage workers. That has the effect of both growing the lower class and enriching the upper classes. The idea that the Democrats are somehow the party of the little guy is ludicrous.

-- Submit questions politicians don't want to hear, and submit their answers.

Posted by: TLB on October 28, 2006 at 10:53 PM | PERMALINK

It's ideological. Power justifies itself.

People who have power and status are entitled to more wealth and power.

Posted by: Carl Nyberg on October 28, 2006 at 11:04 PM | PERMALINK

RE this comment:
*** Some people are really good at making money. Some people are really interested in making money. Because our economy is both free and complex, those who want to make a lot of money and who are good at making a lot of money can become much richer than the rest of us.
***

If Kevin Phillips' books are any indication (and I believe that they are) ... that top 1% didn't *make* money (in the vernacular way most Americans use the term) ... they *inherited* it.

Posted by: Kathy on October 28, 2006 at 11:05 PM | PERMALINK

This is why the Bushites support a return to the policies of the 1890s. It seemed generally good for the wealthy, a class that they desperately want to either join or are already in.

I'm curious though, hasn't the generally trend of the US population up til now been been to become wealthier and wealthier.

I submit that the wealth that would generally 'trickle down' to people in the US is now going to the wealthy of countries other than the US. And the wealthy here are giving it to them rather than giving it to the average Joe. Why that may be is rather complicated...but it does feel as though that is happening.

Posted by: parrot on October 28, 2006 at 11:06 PM | PERMALINK

AH: Maybe the top 1% is much better educated

GWB: Is our children educated?

Finally, AH's true identity has been revealed.

Posted by: Disputo on October 28, 2006 at 11:12 PM | PERMALINK

Let us look at this a bit more rationally. It has been reported that the CEOs make 360 times more than the average worker. Even the lowest paid CEO makes something like 5 million dollars. I am a PhD in engineering from Berkeley making just six figures. How is that goddamn CEO better educated than me? That CEO makes 50 times more than me. If you assume that your immediate boss makes 20-30% more than you, the ratio is 1.3 and at that ratio, the CEO is 15 levels of management higher than me. No way I am at that "bottom" level. Basically, it all boils down to greed and the maxim "screw every one".
If you look at the evolution of labor, communism, workers rising up, this was exactly what caused it. I wouldn't be the least bit surprised if there is a repeat of this.

Posted by: Rajan on October 28, 2006 at 11:20 PM | PERMALINK

"Better educated" is a euphamism for knowing the right people.

Posted by: Carl Nyberg on October 28, 2006 at 11:25 PM | PERMALINK

alex asked: What does this ["Some people are really good at making money"] really mean? Does this have any meaning other than the painfully obvious?

I worked, indirectly, for one such person, Henry Singleton. Singleton was a brilliant research physicist, who decided to go into business. He created a conglomerate called Teledyne. He measured his performance in terms of money. At one point, he was close to getting his personal net worth above a billion dollars -- "Working for another zero" is how one wag put it.

Anyhow, he applied his brilliance to seeing that the companies Teledyne owned were successful and that the investments made were successful.

BTW he was not poor when he started the business, but it was his brains and drive that made him a billionaire.

Posted by: ex-liberal on October 28, 2006 at 11:28 PM | PERMALINK

It's important to keep in mind here that whatever we posit as "the cause of the change in income distribution", it has to be something that's changed recognizably in the past thirty years or so. Otherwise each of us is just grinding his own favorite axe.

Obviously many rich people are smart and hardworking; obviously many are corrupt. Do we have evidence that these things have changed in the past thirty years? I don't see human nature changing that quickly.

I would suggest globalization, which depresses wages for those in low skilled jobs (at least in the US) while enhancing opportunities for those in a position to sell their product to many new customers (media and software producers, athletes, and fast food franchisers come to mind).

I'm sure that there are several good explanations. But they should be structural, not moral.


Posted by: fizz on October 28, 2006 at 11:51 PM | PERMALINK

My small garbage service company, several years ago, raised their prices compared to a competitor from out of town. When I called to ask why, the owner's wife plaintively said that they had to raise prices to stay in business because the big company was given preferential treatment at the garbage dump. It turns out there was a new 'policy' at the 'public' land-fill site that lowered prices per truck load for 'volume' dumpers. Well, the reasonableness of that new policy escapes me as each truck-load uses the same amount of land-fill space.
I believe that this was a strategy of a big company lining the pockets of politicians [who oversee the public land-fill] to be able to stifle and kill off a small company, adding to the monopoly power of the big company. [ I have happily paid the extra to support the little local company.]

This is a small town example of what must go on big-time on the national scene, with CEOs orchestrating the lobbying and political machinery to stifle entreprenuerial and competitive spirit and negate the good of all who are not on the tiny top of the pyramid.

Posted by: Donna griffiths on October 28, 2006 at 11:54 PM | PERMALINK

It would be easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.

Anyway, that's what I say.

Posted by: Jesus Christ on October 28, 2006 at 11:56 PM | PERMALINK

I am not so much concerened about what the top 1% is getting in personal income as what the rest of us are not getting. The very rich recieve income in a varitiey of ways so it is very hard to keep track. If you look instead at the income share of GDP that the bottom 99, 95 or 90 percent recieve, there is a steady decline after the mid 70's with the only upturn in a few years in the late 90's. see graph at
visualizingeconomics.com
The studies by economist on the effects of immigration, trade, or education on wages are only addressing how the shrinking share is being divided among workers, not why their share is shrinking. I suspect that in controling inflation with a budget deficit the fed has kept the unemployment rates high enough to suppress wage increases that are normal at business cycle peaks.

Posted by: joan on October 29, 2006 at 12:03 AM | PERMALINK

Two-thirds of Forbes' 400 top richest Americans did not inherit their wealth.

This entire discussion is based on the assumption that there is a "wealth bucket" somewhere, probably in Washington, and some people are fishing too much out of it. Not how it works. That Bill Gates gets a lot more money doesn't take it away from the guy who sweeps the sidewalks, and if Bill Gates makes less money, the guy sweeping the sidewalk doesn't get a percentage of the leftovers.

BTW, the richest in this country aren't all Republicans by any stretch of the imagination.

Donations

Celebrities, rich and otherwise, are pretty much solid Democratic.

Posted by: elmendorf on October 29, 2006 at 12:05 AM | PERMALINK

The term "global economy" implies a single, planet-wide market for everything, including labor. We're far from arriving at such a destination, of course, but we're seeing its harbingers with increasing regularity (e.g., U.S. programmers priced out of a job by people with equal skills in far away India).

Theoretically, at some point in the future, price differentials world wide should become tiny, and eventually vanish. Hence, a Big Mac will cost the same in Peru and Norway; an hour of acupuncture the same in Hong Kong or Nigeria; fifteen minutes of tech support the same in Long Island or Mongolia. The price of labor (wages) is naturally not exempt from this trend.

If we are indeed moving toward such a world, then ordinary folks living in rich countries can expect to see income/wage differences flattening between themselves and those in the developing world. Likewise the differences in income between wealthy people in rich countries and their wealthy counterparts in the developing world are diminishing; places like China, Russia and India are home to lots of tycoons. For this latter group -- global high earners -- the potential gains are truly staggering. Globalization itself -- the fact that the entire human race increasingly is participating in market capitalism -- means there is far more wealth up for grabs than ever before. All things being equal, economically successful "winners" benefiting from a market of 6.5 billion souls will enjoy bigger paychecks than their counterparts from the days when the same market counted only 2 billion.

So, if you're living in a rich country and you don't count yourself among the ranks of the wealthy, you're undoubtedly going to find the income gap growing between you and the tycoon class, and the gap shrinking between you and the rest of the world's non-rich. We all gonna be one big happy proletariat!

What this scenario does not imply or require, however, is absolute declines in living standards. In other words, we might expect that over the long run, the wages of, say, Vietnamese workers will rise faster than those of Swedes or Americans, but Swedish and American wages (and, more importantly, Swedish and American living standards) can (and should) continue to grow in absolute terms.

In short, as long as you don't mind the fact that the salary gap between you and a CEO is likely to expand from today's differential of (say) 500 to (say) 3,000 in the year 2029, you've got an excellent chance of enjoying a higher standard of living that year than you do now. But in 2029 you're also likely to make only two times more than a Malaysian doing similar work, instead of six times like you do now.

Posted by: 99Jasper on October 29, 2006 at 12:26 AM | PERMALINK

BTW, we can't read the second part of the article without paying.

Posted by: llbean on October 29, 2006 at 1:01 AM | PERMALINK

Here is the simple analysis that I would like to put forward. Please put a hole in it if you can.

Years ago commerce was local. Even companies that were globally connected needed a distribution network to get product to consumers. All along the way someone got a piece of the pie that was a successful company.

Communication and research was painstakingly slow. Many middle managers were employed in the aggregation of field data to present it to the top decision makers.

The internet and the global community changed this. Why is Bill Gates the richest man in the world. Because he makes a small percentage off every computer in the world.

Bill Gates employs much fewer people than he did before to check on the status of the world wide company.

I live in LA. I can get Maine Lobster, Chicago Beef, NY Pizza all delivered to my door fairly cheaply. No one involved in the transaction but a website and a delivery company.

Obviously you will be richer if you can get 1 percent of sales from a billion people than 1 percent of sales from one hundred thousand.

Why are professional atheletes making more? Because their product ( televised sports ), goes out to billions of people. You can charge a lot more for an ad which shows to a billion than one which is only shown to one hundred thousand.

