Sad state of American Economics

weso1 said:
I'm looking at the graph Zito linked in the OP. The wage gap didn't start changing in a significant way till the mid 90's or so. I think aces is looking at the same thing I am too.
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You're not reading the graph right. The consolidation started pre-Reagan but started it's upwards climb with Reagan.

Supply side economics create a big issue because the middle class is the strongest part of an economy. We were strong in the 40s-60s because of a booming middle class.
 
zitothebrave said:
You're not reading the graph right. The consolidation started pre-Reagan but started it's upwards climb with Reagan.

Supply side economics create a big issue because the middle class is the strongest part of an economy. We were strong in the 40s-60s because of a booming middle class.
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If you read the text that accompanies the graph, it actually says early-80s. Looks more mid-80s to me, but the authors of the study from which the graph comes see the gap accelerated prior to the 1990s.
 
zitothebrave said:
You're not reading the graph right. The consolidation started pre-Reagan but started it's upwards climb with Reagan.

Supply side economics create a big issue because the middle class is the strongest part of an economy. We were strong in the 40s-60s because of a booming middle class.
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I'm absolutely not reading it wrong. Heavens to Betsy will you guys stop saying that. There was no consolidation until 1986 according to the graph (Which I guess technically is mid 80's but on the back end of the mid 80's). So really 50 is just pickin nits. I'm comparing the gap between the poorest 10% and richest .1%, which is what the graph compares. The wealth gap between those 2 groups remained steady during the Reagan admin until that point, so you're the one reading the graph wrong bub, yeah that's right I said bub. But if you draw trend lines, which you're supposed to do when looking at graphs like these as there are always going to be normal spikes in the data, then you'll see there's no real significant dip in the trend line until the early to mid 90's. At that point over the next two decades is when the consolidation truly began in a significant way. So in other words there's an obvious trend there which can't be blamed on noise. So there's a quick lesson on how to read these types of graphs so that your own biases don't mislead you.

Now, I do believe that Reagan's cap gain rate cuts did have an impact on this gap, but I think that's best reflected in about the year 1989 when the wealthy gained about 2% more than they had from about 1950-1970. I believe that's a fair position. You might think that's significant, but I don't.

I believe the income gap from that point forward is best explained through the bubbles that occurred in the 90's and 00's. This is the simplest and most reasonable answer. Both bubbles impacted the middle and lower class more than the upper class and both fixes, especially TARP helped widen the gap.d

So Reagan tax cuts did have a slight impact on the gap, but not in a significant way. Globalization, ecomonic bubbles, Stimulus, TARP and the internet imo played the biggest roles. I think blaming this all on tax policy is nothing more than fantasy from those on the left. There are plenty more likely reasons for the current wage gap.
 
weso, I may be picking nits as to if the downward slope started in mid-1980s (or early-1980s which the authors of the study propose), but the trend line starts downward from some point near the mid-1980s and the slope runs at what looks like to be a 30 degree to 40 degree angle until the early-00s when the descent becomes more rapid with globalization and the Bush 43 tax cuts and it accelerates again to account for the recession. There's a lot of things that go into this. It isn't just tax policy and I don't think anyone here is contending that it's just tax policy.

But even if it isn't just tax policy, the changes made in the 1980s were going to have an on-going cumulative effect over time. There wouldn't be one simple lurch because of the Reagan tax policies. Everyone wouldn't sell everything all at once. It would be spread over time.

The more damning fact is that median income has been stagnant since the mid-1970s, which has driven everyone to use credit/harvest equity to a greater degree.

And it's the bottom 90%, not the bottom 10%.

Here's the Powerpoint and the study from Saez and Zucman.

Study: http://gabriel-zucman.eu/files/SaezZucman2014.pdf

Powerpoint (income and wealth discussed): http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf

I could go either way on TARP. The banks shouldn't have been rewarded for bad behavior, but I don't think there's much question that the economic collapse would have been much steeper in its absence. I think we'll see deflation within my lifetime (I'm 61 and healthy, so do the math) as Europe is teetering on it now. We've got a consumption-based economy and when the merry-go-round stops, there will be huge problems. And I think the merry-go-round is going to stop.
 
Companies are responding to incentives...I guess many Americans are annoyed at those companies, but I point the finger at those who created the incentives in the first place.
 
I'm not disagreeing with you on the tax codes being a problem. But we damn sure can not make another tax holiday. Let those companies not have access to that money. Another tax holiday will yield to yet another massive laying off because a massive injection of cash is great for shareholders, why not boose it with more money from not paying employees, let them sell off stock, and then you're back to square one where the rich get richer. Only way I'd consider a tax holiday was if 100% of that money was spent not stashed, either on employment or on American produced goods. As it is fix the loopholes and force companies like Apple and Google to make some moves.
 
Why is it a surprise to anyone that the income gap will continue to get wider? Doesn't everyone understand what compounding money is? They are the ones with the most capital, which allows them to invest to create more capital more rapidly. This is very basic stuff, and is not a "problem."

