Editore"s Note
Tilting at Windmills

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June 13, 2007
By: Kevin Drum

THE END OF INEQUALITY....Over at the Weekly Standard, Irwin Stelzer talks about growing income inequality. He walks us through the usual statistical litany and even adds a few new ones for the Robb Report set: blue collar men have less money than their fathers; the share of national income going to the middle class is shrinking; corporate vice presidents are losing ground to CEOs; and CEOs are envious of the skyrocketing incomes of principals in private equity firms. Things are tough all over.

But this being the Weekly Standard, you can be sure that none of this is a problem. Guess what's coming to the rescue?

Market forces are already in motion to change some of these trends. As more and more imitators follow the path of the original private equity players, those profits are being competed down — which is what happens to all builders of better mousetraps in the long run. CEO compensation is now under greater scrutiny than ever, as increasingly active shareholders and corporate boards, awakened to their fiduciary responsibilities by Sarbanes-Oxley, become less generous. More and more workers are enrolling in community (two-year) colleges to upgrade their skills. Wages in China and India are rising, easing some of the pressure on wages of unskilled workers in developed countries.

That's a relief, isn't it? Market forces are going to fix all this stuff, so there's no need to worry our pretty little heads about it. Now get back to work.

POSTSCRIPT: Really, though, I'd be remiss if I didn't excerpt this paragraph from Stelzer's piece. Read and be astonished:

Start in a place where you wouldn't ordinarily expect to hear whining about relative incomes: the executive suites of major corporations....Not that CEOs are suffering. Professor Xavier Gabaix of MIT and Professor Augustin Landier of New York University estimate that average CEO incomes increased six-fold between 1980 and 2003....But even the most handsomely remunerated corporate chieftain is a pauper compared with the moguls who run Blackstone, KKR, and the other buy-out shops. The average CEO can afford to join a country club, either with his own money or by having the corporation pick up the tab; a private-equity operator can build his own golf course. A corporate jet is fine, but using it for private travel is likely to raise howls of protest from shareholders and, in some cases, attract the attention of federal prosecutors. Leaders in the private equity sector have their own jets, and no need to apologize or explain if they flit to the south of France for a weekend in the sun.

A pauper!

Kevin Drum 3:35 PM Permalink | Trackbacks | Comments (76)

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Comments

Is there word, preferably a pithy and preferably unpleasant one, for the tendency of many prosperous people to solicit sympathy by measuring their means down against those of people who are even more wealthy? If not, someboy please invent one.

Posted by: Ken D. on June 13, 2007 at 3:46 PM | PERMALINK

Leaders in the private equity sector have their own jets, and no need to apologize or explain if they flit to the south of France for a weekend in the sun.

Now I'm jealous.

Posted by: tomeck on June 13, 2007 at 3:54 PM | PERMALINK

Well, you take your allies where you can get them. A lot of well-off professionals are starting to feel a little angry about the explosion of income at the top. People like corporate veeps (yes, Virginia, the CEOs are leaving #s 2,3,4, etc. in the dust as well as rank & file), doctors and small businessmen are starting to grumble a bit about being left behind in a non-Christian sense.

Posted by: demisod on June 13, 2007 at 3:54 PM | PERMALINK

Yeah, I'm sure that the final "surge" of market forces will correct the income inequity problems all the previous market forces only made worse.

Don't you believe in the power of Magic?

Posted by: frankly0 on June 13, 2007 at 4:00 PM | PERMALINK

.But even the most handsomely remunerated corporate chieftain is a pauper compared with the moguls who run Blackstone, KKR, and the other buy-out shops.

I am repeatedly admonished that these social comparisons are legitimate; and that the justify a feeling in the middle class that they are getting poorer despite getting richer decade by decade.

True, the word "pauper" is an exaggeration, but the actual feeling referred to is the motivation behind the "market" corrections that Stelzer wrote about.

Posted by: MatthewRmarler on June 13, 2007 at 4:01 PM | PERMALINK

Now, now, Mr. Vice President, you mustn't talk as if there's something crooked about your chief getting bigger raises in compensation more frequently than you, just because he's got friends on the compensation board and even though he isn't delivering a profit. That's class warfare, you know.

Posted by: derek on June 13, 2007 at 4:03 PM | PERMALINK

Ah, Kevin.


It's just like you isnt it to deniggrate market forces. Market forces that pay your salary so you can play on your computer all day from the comfort of your own home, all procured through market forces.

But Kevin wants to bite the hand that feeds him. Kevin doesn't like market forces because the best and brightest, people he's jealous of, get rewarded for there hard work. Who's going to look after the poor welfare queens in there cadilacs, Kevin wonders. Whos going to protect all the poor drug dealers and gang members and killers and terrorists? And don't forget the poor liberal bloggers. They deserve millions of dollars too. Just bleed the people at the top. They'll always have money. Right? RIGHT?!

Posted by: egbert on June 13, 2007 at 4:04 PM | PERMALINK

Wrong and getting wronger...but this is a capitalist society, just headed for the extreme. What do you call a country where corporate interests run the government?

