Is it Iraq or the Economy? That’s the question the MSM seems to be focused on. The obvious answer is being overlooked:
How about both.
Most pundits, politicians and economists have yet to figure out what the public long ago came to realize: We now have a dual economy — one that distributes gains and losses in a very uneven manner.
The lowest economic strata have seen tremendous job creation, particularly in China, India, Malaysia, Viet Nam, Taiwan, and parts of Eastern Europe. And any owners of hard assets: real estate, energy, precious metals, as well as global equities, have seen their fortunes move up.
So while the media drones on about whether the GOP will suffer from Iraq in tomorrow’s elections, or prosper from the "strong" economy, you can be sure they know not what they say. While those of us in the top percentiles are doing very nicely indeed, the rest of the country is scraping by.
The economy, despite good overall data and record high corporate profitability, does not exactly imbue to the incumbent’s advantage.
Evidence for this can be found in a recent study, titled "The Evolution of Top Incomes," by University of California-Berkeley economist Emmanuel Saez. Consider the following info from the study about the nation’s richest income gainers. This top 1% of all American households — 719,910 of them — had:
• an average annual income of $326,720 in 2004;
• this represents 19.8% of the entire nation’s pretax income; That’s up more than 10% (from 17.8%) from 2003;
• In 2004, the top 1/10 of that 1% — 129,584 American households — reported income equal to 9.5 percent of national pretax income.
• Between 2001 and 2004, median, or midpoint, family income rose only 1.6 percent.
• Median family real net worth – a family’s gross assets minus liabilities – rose only 1.5 percent during those four years.
Compare the recent sluggish income-growth with the four years between 1998 and 2001:
• Median family income grew by 9.5 percent and median family real net worth grew by 10.3 percent.
• Over 2000-05, workers with four-year college degrees saw their inflation adjusted wages fall 3.1%
• Only two groups, who together make up just 3.4 percent of the workforce, saw inflation-adjusted wages rise: workers with doctoral degrees or specialty degrees, such as medicine or law, according to the U.S. Census Bureau.
• Soaring pay enjoyed by top CEOs, athletes and entertainers has also added to the widening income divide.
• The median value of stock holdings for the wealthiest 10 percent of
Americans was $110,000 per household in 2004, according to Morgan
Stanley, the banking giant. The value of stocks held by the other 90
percent of Americans averaged $8,350.
Those numbers are precisely why the Middle Class rates the economy only fair to poor, despite the data showing overall (but diminishing) strength.
Depending upon the elections results tomorrow, the Middle Class might force some
changes — in both the economy and the stock market. A minor realignment
would produce gridlock, and that would be a good thing: it would act
as a check on the profligate spending, and force some of the more
heinous lobbying abuses back to merely egregious.
A major shift would reflect a full blown political re-alignment, and that could cause all sorts of mischief as far as markets are concerned. Its more than Iraq, the budget surplus
deficit, earnings and inflation. We can expect to hear questions raised about fundamental fairness, given
how the benefits of the tax cuts have accrued primarily to the top percentile.
Individual income tax rates were lowered, most especially the highest brackets, down to 25, 28, 33 and 35%. The big cuts in the way capital gains and dividends
are taxed also fell to the wealthiest Americans. Indeed, much of the market run from 2003 is in large part
predicated on tax policy that made it cheaper/more profitable to be a
stockowner. (And I personally benefited from all of these changes).
I expect all of these 2003 tax
cuts to be revisited in the event of a major GOP loss.
Former Treasury Secretary Lawrence Summers takes note of the way various economic classes have been impacted by the recent changes. Writing in the Financial Times, he notes:
"Against all odds, we are living in a time of plenty. Neither the after-effects of September 11 2001 nor a tripling in oil prices has prevented the world’s economy from growing faster in the past five years than in any five-year period in recorded economic history…
Two groups have found themselves in the right place at the right time to benefit from globalisation and technological change. First, those in low-income countries, principally in Asia and especially in China, who are able to plug into the global system. The combination of low wages, diffusible technology and the ability to access global product and financial markets has fuelled an economic explosion.
Second, it has been a golden age for those who already own valuable assets. Owners of scarce commodities have seen their returns rise prodigiously. People running businesses that can take advantage of globalisation to source labour less expensively and sell to larger markets have seen their incomes rise far faster than incomes generally. Certainly those in the financial sector in a position to benefit from the asset revaluations associated with globalisation have prospered." (emphasis added)
That pretty much sums up the upper and lower strata — but its in the great middle where we see all sorts of angst coming out of this "new era."
And, if we are to believe what members of this group are actually saying to pollsters, its that same middle that is likely to impact the mid-term elections in the United States . . .
<>
Sources:
THE EVOLUTION OF TOP INCOMES: A HISTORICAL AND INTERNATIONAL PERSPECTIVE
Thomas Piketty, Emmanuel Saez
January 2006http://elsa.berkeley.edu/~saez/piketty-saezNBER06AEAPP.pdf
THE EVOLUTION OF TOP INCOMES
NBER WORKING PAPER SERIES
NATIONAL BUREAU OF ECONOMIC RESEARCH, January 2006
http://www.nber.org/papers/w11955
The rich are getting much richer, much faster than everyone else
Kevin G. Hall
McClatchy Newspapers, Thu, Nov. 02, 2006
http://www.realcities.com/mld/krwashington/15912820.htm
The global middle cries out for reassurance
By Lawrence Summers
FT, October 29 2006 18:48
http://www.ft.com/cms/s/89aac4dc-6777-11db-8ea5-0000779e2340.html
“It’s a great time to buy or sell a stock!”
