Income Distribution

In the US there’s also considerable vertical mobility so I guess you should paint a toe instead of the nose and the nose in the place of the toe. ;-)

Actually, Gabe and 89…, vertical US income mobility is a myth. It’s easier for a poor man to become a top-quintile earner in Germany than in the US.

We are better than Mexico, though.

And that’s just sad.

Phil, does that chest and do those biceps look normal or fake to you? Looks like silicone implants in both, but ya can’t deny that they’re there.

we need a consumption tax system

I am amused at the fact that those who have become rich and moved up the income ladder under the old rules want to change them now to benefit their new position in life. It is not fair game for those who follow to have the same chance. Greed wins in the new USA and the office it buys with it. All for one and one for all, a fairy tale. Enjoy labor day, all.

sheesh, more class warfare. Anyone can be rich if only they’d take risk and try. Since the masses are usually too lazy and fearful to take the plunge and go for it (this includes white collars too) what you get instead is blamemongering, griping, excuses, and stupid cartoons. The US has the best environment for getting rich on the planet. If we don’t then why do we have so many more billionaires than the rest of the world?

Barry, this site has definitely become a pessimist bear cave. My suggestion is to stop focusing on everything that’s wrong out there and how bad people think things are, and instead start focusing on opportunities to make money and get rich. Even if bad news comes out I think one needs to discuss it from the point of view of “how do I get rich using this info?”.

Thanks and have a great labor day.

>> I am amused at the fact that those who have become rich and moved up the income ladder under the old rules want to change them now to benefit their new position in life. It is not fair game for those who follow to have the same chance.

This is an attack that can be — and is — levelled at anyone who (a) ended up at the top of the heap and (b) is smart and honest enough to understand “the role of chance in markets and in life” and say “hey, although I succeeded, the system would be fairer if we changed “X”, “Y”, and “Z”‘.

It’s powerful rhetoric, very persuasive to about half the population. It helps the listener tune out any recommendations for change on the basis of some suggested “motive”. (“They” have “an agenda”, so I’m not going to listen.)

>>Anyone can be rich if only they’d take risk and try.

Do risks always play out in the risk taker’s favor? If so, then your statement would be correct. But, they don’t. If it were that easy, everyone would be rich. (I’ve taken a LOT of risk, work my ass off, and I’m not rich.)

Take 1,000 monkey stock pickers and some will do much (much) better than others. That’s natural. So, when you see someone who attained “financial success”, how do you know how much merit, risk, hard-work, etc. the person put into achieving that success? You don’t. (Not without really getting to know the person. Most times that’s happened but not always, I’ve been less than impressed.)

We work in a system where there is SIGNIFICANT misalignment between contribution and reward. Highly progressive taxation starting at the top 1% redistributes the wealth the economic system really generates and which is effectively “captured” by people who have tremendous personal leverage by virtue of their position.

For example, right now, we are witnessing a tremendous growth in corporate profits thanks to stagnant American wages, which are kept down thanks to globalization. The execs and top 1% (who own 50% of the shares) did not invent globalization. Yet, they’re getting the windfall. You have to ask yourself whether it’s fair and appropriate for the windfall to go to them rather than be shared with the rest of us.

Anecdotally, the Walton family heirs’ rewards have zero to do with their contributions. And their heirs in turn will live off interest and dividends from your children’s work at the companies whose stock they own.

Only a highly progressive tax on the top 1% redistributes the income which top earners “captured” on account of the unique, tremendous leverage they already possess.

Other tidbits:
– As it turns out, wealth is distributed according to the power law; not according to the bell curve of people’s abilities and work ethic. You have to ask yourself “what factors contribute to this distribution?”
– Hint: there is truth to the statement that “To turn $100 into $110 is work; To turn $100 million into $110 million is inevitable.” It’s the simple principle that “success begets success” and “wealth begets wealth”.

You CAN introduce more fairness WITHOUT choosing a different economic system: you just have to re-introduce higher progressive taxation.

Pardon some of the non sequitors. I’m hungry and want to eat.

-wunsacon

All of this is fun but of course the Big Picture is about facts and those are: The income disparity is between those with college educations and those without. No ha-ha’s here.

“Anyone can be rich if only they’d take risk and try. Since the masses are usually too lazy and fearful to take the plunge…”

enrichez vous?

Don’t forget Porn Johnny V….and drugs; legal, but especially illegal drug sales yeah that’s the ticket (no taxes=genius!).

What could be more noble than INHERITING wealth? Not much unless it’s cooking up a really neat Ponzi scheme….
Military contractors? Now THERE are some folks we can all look up to with immense patriotic pride. I’ll bet the richly rewarded folks working on that Missile Shield thingy are bootstrappers all…..