Posted by: jame on June 13, 2007 at 4:05 PM | PERMALINK

JK Galbraith: "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness." "Having enough, many wish for more."

Thorstein Veblen: "But it is otherwise with the superior pecuniary class, with which we are here immediately concerned. For this class also the incentive to diligence and thrift is not absent; but its action is so greatly qualified by the secondary demands of pecuniary emulation, that any inclination in this direction is practically overborne and any incentive to diligence tends to be of no effect. The most imperative of these secondary demands of emulation, as well as the one of widest scope, is the requirement of abstention from productive work."

Posted by: Carol on June 13, 2007 at 4:07 PM | PERMALINK

Market forces are going to fix all this stuff, so there's no need to worry our pretty little heads about it. Now get back to work.

You exaggerate opinions that you disagree with everyday, and you exaggerate the scope and scale of bad news, and even of "badly reported" news.

Posted by: MatthewRmarler on June 13, 2007 at 4:07 PM | PERMALINK

The point, of course, isn't that these whiners are not poor, but that they really have no understanding of poverty, which means deprivation of the ordinary requirements for health, life and a modicum of leisure, not the lack of ever increasing amounts of stuff.

There is a peculiar kind of poverty known only to the rich, which is poverty of the soul.

Posted by: Carol on June 13, 2007 at 4:10 PM | PERMALINK

jame;
Plutocracy - evolving into Kleptocracy.

Posted by: osama_been_forgotten on June 13, 2007 at 4:19 PM | PERMALINK

The pie is shrinking.

Posted by: anonymous on June 13, 2007 at 4:23 PM | PERMALINK

Market forces are going to fix all this stuff

Maybe you can do a post on what exactly needs to be "fixed". I know this is one of your hobby horses, but I'm having trouble seeing any legitimate problems. Spare me the ludicrous poor-masses-with-pitchforks scenario and explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy.

Posted by: Homer on June 13, 2007 at 4:28 PM | PERMALINK

As income increases, so do the things you need to acquire to protect yourself. A poor person has no need for house insurance, but if his income increases and he buys a house, he needs insurance as well as the house.

Similarly the rich have need to buy things to protect their wealth - things that the average middle-class liberal can't even imagine - things like lawyers, bodyguards and congressmen.

Posted by: Al on June 13, 2007 at 4:31 PM | PERMALINK

Spare me the ludicrous poor-masses-with-pitchforks scenario and explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy.
Posted by: Homer on June 13, 2007 at 4:28 PM | PERMALINK

It represents a partitioning of the economy. It goes much further than the "two Americas" thing.

A million dollars in Paris Hilton's purse will not be spent on goods and services (nor will it be constructively invested). A million dollars spread across 1000 poor people will not be socked away in some numbered account in Switzerland.

Which scenario is of more benefit to the economy, as a whole?

Posted by: osama_been_forgotten on June 13, 2007 at 4:35 PM | PERMALINK

How about stratification of the consumer market? Does that not frighten you, Homer? How about lack of savings? These are all tied to wage distribution. It is an issue of great concern for economists.

Posted by: scott on June 13, 2007 at 4:37 PM | PERMALINK

Ah, the old "I'm in charge of the company, so I should earn more than anyone else". This is the reverse of the "I'm the greatest player on the team, so I should be captain" whine. Neither is true.

It must be said that the principals of investment firms work off commission - the more they bring in, the more they make. Chief Sales Directors usually have similar deals. Any Cxx level executives who doesn't understand that their performance compensated employees might make more than them shouldn't be employed. And it's not like sales and traders have golden shakes like the board.

Posted by: royalblue_tom on June 13, 2007 at 4:38 PM | PERMALINK
... the actual feeling referred to is the motivation behind the "market" corrections... MatthewRmarler at 4:01 PM
In the latest defeat for shareholder activists:

Countrywide Financial Corp. shareholders today rejected a proposal that sought to give them an annual advisory vote on the company's compensation of top officers.
Nearly 60% of votes cast at the mortgage giant's annual meeting in Calabasas were against the measure, while 31.7% supported it....

Investors reluctant to tackle exec pay

...Despite years of outrage over soaring executive pay, shareholder activists still find it tough to persuade many investors to cast even symbolic votes against management on compensation issues.
As annual meeting season winds down, pay critics have won only a few majority votes this spring on proxy proposals intended to signal disapproval of executives' financial hauls.
More typical was the balloting Tuesday at Yahoo Inc. The Internet firm's shareholders rejected a measure that would have requested company directors to consider new ideas for tying executive pay to the performance of the business....

Who holds the voting shares, fund managers or individual shareholders?

Posted by: Mike on June 13, 2007 at 4:42 PM | PERMALINK

Leaders in the private equity sector have their own jets, and no need to apologize or explain if they flit to the south of France for a weekend in the sun.

Is that all you get for all the deception and the theft and the robbery and the plundering and the exploitation? A fucking weekend in the sun in, of all the places, France?

The worshippers of the free market have to give us a better reason to learn to steal.