Interest Rates Near Record Lows
Today’s interest rates are comparable to 40-year lows, offering stockbuyers a once-in-a-lifetime opportunity.
Large Inventory Won’t Last
There are currently billions of shares of stock for sale. We have had a record inventory of stocks on the market in recent months, offering consumers the greatest choice in decades.
Prices Overall Have Stabilized
Prices of stocks in June – November are only up 12 percent and the outlook is for stock prices to increase next year.
Positive Outlook
Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. “Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter.” According to industry estimates, 2006 will be the third-best year on record for stock sales.
Stocks are a Great Investment
Stock ownership is a safe, secure way to build long-term wealth. The national median price/earnings ratio of stocks bought ten years ago has increased 88 percent. The number of US households is expected to increase 15 percent during the next decade, creating a continued high demand for stocks.
Don’t Delay
Now is a great time to buy or sell a stock. If you delay, you run the risk of paying more for a new stock.
I couldn’t resist
“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford
Excellent slicing of that troublesome “unhappiness”.
Do we need to remind ourselves that the bigger trouble (wars) is usually preceded by socio-economic conditions that are then ignited by some accident? [Chaos theory and those troublesome initial conditions come to mind.]
So this disparity in income distribution and wealth distribution , although innocuous in appearance, can be ignored for only so long…as Chamberlain I’m sure would surely confirm…but perhaps Giffen less so.
OIL, CASH AND CORRUPTION
Comparing 2001-2004 to 1998-2001 is rather rediculous given that 1998-2001 was an entirely false economy due to dot com euphoria, fed liquidity in preparation for y2k and corporate fraud. People were leaving solid decent paying jobs to go get jobs with internet start-ups that paid 50% more. Now they complain they can’t make what they made in 1999. All I can say to that is …. DUH!
“Individual income tax rates were lowered, most especially the highest brackets, down to 25, 28, 33 and 35%”
COME ON!!!! The 15% bracket was expanded to a much larger dollar value and the 10% bracket was added and the child credits were increased to large amounts and the standard deduction for married couples was expanded. You aren’t going to make the argument that the rich got a larger dollar tax cut are you? Because that is the lamest argument but one that atleast a market economist should know better than to make. In percentage terms the lowest brackets got by far the largest tax cuts.
You want to roll back the tax cuts. OK, lets hear you propose rolling them all back. Child tax credit goes from 1000 back to 600. 10% bracket goes back to 15% and the cutoff for the 15% bracket for married couples drops from the current value around 60,000 back to around 45,000. And then you can take the tax cuts back from the other brackets too.
So all those in the lower brackets who would like to sign up for a complete repeal of the tax cuts, ALL THE TAX CUTS, please raise your hand?
How about a little honesty about this.
If its so terrible out there why are not the Republicans going to be thrown out by wide margins. If its the 90% who are feeling the crunch it should be easy to throw them all out except in the redest of red districts.
Instead the Democrats will gain a slight majority in the House and probably have a split Senate.
I fear what I am seeing here is the same mistake Warren Buffet made when he bet against the dollar because he felt Bush was incompetent. That political gamble made in currency markets cost him a few billion dollars. Is your bearishness based on your belief that Republicans have screwed over the peasants? Because if so its not valuable insight. And if not then why the constant bashing of conservatives and the class warfare that gets posted on here (this is far from the first class warfare post here).
I have appreciated many of your other market calls but this kind of stuff really makes me question if your judgement is clouded by the political spectrum with which you view the entire system.
~~~
BR: This was an economic discussion, and a look as how this may impact politics — not a market discussion.
But that’s okay — QBall wouldnt be Qball w/o trying to muddy up the waters and distract from the actual issue at hand.
I’m kinda impressed, I’ve been assigned my own rotating trolls by the RNC!
As long as President Bush the veto pen, there will be no rollback in tax policy.
Just a thought, but it seems to me that a very large portion of any increases in the net worth of individual Americans for almost 10 years now have been a result of extreme asset price inflation, or asset bubbles. This coupled with a negative savings rate would make for a precarious situation.
YES …. I am in the lower bracket
roll back every tax break.
>>> “Only two groups, who together make up just 3.4 percent of the workforce, saw inflation-adjusted wages rise: workers with doctoral degrees or specialty degrees, such as medicine or law, according to the U.S. Census Bureau”
I think it’s totally normal during globalization. The income of average American was well above international mean for the last 100 years. I see no reason for this to continue. The wages have to go down, this is fair and this is normal. Why workers in China and India should earn less than in Detroit? They should not.
The conclusion about education is also quite simple. Any dog or his dogwalker can get a bachelor degree those days. The real men must have a graduate degree. This is totally normal, too.
Q Ball,
I am in one of he higher brackets.
I want spending on BS war cut before you raise any taxes.
I want general BS spending cut.
I do not want to hear you voted against a poor kids entitlement while you vote for a trillion in subsidies for the drug companies.
I want to see income taxed, not employment.
If my 15% bracket is wider okay as long as the money is not wasted.
And give me T Bills for the SS trust fund now.
MarkTX,
You make 1. I would love to put that to a national vote.
And you say you are in the lower bracket. I would like to know how much the roll back would hurt you. Perhaps you are in a low enough income bracket that it wouldn’t actually cause you to pay much more tax. I don’t know that. Perhaps it would actually significantly increase your taxes which would make your statement a very strong statement of belief that the tax cuts were a mistake and would be quite impressive. But if you are in a situation where you already paid little to no taxes anyway then your statement does not count for much.