It’s risky to cut the pension and health benefits of your company’s emplyees as your own vast stock options vest but this GREAT system of ours wasn’t built by fearful men……
I could go on and on about the abundant and virtuous wealthy of Amerika….

(…now where’s my Mother#&$@ing pitchfork)

My suggestion is to stop focusing on everything that’s wrong out there and how bad people think things are, and instead start focusing on opportunities to make money and get rich.

My Dear

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In fact, She conferred in me that her son was working with a German National only for the German to take advantage of the situation, there by setting her son up in Germany where he went to claim his father deposit. You can verify this fact your self through the German Embassy over an alleged Abacha’s Son, Mr. Abba Abacha trying to pull out the sum of (US$40 M) Forty Million Dollars from the Bank.

At this point in time, She solicited my humble self to look for a reputable gentleman who will be of great assistance to the family and somebody who can take over the sum of $27M (Twenty Seven Million United States Dollars Only)which is presently deposited in a Security Company, for investment. I will later on the course of this transaction disclosed to you the Security Company accordingly.

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Regards,
Barrister Musa Issah

Reg. getting rich, Of course there is always the old fashion way. The way my parents did it starting with nothing. Living below your means (forgoing the latest anything) Not being self indulgent. Tithing to the church. Tithing to your savings account. Buying CD’s(certificates of deposit) and bonds. Living in the same house and community for decades. Paying off your fixed rate mortgate. Holding a couple (3) conservative stocks for decades. Having a job you love and working until you are 70. Taking vacations all over the world on the cheap. My mom and dad lived this way, raised 5 kids (who all are successful professionals) and are living out their last few years together(they are both 90) in the nicest assisted living joint in Indy eating gourmet meals sitting on a pile of cash. Don’t tell times have changed. That is just a losers excuse. It takes self discipline and faith to accomplish what they did. The most important points are 1-4 above. Tom in Indy

hey TOM, what you said about your parents and
mine are true, in their time.
Today, things are different.
Don’t tell me the middle class is more healthy
today than in your parents time ??

Johnny V., Tom in Indy, and Norman, tell all those just announced laid off workers at world class Intel that they’re not smart, well educated, and hard working, after all they made Intel world class. Intel’s stock went up .31 on this deflationary news, which along with the other coming layoffs, will lead to lower interest rates here in the US, expansion of stock P/E’s, and a softer landing for the housing market with consequent, of course, more debt creation to inflate the worldwide financial bubble. Can you guess where those jobs went. Most of the US productivity gains recently were made in China and India. It’s not a question of education anymore, but wages. Soon you will see the export of medical surgical procedures to Bangalore, India because the results are just as good, but mainly because it’s cost basis is 5% of that here in the US.

Deleted and banned due to IMBECILITY

Poor people get less and have less because they are simply stupid and lazy. duh.

Zephyr

Who owns the land?

Works for fruit, but do you really think it covers all the situations in the world? Nothing wrong with the idea of preparing for the future. Just like the current group is preparing for our children and their children to pay back what they have borrowed…..

Like borrowing your fruit and then disapearing.

If you do I have some magic beans…..

(which you can plant next to the fruit tree’s.

Teddy, you are right about the medical field. I have a friend who flew to India for hip replacement surgery. Couldn’t afford it here. My answer at 51 yoa is to enroll in Purdue U. for some online classes that will upgrade my education and skills in the degree that I earned >25 years ago. It will cost me >20K and a lot (3 years)of evenings spent studying to accomplish my goal, but I wouldn’t bet against me finishing it.
Rick, nothing has changed for the middle class. Hard working people who are willing to postpone gratification get ahead. How you invest what you earn is personal choice. Those who want to gamble with their earnings to win more doubloons, candy, or funny money don’t come out ahead. They lose it. Zephyrs fruit orchard analogy is exactly what the US has. Unless you are as smart as brion.

The fruit orchard economy toy model has pedagogical value to 8th graders. If you add layers of complexity to better approximate reality, the resulting model might become relevant.

For instance, the model doesn’t explain why wealth is distributed as a logarithm, while people’s skills and work ethic (and likely risk-taking, which someone mentioned earlier) are distributed more along the lines of a normal distribution. How could it? The model doesn’t even begin to address factors such as disability, inheritance, access to education, proximity to people with wealth and power, network effects, scarcity, operating leverage, luck (probably the last thing the orchard-model school wants to admit exists), cheating (the other last thing), insider knowledge, tax policies, and more.

