Who Actually Earns $400,000 Per Year?

by Emily Guy Birken · 4,843 comments

Surgeons

After the unending media coverage of the fiscal cliff throughout December 2012, it was a relief to everyone when a last-minute compromise was reached. In particular, the most reported-on compromise had to do with the extension of the Bush-era tax cuts. Those cuts will remain in place permanently for any individual making less than $400,000 per year, and for couples earning less than $450,000. Those fortunate few who make more than that amount will see their rates rise from 35% to 39.6%.

The news about this particular tax rate increase got me wondering: what professions can expect to earn that kind of money? Since I don’t personally know anyone bringing home $400,000 per year, I decided to find out what kind of jobs command such high salaries:

1. The President

Perhaps the most famous $400,000 per year job is the leader of the free world. The office of president not only pays a $400,000 annual salary, but also provides the president with a $50,000 annual expense account, a $100,000 nontaxable travel account, and a $19,000 entertainment account.

There are some obvious downsides to this particular career, however. Besides being very difficult to get, the job is highly stressful, and advancement post-office can be considered somewhat iffy. And, of course, you can’t expect regular raises: the last salary increase for the commander-in-chief (from $200,000 to the current rate) was in 2001. Prior to that, the previous raise (from $100,000) occurred in 1969.

2. Surgeons and specialists

Even a local general practitioner can expect to pull in over $100,000 per year, but the real money in medicine is reserved for those who specialize. Anesthesiologists, heart surgeons, and brain surgeons can all expect to make up to $400,000 per year at the height of their career. Plastic surgeons can make up to twice that amount.

3. CEOs

The median salary of a Chief Executive Officer is over $700,000. These directors are in charge of both short- and long-term profitability for their companies. CEOs generally have to know the industry backwards and forwards (although there are certainly plenty of counter-examples), and need to have worked their way up over many years.

4. Wall Street Bankers and Lawyers

If you work in either finance or finance law, the place to go for fat paychecks is Wall Street. According to an October 2012 report, “the average salary of financial industry employees in New York City rose to $362,950 in 2011.” While that still falls short of the mark required for the higher tax bracket, it’s important to remember that this figure represents the average (meaning some people are making more) and that there have almost certainly been raises in the past year and a half.

The Top Percent of the Top Percent

These high-income earners are really rare. Consider the fact that most articles listing the highest paying jobs in America don’t even include any professions with median salaries of $400,000. Those individuals making $400,000 per year are in the top one percent of the top one percent — and often, they’re also public figures.

Thankfully, even though individuals in this bracket are few and far between, the government estimates that raising the tax rate on this small group will raise about $600 billion in new revenues over the next decade.

Not bad for a group that small.

What other professions that earn annual incomes of $400,000? 

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

Looking to save on your mortgage? Here are some good rates...

Related Posts

{ 4843 comments… read them below or add one }

Stevendad March 19, 2015 at 6:39 am

Peter from 20 years ago sounds like Stevendad from 30 years ago. 100+hour work weeks and lotsa home cooking. Now being punished by high (but not high enough for some) taxes.
I ran into this article: http://twitter.com/washingtonpost/status/578372084952354816/photo/1
and would love some comments. The overlay correlation of the income disparity map is extraordinarily close to that of the counties that voted for Obama map. Do liberals talk so much about inequality because of guilt? Or do their local liberal policies cause inequality? Other explanations? Steven H, Peter and JTM have any ideas?

Reply

Steven H March 24, 2015 at 6:31 pm

Inequality is caused by political and monetary control of those who have money over those who don’t. It is caused by the natural tendency of wealth to trickle up, not down, unless government actively counteracts that trend. It is caused by growth of capital tending to exceed growth of salaries. You may recall a bestselling economics book of groundbreaking research made that point recently.

Reply

Peter N March 24, 2015 at 9:15 pm

“Inequality is caused by political and monetary control of those who have money over those who don’t.”
Libtard non-sense.

” It is caused by the natural tendency of wealth to trickle up, ”
Well yes. There are those that know how to generate wealth and those that just consume it.

“It is caused by growth of capital tending to exceed growth of salaries. ”
Not quite. It is cause by the increasing percentage of wealth being generated by capital.
Basically, machines are replacing people in low skilled jobs or one can buy low skill over seas skills cheaper.

Reply

Normal Joe March 26, 2015 at 9:00 pm

@Peter N Please desist with the ad hominem attacks. It accomplishes nothing other than poisoning the well. It is my earnest hope that if you are either unwilling or unable to assimilate reason over ideology, then at least there are others that find the exercise enlightening and therefore useful. There are just as important things in life, and business, as wealth accumulation. Many people more clever than I have recognized and accept that as an oligarchy public policy is shaped by and for those with the money for lobbying and supporting political campaigns. Both political parties have succumbed to the pressure turning our legislative process into a tool of those who finance it. Your opinion is unsupportable without your circular reasoning.