In short, the amount of employees needed to sell something to a global audience has been drastically reduced by technology.

I am not worried. Although this creates a few ultra-ultra rich, the rise in standard of living from the availability of cheap goods is well worth the allowing the existence of some billionaires.

People complain about the lowering of median incomes based on constant dollars. This is baloney. The cost of living based on essential items may have indeed outpaced income, but the sheer amount of availability of what were once luxury items - Computers, multiple TVs, large cars with many features, digital devices - has far outpaced that. I guess when the economy is going well the dems have to find some place to complain. This economy is going really well, and only those who want to find some reason to not think that worry that the supper rich are getting richer.

Posted by: John Hansen on October 29, 2006 at 1:13 AM | PERMALINK

Of course, it's not just a question of income, the other side to this is the huge accumulation of wealth.

Most of this has come by moving capital from shareholders hands into the mits of the geniuses who are running the companies and are rewarded through share options, etc. in a way that has been showen to have little to do with performance.

It's hard to argue with the capital gains accrued by entrepreneurs who hold the corporate shares and trully create wealth over time. Or who trade whole or large portions of companies after restructure. It is all to easy to see through the fraud of over-reward of mediocre and underperforming managemant.

Sean -- I'm not sure the diversity angle holds unless it coincides with a subservient majority. viz robber barons, 19-20th century. And at present, working class have substantially improved Repbublican election chances while labout laws have certainly moved to the benefit of capital over labor.

I think you are a little sensitive. For me, Repugnuts is reserved for the neocons; repugs for those with anti-social, piss-on-the-poor tendencies; I definitely like repiglicans above, although personally I'll coin repiglets as better since they like the trough so much. It's not like the Republican party are against using their own derogatory terms, now, is it?

Posted by: notthere on October 29, 2006 at 1:13 AM | PERMALINK

In the future, wealthy private schools won't even lose football games to lowly land grant schools inhabited by students in plaid flannel shirts.

Posted by: B on October 29, 2006 at 1:16 AM | PERMALINK

The more I think, the more I lilke "repiglets" for their tendency to suckle off the state with tax-breaks, corporate welfare and cosy contracts, as well as the trough of K-street, while crying "Wee, wee, wee" to the public about "free markets". It's all bull. Or sow's ears. Or something.

Posted by: notthere on October 29, 2006 at 1:18 AM | PERMALINK

> Not how it works.
> That Bill Gates gets a lot more money doesn't
> take it away from the guy who sweeps the
> sidewalks, and if Bill Gates makes less money,
> the guy sweeping the sidewalk doesn't get a
> percentage of the leftovers.

I have worked in the computer industry for over 30 years. Sorry but what you said about Bill Gates and Microsoft is not true.

While Bill Gates and Microsoft did not take money directly out of the pocket of the street sweeper, they did take the money from thousands of small competitors. They did this by locking out these competitors from getting sales because Microsoft had already had it software preloaded on customers computers. The end result is Microsoft got the bulk of the sales regardless of product quality.

I have a list of hundreds of commercial software proucts for sale in late 80s to late 90s where the competitors besides losing all those sales also have to write off their investments in software development for thos products.

Posted by: John Stevens on October 29, 2006 at 1:22 AM | PERMALINK

Stevens:

Recommended reading.

Posted by: hayek on October 29, 2006 at 1:35 AM | PERMALINK

...I guess when the economy is going well the dems have to find some place to complain. This economy is going really well, and only those who want to find some reason to not think that worry that the supper rich are getting richer.

Posted by: John Hansen on October 29, 2006 at 1:13 AM | PERMALINK

Guess you forgot about Reagan's "rising tide" and GW's "benefit all"; GHW didn't get much of a look in. Then we have the deficits, AGAIN! Guess it'll take another Democratic administration to put that right, AGAIN!

This economy is only going "really well" for some.

Your comfortable analysis would be OK if our biggest single ticket item, housing, hadn't been going up by 2-5 times inflation, our second biggest item, health insurance, 2-4 times inflation, and I really don't see that vehicle prices have fallen and all their little gizmos have little effect on productivity.

In the later 90s, people outside the top 20% did get some real income growth, and, while Clinton was on the healthcare warpath, healthcare cost inflation abated -- then exploded again. Coincidence?

It seems pretty clear, this administration is all for wage cost suppression, labor union and labor, generally, weakness, don't give an F for healthcare coverage or the condition of the working or non-working poor. The only measure on their horizon is corporate profitability and party donations.

Posted by: notthere on October 29, 2006 at 1:52 AM | PERMALINK

A lot of the comments above seem to equate income with wealth. These two are very different. Bill Gates, the wealthiest man in the world, had earned income (salary and bonus) of less than one million dollars a year in 2004. There are many 26-year-olds on Wall Street (and probably at Microsoft as well) who make more than that. Gates's income went up when Microsoft started paying a dividend -- but still, there are probably many people with much less wealth than Gates who have higher incomes today. (Gates's wealth, of course, comes from owning Microsoft stock -- which is assets).

I read somewhere that Michael Bloomberg, another billionnaire, was getting a salary equal to that of the lowest-paid employee of his company ($25,000 some years ago). He probably also got profit distributions, but he is rich mainly because of his business ownership.

On the other side of the scale, you have company executives and key employees with gigantic salaries. These salaries have grown uncontrollably and, as someone remarked above, many believe that this compensation is not really subject to a market process.

As also remarked above, globalization is also responsible: people at the corporate bottom are competing with workers in India and China, whereas top executives and traders are making new money from India and China. So globalization hurts the worker while it helps the executive.

But mdr3000, don't hold your breath until a revolution comes. Only mass unemployement or runaway inflation would cause a revolution -- but as long as there are jobs, no matter how little they pay, people will be happy with their cars, TVs, and DVD players.

Posted by: JS on October 29, 2006 at 2:07 AM | PERMALINK

I just watched a rerun of the Tennessee Senatorial debate between Ford and Corker.

The issue of economics is such a complicated one and so debatable that it's hard for them to debate it with 2 minute speeches. So, they said they'd balance the budget and Ford said he'd support a minimum wage increase. They both (I think) said we had to educate the kids. That's about as far as it went.

Government intervention in the economy of the country is a very sticky issue. It's undergone some major changes from the great Depression era to the great devolution since Ronald Reagan and the balancing act of Bill Clinton. Maybe one day in the distant future we can have a complete discussion on the issue, but for now it's hidden behind smoke and mirrors.

I did like that Ford brought values and pride into the debate and he took the very high ground with regard to the negative ads, particularly the sleazy one Corker had to pull off the air.

All-in-all the debate was very formal, covered a lot of ground, required the candidates to give terse relevant answers and was tense, but civil. It was one of the very best professionally run debates I've yet seen on t.v. this year.

My hope Ford wins probably doesn't shade my opinion of the debate much. I haven't followed their campaign much and don't have strong opinions of either candidate. I think Corker's voice is irritating, but Tennesseans might not mind it. I think Ford's color might bother as many Tennesseans as Corker's voice might bother. It was a slight ad to Ford I think, but not much more than that.

I'd like to see Al Gore give a great speech from Nashville to tip the balance in Ford's favor. I wonder how Ford and Tennesseans feel about Al these days.

Posted by: MarkH on October 29, 2006 at 2:16 AM | PERMALINK

Actually, the average MLB player is only a little bit better than the guys playing in triple-A, if you put them on the scale of all baseball players. The very best are quite a bit better, maybe 2 or 3 times as productive, but they get paid a lot more than 2 or 3 times as much.

Posted by: DoctorJay on October 29, 2006 at 2:33 AM | PERMALINK

Well, it took awhile but someone did finally respond to mdr3000, but JD missed the comment he made--no revolution soon, probably just a despair, etc. And I think a rereading of Marx really is in order. Where I see capital accumulation happening is in my friends' medical bills and insurance. Everyone I know either has giant medical bills or is hanging on to rotgut jobs (jobs where you have to drink lots of rotgut just to make it through the day) just to maintain insurance which, when the going gets tough--when expensive medical bills start rolling in--dissappears. Marx was right, and sooner or later, when the children can't arfford TVs, they'll revolt.

Posted by: jim on October 29, 2006 at 2:34 AM | PERMALINK

You're right, jim -- I got his point when I was reading his comment, but by the time I got to the bottom of the stack I remembered mainly his reference to revolution. My bad.

By the way, income inequality is not as extreme as assets inequality: The top 1%, the next 9%, and the remaining 90% each own one-third of the nation's wealth
Source: Kennickell, A. (2003). A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989 to 2001. Washington, D.C.: The Federal Reserve Board.
.

Posted by: JS on October 29, 2006 at 2:42 AM | PERMALINK

sooner or later, when the children can't arfford TVs, they'll revolt.

jim, to point out the obvious, there is no need to revolt these days. Just vote the bums out. (But as you probably know, many of the lowest-paid people in the US, and the ones with no assets, vote Republican because of gay marriage, supporting the troops, atc. The Red States are also the poorest states. I don't know what Marx would say about that.)

Posted by: JS on October 29, 2006 at 2:52 AM | PERMALINK

hayek --

http://www.theadvocates.org/celebrities/peter-thiel.html

I see Thiel's reading list for becoming a "libertarian" and just don't get it. Actually, I think he's like our friend "ex-liberal" and was always wired that way, just in some form of denial.