As I said, would love to put that question to a national vote. Think you can get even 25% to vote for such a thing? Only those who would be so low in the tax charts as to not really pay much of any tax anyway would vote for this and a very very slim margin of those who would face significant tax increases but who who stand on pure principle of not lowering taxes.
To Q-Ball:
All’s fair in love and class warfare. Why would the typical voter want to roll back his own tax cuts? It makes more sense to tax the rich because, as they say, that’s where the money is.
There is a big reason Americans believe workers in America should have a continued advantage in the standard of living. Much of the newly minted prosperity in China, India, etc. is the result of American wise stewardship and benevolence of the global system. Many of us, myself included, have put our lives on the line defending and expanding freedoms in this world. We have along history of hardwork and sacrifice in America and it is wrong to ship that overseas for short term gain of a very few criminals.
There are two ways to globalize: a race to the bottom, and a race to the top. I, and most Americans prefer the latter and our voices will be heard.
When you ask someone to raise their hand,
and they do…then don’t give a backhanded speech that
may or may not prove anything.
Do you really think congress would allow
a national vote on income taxes?
Q-Ball,
If the economy were the only issue, you bet that every republican in both houses would be sitting on their rear ends on the steps of the capitol come Wednesday morning, but it is not. We still have a few hangers on who support our involevment in Iraq, and ignorants who don’t understand that the only reason terrorists are in that country is because we opened the doors when we invaded. You have a huge group of religious right, or even religious moderates who are scared to death that gay marriage will threaten their sexuality, maybe give straight people funny ideas, and all the other hog wash that comes from these types who oppose stem cell research and any form of progress that may conflict with their literal interpretation of the Bible.
These are the only reasons why the middle classes may be tempted to stick with the republicans. As for the rest of us, well, I hate to say it, but most of my colleagues are just too greedy, and I am not afraid to tell them so.
Wow, a Henry Ford quote on the banking system! Of course, you do know who ol’ Hank blamed for WW II, don’t you?
Perhaps yours was just a sardonic commentary on the prejudices of some in middle America. Hope springs eternal.
No I don’t think congress would allow a national vote on taxes. I was just saying that I don’t expect a very positive response to such a hypothetical vote.
I was also just trying to ascertain if such a change in tax law would hit your pocket book by a thousand dollars or 50 dollars?
If I am asked to be in favor of something that negatively affects 80% of Americans but has no impact on me, it doesn’t really mean much if I am in favor of it. However if it has a big negative impact on me and I am still in favor of it, that is standing on principle and means something. That is all I was saying, and I don’t know which is true in your situation. If it is the latter then I have great respect for your raising your hand. You didn’t say what the impact would be to you if such a roll back happened so I don’t know which group you are in.
To the others who commented on other things, yes other issues do matter too. But the pocket book is a huge issue and it tends to matter more than other issues to a majority of people. So if the economy was so terrible for the vast middle it should result in a great backlash at the ballot box.
I don’t agree that it is so terrible. It isn’t the go go 90s thats for sure. And I am sure for some it is actually pretty bad. But I believe for most it is just the usual steady economy with small pay increases and stable employment. Thats what normal economies usually do. This idea of comparing things to where people were at in 1999 is rediculous. Not only that but the numbers posted in this entry are comparing 1998-2001 to 2001-2004. Thats comparing the height of the boom to the valley of the pull back. And that data is 2 years old. And even in 2004 when it was worse it didn’t result in negative results for Republicans at the polls. Now its 2 years later and the economy and recovery is better. The numbers would look better if it was using 2006 numbers instead of 2004.
Its always the economy stupid. And the economy is fine. Which is why that has nothing to do with this vote. This vote is about Iraq and the war and all its ramifications. For the most part thats what is sinking the republicans.
The trend towards oligarchy or plutocracy — owners of capital over labor — is just that, a trend, something to analyse and consider. If mentioning it in polite society is to be forbidden — images of a maiden aunt insisting that what the dog left on the carpet was an unsightly mess rather than a pile of shit come to mind — then call it what you will; it’s still there and increasingly hard to ignore.
Whether that makes the putative middle of the electorate more inclined to clean house or not is the question to be asked and answered currently I suppose. However, in the same metaphorical vein, I suspect most are still focused on that undercooked Iraqi turkey they’ve were served for dinner and are deciding whether they should insist it be removed from the room (possibly along with the doggie doo) or whether they should continue to be polite, eat it and puke later.
Okay, enough of that: another cup of coffee, a pesky puppy who wants her walk, and a couple junior gold miners demand my attention. So much for this morning’s prioritization task.
Boy, feelings are running a little high around here.
Barry, you are right on.
My hubby and I are doing fine, will do fine. My daughter and her hubby are doing fine, for the most part. A degree for him, some college and a great job for her.
My son also has some college. But he works in a blue collar job. His wife works for Walmart. They both work hard but struggle with their bills at the end of the month. And I fear greatly for their future. And the future of my grandchildren.
And I will go vote tomorrow – probably against my best economic interests and for the future of my children, grandchildren, and my country.
Q-ball,
>> So all those in the lower brackets who would like to sign up for a complete repeal of the tax cuts, ALL THE TAX CUTS, please raise your hand?
Right here.
“Tax cuts” without spending cuts –> inflation –> a decrease in spending power
George W. has not passed ANY tax cut for the bottom 95%. Ask any one of them how much more they have to pay for gas, food, or anything non-electronic. There was no net gain in purchasing power.
>> Comparing 2001-2004 to 1998-2001 is rather rediculous given that 1998-2001 was an entirely false economy due to dot com euphoria,
So, the euphoria is gone in 2001-2006 for the masses? But, do you recognize the euphoria returned for the top 5%? That’s the point.