Let’s separate wealth from income. Wealth, as I define it, is the accumulation of assets, be they cash, investments, and property. Income, is simply cash flow. It is this cash flow that has been seriously hijacked by fewer and fewer people since the ill advised implementation of Reagan’s voodoo economics we now call “trickle down.”

What those who share some of your points of view need to understand is that these voodoo economics is an ideology without empirical evidence that it functions as it is purported to. And this almost dogma like commitment is preventing you from accumulating more wealth because of the negative impact on the engine of the economy, consumer demand.

In a previous post I used the term “trickle up” as a metaphor for the way cash flow enables wealth accumulation. The current state of our economy illustrated by the severity of the recessions, the longer it takes to emerge from recessions, and the slum lord way we are forsaking our infrastructure are all related to this severely constrained cash flow. What we see instead are corporations buying back issued stock to reduce the number of shares in circulation resulting in paper profits and the illusion of wealth. There is no incentive to invest in the means of production.

It seems that every Republican President this century who left a trashed economy upon leaving office, starting with Herbert Hoover, believed in “trickle down” economics. Will Rogers explains why, despite its devastating effects on the poor, the GOP may forever be enamored of the concept.

“The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.”

The minimum wage went up in 13 states — Arizona, Connecticut, Colorado, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and Washington — either thanks to automatic increases in line with inflation or new legislation, as Ben Wolcott reports in his analysis at the Center for Economic and Policy Research. The average change in employment for those states over the first five months of the year as compared with the last five of 2013 is .99 percent, while the average for all remaining states is .68 percent.

Digging deeper, all but one of those states are experiencing increases in employment, and nine of them have seen growth above the median rate.

Wolcott’s analysis builds on a previous one from Goldman Sachs, which did the same evaluation for just January and compares it to December of last year. It found that the states that had minimum wage increases experienced faster job growth than those without a raise.

This doesn’t mean that increasing the minimum wage necessarily creates more jobs. “While this kind of simple exercise can’t establish causality, it does provide evidence against theoretical negative employment effects of minimum-wage increases,” Wolcott writes. Indeed, it adds to the evidence that higher minimum wages may not hurt job growth as much as some have warned. Washington has the highest minimum wage and saw the biggest increase in small business jobs last year. Its job growth has also remained steady and above average in the 15 years since it raised its wage. When economists studied state-level minimum wage increases over two decades they didn’t find any conclusive evidence that the raises impacted job creation.

These very same states are showing economic growth higher than those who have not raised their minimum wage rate. How is Minnesota’s economy doing compared to Wisconsin’s which is in the process of doubling down on tax breaks for the wealthy and refusing to bow to the pressures for raising the minimum wage?

http://www.minnpost.com/macro-micro-minnesota/2013/02/walker-vs-dayton-smackdown-which-governor-has-better-economy

http://www.huffingtonpost.com/walker-bragman/minimum-wage-a-simple-fact-check_b_3114239.html

http://davidjamesbrunner.org/en/the-case-for-restricting-stock-buybacks/

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/09/25/the-case-for-raising-taxes-on-capital-gains/

Reply

Dude April 5, 2015 at 4:38 pm

That was impressive, but too much effort for a troll. Signed, a Republican who admires your argument backed with data.

Lance B May 5, 2015 at 1:07 pm

There is nothing normal about your response. I’ll bet you’re a stitch at parties.

Steven H May 12, 2015 at 4:50 pm

Late comment to Normal Joe’s March 26 post at top of page: GREAT POST. Thanks for the data.

Peter March 25, 2015 at 7:31 am

I need to read over this at home. Unfortunately my firm blocks twitter so I can’t look at it at work….been meaning to read and comment though.

Reply

Steven H March 26, 2015 at 9:29 pm

The states that vote for GOP also correlate to greatest dependency on government. This doesn’t necessarily mean anything, as this article fairly discusses,
http://www.cheatsheet.com/business/10-states-most-dependent-on-the-federal-government.html/?a=viewall
with multiple detailed reasons for the top 10 government-dependent states, 8 of which happen to be red. Finding simplistic correlation of one set of data to another often means very little and speculation just invites a false sense of proof to a predisposed bias, as exhibited in your post.

Reply

Stevendad March 19, 2015 at 8:08 am

Just had a chance toread through some of the posts while I was out.

Steven H, here is why you said we left ( to paraphrase) “they left because they could not support their weak positions”

I left because you were being arrogant, abrasive, closedminded and dogmatic.

Just to be clear.

It’s fascinating to see you have changed your position ZERO since your first post. And yet you constantly say how fair minded and open you are.

Not to dredge up the past, but I had to defend myself from your falsehood.

Reply

Steven H March 24, 2015 at 6:22 pm

Stevendad,
“I left because you were being arrogant, abrasive, closedminded and dogmatic.”
As were you, if you recall correctly. You apologized at the time but seem to have forgotten that part. Why try to stir it up again?