Writers Liebowitz and Margolis both are at the inaptly named Independent Institute, founded by libertarian David Theroux and self-admitted "way libertarian" Peter Thiel.

Actually, I think I'm way behind this wave. I hadn't quite realized that the term "libertarian" has been exclusively hijacked by fasco-capitalists?

Posted by: notthere on October 29, 2006 at 2:59 AM | PERMALINK

How much do President Bush's tax and economic policies further enrich the upper crust?

It's sheer hypocrisy how the GOP's elite titans of industry get working class stiffs pissed off against the government in order to deflect attention from their own greed. How often have we heard Republican political and economic leaders warn, "The Democrats want to steal your money by raising your taxes," only to see these same leaders implement policies and laws that raise the tax burden on middle and low income families while reducing their own.

Furthermore, GOP industry titans have suppressed the hourly minimum wage at $5.15 for the last nine years. Because of inflation its value has fallen 20 percent, shrinking the real purchasing power of the minimum wage to its lowest level since 1955. A 40-hour work week is now worth only $10,700 per year. How does a working person build equity and move up the ladder when his boss supports economic policies that choke off savings? Where is economic growth supposed to occur?

The Republican elite have been robbing the Republican rank and file blind for years while marketing "big tent" issues such as support for the military, hatred of the Clintons, hatred of immigrants, abortion, flag burning and religion in the schools.

When the GOP elite say "Its your money" they really mean, "It's my money." Judging by the polls, in 2006 the rank and file of the GOP and the moderate Democrats are finally starting to see through this utterly cynical manipulation.

Posted by: pj in jesusland on October 29, 2006 at 3:17 AM | PERMALINK

...and the share going to the richest one-hundredth of 1 percent has quadrupled.

Let's ask John Kerry how he did it. Oh yeah, gold digging marriages!

Posted by: sportsfan79 on October 29, 2006 at 3:38 AM | PERMALINK

Quick question: who had more money?

a) John Kerry

b) George Bush

Bonus round: by how much?

a) Tenfold

b) One hundred fold

c) One thousand fold

Double bonus round: who payed more income taxes, as a percentage of income.

a) John Kerry

b) George Bush

c) George Bush by tenfold

d) George Bush by one hundred fold

Posted by: sportsfan79 on October 29, 2006 at 3:42 AM | PERMALINK

Wow sporty79, such a rich trove of insight. You complete me.

Posted by: Keith G on October 29, 2006 at 3:56 AM | PERMALINK

Kathy is right for many of the top 1 percent, and ex-lib ignores that basic fact.

What he, Hawk and others even more blatantly ignore is this one word: "luck."

When bagazillionaires like Bill Gates testified earlier in this Congress about keeping the estate tax in place, they all mentioned some variant on the word "luck" as a significant factor in their getting rich.

Take Gates. Pure-D luck that IBM didn't sniff him out sooner. (Or Steve Jobs didn't sniff him out either, for that matter.)

Posted by: SocraticGadfly on October 29, 2006 at 3:59 AM | PERMALINK

One of the effects of globalism is the lost of the importance of a corporations local market.

Growing up in an old rustbelt city, I witnessed the demise of corporations as concerned neighborhood citizen. Companies like Champion Spark Plugs were truly community based.

Everyone from the janitors to the chairmen of the board, and most of the shareholders lived in our area. While these folk would never be confused with socialists, they seemed to care a great deal about the welfare of their workers since they were their neighbors. This was reflected in both working conditions and wage differentials.

Posted by: Keith G on October 29, 2006 at 4:22 AM | PERMALINK

JS,

jim, to point out the obvious, there is no need to revolt these days. Just vote the bums out. (But as you probably know, many of the lowest-paid people in the US, and the ones with no assets, vote Republican because of gay marriage, supporting the troops, atc. The Red States are also the poorest states. I don't know what Marx would say about that.)

He said "religion is the opiate of the people". I always thought that was one thing he was right about.

Posted by: Bengt Larsson on October 29, 2006 at 5:42 AM | PERMALINK

One way to start rectifying this is to stop taxing unearned income from dividends, capital gains, etc. at lower rates than earned income.

Posted by: bob h on October 29, 2006 at 5:46 AM | PERMALINK

elmendorf tells us: "Two-thirds of Forbes' 400 top richest Americans did not inherit their wealth."

That's dicely deceptive.

That same Forbes report tells us those same two thirds did grow up in households worth more than a million bucks. It matters. No, Bill Gates hasn't inherited his wealth because his dad hasn't died yet (I don't think.) But he did grow up in a millionaire family and was well endowed with the perks of status before he ever wrote that 8 bit processor operating system. Go take a look at Ruby Payne's "A Framework for Poverty" to get an idea of what growing up in wealth versus growing up in poverty means. Better still put on your dreggiest duds and go stand on a corner begging for an afternoon - walk into a 7/11 dressed like that. You'll very quickly see how those in poverty get beat up from the get go in our free society.

Posted by: Ed D. on October 29, 2006 at 7:56 AM | PERMALINK

Couldn't care less about this topic...I save my respect for those obscenely wealthy folks who actually USE their wealth to make the world a better place for their fellowman. Not those who accrue their toys and set their agendas to destroy the rights and lives of others (especially those hypocrites who do it in the name of JESUS). They can't take it with them any more than I can and you can only wear one pair of shoes at a time...so they are THE PROBLEM...seldom part of the solution unless they practice some charitable behaviors!

Posted by: Dancer on October 29, 2006 at 8:06 AM | PERMALINK

I think you ought to separate the top 1% into two groups; the entrepreneurs -- Bill Gates, George Lucas, even Warren Buffett -- who very few people begrudge their wealth, as opposed to the paper shufflers -- Dick Grasso trying to pay himself $180 million for running the NY Stock Exchange, for example.
I would say this problem has roots in the 1960's where two trends started to merge. First is what I would call the free agency myth. Following in the steps of those truly able to demand economic rent due to their unique status - Muhammad Ali, Joe Namath or Curt Flood, for example - the cartel unions like the baseball players, longshoremen or airline pilots went hog wild with their wage demands. Following right on their footsteps were the Board of Directors/CEO cartels, who felt they deserved rent seeking profits as much as any jock.
The concurrent trend was the erosion of any sence of fiduciary duty, the fusty old unwritten rules where a good employee could depend on his job or shareholders could expect management to show deference to their interests. I blame this on the rise of the MBA as office prima donna, and I think the most egregious examples are in the so-called "not for profit" sector. A good example would be [and someone from Washington Monthly should do a story on] the trustees of the "nonprofit" Blue Cross/Blue Shields around the counrtry cashing out while selling out their subscribers.

Posted by: minion of rove on October 29, 2006 at 8:20 AM | PERMALINK

minion of rove,

I doubt Washington Monthly is going to take a hard look at "non-profits" anytime soon.

Ed D.,

If you are still going to begrudge those like Bill Gates their wealth, how about elmendorf's other point? Plenty of those richest 1% give more to the Democratic Party, so explaining income inequality is a little more complicated. Here's just a sample of donations from that link:

Paul Allen, Microsoft co-founder, 81% to Dems

Ron Burkle, supermarket magnate, 98% to Dems

David Geffen, Dreamworks co-founder, record producer, 88% to Dems

Leona Helmsley, hotel developer/operator, 100% to Dems

Steve Jobs, Apple Computer CEO, 100% to Dems

Joan Kroc, philanthropist, 97% to Dems

Charles Kushner, real estate developer, 97% to Dems

George Lucas, filmmaker, 100% to Dems

Pierre Omidyar, eBay founder, 75% to Dems

Ron Perelman, businessman, 66% to Dems

Sumner Redstone, Viacom chairman, 66% to Dems

Steven Spielberg, filmmaker, 93% to Dems

Oprah Winfrey, talk show host, 94% to Dems

Jerry Yang, Yahoo! co-founder, 80% to Dems

Do I even have to mention George Soros and Ted Turner? That article linked by JS is very enlightening as well.

Posted by: Chuck on October 29, 2006 at 8:33 AM | PERMALINK

Chuck,

I agree 100% - this is not a site that would endulge in Sista Soulja-type analysis. I've frequently pointed out how The Weekly Standard or National Review will commit some apostacy (exposure of Jack Abramoff being the best example) while WM continues to goose-step to the Dem Party line.

Posted by: minion of rove on October 29, 2006 at 8:40 AM | PERMALINK

Yeah, but you suck dirty green donkey dicks in Hell, minion of rove.

A joke for you:

George W. Bush was out jogging one morning when he tripped, fell over a bridge railing and landed in the creek below. Before the Secret Service guys could get to him, three kids who were fishing, pulled him out of the water. Bush was so grateful he offered the kids whatever they wanted.

The first kid said, "I sure would like to go to Disneyland." George said, "No problem. I'll take you there on Air Force One."

The second kid said, "I really need a new pair of Nike Air Jordan's." George said, "I'll get them for you and even have Michael sign them!"

The third kid said, "I want a motorized wheelchair with a built-in TV and stereo headset!!" George Bush is a little perplexed by this and says, "But you don't look like you are injured or handicapped."

The kid says, "I will be after my dad finds out I saved your ass from drowning!"

Posted by: The Liberal Avenger on October 29, 2006 at 8:53 AM | PERMALINK

The mystery that Chait describes is that the richest of the rich seem to be getting richer and richer though no one else is. Economists can't figure out why. It isn't the policies of the government (though tax cuts for the uber-wealthly exacerbate it.) It obviously isn't because the top 1% is significantly smarter, hard-working than the next 4% (say) though they may be luckier--they happen to land on economic gold mines while the rest of us are sitting on sod.