Posted by: gregor on June 13, 2007 at 4:44 PM | PERMALINK

"... explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy."
Posted by: Homer on June 13, 2007 at 4:28 PM

I'm envious of some people it's true. But, the people I'm most envious of are not particularly rich. Some other people might be envious of the Rich. I don't know.

My feeling is we're reliving a bit of the 1920s economics so fondly promoted by Milton Freidman. If you'll recall that ended with the great stock market crash of October 1929 and the Great Depression thereafter.

I'd prefer to avoid those kinds of problems and I don't feel at all certain America is as insured against it as we need to be. Furthermore, there is a fundamental distrust of the idea that the American economic system is completely fair. And, as a result it just doesn't seem right (to a casual observer or to economists) that CEOs and many others should receive so much of the new wealth of America and that other 'lesser mortals' should be slowly sinking (economically) into oblivion.

The war against unions, the new law making bankruptcy more difficult, the irregular and infrequent raises of the minimum wage, the greater difficulty for students to get college loans they can afford, the difficulty everyone has with credit and the obvious problems people have with health care costs are obvious and serious problems with our economy which need to be fixed so that ordinary people, the most numerous in America, will not all go into the ditch and pull the entire economy down with them.

Even the simplest look at our economy shows retail spending to be a huge part of the whole and if the common folk can't spend it will break the system. Nobody wants it to break and we who think about these things and have compassion for the poor and bankrupt want to see it fixed.

Do YOU want it to break?
Can YOU see the problems?
Do YOU want to have it fixed?
Do YOU see ANY Republican trying to fix it?

Then you know why Democrats, regardless of their occasional ineptitude in government, are the only hope to keep America afloat and on course.

Posted by: MarkH on June 13, 2007 at 4:45 PM | PERMALINK

Sarbanes-Oxley is market forces?

Posted by: KCinDC on June 13, 2007 at 4:46 PM | PERMALINK

Market forces are going to fix all this stuff,

If by "market forces" you mean like at the Bastille, well maybe you're correct. But after almost 40 years in the work force, I have yet to see any market force that works to my advantage. The guys at the top control it, and they don't like to share.

Posted by: tomeck on June 13, 2007 at 4:47 PM | PERMALINK

My feeling is we're reliving a bit of the 1920s economics so fondly promoted by Milton Freidman. If you'll recall that ended with the great stock market crash of October 1929 and the Great Depression thereafter.Posted by: MarkH on June 13, 2007 at 4:45 PM | PERMALINK

Oh - but back then, we were on the Gold Standard. Now; we have great things like the FED and Interest Rate hikes, and computerized trading limits, that will end all the problems that caused the stock market crash, and what led to the depression. Right?

Posted by: osama_been_forgotten on June 13, 2007 at 4:50 PM | PERMALINK

Isn't it amazing how you can turn ridiculous bullcrap into a respectible argument by wrapping it in free market economic language?


Posted by: Archie on June 13, 2007 at 4:50 PM | PERMALINK

The real question is whether as anonymous says above "teh pie is shrinking." If that is the case or if the demands on the pie are increasing faster than it is growing, then Huston we have a problem. I have said it before and I'll say it again, in literate industial societies, those problems almost always work themselves out, almost never to the liking of the entrenched elite. The richistanies should enjoy it while they can. If the distance between the top and bottom grows too great the imbalance won't last forever.

Posted by: Ron Byers on June 13, 2007 at 4:54 PM | PERMALINK

Jesus Christ, doesn't anybody deal in moderation anymore? Yes, Al, Egbert, etc., free-markets, and liberty, and liberalism, etc. All very important, no one argues with that. But what about equality? What about social-mobility? Wealth gaps substantively obstruct upward social-movement. This is only compounded with bullshit neo-liberal deregulation regimes which remove social safety nets from the middle- and lower-economic classes and re-redistributes that wealth back to the wealthy. Good God. We did fine in the 50s, 60s, and 70s with high progressive income tax structures; the rich got rich, the economy grew, the US dominated much of the free-world economy, etc etc etc, but we also didn't shit on the poor, working, and middle classes.

Also, please, show me these 'welfare queens' in the Cadillacs. Show me these 'welfare queens' who live in large houses and view their children as simply sources of income. You show me a welfare queen, and I'll show you a single-mother, the daughter of a veteran who survived Hurricane Katrina. I'll show you someone who wanted to go to college but couldn't afford to abandon her poor family who needed her supplementary income.

Seriously. What's wrong with you?

Posted by: Everblue Stater on June 13, 2007 at 5:03 PM | PERMALINK

"If the distance between the top and bottom grows too great the imbalance won't last forever"

Think of "Monopoly."

I think the game was invented to teach that very lesson. Today's kids play Doom.

Posted by: Archie on June 13, 2007 at 5:06 PM | PERMALINK

Kevin

Astonished? This is all old news. One who lives in the OC should be fully aware of the disporportionate share of GDP accruing to, not the top 10% (wealthy), nor the top 1% even (your average CEO) but exponentially to the top 1/10 of 1% (the guys who leverage OPM). As an earlier poster mentioned, this is just the system going to one of its predictable extremes.