“It’s fascinating to see you have changed your position ZERO since your first post.”

Not true. Just another potshot from the peanut gallery. I will listen to any facts you choose to provide but I will not be lured into another p*ssing match.

Reply

Steven H March 24, 2015 at 6:46 pm

Steven dad comments in quotes:
“Something ignored here is that capital can and will flee and the very hard working will quit working.”
Agreed, except the very hard-working are mostly the middle class, not the very wealthy, and the fleeing capital is their labor and ingenuity which is underused.

“Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.

“Also, it is assumed that there is NO immorality in taking something from those who work very hard and smart and giving to those who don’t.”
Exactly. We need to stop doing that. Which is why wealth and income needs to be moved back to the hard-working middle class. Our gross overpayment of investment class is indeed immoral.

“Again 100% taxation of the 1% doesn’t solve our deficit.”
No, but quarter to half of the deficit could come from the upper 0.5% or so and it would bring us a whole lot closer.

“We must and will go lower and lower OR seriously curtail payouts. Only other option locking up a lot of long term debt and printing money to inflate our way out of it.”

Deficits are less than 3% GDP. Growth is over 2% GDP. When Deficit = Growth as % GDP, that IS a balanced budget in national economic terms. Anything beyond that and we are paying down Debt/GDP over time.

We need to stop talking like we need we have to reach $0 deficit to balance the budget, or that we EVER need to drop total debt below $17T. We dropped Debt/GDP from 100% plus in WW2 to 32% in 1980 without lowering the total debt even a dollar or maintaining a negative deficit. Deficits were generally 1 to 2% of GDP and total debt multiplied.

We need to understand the math and aim for realistic goals or we will never succeed. $0 deficits and lowering total dollar debt are not practical or useful goals. Cutting investment in education and slashing safety nets is neither necessary, nor productive.

Reply

Peter March 25, 2015 at 7:33 am

“the very hard-working are mostly the middle class, not the very wealthy”

This is the error in your perspective in a nutshell.

Reply

Peter March 25, 2015 at 7:34 am

And nobody is going to care about debt as a percentage of GDP when the bills come due….. all that matters is the actual number and whether we can afford to pay it.

Reply

Steven H March 25, 2015 at 8:45 pm

If we can drop the deficit/GDP ratio below GDP growth rate (and we are very close), we ARE paying the bills and Debt/GDP ratio falls. It really does not matter if the raw dollar amount falls any time soon, as long as the economy can grow and population can grow. There is an eventual limit to both, but probably not even in our grandchildren’s lifetimes.

We do not need to drop the deficit to $0 in 10 years or in 50 years, or maybe ever. Realistic goals are to get deficit/GDP down to 1.5 or 2% and concentrate on getting growth higher than that. If we can get Debt/GDP down close to 30%, as it was in 1980, we can maybe manage to pay the rest off quicker. It might take us 30 or 50 years to get that far, and maybe raw dollar debt will be $25 or $30 trillion after inflation and economic growth. It won’t matter.

The point is that we must not strangle the economy and suffocate the middle and working class with needless austerity to meet economic goals that make no sense.

Reply

Steven H March 25, 2015 at 8:35 pm

No, not an error, but it is the heart of our disagreement. You have convinced me you are a hard-working entrepreneur. But I am not convinced that very many of the $5 million plus earners work any harder or smarter than an average construction worker.

Reply

Peter March 26, 2015 at 10:03 pm

That’s a shame. What an odd perspective. Seems like everyone who wanted to could just make $5 million then if it is no harder than construction work. Come on…..

Reply

Steven H April 2, 2015 at 6:53 pm

The perspective is not as odd as you think. People are clever at different things. I know a very smart lady who could run a business but she is particularly clever at mechanical things and loves working at a specialty bicycle shop as a mechanic. Some people are clever at construction, others at art, others at communication, others at engineering, others at money. Those who are clever at money aren’t any smarter or harder working than the honest ambitious hard-working people at comparable skills in other specialties. They are simply clever with money. Too clever, sometimes.

Peter April 3, 2015 at 4:31 pm

But you imply that the financial industry is responsible for the income disparity or makes up the majority of the 1%. Maybe your beef is with hedge fund managers and the like and not with the 1% you continouously attack. That 1% is largely made up of hard working people – many small business owners – who have a skill and made good decisions (and of course, had some good fortune along the way)

It’s clear you hate a lot of the “traders” and “money people” on Wall Street and certainly feel ill will towards those that inherited wealth. But why you keep separating a skilled mechanic from a skilled doctor, lawyer, business owner, or even mutual manager I am unclear about.

Peter April 3, 2015 at 4:31 pm

Mutual FUND manager that should read.

Peter April 3, 2015 at 4:32 pm

And some jobs pay more than others. That is life. Someone who can fix ceramics is not going to make more than someone who can perform heart surgery.