My proposal is that it is a side-effect of compound interest and the miracle of exponential functions. Their wealth is invested and growing faster than they can spend it. That million dollars invested wisely becomes two million in no time at all. And two becomes four, and so one. This would account for the differences among the uber rich, as well. At some point, with sufficient excess, you reach a sweet point. Once you get there, you are protected from the market and your wealth just grows exponentially.

Meanwhile, all the rest of us are scraping by, trying to save that first $10,000, or $100,000, or $1,000,000. No sweet point in sight.


Posted by: PTate in MN on October 29, 2006 at 9:03 AM | PERMALINK

Income inequality is always resented.

An artist friend of mine was so poor that he had to go out and make chalk drawings on a sidewalk to get some money, any money. He chose a spot with good traffic already being worked by panhandlers, just moving down from them to be unconfrontational. He made good money. So one of the panhandlers came over to him and snarled, "Why don't you get a real job?"

Posted by: Bob M on October 29, 2006 at 9:09 AM | PERMALINK

To me there's just something intuitively repugnant to the idea of tax cuts to the rich. There are people in our society who stay out of the public eye for the most part, who enjoy a lifestyle and financial security that the rest of us only fantasize about. Their wealth provides them with power and influence on the political process far beyond what majority of the population has. Yet the republican approach to economics is to reward these people with even more wealth, via tax cuts. I really don't know if the approach is effective or not (everything I've read suggests it's marginal at best) , but it's definitely morally repugnant.

Posted by: Del Capslock on October 29, 2006 at 9:12 AM | PERMALINK

Avenger,

I hate the color green.

Posted by: minion of rove on October 29, 2006 at 9:17 AM | PERMALINK

PTate in MN,

Even in the U.S., if you have $1 million in savings, that's pretty much a sweet spot.

The Liberal Avenger,

Yeah, that was very funny about the President of the United States almost drowning. Have you seen that new movie, full of jokes and laughs, about Bush's assassination yet?

minion of rove,

You do know that Washington Monthly is a "non-profit" too, right?

Ed D.,

This is from the list of "celebrities" who have given 100% to Dems:

Ansel Adams, Ben Affleck, Jessica Alba, Jason Alexander, Joan Allen, Krista Allen, Kirstie Alley, Louie Anderson, Paul Thomas Anderson, Julie Andrews, Marc Anthony, Christina Applegate, David Arquette, Jules Asner, John Astin, Richard Avedon, Dan Aykroyd, Lauren Bacall, Diedrich Bader, Anita Baker, Drew Barrymore, Kim Basinger, Justine Bateman, Ned Beatty, Harry Belafonte, Robert Beltran, Tony Bennett, Tom Berenger, Candice Bergen, Valerie Bertinelli, David Blaine, Robert Blake, Michael Bolton, Barry Bostwick, Peter Boyle, Lorraine Bracco, Zach Braff, Amy Brenneman, Lloyd Bridges, Matthew Broderick, Adrien Brody, James Brolin, Albert Brooks, Mel Brooks, Pierce Brosnan, Jimmy Buffett, Carol Burnett, Ken Burns, Nicolas Cage, James Cameron, John Candy, Tia Carrere, David Caruso, Dan Castellaneta, Michael Chabon, Michael Chiarello, Tommy Chong, Deepak Chopra, Patricia Clarkson, George Clooney, Enrico Colantoni, Sean 'Diddy' Combs, Ry Cooder, Francis Ford Coppola, Courteney Cox, Cindy Crawford, Michael Crichton, David Crosby, Marcia Cross, Sheryl Crow, Cameron Crowe, and Tom Cruise.

That is only "Names A - C" and doesn't include some who gave A LOT (like Steve Bing who "only" gave 87% of his total $11,019,719 in donations to Dems, 0% to GOP, and 13% to "other"). You can view the rest at that link above.

Posted by: Chuck on October 29, 2006 at 9:24 AM | PERMALINK

PTate in MN, as usual, is spot on.

Posted by: thethirdPaul on October 29, 2006 at 9:26 AM | PERMALINK

I have an idea: Maybe its because there are a few people out there who are really good at making money, in a time of changing technology that gives them opportunities. And they are doing it in a country that (mostly) does not act like savages who feel the need to loot from the richest person around just because they can.

Posted by: coyote on October 29, 2006 at 9:38 AM | PERMALINK

Wow, John Candy, is giving to the DNC. Any word on Rudolph Valentino?

Posted by: stupid git on October 29, 2006 at 9:39 AM | PERMALINK

stupid git,

The list includes "celebrities" (actors, musicians, authors, icons) who "have given" (past tense) 100% to "Dems" (I will assume you know which party that is). Kinda goes to the point being made by those like sparky above about buy yourself a political party.

Posted by: Chuck on October 29, 2006 at 9:50 AM | PERMALINK

By the way, why do we care? I guess if it was a zero-sum economic world, and people getting richer meant everyone else was getting poorer, it might matter. But the world does not work that way. Not even close. Paris Hilton gets rich, but I'm doing fine, so why do I care one bit? Why do you care?

And, if you really think that the economic world is zero-sum, and rich getting richer mean we are poorer, then you are just as screwed up as any conservative who denies evolution. Economics is as much of a science as evolution, and it is just as much a crime against reality to ignore it as to ignore Darwin.

Posted by: coyote on October 29, 2006 at 9:50 AM | PERMALINK

coyote,

They care because the Democrats have been better at hiding the fact they are bought and paid for, just like the Republicans. Class warfare works on some levels. It makes for good political advertising directed at the masses.

Posted by: Chuck on October 29, 2006 at 9:53 AM | PERMALINK

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Posted by: mmf铃声 on October 29, 2006 at 9:57 AM | PERMALINK

I have an idea: Maybe its because there are a few people out there who are really good at making money, in a time of changing technology that gives them opportunities.

Examples? The various executives that back-dated options to ensure they maximized profits? Dick Cheney, who oversaw the downsizing of the military under one administration, then profited from the use of a no-bid general service company by the military under another administration? The CEOs who serve on their buddies' boards and set their buddies' pay, while appointing their buddies to their own boards?

There's a lot of theft going on. Some it is in a grey area, where it might be morally or ethically wrong, but not legally wrong. That's because the people who write our laws are beholden to the thieves.

Posted by: Wapiti on October 29, 2006 at 10:11 AM | PERMALINK

You can extend your examples of rising inequality to include movie stars, musicians and novelists. The top novelists (e.g. J.K. Rowling) can make hundreds of millions off of royalties. But I'll bet that once you get past the top-selling 10% of authors, you reach authors who can only barely make a living through writing.

I think that the reasons for this "winner-takes-all" trend are understandable. There is no reason that a few thousand talented writers could not provide all the books that are read in America. There is no reason that a few thousand talented programmers could not provide all the software that we ever need. There is no reason that a few thousand farmers equipped with high tech farming equipment could not provide all the food that we eat.

In general, it seems plausible to me that technology could enable 0.1% of the population to provide enough major goods and services to satisfy the needs of the other 99.9% of the population.

Posted by: Daryl McCullough on October 29, 2006 at 10:16 AM | PERMALINK

Fact: large amounts of money, can make even larger amounts of money.

Posted by: Dataracks on October 29, 2006 at 10:19 AM | PERMALINK

The rich getting richer is an accepted part of our society.

Posted by: SEO Hosting on October 29, 2006 at 10:20 AM | PERMALINK

Money makes money, those that have capital make more capital. The wealthy becoming more wealthy has been a normal part of America since the beginning.

What is not normal is that the middle class is not becoming wealthier, too. The reason has to do with trade. First, the outsourcing of manufacturing jobs has sent many middle class workers on an exodus from the factory to the fast food joint. Middle class people are losing jobs, and those jobs are replaced with service jobs that usually do not pay as much as manufacturing does.

At the same time, the migration of the middle class into service jobs means a greater surplus of labor in those areas of the economy. Thus, employers have the ability to pay workers less and less as the surplus grows. Illegal immigration has sped this up.

The United States, of course, does need to educate people for information jobs and technology jobs. But manufacturing will always been important, and the American middle class will only see their incomes rise if our leaders fight against the free trade dogma and return to the economic patriotism of Lincoln and Theodore Roosevelt that turned our nation into a Great Power. For the Democrats, this will be painful, as they will be turning on decades of their own heritage. But some, such as John Edwards and Al Sharpton, have questioned so-called "free-trade".

If the rest of the Party follows suit, America could be in store for the return of well-paying middle class jobs, less Big Government (which has been used to hide the effects of free trade-for example, billions of dollars of farm subsidies prevent some farmers from losing their jobs the way factory workers are), and smaller federal budget deficits (taxes are digured into the cost of a good-when an item is bought from China, we pay taxes to Bejing instead of Washington, D.C.).

If the Democrats fight to restore economic patriotism, they will fight to restore both the social justice and true economic strength of the United States. And they will claim a piece of the mantel of conservatism that the Republican Party dropped a long time ago. The Democrats could become America's party again on this one issue.

Posted by: brian on October 29, 2006 at 10:36 AM | PERMALINK

Hmmm...not sure where this thread is going. Apparently some people are hung up on where famous people donate their money.

But whatever.

John Hansen: you had me till the final two paragraphs.