Posted by: martin on June 13, 2007 at 5:12 PM | PERMALINK

Complaints in the executive suite are nothing new. Twenty years ago when I worked in executive support (for a staff of officers whom I generally respected) one fellow became a legend by bursting into tears when unable to deal with the fact that somebody else had a parking place ten feet closer to the elevator than his.

Kind of makes it hard for me to take the economists and their talk of "incentives" very seriously.

Posted by: Gene O'Grady on June 13, 2007 at 5:14 PM | PERMALINK

Ah, Eggy. Now Al Sharpton's going to kick your butt, li'l fella.

It's called "S p e l l_c h e c k." Won't help with the errant punctuation, however.

Eggy bleated:

Ah, Kevin.

It's just like you isnt it to deniggrate market forces. Market forces that pay your salary so you can play on your computer all day from the comfort of your own home, all procured through market forces.

Posted by: Trollhattan on June 13, 2007 at 5:17 PM | PERMALINK

CEO compensation is now under greater scrutiny than ever, as increasingly active shareholders and corporate boards, awakened to their fiduciary responsibilities by Sarbanes-Oxley.

If a piece of legislation is responsible for the greater scrutiny, then the pressure on CEO salaries is not coming from market forces. It is coming from political forces and we need to keep it up.

Posted by: Nonplussed on June 13, 2007 at 5:35 PM | PERMALINK

That's a relief, isn't it? Market forces are going to fix all this stuff, so there's no need to worry our pretty little heads about it. Now get back to work.

What's your alternative to market forces, Kevin? Federal compensation controls?

Posted by: harry on June 13, 2007 at 5:39 PM | PERMALINK

'Spare me the ludicrous poor-masses-with-pitchforks scenario and explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy.
'

The problem isn't some people getting richer than others. Its rich and powerful using their wealth and power to influence government policy in such a way as to make them richer at the common citizens expense. Its wars in the middle east that seemingly only benefit defense contractors and oil companies. Its fighting CAFE standards so the auto industry stays profitable. Its ignoring global warming so energy companies aren't hit financially. Its appointing the head lobbyist from the National Association of Manufacturers to be head of the Consumer Product Safety Committee so manufacturers can get past regulations which cut into profits. Its tort reform which will allow manufacturers to calculate the cost of consumer lawsuits into product development costs.

It ain't about envy or jealousy, thats just how the right will relate it to you.

Posted by: jg on June 13, 2007 at 6:09 PM | PERMALINK

'What's your alternative to market forces, Kevin? Federal compensation controls?

Posted by: harry on June 13, 2007 at 5:39 PM '

I could be wrong but I think Kevin's joke concerns the rights use of 'market forces' as though it was some kind of government free force of nature. The thing is though, you can't have a 'market' without government. Government provides the structure that the market needs in order to exist(i.e. currency, contract guarantees). What the right wants is a very highly unregulated market. One where the government won't impose rules that cut into profit. Sounds great except that the regulations they want removed keep businesses from screwing people and places. You won't hear that side of the argument on Fox.

Posted by: jg on June 13, 2007 at 6:17 PM | PERMALINK

What I don't understand is they "private equity" folks are sticking their hands into someone's pocket. At some point the suckers^h^h^h^h^h^h investors are going to wake up, if the dealmakers are taking $100s of M out of a deal I expect that the investors may want to see more of that in their side of the deal.

It truly is obscene.

c.

Posted by: c. on June 13, 2007 at 6:23 PM | PERMALINK

The rich want the market forces FIXED so that the workers get less and less and are told they need to compete against $1 a day workers, while the rich are protected from any loss by our military adventures and legal systems. These military adventures should preferably be also preventing any future losses too. The legal system should also be fixed so that stealing their silverware gets a greater penalty than them stealing workers' pensions.

Those are the market forces we talk about here, not the "invisible hand" sort of forces.

Posted by: Carol on June 13, 2007 at 6:24 PM | PERMALINK

What's your alternative to market forces, Kevin? Federal compensation controls?
Posted by: harry on June 13, 2007 at 5:39 PM | PERMALINK

Shareholder bill of rights.

Let the shareholders DIRECTLY approve compensation packages. It's 2007, there's this thing called the INTERNET. . .

Posted by: osama_been_forgotten on June 13, 2007 at 6:28 PM | PERMALINK

Here's an idea: make the truly rich, (over 1$ billion in assets) buy environmentally threatened real estate (which they will then own) and place a green easement on the land. The threatened land will then be safe from development and the owners and everyone else can feel good about protecting a portion of our planet. These billionaires made their money with the aid of our capitalistic system, so they can't feel badly about giving some of it back to the rest of us and our children's children.

Posted by: slanted tom on June 13, 2007 at 6:28 PM | PERMALINK

When some politician or journalist utters the phrases "market forces" or claims "economic efficiency" as an excuse of inaction, I think that you should assume that they trying to shut down the discussion -- under the guise of being scientific and hard-headed realists. But that is usually just a cover for an ideological choice that is anything but scientific.