Steven H April 13, 2015 at 9:43 pm

“And some jobs pay more than others. That is life. Someone who can fix ceramics is not going to make more than someone who can perform heart surgery.”

Of course. And if you recall, I keep saying that skilled professions are important. Even a mutual fund manager may have an important job. Yet even people with important and necessary jobs can be overpaid. All evidence indicates our financial industry is bloated. The individuals within that industry are not evil or devious, but our society has provided poor motivation. We encourage more people than necessary to go into banking and high finance by overpaying them, and also undertaxing those large incomes. It should be no surprise that we get overly-risky financial schemes and complicated unmanageable financial instruments. We reward this behavior with high salaries for dubious work and then government bailouts to reward failure. If we want a different result, we need different incentives and a MUCH smaller proportion of the economy devoted to finance.

Peter N March 24, 2015 at 9:29 pm

““Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.”
you are both wrong. SS and MC are a wealth transfer program. If it was enforced savings I would get back what I put in.

““Also, it is assumed that there is NO immorality in taking something from those who work very hard and smart and giving to those who don’t.”
Exactly. We need to stop doing that. Which is why wealth and income needs to be moved back to the hard-working middle class. Our gross overpayment of investment class is indeed immoral.”
You are confusing working hard with working smart and the true value of what is being done.

““Again 100% taxation of the 1% doesn’t solve our deficit.”
No, but quarter to half of the deficit could come from the upper 0.5% or so and it would bring us a whole lot closer.”
This is dangerous talk. You all might as well be communist.

“Deficits are less than 3% GDP. Growth is over 2% GDP. When Deficit = Growth as % GDP, that IS a balanced budget in national economic terms. Anything beyond that and we are paying down Debt/GDP over time.”
What non-sense.
GDP is not a measure of the increase in wealth.

It is clear the libtards are clueless.
I have zero faith in our economic system now. I am looking at buying real assets like property, gold, weapons and food.

If you believe the government you are a fool.
Those that can create wealth will survive the coming chaos but it won’t be easy.

Reply

Peter March 25, 2015 at 7:38 am

““Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.”
you are both wrong. SS and MC are a wealth transfer program. If it was enforced savings I would get back what I put in.

—- I won’t get anything close to what I put in and many will get more than they put in. Some won’t get anything at all (if they die before 62).

Bottom line is – and we aren’t changing Steven H’s point of view of this – is that he thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth. This shows his ignorance and in spite of example after example, anecdotal stories and other evidence – he will not change his point of view. Honestly, if I felt the way he did I would likely share his worldview. I TOTALLY see his point of view. I just think it is narrow-minded and categorically wrong.

Reply

JTM March 25, 2015 at 3:59 pm

Peter – A few simple calculations would show that you will most likely get back at least as much as you paid in to SS as long as you retire at the normal time and live at least 11 years beyond. I don’t know your age, but know you are a bit older than me. I used birth of 1960 and an SS calculator with max earnings for each year. The maximum SS tax payment (employee + employer) this year is $14,694 time 35 years is $514,290, this would be the absolute maximum in today’s dollars you could have paid in, the actual total is way lower. The monthly SS payment then is $3,861, leaving 133 months needed to recoup all inflation adjusted payments. this disregards the facts that monthly payments will go up with COLA and that the earliest years max payments were only $2200. Yes, you may receive less, but that would also mean to paid in less some years. Like many other insurance programs, losses by some (early death) make up for others coming out ahead (living longer). It’s a bit of a stretch to call it wealth transfer though.

Reply

Peter March 25, 2015 at 4:42 pm

That’s fair enough….

Reply

Steven H March 25, 2015 at 8:20 pm

“Bottom line is – and we aren’t changing Steven H’s point of view of this – is that he thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth.”

Overstating my position does not prove my actual position wrong.

Bottom line is that there is a very simple test to determine whether wealthiest people are earning more money per effort than the past. You just have to look at whether wealth and income of the richest people grow at a faster percentage than the rest of the population, and …. yep, that is what is happening.

It’s not that I think rich people do nothing or very little. That is a complete and utter exaggeration of my position. They are just overpaid by a certain amount, as per relative to both historical norms and proven optimum income distributions. Why do you always take my positions, exaggerate them into absurdity, and then ridicule my arguments based on things i never said?

Reply

James March 26, 2015 at 9:16 am

your position is absurd enough without exaggeration

Reply

Steven H March 26, 2015 at 9:32 pm

And your actual point, if you have one, is …? Or are you just trolling?

James March 27, 2015 at 7:09 am

Quotes from this page alone……

Steven H – “the very hard-working are mostly the middle class, not the very wealthy, and the fleeing capital is their labor and ingenuity which is underused”

Steven H- “I am not convinced that very many of the $5 million plus earners work any harder or smarter than an average construction worker”

Steven H – “Businessmen alone do not create wealth … unless and until they collaborate with the middle class to do so. If you think the middle class needs you more than you need them, you are a fool.”