First, better off in an absolute sense doesn't matter as much ss you think it does. I may have more money than my great-grandfather, but I really do have to pay for a flush toilet - it's not really an option. Many job applications require me to fax information to the company. Simply participating in the economy has its requirements these days. Also, extreme inequalities are just as extreme absolute poverty at denying individuals access to the education and socialization that helps them progress within society.

Second, it's not true that *all* people are better off in an absolute sense as a result of globalization. Computer software is a type of automation that can result in the outright elimination of midlevel jobs. Outsourcing can kill off domestic industries and transport them elsewhere. Keep in mind that all those theorems on "comparative advantage" from economics show benefits *in the aggregate* not to any individual. Indeed it's likely that many individuals will suffer. "Coyote" above evidently does not understand this. Bill Clinton understood it, and a counterpoint to his support for NAFTA and similar agreements was supposed to be strong support for retraining and education funding. It's not clear to me that he came through on that, though.

p.s. A related point is that in the "new economy" the midlevel worker is not just facing lower pay vis-a-vis the top 1%, but increased risk. That was the point of Jacob Hacker book discussed here recently.

Posted by: fizz on October 29, 2006 at 10:37 AM | PERMALINK

I agree with Daryl McCullough. As long as our "wants" are simple there will be a whole lot of unemployed people around. There are not a lot of unemployed people in the U.S.A (I counted almost two dozen help-wanted signs yesterday on all kinds businesses) but if we really want to raise up working class wages quickly we should immediately close the borders and go to zero immigration for a couple decades. Also put up a big tariff on all imports so that our economy will hire and promote a lot of people making import replacements.

Mainly, we all need to consume more. I don't want a 5,000 sq ft house or two 2,500 sq ft houses, but my present modest house and a diesel pusher RV would be great. The problem with the ultra rich is that they really can sleep in only one bedroom at a time, they eat and drink less than many on welfare, and they have few if any personal servants. Some hire a lot of security staff, which is great if you have been to Iraq as a Navy Seal or Special Forces. Good jobs await here at home.

I like consuming things in a group fashion, like building a cruise ship to haul me around a week every year with lots of servants. I would have flown the Concorde, but it went out of service. I can't afford the Russian space ride, but will go to Las Vegas and rent a C-6 Corvette for a couple days. Please join with me in "consuming" a manned mission to Mars and the moons of Jupiter.

I like to consume NFL football and red wine at the same time (today's plan.) I'd like to consume a couple more tailor made suits, a 20-gun firearms collection, and a 120-hp personal airplane for assisting search and rescue work. An inflatable boat would be nice. The wife does not need inserts but maybe it is time to get the lasic procedure and give up on eyeglasses. When I win my election I'll get a chin lift and white overlays on the old teeth, to look pretty down in Olympia.

Posted by: Mike Cook on October 29, 2006 at 10:55 AM | PERMALINK

One of the most striking features of other developed nations-Europe and Japan- is how broadly middle class they are. This is even the case in very rich countries like Switzerland where there are quite a number of very rich people. You dont need to look at the Gini index, just at the way people live.

When you come to America you are immediately aware of the gated communities, exclusive grocery stores and up market shopping malls and the dining-out lifestyles of the well-off. Everyone else gets Wal-Mart and McDonalds. The antiquated infrastructure, undercapitalized schools (except for the well-off whose schools are glorious) and lack of health care are also quite striking. The Deep South is as undeveloped as parts of Africa the I have seen deindustrialized places in the mid-West that could be in Russia. Many Europeans who come to the US say that it reminds them of South America and not because of the pockets of Latin culture. This is a dramatic departure from Americas Golden Age in the decades after World War II and I think it comes as a surprise to Americans.

Much of this is the direct result of political choices particularly the uncritical embrace of Chicago school economics, laissez-faire capitalism, low taxation, deunionization and a taught aversion to risk-sharing. All things that benefit the pocketbooks of the wealthy and have, through propaganda, been transformed into holy writ.

The rights true war is not against the poor or the welfare mothers but against Middle Class economic and social security. The immigration thing (which is nothing compared to global labor arbitrage), rich sports star salaries, and liberal elites are just garden variety political canards to occupy the political imagination of the hoi polloi.

Posted by: bellumregio on October 29, 2006 at 11:11 AM | PERMALINK

Gotta love Chuckles. Ad hominem attacks against the Washington Monthly and lists of wealthy Democratic supporters, and not even a hint of anything actually relevant to the discussion.

Posted by: PaulB on October 29, 2006 at 11:11 AM | PERMALINK

The lower tax rates, reduction of death taxes has kept the money in the family. That is why we have Paris Hilton's today. You also have the cronyism issue. George W. Bush is an abject failure. He screwed around in school, getting mediocre grades. His attendance was "spotty" in the National Guard Spot his daddy got him. He brought several oil companies into bankruptcy, that were handed to him because of his connections. He drank like a fish, likely snorted coke, and fucked up until he was 40.

What was his reward? More money of course. He is an influence on daddy, so more people sent him money, jobs, deals on baseball teams, because they figured to get money from dad that would more than make up for it. He now is President of the United States.

His brother Neil is a multi millionaire educational software developer (cough cough), and Jeb is Governor of Florida. If these three kids were dumped off into an orphanage as toddlers, how much money would they be worth now?

Posted by: trifecta on October 29, 2006 at 11:16 AM | PERMALINK

Mike Cook:

You are precisely the reason America is in decline.

You remind me of nothing so much as a Roman Senator in the time of Caligula.

Bob

Posted by: rmck1 on October 29, 2006 at 11:50 AM | PERMALINK

You remind me of nothing so much as a Roman Senator in the time of Caligula.

Or Marie Antoinette, with his unctuous admonition that "we all need to consume more"...CAKE, apparently.

Posted by: Windhorse on October 29, 2006 at 12:01 PM | PERMALINK

"Standing behind every successful man are 100 men made destitute by him." --- Adam Smith

(yes, that Adam Smith.)

Posted by: dopey-o on October 29, 2006 at 12:04 PM | PERMALINK

Since the US has a zero savings rate and a huge trade imbalance (Germany exports more in dollar amounts and has less than a third of the population) it can consume only because foreigners buy US debt. The impoverishment of the US consumer and his inablity to absorb more exports is the cause of the great global imbalance. If the world is to prosper others will have to take up America's old role as global consumer.

Posted by: bellumregio on October 29, 2006 at 12:16 PM | PERMALINK

Inequality there was not abolished but Labor felt increasingly more powerful and disdainful of the public good.

Oh really, mhr? And you know this.how?

taxes on the highest incomes reached 90%.

So? I have never heard any credible, main stream political leader here call for anything like this. What is your point?

Posted by: Keith G on October 29, 2006 at 12:18 PM | PERMALINK

Windhorse:

I guess it was Mike discussing he and his wife's plastic surgery needs ("No implants for her, no siree!") in order to get "prettied up for Olympia" that pushed it completely over the top for me ...

Here's a guy who on the one hand is a hard-right Christian conservative -- and on the other has one of the most slavish faiths in technology I've seen this side of the golden age of early 80s futurism ...

What kind of a bizarro world *is* that? And he's a *political candidate* for the Washington State legislature.

What's his platform? Theocratic space colonies?

Seriously ... no connection whatsoever between the blithe instrumentalism of his consumer fantasy with its implication for moral values ...

Bob

Posted by: rmck1 on October 29, 2006 at 12:25 PM | PERMALINK

Germany and France, not to mention the Scandinavian countries, had better overall economic performance than Great Britain in the later part of the 20th century and they had both high taxes and strong unions. These things alone do not explain Britains decline and relative recovery and they would cause one to both under- and over- estimate the Thatcher governments reforms.


Nicholas Crafts at the London School of Economics (in Supply-Side Policy and British Relative Economic Decline), after extolling the virtues of Thatcherite deregulation, concludes:

Nevertheless, if regulation really were the key to comparative European productivity outcomes, Britain would probably outperform both France and Germany. As Table 6 reports, in the mid-1990s the UK experienced less regulatory interference in the establishing of new businesses and was further ahead in implementing the Single Market than either of those countries. The sample survey by Blondal and Pilat (1997), also reported in Table 6, found that UK productivity in the five sectors investigated suffered a lower productivity handicap from regulation than either France or Germany, although considerably more than in the United States. Moreover, if, as Table 2 suggests, human capital accounts for much of the productivity gap with Germany, it is hard to see that this is primarily the result of weak competition policy or restrictions on land use.

One of Crafts major criticisms of the Thatcher government is underinvestment in human capital and R&D. In Britain the right-wing revolution took place in the context of economic class warfare and under the ethos of conservative anti-socialism. Therefore the Thatcherites were prone to dismiss anything that looked like redistribution, risk-sharing or social investment. Labour has tried to mitigate this while maintaining many of Thatcher's policies.

Posted by: bellumregio on October 29, 2006 at 12:43 PM | PERMALINK

That is only "Names A - C" and doesn't include some who gave A LOT (like Steve Bing who "only" gave 87% of his total $11,019,719 in donations to Dems, 0% to GOP, and 13% to "other"). You can view the rest at that link above.

What did it get them?

Posted by: rdw on October 29, 2006 at 12:52 PM | PERMALINK

The impoverishment of the US consumer and his inablity to absorb more exports is the cause of the great global imbalance

You are a blathering idiot. The global economy is far strong and better balanced by far than it's ever been. The US consumer is far from impoverished. They take breaks periodically but only because they run out of things to buy. Surveys have shown consumers expect to spend 8% more on Xmas this year than last and because so much more is made overseas Americans get a great deal more for their money.