In cases like this, the B.S. assurances that market forces are working -- despite two decades of evidence that they are NOT restraining executive pay -- is a way of saying "F__k you" and walking away from the debate. Nyah nyah, not listening.

The only reason these evasions still work is because so many people are still cowed by them. The argument hasn't failed big enough yet -- as it did during the Great Depression.

-- Bokonon

Posted by: Bokonon on June 13, 2007 at 6:30 PM | PERMALINK

Homer, what is so ludicrous about poor masses with pitchforks?

Have you actually read any history of the gilded age? Riots, Bombings, General Strikes, Hired Thugs shooting into Demonstrating crowds?

There is nothing ludicrous about it. Inevitable possibly, but far from ludicrous.

People will tolerate the idea that some members of society earn more than them. They will tolerate the idea that luck and hard work can sometimes make someone wealthy.

They will not tolerate the kind of gap that was seen in pre-revolutionary France, In America's gilded age, or the kind of gap we are seeing now. They will not tolerate the manipulation of society that allocates more and more wealth to fewer and fewer people. Most of all, they become extremely angry when they see the fabulously wealthy abusing their power an privilege. You can call it envy if you like, but the fact is that people expect a fair deal from society. Not a free ride, just a fair deal. They want to know that if they are honest and hard working, they will prosper. They don't have that any more, and so they are becoming restive.

Market forces are going to fix all this stuff

Maybe you can do a post on what exactly needs to be "fixed". I know this is one of your hobby horses, but I'm having trouble seeing any legitimate problems. Spare me the ludicrous poor-masses-with-pitchforks scenario and explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy.

Posted by: Homer on June 13, 2007 at 4:28 PM | PERMALINK


Posted by: charles parr on June 13, 2007 at 6:44 PM | PERMALINK

Homer, what is so ludicrous about poor masses with pitchforks?

Have you actually read any history of the gilded age? Riots, Bombings, General Strikes, Hired Thugs shooting into Demonstrating crowds?

There is nothing ludicrous about it. Inevitable possibly, but far from ludicrous.

People will tolerate the idea that some members of society earn more than them. They will tolerate the idea that luck and hard work can sometimes make someone wealthy.

They will not tolerate the kind of gap that was seen in pre-revolutionary France, In America's gilded age, or the kind of gap we are seeing now. They will not tolerate the manipulation of society that allocates more and more wealth to fewer and fewer people. Most of all, they become extremely angry when they see the fabulously wealthy abusing their power an privilege. You can call it envy if you like, but the fact is that people expect a fair deal from society. Not a free ride, just a fair deal. They want to know that if they are honest and hard working, they will prosper. They don't have that any more, and so they are becoming restive.

Market forces are going to fix all this stuff

Maybe you can do a post on what exactly needs to be "fixed". I know this is one of your hobby horses, but I'm having trouble seeing any legitimate problems. Spare me the ludicrous poor-masses-with-pitchforks scenario and explain why some people being richer than others, even egregiously so, is a problem in a free society. It comes across as just simple envy.

Posted by: Homer on June 13, 2007 at 4:28 PM | PERMALINK


Posted by: charles parr on June 13, 2007 at 6:44 PM | PERMALINK

Where's Karl Marx when you need him?

Posted by: dr sardonicus on June 13, 2007 at 6:45 PM | PERMALINK

Marx was an excellent descriptor of the economic and social problems of his day. His prescription certainly turned out to be problematic, however.

Note that the changes brought into being after the gilded age were not only highly effective, but they were also brought in in order to do an end-run around marxists and trade-union anarchists, in an effort to fix the economy without suffering through a revolution.

It worked quite well. The USA became the most powerful nation in the world, remained a democracy, and had by far the highest standard of living in all of human history. That lasted until around the Nixon years, and it's been slowly downhill since.

Posted by: charles parr on June 13, 2007 at 6:55 PM | PERMALINK

"As more and more imitators follow the path of the original private equity players, those profits are being competed down"

It's inevitable, inevitable, I tell you, as inevitable as the Communist Revolution.

Why is it that the biggest haters on Marx are, nonetheless, also the biggest subscribers to bizarre notions of historical inevitability --- just a different inevitability?

Posted by: Maynard Handley on June 13, 2007 at 6:59 PM | PERMALINK

Spell check won't help people who don't know the difference between "their" and "there." Like egbert. Also, Cadillac is spelled with a capital "C".

But more importantly, every dollar made by a CEO is a dollar less someone else is getting. Value/wealth doesn't grow on trees. It is the product of work and resources. Besides the factor mentioned above of the super rich using their (note: "their") resources to influence government to maintain the massive inequality they so enjoy.

Posted by: emjayay on June 13, 2007 at 7:05 PM | PERMALINK

George Will had a snotty column the other day about what a great economy George W. Bush had created and what could the Democrats possibly say to disparage such a wonderful state of affairs. The answer is - PLENTY!