Steven H – “Companies and their high paid management teams are getting rich off of conditions that simultaneously enable them to lord their power and control over the rest of the country.”

Peter – “Steven H thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth”

How is this an exaggerated restatement? At least own what you believe. You almost never mention the middle class without the adjective “hard working” before them – even calling them “ingenious”. And you have spoken repeatedly about the rich as using their wealth and power to accumulate more wealth, earning more than they deserve, and not creating jobs or anything of value. Own it at least…..

Peter March 27, 2015 at 9:09 am

We could add this quote from Steven H: “You confuse accumulation of wealth with creation of wealth. Some businessmen create wealth with their efforts. Others accumulate it. Many create some but accumulate more than they create”

Steven – at least own the fact that you think that the large majority of the super-wealthy are not job creators or helpful to the economy – they are simply using their existing power and wealth to accumulate more wealth – far more than they deserve, far more than in history, and far more than is good for society at large. Meanwhile, the middle (and lower) classes are full of hard-working people who are largely the ones responsible for the success of our economy – but they aren’t getting their fair share – due to policies that favor the rich and undermine their negotiating power.

You don’t believe that the rich are there because they took risks, have special talents or skills, or simply worked harder and/or smarter than others. You also don’t believe that the middle class’ perceived struggle is due to automation, a changing economy, their own lack of skills or work ethic.

Own your opinions. I think it is very telling that you react the way you do to your words being restated. I really don’t think you even hear yourself…. (this is the dogmatic, closed-minded trait that Stevendad was referencing)

Ken really hit the nail on the head with your lack of acceptance of “ownership” as one of the key factors in income disparity. I think that is the biggest missing link in your arguments. You dismiss this far too readily and continue to insult and blaspheme the successful. Say what you want about my point of view, but I don’t do the same thing for the lower wage earners. Why would I? I used to be one myself. (See the Peter from 20 years ago post that you didn’t reply to)

Steven H March 28, 2015 at 7:49 pm

Peter ========
Steven – at least own the fact that you think that the large majority of the super-wealthy are not job creators or helpful to the economy – they are simply using their existing power and wealth to accumulate more wealth – far more than they deserve, far more than in history, and far more than is good for society at large. Meanwhile, the middle (and lower) classes are full of hard-working people who are largely the ones responsible for the success of our economy – but they aren’t getting their fair share – due to policies that favor the rich and undermine their negotiating power.
=====================
Yes, This is a pretty good restatement of my position. Very good.

Peter =============
You don’t believe that the rich are there because they took risks, have special talents or skills, or simply worked harder and/or smarter than others.
=================
Now there is considerable subtlety missing from the statement. For example, who are we talking about as rich in this case? I have REPEATEDLY stated that I think small businessmen are important to the economy, and that entrepreneurs who invent, build, and/or sell their products and services to the economy are not a big driver of high income disparity. MANY of these folks work very hard and have special talents and skills that improve the world. And this category seems to include most of the high income posters on this site, who seem (based on their own posts) to fall somewhere in the 98 to 99.5 percentiles. It is more correct to state that I believe large percentages of the upper 0.5%, and especially the upper 0.1% receive far more of the national income than they seem to earn. As you accurately restated for me above, this INCREASE in reward is largely due to changing rules and negotiating power, and changing world conditions, and not due to any particular INCREASE in meritorious skill or virtue on their part.

I AM particularly critical of the financial industry whose actions were a major contributor to the 2008 downturn and near-collapse of the banking system. Many of the 0.1% play in this game, and the actions they have taken and the risks they take with OTHER people’s money yield little benefit to the economy and do not merit the kinds of incomes these people receive. So yes, THIS particular faction of folks (not all of the 0.1% – but they know if the shoe fits) is pretty much worthless in my opinion. They have NOT created wealth and they have destroyed much wealth very recently.

Peter =======
You also don’t believe that the middle class’ perceived struggle is due to automation, a changing economy, their own lack of skills or work ethic.
===========
In order: Yes, yes [I actually DO believe], no, and no [you are correct I don’t believe]. The no’s are because the MIDDLE class clearly does NOT lack skills or work ethic. The yes to automation and changing economy simply acknowledges that the economy is changing, as it has every decade in this country’s history. The difference in the last 35 years (which so closely echoes the gilded age in latter 19th and early 20th century) is not that the economy is changing, but that we are allowing the wealthy to benefit disproportionately from these changes, largely through new rules established of, by, and for the wealthy.

We are a nation for a reason. We vote for a reason. We band together for a reason. We create this country’s infrastructure, policies, communities, families, schools, banks , governments for a reason. And that reason is to establish a more perfect union, not to let a small percentage of the folks run roughshod over everyone else, using the nation’s resources for their own extraordinary gain.