Capitalism means that 35" Big Screen TV of 5 years go is obsolete. Today you can buy a much larger HD TV that weights half as much and costs half as much. Capitalism means that IPOD of 5 years now has 5x' as much capacity and.... oh wait minute. They didn't have IPODs 5 years ago. OK, That digital camera of 5 years ago now has 5x's as many pixels and memory and even shoots live action streams.

Your liberal woe is us act ain't working in this century. We ae the land of plenty. That's why everyone wants to come here.

Posted by: rdw on October 29, 2006 at 1:00 PM | PERMALINK

rdw:

Then why do Americans express so much economic uncertainty in public opinion surveys?

Bob

Posted by: rmck1 on October 29, 2006 at 1:07 PM | PERMALINK

What's his platform? Theocratic space colonies?

If I understand Mike's agenda, prosperous "Theocratic space colonies" is more accurate.

Apparently for some worshippers of the sky god, salvation does indeed come from "above."

Seriously ... no connection whatsoever between the blithe instrumentalism of his consumer fantasy with its implication for moral values...

Yep. As we've talked about before, such is the direction of the "Bix Box Evagelicals" that are emerging from the fundamentalist movement. Having been unsuccessful in their efforts to drag society backward toward the agrarian sensibilities of an earlier age, they've changed tactics and have decided to ride it forward on their own terms, using "guerilla marketing" to co-opt the most nakedly consumer and materialistic elements of our culture and re-brand them with a Christian theme.

They've discovered that it's easier to win followers when you play to people's vanity, greed, and sense of entitlement.

Whereas early Christians were not permitted to eat meat that had been offered to idols, today's Evangelicals can not only eat the meat, they have their own competing brand with glitzy packaging.

Posted by: Windhorse on October 29, 2006 at 1:12 PM | PERMALINK

rdw,

I guess the same thing those like sparky above argue other super-rich got from the Republicans. If I am guilty of ad hominem, it is only because I am holding up a mirror.

Posted by: Chuck on October 29, 2006 at 1:17 PM | PERMALINK

Windhorse:

All I know is, I'd just *love* to be his opponent's oppo researcher :)

I know it's only a state lege race, but could you *imagine* the mailings?

"While Mike Cook dreams of colonizing Mars and paying for his chin lift on your dime, we here in the district have more pressing issues ... "

ROTFL !

Bob

Posted by: rmck1 on October 29, 2006 at 1:22 PM | PERMALINK

Keith G, one of the points I take from mhr's take on British Labour in the sixties and seventies that might be relevant is that good-hearted policies can be perverted and then the result is hat you end up with someone like Thatcher, who did, damn her, put Britain back on its feet.

The point is not to go too far, I think, or you go over the cliff. How far is too far? Anything vindictive, like 90% taxation. (Actually, I think taxation went over 100% in some odd situations in England. It drove out the Rolling Stones, I was told at the time.)

Notice the vindictive tone at places in this thread. I wouldn't want some of these guys in power over me. I like them reasonable and moderate, thank you.

Posted by: Bob M on October 29, 2006 at 1:29 PM | PERMALINK

BOB M:Anything vindictive, like 90% taxation.


the story goes....that ron reagan was testifying before some government committee in the late 1950's during his tenure as the head of the screen actors guild.

with the top tax rate of 90% for anything earned above $400,000....

reagan was asked...where would he put the rate?

the story continues that reagan said...if the rate was at 50% , that he would be too busy working to spend time complaining about the top rate..

flash forward to 1980....reagan is president and with the rate around 70%...he cut it in half...

of course....debt piled up...

he eventually had to raise taxes...7-times..in all..

few remember that...


just wanted to add...


The top 20% of Americans own 84.4% of all privately held wealth. (2000 Census)


The top 1% own 33.4% of all privately held wealth. (2000 Census)


Posted by: mr. irony on October 29, 2006 at 2:06 PM | PERMALINK

"At some point, with sufficient excess, you reach a sweet point."

I was thinking about my previous comment, wondering what the sweet point would be.
It has to be large enough that you can't actually spend the interest on your investments. The sweet point is significantly more that $1,000,000. (Tax-free interest income on $1M is only about $30,000-50,000. Nice, but not a perpetual money machine.)

I speculate, rationally, that the sweet point is somewhere around $20M, generating an income of $1,000,000 or more. $1M is, coincidentally, about the income required to be counted in the top 1%. But even someone with a mere $20M invested in land and securities could feel the pinch if they wanted to buy that $2.5M condo in Manhattan. So, he or she would have to live within budget to have the money machine continue to build their fortune.

A lucky, smart, hardworking young entrepreneur who builds a Google, Walmart or Microsoft can reach $20M by creating value. A popular actor can get $25,000,000 for one film. JK Rowling made her fortune selling books. But having reached the sweet zone, their fortunes will continue to grow, as long as they don't go for excess.

It takes a fortune of at least a billion dollars to get into the Forbes 400, that "richest one-hundredth of 1 percent."

The average American worker--living on around $40,000 per annum--would have to save $1,000 a month from the time he or she is 22 to the time they retire at 66, invested at 12% per annum--to reach $20M (assuming the market always gets better, no market downturns.)

Fun quiz--Do you have what it takes to be a billionaire?

Posted by: PTate in MN on October 29, 2006 at 3:02 PM | PERMALINK

I think that there are a lot of good reasons for this, many of which have been mentioned above. Personally, I think that the fact it is a lot easier for entrepeneurs to monetize a good idea and get filthy rich has something to do with it.

But I think another factor, something that it probably impossible to measure, is that wealthy people are simply better at managing their money than others.

My wife and I make $120,000 a year combined. We have a strict budget that we adhere to rigorously that has allowed us to save over $100,000 in the past four years. We wait to rent the DVD instead of going to see first run movies. We have library cards and therefore never buy overpriced new books. We have the same TV, DVD player, VCR, and stereo that we did ten years ago. We each have exactly one credit card and pay off the balance each month. We have the same cars we had seven years ago, both of which were bought used instead of new. We don't have IPods. Bottom line...we've done well financially because we manage our money well and are therefore able to save almost 20% of our income.

There are plenty of other people making incomes similar to ours, but most of them buy every new gadget that comes out, have multiple credit cards which they do not pay off monthly, have bought overpriced new cars to satisfy their vanity, etc.

Its not just coincidence that the US has a negative savings rate...its that fact that most people waste money on things they want, but do not need, and therefore are never able to save any money. It doesn't help that most people's math skills are so poor that they couldn't calculate a stream of interest payments if it hit them in the forehead.

This is far from being the only reason that income inequality is rising, but I am firmly convinced that one of the reasons that wealthy people get wealthy in the first place and then manage to stay wealthy is because they have much better financial management skills than the average middle-class worker.

After all, its not just wealthy people buying all those fancy new high-definition flat-screen televisions that they don't really need.

Posted by: mfw13 on October 29, 2006 at 3:50 PM | PERMALINK

PTate in MN,

As mfw13 just pointed out, assuming no excess, even in the U.S., $1 million in savings is pretty much already a sweet spot.

Posted by: Chuck on October 29, 2006 at 3:54 PM | PERMALINK

Chuck,
I am defining "sweet" point as that point at which a fortune has become so great that it is impossible to consume. The fortune just gets bigger and bigger--it starts to exhibit exponential growth.

It would be sweet indeed to have a million in investments, I agree. But a million isn't enough wealth to be the kind of self-generating fortune I am speculating about. If you inherited $1,000,000 today and invested it at 12% per year-- you don't touch it at all--it would take 25 years to reach $20M, assuming no economic downturns.

The size of some of these top 1% fortunes is, by the way, one reason to keep the estate tax.

Posted by: PTate in MN on October 29, 2006 at 5:30 PM | PERMALINK

You just stated that the average American worker is living on around $40,000 per annum. For the last time, as long as they don't go for excess, anyone can retire once they have $1 million in savings.

Posted by: Chuck on October 29, 2006 at 5:41 PM | PERMALINK

mfw13: "Personally, I think that the fact it is a lot easier for entrepeneurs to monetize a good idea and get filthy rich has something to do with it"

I think you are on to something here--the ability to monetize a good idea. It reminds me of the kinds of recommendations you see in the popular press: Talk to your doctor about this, talk to your lawyer about that, talk to your financial advisor. Maybe on the East Coast they have financial advisors who talk to non-gazillionaires. But here in the midwest, good advice is hard to find.

So let us say that you have a clever idea. Getting that idea to the marketplace requires know-how and capital.

The state of Minnesota used to have an office that provided advising and help to entrepreneurs, but that office was cut by our Republican governor even though they had documented that they produced $6 in new tax revenues for every dollar invested.

Posted by: PTate in MN on October 29, 2006 at 5:50 PM | PERMALINK

The reason this thought occurred to me is that when poring through some census data a while back I noticed that the self-employed had far higher net worths than those who worked for someone else.

There are huge numbers of entrepeneurial small-business owners in this country, and while many of them struggle to make a profit, there are also huge number's of them who are very successful.

In the technology field particularly, it is possible to become fabulously wealthy in a very short time if you have a good idea. Look at Microsoft, Dell, Amazon, Ebay, Netscape, Yahoo, Google, Hewlett-Packard, PayPal, Hotmail, Facebook, MySpace, etc. All were started by entrepeneurs in dorm rooms or basements.