>> Warren Buffet made when he bet against the dollar because he felt Bush was incompetent. That political gamble made in currency markets cost him a few billion dollars.
Over which time period? I read he was in the black.
>> If its so terrible out there why are not the Republicans going to be thrown out by wide margins.
Because:
– It’s not easy for anyone to adjust his/her worldview in response to new data. And some people take longer than others to do it even if given the “same facts”.
– Different people are exposed to “different facts” by way of differing media outlets.
-wunsacon
History will record that the emergence of the middle class in the US was a temporary phenomena roughly the 50 years post World War II. But that’s not what I wanted to vent. Tax cuts? What tax cuts? Taxes are what the govt spends not what it collects. Besides, the Us cheats in these comparisons due to two factors; one we comapre to places with universal healtcare and two we have a strong State federation that also taxes. Live in Kalifornia where 28% Fed, 9.3% CA, 7.25% sales taxes and throw in health insurance and then compare to “high tax” developed countries. Then there’s the AMT but don’t get me started.
Q-ball,
What people like you fail to realize is I had a great job with great income under the first time period. under the second time period my job went immediately to India. I have learned that even though you may have 4 years of grad school, if you are 55 you don’t get hired period.
You also need to realize that until 2004 I generally voted republican.
Now read Fred Barnes on the WSJ editorial page today and you will find republicans are losing because they gave up and didn’t wipe out social security.
You may cut taxes all you want, I pay zero in either case because there are no jobs. You need income to pay income tax.
I want the 2 Trillion you seem so willing to spend in Iraq to provide them with 2 hours of electric a day instead of thwe 22 hours a day they were used to.
Since globalization is such a great thing I want to be able to buy into Medicare.
I want pensions that are stolen, ala IBM and now Citi, to be taxed. CEOs here make 400 times more than the average worker, yet in the UK iit is only 98 times. certainly you wouldn’t’ agrue that the results of corporate America are superior to the UK?
So Barry is right, it is still the economy stupid. It is the wasted money in Iraq but the chickenhawk brigade lost me when Chaney said he had better things to do than serve in the military. What hypocrites, Clinton dodging bad, Chaney dodging good.
Republicans have shown themselves to be selfish, whether trashing the environment, our economy, out jobs, out nation. Yes, Sam Palmisanno of IBM says IBM should be allowed to do what it wants because they are a global company and he shouldn’t be tied down by a nation’s laws.
So while he and Gates and Intel and the rest are destroying this country by hiring Indians, do you think Tata and Wipro are hiring as many Americans?
And that my friend is why you will wake up Wednesday to a different government, and deservedly do.
Q-ball
my tax bracket has varied widely the last 7-10 years (from the 0% income bracket to the 25% bracket and now somewhere in between)
I am single with no children (no tax credits)
The IRA new adjustments helped me (tax credits)
et al…
Simplifying the tax code would probably benefit me the most…if not just for the time, confussion and (the agony of defeat?) LOL
“Over which time period? I read he was in the black.”
http://www.smh.com.au/news/business/buffett-cuts-forex-loss-after-12b-
hit/2005/11/07/1131212004579.html?oneclick=true
he cut his loses and reduced his exposure after losing 900 million US in the first 9 months of 2005. It was an admission that his bet had been wrong for all of 2005 and he needed to scale it back.
“So, the euphoria is gone in 2001-2006 for the masses? But, do you recognize the euphoria returned for the top 5%? That’s the point.”
Have the top 5% done better in income than the rest. Apparently so. That was not may argument. In the end if the top 5% triple their income and the middle still gains nicely it may seem unfair but it doesn’t make the middle peasant slaves. My point was that the middle may be seeing no growth right now but comparing their gains to 1999 was not valid since the gains many saw from 1995-1999 were not based on a real economy but on fantasy so there is going to be a period of years where that fantasy is removed and evened out. If we continue on this path where the middle cannot make gains going forward, then serious problems will result, I agree.
Also my point was in pointing out this desire to make it look like the rich got all the tax breaks, which is just a blatant pile of donkey dung and I am tired of hearing it. Make your arguments that after inflation and gas prices the tax increase is eaten up if you like. Doesn’t change the fact that more money is in the lower tiered people’s pockets because of the tax cuts than without them. Independent estimates put the average middle class tax benefit at somewhere around 2100 dollars a year. I am sure no one cares about that 2100 dollars. Just give it back. Its eaten up by inflation and extra gas costs anyway so I don’t want it.
Thats just not a very coherent argument.
Oh and by the way. My tax bracket is the 15% bracket get very close to the 25% bracket, just so you know. So I am not getting this great boon the “rich” are getting from the huge tax breaks they got that I didn’t get baloney.
Robert Cote,
I agree that inevitably taxes are what they spend because they have to get them eventually and this congress and president have been terrible on spending. That and the entitlement tsunami that is coming is what is going to wipe out the wealth of the middle class in coming decades. What is being complained about here right now is nothing compared to what is coming when our government can’t even come close to keeping its promises on SS, medicare, medicaid.
There was a poster here who was upset about pensions being cut off. Thats nothing compared to the mess of the SS and medicare system in 20-40 years. Perhaps many here won’t feel the pain too much if they are old enough. But our kids are going to get screwed. This is the last generation that will do better than its parents. And its not because of taxes or corporate salaries. Its because of the financial mess that is coming when the US entitlement system as currently designed and funded, collapses under its own weight. Now that will be a real pension default.
Q-Ball
All right, set aside for a moment the data Barry is using and ask yourself this, when in history have dual incomes and dangerously excessive leveraging been necessary in order to live a non excessive, middle class life style (raise kids in a decent neighborhood , with decent schools, take a two week vacation once a year, and drive a late model car)? I just don’t think this can be considered a normal, steady or healthy climate. We keep raising the bar on what is necessary to achieve middle class status, and there you have the crunch.