1) Bush's is a false prosperity, built on borrowed money. If I went out and maxed out my credit cards and bought a new car, a big screen TV and all new furniture, I would feel pretty prosperous too, until the bills arrived. Bush and his dad are the most egregious bad check artists in history and the bill is going to come due on our children and grandchildren. Clinton balanced the budget - Bush broke the budget. Nuff said.
2) Bush has presided over the biggest loss of manufacturing jobs in American history. His "free trade" policies have also made us the biggest debtor nation on the face of the planet. This will also redound to our detriment. The U.S. cannot remain a world power long with no manufacturing base. We cannot sell each other annuities or flip burgers for one another and expect to enjoy a prosperous lifestyle for long.
3) Concentration of wealth at the top bids up the price of goods that everyone needs, such as housing and food. Progressive taxation makes everything more affordable for everyone.
4) The wealth accruing to the highest strata comes at the expense of people down below. It is no coincidence that the billionaires in the Walton family got that way by paying their employees at Wal-Mart peanuts and not providing decent health care coverage. Had they been more generous in sharing the fruits of their people's labor and allowing workers to unionize, everyone would have benefited.

Greed hurts everyone.

Posted by: The Conservative Deflator on June 13, 2007 at 7:11 PM | PERMALINK

It's hard or impossible to do anything about income disparity without screwing up the economic system. E.g., ARod now makes about $28 million a year, and his salary might go up to $33 million next year. Teams are willing to pay him that much. Would you pass a law putting a salary cap on what sports teams can pay?

Tiger Woods earns some multiple of what ARod gets, from various victory purses, advertising contracts, etc. If you wanted to legally cap his income, how would you do it? He has many different sources of income. Which ones would you cap and by how much?

One could try to cap income by raising income tax to prohibitive rates in the highest brackets. When I was young, the highest rate was 90%. But, that held the economy back, because it discouraged people from working when they were in the 90% bracket. When JFK lowered the income tax rates for high earners, the economy boomed and income taxes paid boomed.

Posted by: ex-liberal on June 13, 2007 at 7:31 PM | PERMALINK

When I was young, the highest rate was 90%. But, that held the economy back, because it discouraged people from working when they were in the 90% bracket.
Posted by: ex-liberal on June 13, 2007 at 7:31 PM | PERMALINK

Cite for this baseless assertion?

When JFK lowered the income tax rates for high earners, the economy boomed and income taxes paid boomed.

correlation does not prove causation.

Posted by: osama_been_forgotten on June 13, 2007 at 7:44 PM | PERMALINK

Whenever this free market bullshit starts to get really ripe, I like to suggest REALLY freeing up the market.
You know, like letting market forces decide who your wallet belongs to. Those market forces might include my fist smashing your face, but hey, the market can be rough sometimes.
The corporatists like to talk all "free market" but there's definitely one type of regulation that they still believe in and are willing to pay for: guns to protect their stuff. Without police and military, it wouldn't be quite as envious to have huge piles of shiny stuff.
I think it's good for the ultra rich to have a healthy fear of the masses. Just as it's good for a worker to have a healthy fear of getting fired. Keeps people in line, that fear of real consequence. And it's the only thing that will keep the wealthy (relatively) honest, because they can buy off any other consequences.
In summary (and to throughly mock Gordon Gekko):
Class warfare is good.

Posted by: Govt Skeptic on June 13, 2007 at 7:47 PM | PERMALINK

"But, that held the economy back, because it discouraged people from working when they were in the 90% bracket. "

Really? Please tell us the period of US history during which these high tax rates held back the economy.
By my eyes, in terms of the big picture:
http://www.ucl.ac.uk/~uctpnpa/growth.pdf
the rate of growth of GDP in the US since 1950 has been pretty much the same from then till now, regardless of what is done with taxes.

Posted by: Maynard Handley on June 13, 2007 at 7:48 PM | PERMALINK

Mike on June 13, 2007 at 4:42 PM

that was an interesting and informative post. The "motivation" that I wrote of, the basis of "market forces", may not be very great.

Posted by: MatthewRmarler on June 13, 2007 at 8:13 PM | PERMALINK

The term pauper, used in what seems to be such a silly way, reflects the importance of social status and relative inequality. The super rich don't measure themselves by comparison with the poor, but with each other. You can probably do a study and find out that the super super rich live longer and have other better health outcomes, etc. than those who are "only" super rich. Per Michael Marmot's and Richard Wilkinson's work in social epidemiology.

Posted by: Dale on June 13, 2007 at 8:16 PM | PERMALINK

I think there is a lot of truth to how people are feeling about the super-rich. My wife bitches and moans all the time about how the $130,000 a year she makes is not enough considering how hard she has to work, something I find laughable considering I make $50,000 a year as a high school teacher who works just as hard.

But when I realize that she works at a company where there are numerous people above her on the corporate ladder at her company who have salaries way out of proportion to their value (including the CEO)and are absolute idiots, her bitching and moaning doesn't sound quite as crazy anymore.

Posted by: mfw13 on June 13, 2007 at 8:26 PM | PERMALINK

It's pretty funny that there isn't a single instance of "immig*" anywhere above, yet everything Kevin Drum says about the Weekly Standard applies to his occasional posts supporting MassiveImmigration.