Peter March 29, 2015 at 8:15 am

You can keep trying to slice your targeted “enemy” group even further if you like (eliminating small business owners, wealth creators and 90% of the top 1%), but every single solution you are suggesting impacts those people significantly.

The problem is that even though it sounds appealing to most, just hitting the top .1% – while avoiding hitting any job creators in that group – doesn’t make the desired impact of bringing in tons of revenue and/or burgeoning the middle class. You have to hit the small business owners too and other people who do create jobs, drive the economy and are products of the American Dream.

Steven H April 5, 2015 at 6:13 pm

Peter, tell me how increasing taxes on the upper 0.2% or so affects the rest of the upper 1%. Tell me how making it less profitable to invent credit default swaps hurts anybody.

Steven H April 11, 2015 at 7:40 pm

James, the absurd position is thinking that the tiers within the 1% earn 2x, 3x, 5x or more of their historical norms and that they can and should continue to extract such incomes out of the economy while most incomes are stagnant for decades. The crazy statements are those of Peter N who proclaims he is a slave to the impoverished class. The economy changes but human nature changes very little. Those who strive their whole lives for money and power never satisfy their appetite and will always proclaim themselves exceptionally worthy and others unfit. But as a society, we can learn from history. We saw the rise and downfall of a gilded age in the late 19th and early 20th century. Surely we can learn by example and dismantle this gilded age economy in a more civilized and organized way than continually pumping more the economy’s wealth into the upper echelons of power and finance, until economies collapse and/or the populace revolts.

Steven H March 25, 2015 at 8:30 pm

Peter N,

You confuse accumulation of wealth with creation of wealth. Some businessmen create wealth with their efforts. Others accumulate it. Many create some but accumulate more than they create.

GDP is directly proportional to sum of earned income of the population, which absolutely means increased GDP measures increased wealth of the nation. Debt/GDP stays constant (balanced budget) when % GDP growth = Deficit/GDP. That’s not nonsense. That is math.

Businessmen alone do not create wealth … unless and until they collaborate with the middle class to do so. If you think the middle class needs you more than you need them, you are a fool. Those that create wealth (middle class and true entrepreneurs) will survive the coming chaos. Those that merely accumulate wealth will not.

Reply

Peter N March 27, 2015 at 9:00 am

GDP is not a measure of increasing wealth. Got that!!!? GDP is simply a measure of economic activity. Rebuilding New Orleans increased the GDP but rebuilding what as lost isn’t a gain.

“Businessmen alone do not create wealth”
30 years ago my company had 3 owners only. Somehow we created enough wealth and opportunity without others to start hiring and expanding. If what you said were true then we would be stuck back with the 3 owners only.

Reply

Peter March 27, 2015 at 9:12 am

I have certainly created a great deal of wealth for many. My employees, my clients, and all of the personal contractors I have employed over the years at my house. When I was making $20k/year I was creating wealth for nobody, including myself. Now that I make more money, I create wealth for dozens of people – not JUST myself.

Reply

Steven H March 28, 2015 at 7:55 pm

Did you have customers? Did you work with a bank? Did you drive on roads? Did you build all of your equipment and buildings yourself, or did you hire other people to do that or buy the buildings and equipment other people built?

Businessmen are part of a system. They are ONE cog. Businessmen alone do NOT create wealth.

Reply

Peter N April 16, 2015 at 11:28 am

Yes, we do. I automate machinery that makes products faster, cheaper and of higher quality. These are all value added processes. I do have customers and I get e-mails on how we have improved production, reduced rejects, maintenance etc.

Steven H March 28, 2015 at 7:59 pm

Peter ========
I have certainly created a great deal of wealth for many. My employees, my clients, and all of the personal contractors I have employed over the years at my house.
============
Yes, small businesses often are drivers of wealth creation, and the creators/founders of those businesses are an essential element in the process that includes many people and a lot of pre-existing infrastructure.

Reply

Peter March 29, 2015 at 8:36 pm

I work for a major corporation. One of the big banks is our parent company. So not really a small business owner per se….although am paid totally on commission and take 100 percent of the risk when I started.

Peter March 29, 2015 at 8:37 pm

But thank God there are roads between my house and my office. Without them I probably would have never been so successful.

Steven H April 9, 2015 at 7:52 pm

“roads …”
Totally agree. And banking infrastructure and an education system, and all the rest. Glad you acknowledge the importance of all that.
😉

Steven H March 28, 2015 at 8:04 pm

Peter No =================
GDP is proportional to national income which IS a measure of increasing wealth. What you describe are anomalies in the system. There are many activities that generate income but do not generate overall wealth for the nation. Romney’s vulture capitalism, for instance. Credit Default Swaps, Selling overrated mortgages. Rebuilding New Orleans is actually a gain, as there will always be natural disasters, and restoring those losses is a gain relative to not restoring them. No one got paid to destroy New Orleans, unlike the bankers who got paid extraordinary sums to destroy the economy.