Posted by: mfw13 on October 29, 2006 at 5:59 PM | PERMALINK

Chuck: "as long as they don't go for excess, anyone can retire once they have $1 million in savings."

I agree with you, but we are talking about different things. Interest income on $1M is around $40K.

But the question that I was originally mulling had to do with the exponential growth of fortunes in the top 1% of the population. You need an INCOME of about $1,000,000 to qualify for this group. You need a fortune of $1Billion dollars to get into the ranks of the top 400 richest Americans, that "richest one-hundredth of 1 percent."

But, yes. Given that one can live comfortably on the interest from $1,000,000--triple that to $3,000,000 to add cushion--what do individuals do with a billion dollars??? Other than buy islands in the Caribbean, fund swiftboat ad campaigns and boy political parties.

Posted by: PTate in MN on October 29, 2006 at 6:04 PM | PERMALINK

"boy political parties" wow, talk about Freudian slips: "buy" becomes "boy"...

...and Rep Foley isn't even in the headlines anymore.

Posted by: PTate in MN on October 29, 2006 at 6:08 PM | PERMALINK

Look at this correlation between literacy and income and see what you think: http://www.thephonicspage.org/On%20Phonics/profitable.html. Now, look at the percent of Americans in each category: http://www.thephonicspage.org/On%20Phonics/litpercent.html.

Sadly, we're not being taught to read as well as we used to be. For those who complained about homework for their first graders, look at what 2nd graders in 1851 were reading (presumably without much homework because of all their chores): http://www.gutenberg.org/files/16936/16936-h/16936-h.htm. And, for 4th graders during the Civil war: http://www.gutenberg.org/dirs/etext05/sread10h.htm. I've used another Sanders 4th grade textbook for a reading grade level test for 8th and 10th grade students: http://www.thephonicspage.org/On%20Reading/readinggradeleve.html.

Those in the upper levels send their kids to private school, get tutors or buy reading programs to compensate for poor teaching methods. Actually, you can do it for free or very cheaply, read my website, the National Right to Read foundation's website (www.nrrf.org) or Don Potter's Education Page (http://www.donpotter.net/ed.htm) to find out how. Sadly, those most impacted by poor teaching methods are poor students in inner city schools.

Posted by: Elizabeth B on October 29, 2006 at 6:21 PM | PERMALINK

PS - a wrapup that apparently got missed: the artificiality of the monetary system, puts new money into circulations through the banking system and thus allows wealth to accumulate beyond what would be possible in a hard-currency system where every increase in money had to come from a direct transaction.

Posted by: Neil' on October 29, 2006 at 6:33 PM | PERMALINK

"Chuck,
I am defining "sweet" point as that point at which a fortune has become so great that it is impossible to consume. The fortune just gets bigger and bigger--it starts to exhibit exponential growth."

Well, not "impossible" to consume, but I get your point.

One interesting point is the point at which a person can live a comfortable life without working with little risk, and $1,000,000 for an individual is right about it. One can get around 4% real growth in assets over the very long term while taking very little risk. That gives $1,000,000 40k in very conservative income, which is enough to live off of in many nice places (keep in mind retired people typically spend about 2/3 of what they did while working, so this is roughly equivalent to a 60k job, except that you don't have to work).

Below $1mil you have to work at least a little, take some more risk to keep going, or live an actively miserly life. Above that you can live better, or have your fortune grow without doing anything.

Another interesting point is where you can spend pretty much whatever you want and never have to cut back. A person who lives a vaguely recognizable american life (think paris hilton's freinds, but not necessarily her herself) can probably spend a few hundered thousand a year. That would put the "I do whatever I want and keep getting richer" point at around $10 million. You get about $400k/year without taking any risk or working at all.

One complication, as has been noted before, is that with $10 million you can probably get more than 4% without any real risk because you can pay for other people to manage your money better than the $1 million person, your accounts start qualifying for better rates and reduced fees, etc. So maybe it is more like $5 million where you can spend basically without restraint and never have to cut back.

Anyone above that would have difficulty out-spending thier income through normal consumption. The only way they can reduce one's fortune is to spend in ways unimaginable to the general public (eg versailles), to make risky business deals, to persue power over wealth (perhaps in politics), philanthropy, etc.

The magic point where a fortune grows exponentially is simply the point where the investment income exceedes maintenence costs and the largest maintenence cost by far is the person's lifestyle. Once a person can live off thier fortune alone thier wealth will grow exponentially with whatever is left over. The richer they are the faster it will grow on a linear scale, but it's all exponential growth.

Posted by: jefff on October 29, 2006 at 6:45 PM | PERMALINK

mmm I think I'm forgetting healthcare, so make it $1.2 million to live a middle class life forever without working.

Posted by: jefff on October 29, 2006 at 7:10 PM | PERMALINK

Then why do Americans express so much economic uncertainty in public opinion surveys?

Same reason as everyone else does. They like to complain. The country is fairly split these days between republicans and democrats. When one half of the population is comprised entirely of victims you get a lot of complaining.

Notice the complaints are different. In America, we complain about how were going to get our next TV thru the door.

Posted by: rdw on October 29, 2006 at 7:39 PM | PERMALINK

By the way, the top category of literacy has 3% of all Americans, so it's not quite the 1% we're looking at, but the income differences are still interesting. Here's the numbers (the graphs are more fun, though):

Literacy Level 1 (22% of Americans): $355/week
Literacy Level 2 (27% of Americans): $462/week
Literacy Level 3 (32% of Americans): $542/week
Literacy Level 4 (16% of Americans): $710/week
Literacy Level 5 (3% of Americans): $859/week

Posted by: Elizabeth B on October 29, 2006 at 7:56 PM | PERMALINK
The rights true war is not against the poor or the welfare mothers but against Middle Class economic and social security.

More specifically, its against the upward mobility of the working population. Attacking the security of the middle class is a means to eliminating that, of keeping workers one misfortune from being destitute.

The more upwardly mobile and secure workers are, the less relatively powerful capital is.

Posted by: cmdicely on October 29, 2006 at 9:04 PM | PERMALINK

jefff,

Fine -- you have a point about added healthcare costs -- I will compromise and say $1.1 million for the average American (you could always find cheaper places to live too).

Posted by: Chuck on October 29, 2006 at 9:32 PM | PERMALINK

Mr. Irony, I think you got me on the example of 90% taxation being inherently "vindictive."

I forgot that taxation was way up around 90% for the topmost income in the time of JFK and the rich were doing fine in the early sixties, so I will stick with just generalities that vindictiveness is bad and will always get the opposite result in the end, I hope, I hope.

But, I can't help but ask, according to the Pareto Rule, isn't it normal for the richest 20% of any society to own 80% of the wealth?

Posted by: Bob M on October 29, 2006 at 9:44 PM | PERMALINK

As already suggested above, I think quite a bit of it has to be with taxation. Second, the richest 400 Americans aren't in the top 1/100. They're in the top 1/1000000. As far as fortune, as long you are not talking celebrity lives, I think you need about $7 million. Part of my reasoning is that you should need to carry very little debt at that point. There is no throwing away $30-50K on interest charges on real estate/vehicles etc and you should have money in higher return investments just based on your investment being greater. And to whoever mentioned the "luxury" items used by everybody nowadays - first the premise is wrong - I work with a lot of poor folks and know plenty of people who don't have big screen tvs, cell phones,ipods,dishwashers,computers and fax machines. They'll have dvd players because 1/lots of movies aren't availalbe on vhs and 2/they get them used or the $50 one from wal-mart. But beyond that, in times past the middle class did get items soon after the wealthy did - cars/color tvs/washing machines/refrigerators. Why should things be different now?

Posted by: azggl on October 29, 2006 at 10:35 PM | PERMALINK
In America, we complain about how were going to get our next TV thru the door. rdw at 7:39 PM
In the real world, most Americans live from paycheck to paycheck and worry about financial emergencies destroying their credit and their lives. Posted by: Mike on October 29, 2006 at 10:36 PM | PERMALINK

Elizabeth B: "By the way, the top category of literacy has 3% of all Americans"

Are your data from the National Adult Literacy Survey?

Posted by: PTate in MN on October 29, 2006 at 11:03 PM | PERMALINK

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Posted by: vdfvd on October 30, 2006 at 12:15 AM | PERMALINK

Until about 1781, the English world had been managed according to the business plan brought into England by William of Normandy and his management team. It took great courage, great physical strength, great planning and a certain amount of luck, combined with cruelty, betrayal and brute force to pull it off.(And keep it.) But he was the grandson of Norwegian Vikings and they were used to going for broke. Some (ad)ventures were worth dying for.

One of the main achievements of the American revolution was to outlaw the nobility, which corresponded to entrenched family wealth and power. I would guess that it's going to take continual vigilance to prevent the return to the British feudal system of wealth distribution, although on a more informal basis. However, it looks to me that when we pass the point of enough per capita to too little, in terms of resources, then we will probably need more arbitrary discipline and less liberty and more concentration of power to maintain order. [It hasn't been shown whether a democratic form of government can expect popular voluntary adherence to long-term shared austerity.]

As far as American evolved fortunes, many came from the luck of owning land above coal mines, iron ore, oil wells, water falls, and timber tracts, etc. With that kind of cash flow, you can afford to build up an organization and then live off a share of their efforts to increase your wealth. You'll need your accountants, your lawyers, your security, your social secretary, your personal jet, and your other retinue or coterie. To have a 20 person staff, you'll need perhaps 200 employees to pay for the overhead, but you'll need to pay them out of your resources (or line of credit) until the start-up phase is finished and they start bringing in the commissions. You're probably going to be in the $50million range to be a self-sustaining privately owned company.