Stephen,
Ok.
I dispute your characterization. Everyone needs a new car today. Everyone needs a cell phone. Everyone needs 5 TVs and 3 DVD players. Everyone needs X,Y,Z,&Q.
When I grew up we didn’t just “go to town” for the heck of it. That as a once a week trip. And town was only 8 miles away. And that was only 25 years ago. We have changed alot what we consider normal and non-excessive.
I argue that we have raised what we think it means to be middle class and that is why we have to have the excessive debt to finance it. I am not saying its necessarily excessive. But its more than what the middle class considered normal and ordinary in 1960. Think about your grandparents in the 1960’s. They lived fairly meagerly compared to today. Nothing wrong with wanting more. But I do not agree that we are working harder to support the same lifestyle of the middle class 50 years ago.
Heck we live in houses 3 times larger than the little shacks they built back then. You seen all the houses that got built on the GI bill when they came back from war in the 50s? Little 2 bedroom 1 car garage houses. Thats considered poverty living today. No one builds a house like that anymore.
We have the ability via debt and financing to purchase more than we can afford. So we do. Which increases the demand, which increases the price and everyone is running to keep up.
We raised the bar on what we think it means to be in the middle class. Thats my take. You don’t have to agree with my, but thats how I see it.
Warren Buffet made money betting against the dollar. He lost just part of what he had made.
Robert Cote
If you are comparing Federal + State+ sales taxes with ‘high tax areas’, you might want to include their VAT as well, which in many places is 15-20%.
Q-Ball,
Of course we have increased our standard of living. Productivity has gone up, which means that there is more produced per person. If productivity had increased at 1-2% for 50 years and the middle class was in the same place, people would have many good reasons to complain. What people are complaining about is that most of the benefits of increased productivity are going to the upper class, while the middle class is stuck in the same place year after year. If productivity gains are going to be used to justify cutting jobs and dropping real pay, then people are going to vote against “progress” because it is being used to hurt them. If the benefits of productivity growth are shared with everyone, then people will vote in favor of progress. Who cares if GDP growth is positive or negative if the entire amount of the change only affects 0.1% of the population?
“History will record that the emergence of the middle class in the US was a temporary phenomena roughly the 50 years post World War II.”
That’s interesting. So, why did millions of immigrants flock here before WWII? Was it not economic opportunity amongst other things? A little amnesia?
I guess you don’t live in the same society I live in. On the Bloomberg Carter interview he quotes $55,000 as the average or median income. I cannot recall which. 50% of the world lives on less than $2 a day. This cycle sucks from an economic opportunity standpoint but I’d argue that cycles would predict that and it is temporary.
So, if that is the case and this is a representative republic, what are you saying? 95% of people are just going to sit around and let their dreams and way of life head down the shitter while the 5% inherit the titles of kings and queens?
Q-Ball, I’m one of those “our kids” you’re talking about, and my husband and I live in one of those tiny houses built in the 1950s. It looks like we have more than our parents did in their 20s, until you factor in the massive amount of debt we have (mostly student loans). We couldn’t afford to buy the tiny GI-era house that we live in.
When our parents were young, they could buy a house. They could have kids and not worry how they would afford to live on a single income, or how they were going to pay for daycare if both parents worked. They could look forward to retiring at 60 or 65, because the company would provide a pension.
We are being squeezed from both ends, paying as much every month for our B.S. degrees as we do for our rent; after 2 years, we’ve finally saved up enough for a 6-month emergency fund. On top of this, we are expected to be ready to support our aging parents as they leave the workforce in the next 5-10 years, since the pensions they were promised have been drastically cut. We’re expected to save for our own retirment, even though we can’t pay off the cost of the degrees necessary to get the job to begin with.
I think you’re right, that we’ve redefined the middle class. But once you’re on the hamster wheel, there doesn’t seem to be any way to get off again.
Nice post jkw
Well, Q-Ball, go off and vote Republican. It seems like they’ve convinced you that what’s good for them rich guys is good for you. Perhaps one day in the future when you read one of their memoirs you’ll see how they’re smiling at what a good snow job they’ve done.
Q-Ball,
Your point is well made, but with one flaw as I see it. I am forty seven, old enough to remember what you are talking about. Problem is, the people living the American dream back in the 60s all had pretty much the latest technology available at the time! Yes, society is to blame for raising the bar on what constitutes middle class, but that is a reaction to the expectation that the economy will provide the stable growth necessary to facilitate the required cash flow, and that comes from the belief that prosperity will be fairly distributed among the classes. Something that is not taking place this time around.
Yes we disagree, but your comments set the stage for some good dialog!
“—COME ON!!!! The 15% bracket was expanded to a much larger dollar value and the 10% bracket was added and the child credits were increased to large amounts and the standard deduction for married couples was expanded. You aren’t going to make the argument that the rich got a larger dollar tax cut are you? Because that is the lamest argument but one that atleast a market economist should know better than to make. In percentage terms the lowest brackets got by far the largest tax cuts.–”
Under the new math, the tax brackets are (for single filers)
Up to $7,150 19.1 %
$7,151 – $29,050 31.2 %
$29,051 – $70,350 34.1%%
$70,351 – $ 97,500 37.1%
$97,500 – $146,750 31.9%
$146,751- $319,100 35.9%
$319,100 above 37.9%
You may ask how I got these – I added the payroll taxes.
Isn’t that unfair?