Reply

Peter N April 16, 2015 at 11:32 am

GDP is not a measure of increasing wealth. It is just a measure of economic activity.

Steven H March 25, 2015 at 9:04 pm

I’m restating this because it is the obvious and seemingly irrefutable heart of my argument:

“Bottom line is that there is a very simple test to determine whether wealthiest people are earning more money per effort than the past. You just have to look at whether wealth and income of the richest people grow at a faster percentage than the rest of the population, and …. yep, that is what is happening.”

The other point that this brings up is that I have been told here that high income disparity is largely due to automation and availability of cheaper labor overseas. This increases incomes to companies in this country. OK. But then the argument goes that average US citizens and workers do not deserve any of that increased profit because they did not work harder to earn it. But business owners and investors seemingly DO deserve that increased profit … even though they also have not worked any harder to earn it.

Why do the richest people “deserve” more of our national profits, but average citizens do not, if the money is basically a windfall that is unearned by both groups?

Reply

Peter March 26, 2015 at 1:54 pm

Not sure if you are asking me, but I have never said anything about people deserving or not deserving their income.

Reply

Steven H March 26, 2015 at 9:55 pm

Peter =====
The job market, suppressed wages, etc. comes back to my point all along with the lost manufacturing and unskilled labor jobs in our economy due to the information age. The unskilled shouldn’t be “compensated” for this.
=========
I understand what you are saying, but wages are going lower on both skilled and unskilled jobs. The availability of cheap labor overseas drives part of this, as does automation. But another large part of it is the OTHER disparity: negotiating power. Cost of flight training to be an airline pilot is $100K but entry salary is about $20K. Students are paying out the nose for college education, but unemployment of college grads is high, and there are more college grads than ever before to BE unemployed. Amazon forces even seasonal factory workers to sign non-compete agreements limiting there job hiring opportunities for 18 months after the seasonal work. Skilled people are suffering low wages along with unskilled, and companies invoke unreasonable burdens on workers, because the large airlines, banks, stores and other companies have negotiating power mostly unfettered by govt or union limitations.

Companies and their high paid management teams are getting rich off of conditions that simultaneously enable them to lord their power and control over the rest of the country.

Why should the richest and most powerful be compensated highly for the advantages that globalization and automation provide, but the rest of the country is not allowed to benefit from those same advancements, and indeed, is made to suffer because of them?

Reply

Ken March 26, 2015 at 6:00 pm

“….This increases incomes to companies in this country. OK. But then the argument goes that average US citizens and workers do not deserve any of that increased profit because they did not work harder to earn it. But business owners and investors seemingly DO deserve that increased profit … even though they also have not worked any harder to earn it….”

The reason that “average citizens” do not “deserve any increased profit” (two inflammatory ways of expressing this viewpoint, IMHO) is not because “they did nothing to deserve it”. The reasons they do not receive “excess” profit, whatever that is, are because 1) they signed employment contracts, which they signed, which had stated dollar figures indicating their complete, agreed-upon compensation; and 2) unlike investors or business owners, they did not have an ownership interest in the retained earnings (the “excess” profits).

Reply

Ken March 26, 2015 at 6:20 pm

Sheesh… said “signed” twice. Oh well… lol. Did I mention they signed those employment contracts?

Reply

Ken March 26, 2015 at 6:27 pm

And I guess a third, corollary, reason non-investors do not receive “excess” profits is because non-investors took no risk commanding (“deserving”) the excess profits as a reward. It’s basically a risk-reward thing. If you play it safe and don’t take the risk of losing your capital, you can’t complain that you don’t share in the rewards.

Reply

Peter March 26, 2015 at 9:53 pm

Obviously. And it doesn’t matter “how hard they work” either. Which is why I have always wanted my own business or to take a job like the one I have which has ZERO salary. I take the risk but I keep the rewards. My assistants get a paycheck.

Reply

Steven H March 26, 2015 at 9:57 pm

So those who get control and capital are allowed to use their wealth and power to accumulate more wealth and power until the rest of the country is essentially enslaved to them. And you see no problem with that?

Reply

Peter March 26, 2015 at 10:00 pm

Power is different than wealth. Yes, you should be allowed to accumulate more wealth. And no this should not result in more power. I have lots of wealth myself and almost no power. The two don’t have to be correlated. Unfortunately they are but the way to change this isn’t to keep people from accumulating wealth. It is to reform the corrupt campaign financing practices that allow corporations to buy politicians.

Peter N March 27, 2015 at 9:07 am

More non-sense. You are free to start your own company anytime. You always decline. In the United Welfare States of America you don’t even have to work at all, those that pay taxes are your slave.