I always get a kick out of it when Aces brings up the question: "What should it be? It's funny because nobody will ever answer that question. It's the same thing with tax rates. Nobody will ever put a number on what the rich should pay, they just want it to be more!

Goldy responds by flipping the question. But perhaps the answer (not to put words in Aces mouth), is that we shouldn't define what it "should" be.

Anyways, as the fed reserve continues to buy bonds, infusing massive amounts of new cash into the banks, who the hell do you think is getting their hands on that cash? And then back to step one, that cash then compounds more rapidly than of the average person's investments (and fewer and fewer "average" people are investing, which will keep them where they are)
 
sturg33 said:
Why is it a surprise to anyone that the income gap will continue to get wider? Doesn't everyone understand what compounding money is? They are the ones with the most capital, which allows them to invest to create more capital more rapidly. This is very basic stuff, and is not a "problem."

I always get a kick out of it when Aces brings up the question: "What should it be? It's funny because nobody will ever answer that question. It's the same thing with tax rates. Nobody will ever put a number on what the rich should pay, they just want it to be more!

Goldy responds by flipping the question. But perhaps the answer (not to put words in Aces mouth), is that we shouldn't define what it "should" be.

Anyways, as the fed reserve continues to buy bonds, infusing massive amounts of new cash into the banks, who the hell do you think is getting their hands on that cash? And then back to step one, that cash then compounds more rapidly than of the average person's investments (and fewer and fewer "average" people are investing, which will keep them where they are)
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Not only that, but I've yet to hear a truly convincing argument why inequality is a major problem in and of itself. It's a by-product of other activities - some which are problems themselves in need of fixing, some which aren't.
 
wonder what he thought was a "fair share"

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acesfull86 said:
Not only that, but I've yet to hear a truly convincing argument why inequality is a major problem in and of itself. It's a by-product of other activities - some which are problems themselves in need of fixing, some which aren't.
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It's a problem in that if wealth (which is the bigger problem than income) gets concentrated at the top end of the income spectrum, the people there basically set the price for everyone else. At that point, those below are forced to liquidate wealth to produce income. Now whether or not that income is then used productively is a totally different question, but too wide an income gap basically turns everyone else into a renter. That pattern, as much as risky lending by the banks, is what led to the housing crisis. People kept harvesting equity to keep up with their perceived needs. Again, there is a difference between perceived needs and real needs, but in an economy that has become increasingly dependent on consumption over savings, the economy stalls when people don't buy stuff (whatever stuff).

The economy like everything else likely has a natural saddle point and income inequality knocks it off that point if it becomes too extreme for too long a time.

By the way, sturg33 is right. Capital accumulation tends to favor those who already have capital over time. Nothing new there.
 
sturg33 said:
I always get a kick out of it when Aces brings up the question: "What should it be? It's funny because nobody will ever answer that question. It's the same thing with tax rates. Nobody will ever put a number on what the rich should pay, they just want it to be more!
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These questions have been answered on this board before. We've had at least one whole super long thread about what "fair taxes" would entail. You just ignored those answers because (a) you didn't like them, (b) you like to complain about this issue because it makes you feel superior.
 
Metaphysicist said:
Which is why we have estate taxes.
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Which is now way too low. For those who complain about the estate tax, it is important to point out that only 1.3% of all estates pay any taxes.

PS--The Reagan quote was kind of funny. That's the era in which I was doing my grad work on tax policy and those comments were laying the groundwork for his 1986 reforms. They eliminated a ton of deductions (which affected everyone who itemized) and pushed the tax burden away from individuals and towards corporations (which was in an opposite direction of Reagan's first set of tax cuts in 1981). That bipartisan reform solved a number of things (broader base/lower rates), but created others (increased lobbying by corporations to create byzantine corporate tax structure that rewards corporations on the quality of their lobbyist).
 
Metaphysicist said:
These questions have been answered on this board before. We've had at least one whole super long thread about what "fair taxes" would entail. You just ignored those answers because (a) you didn't like them, (b) you like to complain about this issue because it makes you feel superior.
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I'M SO SUPERIOR!!!!
 
sturg33 said:
Yes - because once you die... well the government taxes you again. Awesome!
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Once you are dead, you can't be taxed. You are dead. The massive amount of aristocratic income that the heir receives is taxed (minimally these days), however.

If like the Free Market, you should like the estate tax. If you always whine about what "the Founding Fathers intended," then you should LOVE the estate tax.
 
acesfull86 said:
Not only that, but I've yet to hear a truly convincing argument why inequality is a major problem in and of itself. It's a by-product of other activities - some which are problems themselves in need of fixing, some which aren't.
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Well it's simple if I have a pie, and one person gets 50% of the pie and 100 people have to eat the other 50% it creates problems. There is a direct correlation between income consolidation and economic recession/depression as well. Rich people don't spend their income in the same way that average folks do.
 
zitothebrave said:
Well it's simple if I have a pie, and one person gets 50% of the pie and 100 people have to eat the other 50% it creates problems. There is a direct correlation between income consolidation and economic recession/depression as well. Rich people don't spend their income in the same way that average folks do.
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It's not that simple because the pie isn't fixed.
 
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