No it’s not. Because the Rethugs are going around saying that SS money is spent as it comes, and the govt will be bankrupt when it;s time to pay it back. Fair enough. Then the SS taxe are an income tax, and the charade about it being not one should be stopped. You see that the guy in the $70,351 – $ 97,500 bracket is paying the same as gates and Buffet.
But who knows all this math. The sheeple will beleive whatever comes out of FOX news
“You want to roll back the tax cuts. OK, lets hear you propose rolling them all back. Child tax credit goes from 1000 back to 600. 10% bracket goes back to 15% and the cutoff for the 15% bracket for married couples drops from the current value around 60,000 back to around 45,000. And then you can take the tax cuts back from the other brackets too. ”
No, we should keep the tax cuts as it is, Slap an additional 10% tax on everyone earning above a million, and a 1% tax on people earning above $20000, and a 0.25% tax on anyone earning below 200,000. The numbers can be worked out, but the burden would fall on the richest. It should get wide political support, since it would be the the “Terror war tax”. Anyone who opposes it will be called a terrorist supporter and locked up in Gitmo.
Now some wise guy is going to stand up and speak about demographics and economic basics. I know that stuff. But to people who raise bogeymen like “SS is a ponzi scheme” and “the SS bonds are worthless paper”, these are the kind of answers that is required. It is not that they dont know what is going on – bankrupt the governmnet today so that it cannot pay its obligations tomorrow. They plunder today and spin. And spin should the answer to them.
The a$$hole Greenspan said to raise – RAISE – payroll taxes. To prefund SS. Now we see that it has not been for SS. It has been a backdoor tax increase on the lower income folks.
Spin, you crooks. Spin as much as you want. Pretty soon you will be calling FDR a conservative. You think you can hoodwink the sheeple today to bankrupt the government. Tomorrow the same sheeple will plunder _your_ pockets to keep their life going. Economic principles be damned. That’s democracy for you. Do you think that delusion would work only way? That when the system goes kaput, the sheeple would suddenly come to their senses and behave rationally? Good luck.
Q-ball,
>> Make your arguments that after inflation and gas prices the tax increase is eaten up if you like. Doesn’t change the fact that more money is in the lower tiered people’s pockets because of the tax cuts than without them.
No? Sure, they have more paper in their pockets. But, does it buy them more? Add the debt back in to your calculations, too. (And the interest on that debt goes to where? The top 1% around the world.)
>> Independent estimates put the average middle class tax benefit at somewhere around 2100 dollars a year.
“Average” or “median”? And “middle class tax” means what subpopulation? Who were these “independents”?
>> I am sure no one cares about that 2100 dollars. Just give it back. Its eaten up by inflation and extra gas costs anyway so I don’t want it.
The rich got so many more fiat currency notes than that that they can outbid you for the resources that extra “$2100” can buy. Their purchasing power went up. Yours? Not thanks to the tax cuts. Better thank Walmart and China for that.
>> he cut his loses and reduced his exposure after losing 900 million US in the first 9 months of 2005
How did that bet fare in 2004? Overall?
The US doesn’t so much need a minimum wage, as much as a maximum wage. Any annual income over $500k should have its tax rate raised and over over $5 million it bumps up again. We need to destroy the greed bug that has corrupted this country. Also we need to start taking out social security taxes for income over $100 k.
the world’s economy from growing faster in the past five years than in any five-year period in recorded economic history
I have not looked at the recent data to confirm this but I believe he is talking about world gdp rather than gdp per capita. The fastest growth in world gdp per capita was during the 50s and 60s and amounted to double the rate of the 80s and 90s. I doubt things have improved that much in the 00s. Things would really have to be booming to reach the levels of increase in prosperity of the 50s and 60s.
Okay lets talk macro again.
First take a look at the number of replies to any given subject on this blog. Perhaps you then can figure out what is pushing people’s buttons. From what I can tell most people are very concerned over what the future might have in store for them.
Q ball if one percent of the people in the USA control about 10 or more of the wealth then increased gains made by these people tend to go to these people and are used to generate more wealth. Problem is investing dollars seem to have a different effect on the economy then dollars spennt on goods and services generated in the USA. No money acceleration esp. if companies use extra funds to buy back more stock. It likely serves to concentrate wealth further.
No more arguments adressing the general situation based on averages or situations which do not effect the populous across the board. Someone here once pointed out that if we took himself and Bill Gate’s wealth together and averaged it the average might look pretty nice. It is a statistical distortion of reality. If the average gain for any one group is called x but 90% of it goes to a subset of that group comprising 10% of the group the correct answer is that the 10% are getting vastly more gain per person than the members of the 90%.
Republicans made fun of Al Gore for wanting the proverbial “lockbox for Soc. S. Too bad he was right. SS is giving the chickens to the foxes and saying please guard these for me. Look what happened to so many pension funds. This is one of the best reasons for radical election reform. The process of needing to raise $ makes it hard to exclude speacial interests. May the best puppet win! I may be a Democrat but I bet there are a lot of qualified Republicans (and maybe a couple of Democrats) who are amazingly qualified and monetarily unelectable.
Break it down to numbers. The number of lower class and their statistics, the middle class, the rich and then look at the statisitics and trends in comparison. Per person on an equal basis, per family,per area of the country per group. . Anything else lacks merit when it comes to how the people of America are doing.
Be well.
“why the constant bashing of conservatives and the class warfare that gets posted on here?”
Why Q-Ball? Because “conservatives” have shown themselves to be incompetent at governance. They DO excel at crony capitalism however and class-warfare. (the only kind of warfare they’re good at-but then it’s easier to defeat a passive “enemy”) For cons it is “Creationism” in the classroom and lip service to “Darwinism” everywhere else, except that Charles Darwin, to my knowledge never observed THEFT as an evolutionary advantage in the behavior of the creatures of the Galapagos….