Hopefully, in the course of a lifetime, you'll be able to set up trust funds for your children and grandchildren and keep from losing too much from divorces and law suits or as the case may be, from prison time.

Posted by: cd in MN on October 30, 2006 at 12:41 AM | PERMALINK


bob m: But, I can't help but ask, according to the Pareto Rule, isn't it normal for the richest 20% of any society to own 80% of the wealth?


don't know....

was just stating facts...

wonder what the next census will show...


chuck: They care because the Democrats have been better at hiding the fact they are bought and paid for, just like the Republicans.

just read last week...that in this current campaign cycle...

the republicans will spend 200-million

and

the dems will spend just over 100-million..

see...

both bought and paid for...

Posted by: mr. irony on October 30, 2006 at 5:59 AM | PERMALINK

ex-lib: BTW he was not poor when he started the business, but it was his brains and drive that made him a billionaire.


since you endulged in some anecdotal evidence..

in my younger days, i worked for a guy who was worth more than 50-million...

he came into wealth..due to his father-in-law loaning him 10k to open a new hamburger joint in the early 1960's

called mcdonald's.

he was one of the early franchisers...and he got regional dibs...that became in the end..14-stores in all.

a license to print money...but then...something went wrong.

while he was lucky...he wasn't very bright.

mcdonald's requires their stores to be renovated regularly...(there's a clause in the contract with the franchiser..rarely enforced...because?

few are stupid enough not to keep the cash cow going...)

but...he let his stores run down...then mcdonald's forced him to sell them back to him..

14-stores x 3-milion each...(more than 20-years ago)

so what did he do with his cash?

with expert help....he bought some of the worst investments imaginable..

lost everything...

not surprisingly, both he and his wife were republicans...big wigs in the party in that region..

well...

the wife and a county official tipped a few following an election and while in the parking lot...the wife ran over the county official..

then took off.

a hit and run...

she was eventually...caught...charged...and sentenced..

i find that rich people often mistake wealth for being smart and somewhat lucky...

in varying degrees...

last i heard they were in bancruptcy court..

sad...

wonder if he blames dems?


Posted by: mr. irony on October 30, 2006 at 6:12 AM | PERMALINK


And some people are just born that way..See the
Waltons, the Hiltons, Donald Trump, the Bush's
the Ford's......

Posted by: Stephen on October 30, 2006 at 9:07 AM | PERMALINK

PTate-

Yes, the data is from the NALS. They cut off the top category in the 2003 NALS, those are from the 1992 NALS. However, the overal numbers are similar, and although they haven't produced the earnings correlation last time I checked, I talked to an analysts who is producing that report and he said it's also going to be similiar for the 2003 NALS.

Posted by: Elizabeth B on October 30, 2006 at 10:31 AM | PERMALINK

Here's another thought or two to stimulate debate.

The average middle-class worker has not developed unique skills and is therefore easily replaceable by other workers who will do the same job for less money. Hence wage stagnation, due to the fact that workers have no leverage or pricing power. Those who have developed unique skills and ideas are doing just fine...those whose job could be done by someone else are not.

People are overvaluing the worth of a four-year college education and are unwisely going into massive debt to pay for it when they would be better of entering the workforce at 18. Consider that not only due you accrue large amounts of debt to attend college, but you also forgo four years of earnings, possibly more if you go to graduate school. While this may make sense for certain professions (and even then it doesn't always), such as business, medicine, law, engineering, architecture, etc, it does not make sense for many other professions. How many people do you know who have a four year college degree and are still waiting tables, working at McDonalds, or otherwise doing a job they could have done just as easily at eighteen? For many people, it may make a lot more sense to go to a trade school when they finish high school instead of a four-year college.

Thoughts?

Posted by: mfw13 on October 30, 2006 at 12:10 PM | PERMALINK

We need to restructure our tax system so that everyone can enjoy the fruits of our wealth. 37 million Americans live in poverty (12%) and the majority of these people are children. Restructuring our tax system to provide more of a social safety net, to help people get back on their feet would be one way by which we could reduce income inequality and offer a better future for our poor. Moreover, internationally the gap between the North and the South has grown increasingly stark. However, doing our part to address the Millennium Development Goals (only 0.7% of GDP) will help put an end to severe poverty (living on less than $1 a day) and can help slow the growing gap between the rich and poor worldwide. The Borgen Project, a non-profit, non-partisan organization, is working to encourage our leaders to address the MDGs.

http://www.borgenproject.org/

Posted by: Miss Ashley on October 30, 2006 at 12:55 PM | PERMALINK

To: Beaver Nation

I agree with your point on culturla mores in the general sense, however, i must quibble with your examples. I think the average poor or lower income person in New York City is better off than the average midwestern poor and definitely than the southern poor. New York City because of its liberalism has numerous social programs--albeit imperfect--and state protections and the labor force is highly unionized.(That generally means higher wages and health insurance.) No matter what one says about rent control, it does it exist in NYC in addition to a host of consumer protections that serve every citizen. Even the middle,upper middle class and and rich need some protection or fair ability to redress abuse by landlords,insurers (health and the life and annuity lines), brokerage houses, banks and the run-of-the-mill retailer or car dealers. (Particularly the elderly who fall within those classes.)Don't look to the South for that.

And you'll notice, the richest states in the nation, California, NY, Maryland (my state), Illinois, Connecticut, etc., are blue. Or the most affluent jurisdictions: Montgomery Co, MD; Marin Co, CA;Alexandria, Arlington and Falls Church, VA, Fairfield Co, CT. The failure to acknowledge that by John Kerry pissed me off. He wouldn't defent his own state, MMassachusetts, which has the most universities, per capita, a large number of prestigious colleges and universities: Harvard, MIT, Amherst, Williams, Mt Holyoke, Smith, Wellsley, Tufts, BC and BU. And MA has a lower divorce and higher median per capita income of any southern (Bible Belt) state.

How, then, are these manage to generate higher median incomes. Well, an honestly disposed conservative might say state residents are "more productive." Certainly that isn't the whole picture. The ultra rich in the above-mentioned states are so rich that they skew even the median. But also, such states are more likely to maintain social safety nets that don't let the working poor and poor too fall.

In addtion, these states pay more into the Federal Treasury than they get in return (I don't generally like that statistic, but for the sake of argument.) That, why I become pretty miffed when I hear blue state critisicm. I feel as if I'm subsidizing them to disparage me. That self-reliance B.S. drives me crazy. Why then am I paying one subsidy atop the other to mid-western and western farmers? Whose money built those dams in the West? Alaska votes Republican and suck on three Federal tits. Mineral wealth and federal dollars is how it has the third largest Groos State Product. And what about its socialist or commie-inspired "Permanent Fund Dividend?"
Look, all regulation isn't salutary, but conservatives behave as if the regulatory state shouldn't adapt and expand to meet the cultural and technological changes in society. The government should serve as an honest broker, the reality of human venality encouraged by moneyed interests, makes for a highly imperfect system

Posted by: Allen Dyer on October 30, 2006 at 3:46 PM | PERMALINK

Who cares about growing income inequality? The current New York Magazine has several articles about this topic and helpfully labels the liberal philosophy on this "spiteful egalitarianism."

Unless you can prove that in a growing economy, increasing returns to the top 1% or top .1% or top 10% or whatever somehow cause the people on the bottom to be poorer in absolute, not relative, terms, then you have no case. Obviously, that is not what has happened. The very poorest people in the US today are richer in absolute material terms than they were 25 years ago.

Of course, most liberals do tend to view economies as static things and it's true that static, no-growth economies are zero-sum games. Happily, though, that's not the real world.

Posted by: DBL on October 30, 2006 at 5:01 PM | PERMALINK

One minor objection. In software engineering, the top 1% is much more productive than even the 90th percentile. It's bizarre. However, the top 1% aren't proportionately rewarded for this productivity.

Posted by: Dave on October 30, 2006 at 7:28 PM | PERMALINK

I am late to this thread ... but DING DING DING ... we have a winner in bellumregio's response above.

Posted by: dc2berkeley on October 30, 2006 at 10:52 PM | PERMALINK

On part 1 of this thread salary vs wealth equality. Through genius or luck/birth (still a high percentage of the total) once people reach a tipping point ($1,000,000 or $20,000,000 or whatever) of wealth barring some great crisis or gross ineptitude, their assets continue to grow and they become a part of the economic elite. At this point, socialism for the rich rules and economic prosperity is assured. The money based politics practiced in the US reinforces this status quo.

As a side note, for every Bill Gates or Singleton (see teledyne ceo above), there were many wealthy investors, that also increased their wealth when Micro$oft, Teledyne, Enron, Apple, etc. went big, hence perpetuating their membership in the economic elite.


The obscene wages paid to top corporate officials is a related but distinct issue. Paying CEOs 300-500 x the salary of the average worker is simply cronyism, favoritism, and greed practiced by those at the top levels of corporate governance. Again the nexus of politics and money, the revolving door between corporate and governemnt officials (see Cheney, Dick, Rummy, or the Shrub himself), maintains this warped reward system. No amount of economic doublespeak will change these basic principles.

Posted by: beyond_;left on October 31, 2006 at 1:44 AM | PERMALINK




 

 

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