Posted by: TLB on June 13, 2007 at 10:28 PM | PERMALINK

Maynard Handley, thanks for the cite.

That chart on page 1 of total GDP over many years makes it hard to see what the year on year growth rate was. There's a tiny blip around 1959 or 1960 where there was negative growth. The following year, GDP grew sharply. You can also see the Carter malaise, the Reagan recovery and the Clinton boom.

I wish we could find a table of Annual Change in GDP going back the same number of years.

Posted by: ex-liberal on June 13, 2007 at 11:12 PM | PERMALINK

Since Kevin has never once written anything "supporting MassiveImmigration," forgive us if we treat you as the obsessive nutcase that you are, TLB. We're funny that way.

Posted by: PaulB on June 13, 2007 at 11:17 PM | PERMALINK

"Maynard Handley, thanks for the cite."

Dear heart, we're still waiting for you to post your cite for those silly assertions you made. We won't be holding our breaths, though.

Posted by: PaulB on June 13, 2007 at 11:20 PM | PERMALINK

PaulB, I believe Maynard Handley's cite shows the pickup in GDP growth after Kennedy's tax rate cuts, although the format is not convenient for looking at GDP change.

Posted by: ex-liberal on June 13, 2007 at 11:27 PM | PERMALINK

"Maynard Handley, thanks for the cite.

That chart on page 1 of total GDP over many years makes it hard to see what the year on year growth rate was. There's a tiny blip around 1959 or 1960 where there was negative growth. The following year, GDP grew sharply. You can also see the Carter malaise, the Reagan recovery and the Clinton boom.
"

OR, the alternative viewpoint, as I said, is that all this fscking around with the tax rate is just so much BS with the year to year blips no different from weather as opposed to climate.

I could argue that the primary driver of economic growth is science and technology. Investment in science and technology by the federal government has been roughly constant, and in roughly the same sectors (military first, health second, NSF third) since the end of WW2. The main change in the last 60 years has been that private R&D has quadrupled in that time (which sounds a lot, but is an increase of like .5% of GDP to 2% of GDP). I could further argue that, rather than conservatives mortgaging the country for the sake of reducing the tax rate on billionaires, if you really want to juice the economy, you'd increase taxes and increase spending on R&D. I think this argument is better supported by evidence than the "taxes should tend ever closer to zero" argument.

But, of course, as can be seen by the very way the tax cuts over the past few years have been structured, the issue is no longer growing the economy, if it ever was. The issue now is how to funnel ever more money into the hands of ever fewer people. As plenty of others have pointed out above, "growth" doesn't count when it comes with a bill due in a few years.

Posted by: Maynard Handley on June 13, 2007 at 11:28 PM | PERMALINK

Did anyone notice the report by the Congressional Budget Office released in May which concluded that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991!

These numbers do not include government transfer benefits, pensions, or investments, such as an increasing number of Americans who own their own house.

Of course, the richest segment had the second best gain of income (54%) during that period, but the poorest had the largest gains and all segments of society had some gains.

So, this "disappearing middle class thing" is mostly rhetorical smoke and mirrors by the Bush-hating segment of our population. Also for your edification, an article in the upcoming American Scientist (July-August edition) takes serious issues with the algore theme of making Mt. Kilimanjaro the poster glacial mountain for global warming. Of course, the authors of this report bend over backwards to emphasize that "other" glaciers may be melting because of global warming.

Funny thing, I just watched a TV report by geologists that was talking about how all North American glaciers typically melt away to nothing and then reform. Probably this is roughly in sync with Greenland warming and cooling as well. As recently as 5,000 years ago, the geologists say, the famous Athabascan glacier in Canada melted completely away.

But don't worry, lefties. I'm sure the Iraq War will still be grinding along in mid-2008. It now looks like Bush diplomacy has found a way to align the U.S. with secular parties in Lebanon, Palestine, and Iraq. I might say Iran as well. I like the trend of this. . .

Posted by: mike cook on June 13, 2007 at 11:56 PM | PERMALINK

Marx was an excellent descriptor of the economic and social problems of his day. His prescription certainly turned out to be problematic, however.

That was pretty much the point of my snark, though. Marx was arguably better at pointing out problems than solving them. Today we have no one with an alternative perspective, no one willing to point out the problems. Everybody from the CEO to the lowliest janitor is a capitalist now. The laws of the market are considered to be synonymous with the laws of nature. If we were on the brink of another Great Depression today, there'd be no Keyneses to propose economic alternatives, no FDR's with the boldness to implement them as policy. Today, the political leaders would just moan, "We're screwed", and the average folk would barricade their doors and load their rifles.

Marx may have been off-base with some of his prescriptions, but he at least got a conversation started that led to the progressive reforms of the early 20th Century. Few people today are willing to propose a critique of capitalism, and fewer still are prepared to go to jail as Marx did in order to defend it. Without anybody willing to stand up and say "Hey, wait a minute!" - and mean it - most of the world continues to worship at the altar of capitalism, and either pretend not to notice the gathering storm clouds, or deny altogether that they exist.