Bushco have been waging raging class-warfare since W was selected and screaming “class-warfare!” anytime anyone objects. Typical R hypocrisy. Your tribe Q-ball, are a bunch of disingenuous lying bastards and THAT is why you’re being turned out tomorrow.
To sum up, the following arguments are made:
1. Productivity increases means we can have more that 50 years ago all things being equals.
Thats a good point and one I overlooked. I think there is certainly a good factor of that involved in what we can now get. I do believe that easy credit has allowed us to increase what we buy at far beyond just the increase in productivity and is what keeps many feeling as if they can’t afford it all.
And its tough, because when everyone else has it you feel like you are not able to keep up. And especially with kids you feel like you can’t provide them with what everyone else is providing their kids with. However if credit is used to purchase more than we can afford it creates a building problem. Our government has been doing it for decades and I argue that the average family is doing it now too.
I guess the debate is one of whether people are using debt because the economy doesn’t allow them enough wages to provide them same standard of living or if they are using credit to purchase a higher standard of living than they could in the past. Probably some of both. My view is that a large part is caused by people using credit to live above their means. Certainly there are some who are just in very tough circumstances who have few good options. But I think for most middle class families, people are just living above their means.
2. Taxes should be raised on upper income earners.
Thats certainly an argument that can be made. I suspect that given the dire situation of the government’s finances that there is no getting around the fact that taxes will be going up in the future. I believe we are looking at the low point in taxes for the century right now. It seems that should that turn out to be true many who posted here should be pleased with that.
Again, I am not even trying to make an argument here about what taxes should be. But to say that the previous tax cut was only for the rich is preposterous. Of course the rich got lots more money from it. Of course the rich need it less. What kind of an argument is that? Its simple math. Small percentages of big numbers amount to big dollars.
You want to talk about how much a rich person saved in taxes. The poor saved 500 dollars, the rich saved 47,000 dollars. Ok, then talk about what they pay too. The poor paid 800 dollars, the rich paid 138,000 dollars in tax. Talking about dollars is no argument.
The whole point was that it is not accurate to say the rich got the biggest part of the tax cuts.
Be honest, say you think the rich should get no tax cuts. Instead the poor should get cuts and the rich should get increases, or whatever it is you want. But don’t say the rich got all the tax cuts. Thats rediculous. The rich currently pay most of the taxes anyway. And after the tax cuts the percentage of total taxes paid by the top 10% went from like 64% to 67% of all tax collected (I don’t know the exact numbers but it was in that ball park).
So the rich did not get all or even most of the tax cuts. They got most of the dollars but again thats just true of any tax cuts that give any cut to any high income earner.
So you want the rich to pay more, then say it, as some here did. I respect that. Don’t say the rich got almost all of the previous tax cuts. Thats an ignorant lie.
“The whole point was that it is not accurate to say the rich got the biggest part of the tax cuts.”
Of course they did Q…They paid for those tax cuts for themselves with c(h)ampaign contributions to Republicans and “conservative think tanks” and media campaigns decrying the “Death” (aka inheritance) tax….
They were already rich but, ya know, somehow it just never seems like enough when you’re rich and you’re Right.
Socially speaking, Americans have always found aristocracrats to be a bit of an unsavory useless lot, preferring the virtues of “self-made” men who passed the values of hard-work, innovation and individualism down to their own children, who secured their own fortunes in like manner.
The american aristocracy is as full of mishchief as any in history….Eat them i say. Eat ’em raw.
brion,
Your comments are so insightful.
Thank you for the illumination.
Tax the rich and they will just move back to China and India.
Lots of gnashing of teeth here about how unfair the distribution of economic rewards are in this country, yet I’m reading very little about how to correct the problem, except for:
1. “Raise taxes on the rich!”
What’s the proposed #2, give all that money to the “poor?” We’ve been giving money to the poor for a long time now, and I don’t recall (m)any instances where the poor have become not poor due to government handouts.
Given the past history of government and its (mis)use of tax revenues, what exactly gives anyone any reason to believe that suddenly the state will suddenly succeed at rectifying the supposed income inequalities?
Take a look at Europe, and see how well their little welfare state experiments have been doing, and then come back and try and sell that to the United States.
Q-Ball has been prolific here! Brings to my mind that the meek have never inherited anything (other than what flows downhill). Also brings to mind that the most prolific breaders on earth are the poorest (i.e., large families do not equal prosperity – Chinese put a cap on it and look at what is happening). Not procreating lowers expenses (not to mention that the tax breaks don’t even come close to paying for the buggers) and there are no problems with one’s conscience dishing out G’s over the national debt or the SS burden. So, since life is driven by self-interest, gimme mine now — your children and grandchildren can pay for it. I have no reason to give a damn about anything or anyone else. Life is simple. Life is good. Let ’em eat cake and don’t you dare roll back MY tax break.
It’s not about equalizing incomes for my money. Never has been. I’m talking about Wealthyfare not Welfare (which has had IT’S reform).
I’m talking about an already engorged class fattening itself further on the backs of everyone below them through control of the american political/legislative process.
The “shiftless poor” meme is just another Right-wing Plutocracy smoke screen behind which they can feed at the tax trough undisturbed.
The SS tax that someone wrote about above is absolutely just that, a tax. Why is it capped at $90K or whatever it is? Uncap it with no income limit.