And what of Barry’s post that started this thread — the observation that this “recovery” has been far better to the upper class than prior recoveries? The model tells us nothing.

Why even bring up a toy model in a discussion about problems that can only be observed (and thus addressed) at a higher level? Problems can not be solved at the same level of awareness that created them. And certainly not at a lower level.

>> even become billionaires, and have certain pessimistic & angry blog-readers rail against them as well about what terrible people they are.

Which posts on this board said anything about billionaires being terrible people? The nearest thing I see to what you describe are posts which recommend changes within the economic system to more fairly share the burdens and rewards. Some of those recommendations used to, in fact, be bigger features of the tax code (i.e., estate tax, highly progressive taxation).

>> I sympathize with the Intel workers that got laid-off, but now that they are unshackled why can’t they start a bunch of tech-businesses on their own? Not all will make it but some might. … In fact, getting laid-off from Intel might be the best thing that ever happened to some of them…provided they take the risk and try

Unshackled? Many of those were good, high-paying jobs. And the prospect that one of them hits it big is…what? Is it consolation for the rest of them? For society? Wow. What a “game show” mentality.

>> instead of being lazy and watching TV all day.
>> Poor people get less and have less because they are simply stupid and lazy. duh.

There’s a lot of truthiness in these statements. Nothing helps you tune out economic issues and feel superior faster than saying “poor people got what they deserve!”

>> They may not succeed on the first try but they might on the 3rd or 4th.

Unless you start off rich (or famous) and lose other people’s money in your ventures, you don’t get 3 or 4 chances; not without saying goodbye to your spouse and auctioning off your children.

>> IMO people focus too much on jobs and not enough about taking care of business for themselves.

The economy does not need and will not sustain a zillion entrepreneurs. (Maybe it doesn’t need and won’t sustain many more than there are right now?) Consider: (a) Some efforts require teamwork; (b) As the size of the team increases for larger and larger projects, you in turn need leadership; and (c) Someone has to be a leader and the rest have to work for that person. Can you imagine an economy where everyone who works for INTC, GE, MCD, and JNJ just goes off and starts their own business? Productivity would plummet and most of the people who might take your advice would end up in the poorhouse.

You couldn’t manage a substantive reply, phil?

There is little practical difference between consumption taxes and income taxes if all things are taxed equally. You can easily replace a consumption tax with a revenue tax on retailers and nothing will change (except possibly listed prices). But why tax only retailers? Corporate income taxes end up being basically the same as consumption taxes except that the tax level is higher for higher markup items and lower for lower markup items. Which means that luxury items automatically have higher taxation levels and basic necessities end up with almost no taxation. And it makes little difference to people whether they are paid less with no taxes (and then their employer is taxed more) or if they are paid more with lower taxes, so corporate and personal income taxes end up being roughly equivalent.

The thing that matters is how much the government can affect economic activity through the tax code. Corporate income taxes allow the government to provide rewards for things like research, while discouraging excessive CEO compensation by not allowing a deduction beyond some reasonable level. Without corporate income taxes, the government has almost no control over how companies spend money (they can just require some things and make other things illegal). Likewise with personal income taxes. Consumption taxes allow the government to charge different rates based on what type of item is being bought.

The question of what type of taxes we should have really comes down to one of how we want the government to be able to regulate the market. Consumption taxes have the least oversight capability, which is why conservatives prefer them. Income taxes can be progressive and provide rewards for good behavior, which is why liberals prefer them.

If you really believe in capitalism, you should prefer corporate income taxes. Under pure capitalism, corporate profits are a sign that someone is cheating. Which means that taxing them at very high levels is the easiest way to prevent people from cheating. The real world is not so simple, and corporate profits are normally a sign of high barriers to entry. But they still seem like the best way to minimize corruption.

The main advantage of personal income taxes is that they can redristribute income easily. If you’re not going to have progressive tax levels, then personal income taxes are far more trouble than they are worth.

The best argument for consumption taxes right now is that it reduces the cost advantage of outsourcing. It effectively charges taxes to all companies that sell products in the US, regardless of where they are incorporated.

Estate taxes are entirely separate, since they are not based on money being spent. People arguing for low estate taxes are arguing for the creation of an aristocracy, with wealth and income passed down for several generations. High estate taxes seem like a very American idea, since it forces each generation to make it on their own, placing people on a more equal footing so that the best can rise to the top.

I’m not sure how you would expect any taxes to capture an underground economy. Are you expecting drug dealers to pay sales taxes? Or do you think that companies which don’t report their income or their employees to actually report how much they sold?