Posted by: dr sardonicus on June 14, 2007 at 12:21 AM | PERMALINK

The reason no such people exist is that we know more now than we did in Marx' time.
For some problems there are no solutions. Once you have jumped out the window, I can describe your problem to you, but what's going to happen is going to happen no matter how much or how little we talk about the matter.

There are, of course, as always quacks willing to sell you a solution, but people who have thoroughly imbibed the last 150 years of biology, anthropology, history, psychology, sociology and so on, know that all it boils down to is "we are so screwed".

Posted by: Maynard Handley on June 14, 2007 at 12:39 AM | PERMALINK

Yes, Doctor, I think we are in complete agreement.

Posted by: charles parr on June 14, 2007 at 12:42 AM | PERMALINK

Tax these bastards to the max. I work hard for less
than 35K and make nice doing it. Dealing with real people with all of their "issues". One of the calenders at work says, "Management really thinks you get payed too much, but they would never work for what you get payed." Sooooo true.

Posted by: Alan Coltharp on June 14, 2007 at 1:13 AM | PERMALINK

I mean paid, so humiliated.

Posted by: Alan Coltharp on June 14, 2007 at 1:16 AM | PERMALINK

I think the Washington Monthly is a non-profit, so it isn't accurate to say that "market forces" pay Kevin's salary.

Posted by: Nancy Irving on June 14, 2007 at 5:21 AM | PERMALINK

We need to raise their taxes.

Also, Paris Hilton should be the poster child of why we need higher estate taxes.

Posted by: Mark on June 14, 2007 at 7:00 AM | PERMALINK

Archie:
""If the distance between the top and bottom grows too great the imbalance won't last forever"

Think of "Monopoly."

I think the game was invented to teach that very lesson."

Monopoly may teach that the imbalance is rectified because in the game, everyone is subject to the same chances on the roll of the dice: Go to Jail, lose money on th B&O railroad, get taxed according to the value of your properties. In real life, CEOs can have the corporation pay their taxes, can afford the best lawyers to keep them out of jail, and have no idea where the Poor House is. Chance does not apply to them in anything like the way it does to the less well off. Superior outcome is almost guaranteed and equality of opportunity is a joke.

Posted by: Dano on June 14, 2007 at 8:49 AM | PERMALINK

Umm, Mike, 54% does not come in second place to one third. Just what are you talking about, anyway?

Posted by: tomeck on June 14, 2007 at 10:34 AM | PERMALINK

Umm, Mike, 54% does not come in second place to one third. Just what are you talking about, anyway?

Posted by: tomeck on June 14, 2007 at 10:35 AM | PERMALINK

On a related topic:
-------
Products put at risk by relentless cost-cutting:
Study finds that not one of 25 major companies tracked was aware enough of serious risks in the product supply chain.
http://money.cnn.com/2007/06/04/news/economy/supplychain_risk/index.htm

Some snips:
"The search for cheaper labor, cheaper raw materials, and cheaper transportation - the quest for efficiency - has forced the focus of companies to switch from revenue growth to cost reduction," Deloitte said in the study. "Individually, these forces have changed the world in which we live and conduct business. But when combined, these forces can create a perfect storm of risk not seen before in the history of commerce or humankind," it added.

"Modern companies are already being impacted by both well-known and newly emerging threats that are more prevalent and destructive than ever before," the report said. "The very leanness and efficiencies that companies have sought in order to build competitive advantage have also created a new genre of systemic risk."

China, the second-largest trading partner of the United States, presents a number of supply chain challenges, the study said. "The road, air and rail transportation systems have trouble keeping up with global [supply] requirements," it said, noting that quality risks "can be significant."
"Recognize that efficiency leads to vulnerability. As companies move to lower costs across the supply chain, at some point it'll become difficult to buy quality products. History has shown that when you squeeze the supplier, they will skimp," he said.

------

Interesting isn't it, that it takes pets croaking from poisoned food, or anti-freeze in your toothpaste to emphasize this problem in the popular media. What's still very disappointing is the relative lack of concern for workers or consumers, it is all about the risks to *business*. Oh SHIT! There could be a lawsuit! I remember how imported goods used to be validated by their superior quality to domestic products and that was an acceptable reason for domestic producers to get hurt by them. But since the huge capital flight to (everywhere but HERE)that started in the last few years, this has been turned on its head. Now, despite the fact that you can manufacture a higher quality product here, you will go out of business and lose your job to an import of inferior quality, that is slightly less expensive.

Posted by: Doc at the Radar Station on June 14, 2007 at 11:20 AM | PERMALINK

As usual, those who are the least involved in actually increasing usable real wealth and the GDP "make" the most money...

Posted by: Neil B. on June 14, 2007 at 2:54 PM | PERMALINK
The Wash. Post reports that Bill Clinton ....meathead republican at 11:09 AM
Whine me a river. You should have to pay for wasting bandwidth with your stupid, off-topic gibberish. Posted by: Mike on June 14, 2007 at 6:03 PM | PERMALINK

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