Why are long term capital gains taxed at 15%? Why not 5%? Why not 25%? Why is the rate for capital gains lower than for work? The problem as I see it, is not necessarily that the rich are paying less or what have you, but that work is taxed more than wealth. This certainly benefits a smaller subset of the population. Why not have the same tax rate for capital gains as for the median tax bracket? Isn’t that fair?
Take from the rich and give to the poor doesn’t work too well in general, because people don’t value things they didn’t work/strive for. This, however, is a strawman argument. I have little doubt that the current tax structure unfairly benefits corporations and very wealthy inviduals, otherwise what was the point of all their political contributions?
Summary: make it more fair.
Good point Brian.
Someone here suggested instead of a minimum wage we need a maximum wage. Don’t let anyone earn more than a certain amount. That can also be reached effectively by simply taxing them into oblivion at certain incomes.
Unfortunately I think what happens is rather than try to inovate, those who are able to earn at that rate simply dial it in at the end of the year and take a vacation and wait for next year. that really doesn’t help the lower classes keep their jobs when someone does that.
Of course it would put a cap on big CEO salaries and keep those in check. Of course they will just get handed more options to replace the salary and we all know how well options worked for keeping companies running efficiently and clean. Back-dating and faulty accounting to drive up those option prices to name two.
So what is left. What would actually reduce the income gap, keep the lower wage earners working, and reduce poverty over the long run without being detrimental to the economy?
I am not sure I have ever heard anyone take a real crack at answering that in a way that didn’t involve the usual just tax the rich and don’t let them make as much.
Frankly I think most CEO’s are over-compensated too. And I think the stock option thing is an incentive to be short cited and commit fraud if the payoffs is high enough to take the risk. I don’t understand why shareholders don’t revolt and kick out boards that compensate people that way. I mean why do these mutual funds that own so many shares want the CEOs compenstated that way.
But in the end no one changes their pay and I don’t know how you force it in law without negative side effects.
So who has ideas on that?
“Take a look at Europe, and see how well their little welfare state experiments have been doing, and then come back and try and sell that to the United States.”
Are you seriously arguing that US healthcare outcomes are better than any European model? If you are, then you are wrong.
Just today I am reading of people flying to India, paying $12,000 for the flight for two and the surgery, where the cost in the US would be $120,000.
If things are as great as you say, why is so difficult to convince the rest of the country.
This debate has all the hallmarks of a timewasting spin fest.
I am closing comments for a few hours . . .
Qball also posts under QW and APEX.
I don’t care what people post (as long as tis accurate), but I much prefer people post under 1 name — not 3 or 4.
If anyone knows of a good typepad registration plug in — let me know
Comments are reopened
Please keep it civil
Here’s a macro view: the large middle class of the 1930-2000 period was an anomally in history and we are returning to the norm (tiny upper class, small middle class, very large lower class). The “middle class” was largely built on unionism, with non-union shops matching the union wages/benefits to keep the unions out. As the wages rose for the union (and nonunion) worker, the US became uncompetitive and lost industry after industry to foreign competitors (steel, manufacturing, textiles, automobile, etc.). Most of the people in the middle class should not have been there in the first place – their contribution did not merit their wages. Example: paying a truck driver $40/hr just because he is a Teamster rather than the $15/hr the job is worth does not add any value to the end product, it only overprices it and eventually the producer is uncompetitive and goes overseas or out of business.
rb,
Hey what have you got against truck drivers? I saw a CEO of a rather good trucking company on CNBC about 1.5 months ago. He was asked about why there was a large turnover in truck drivers. He said it was a hard and lonely job. Long hours,. bad food, living in motels, not seeing your family much. Yeah you get a lot of time to talk on the phone whoohoo!
It is easy to confuse complexity of the job with supply and demand of labor. If people don’t want to do it and you need it done you have to either pay more or find another way to get the job done, or stop doing it altogether. Aslo for the most part truck driving is a local job. There has been talk of Mexican trucking firms being allowed to work here but that creates some problems on multiple levels.
Perhaps teamsters ask for a bit too much but it is in anyones interest to ask for as much as they can get. I do not see a lot of those overpaid ceo’s or (lucky as opposed to smart) hedgefund folks clamoring to give back any excessive bucks. So why should a truck driver work against his interests? Because he earns less? Or he is a memeber of a socio economic class that will never drive a Ferrari?
Lets say engineering is a job that requires education and inteligence, how does that fit in with their job being outsourced to someone in India? It is simply compettition that was not available until communications improved.
Also did you notice that the periods when the teamsters were in their glory were pretty good for the USA?
Think it through, expand the argument until it works.
causation or correlation
unions are the reason for the US’ “glory days”, yeh organized labor sure has done wonders for the US automakers-
Or Correlation the other way. Good time in US meant good times for Teamsters.
How many non-union truck drivers are there now?
Again, look at the macro view. Within 30 years of a union getting too powerful and overpaid, the industry is destroyed. Look at the steel industry. The steelworkers union had their heyday post WWII through the 60’s but the industry was uncompetitive by the 70’s and is near death in America. We used to OWN the steel industry worldwide. Same applies to manufacturing, textiles, and now automobiles and legacy airlines. Not saying to ban unions, but when they get too powerful they are industry killers. Reducing pay to a handful of executives does not have the same financial impact as paying 1,000,000 teamsters $25 more per hour than the job is worth.
Mark-It wasn’t union members who decided to crank out model after giant model of Urban Assault Vehicles, it was short term thinking, short sighted ceo’s. SUV’s were VERY lucrative for them (until they weren’t)
Next Question
The cartoon below reminded me of something. About 15 months ago, I penned a post called Its Still the Economy, Stupid. Now, we see this: Gee, who could have ever seen this coming?