Steven H March 26, 2015 at 10:10 pm

Ken, your argument assumes that the reward of capital is a fair return for the risk … or if you don’t like the word “fair” then substitute “sustainable”. I think you can agree that there CAN exist conditions where entrepreneurial risk exceeds the potential reward and thus business growth is slowed. This could happen from market conditions, but also from over-taxation or over-regulation. If you agree, then you must also agree that the converse condition CAN exist: where reward exceeds risk and businesses and business income grow quickly. You may see no downside to this latter condition, but it has a cost: it cannot be sustained indefinitely and the extra reward comes from someplace, and and that someplace is getting depleted.

So are we in a stable economy with balanced risk/reward of capital, or one where risk is under-rewarded, or over-rewarded? How do you think that can be determined?

Reply

Ken March 27, 2015 at 6:36 am

It’s not really an argument, Steven. I was just explaining the reason why owners and investors participate in profits, while rank and file employees don’t. I get it that you don’t like the system, but that’s the reason why profits are apportioned the way they are. It has everything to do with risk taking. Risking failure is what causes someone to participate in company profits, if and when profits occur.

At any rate…. With regard to your question about the economy overall, I would say the US economy is the most robust, diverse, vibrant economy in the world. It has the most opportunities for success, and the fewest barriers to entry of any country I can think of. It has produced more wealth for more people than any other economy in the history of civilization. I’d say that’s a pretty good track record.

As far as risks and rewards go, I think (mostly) efficient markets overall determine the risk-reward tradeoff. This scenario plays out every day in the financial sector. Where risk exceeds the potential reward, the price of the investment vehicle decreases accordingly until risks and rewards reach equilibrium (based on available information). The same is true in the reverse.

And the same is true on a broader scale with entrepreneurship. As long as the rewards are out there, a certain portion of talented, self-assured, risk-taking individuals will take on that risk, despite the fact that 80% of small businesses fail. Most people, however, will not take the risk. Most people will opt for the security of a known paycheck, predictable hours, and so on, and forego the risk of failure.

So, after all of that, I would pose an alternate series of questions to you: Is having the most vibrant economy in the world, with the most opportunity and fewest barriers to entry a good thing, or a bad thing? When people are willing to take the risk of an 80% failure rate and achieve profitability anyway, is it fair that the government then takes 75% of their money (as is the case in France)? Where do you think the taxation line is where people will stop taking risks because the government will just seize the profits anyway, and thus the rewards are not commensurate with the risk? 50%? 60%? 80%?

Reply

Ken March 27, 2015 at 7:00 am

I guess my series of three questions in the last paragraph really boils down to the last one… the first two being more rhetorical in nature……Where do you think the taxation line is where entrepreneurs will cease taking risks because too much of the potential rewards are taxed away?

Ken March 28, 2015 at 4:37 pm

So to be fair, and to answer your initial question more directly… I would say that your question about whether there can be imbalance in the risk-reward equation is pretty interesting, and a good question.

I would say that in the short term, yes, there can and are imbalances in the risk reward structure, and in both directions. In fact, I think that markets (and businesses) in the short run are rarely in perfect equilibrium. There can be, and almost always are, things in the short term which skew results in either direction temporarily. In the short term, there are always forces that are affecting things, new information, new ideas, new inventions, whatever, which have not been appropriately priced (absorbed?) into the risk-reward tradeoff. Kind of like “The Borg”, in a way. lol

Anyway, having said that, I would say that in the medium to long term something very close to equilibrium prevails. We never have perfect information, but in the medium to long term we get pretty close. And the markets overall, armed with almost perfect information will almost always act rationally. Individual people and businesses will do the same, and will act in their own interests. Like investments overall, if there are business opportunities available which command certain returns, people will build things to take advantage of those until equilibrium (or something close to equilibrium) is reached.

There is no such thing as a free lunch.

Steven H March 28, 2015 at 9:49 pm

Ken ====
“I would say that your question about whether there can be imbalance in the risk-reward equation is pretty interesting, and a good question.”
=======
Thank you.

Ken ===
I would say that in the medium to long term something very close to equilibrium prevails.
======
I see what you are saying here. I agree that there are short term imbalances that even out. But the “long term equilibrium” you describe is accomplished with the relatively long-term rules of the system. In other words, the economy is series of chemical reactions contained within a bottle. Equilibrium of sorts is reached within the constraints of the bottle. But what if the size and shape of the bottle itself is forcing an imbalance that causes the system to fail?

The “equilibrium” we are reaching under the current rules of the system is unsatisfactory to most people. This “equilibrium” pushes money out of the middle class and into the upper management, corporate, and financial sectors. Much of what I hear as arguments defending the status quo seems to be mechanical descriptions of how equilibrium is maintained within this bottle. I understand risk/reward processes, capitalism, and free markets. What I am suggesting is that the bottle itself has been reshaped, and it is making most people less prosperous and a few people very prosperous. What I am proposing is that the bottle be reshaped again to make this country and economy more rewarding for more people.

If actions are found and taken that reshape the bottle to restore prosperity to the middle class, then the whole country will benefit.

So when I say that risk-reward is imbalanced and you say it reaches equilibrium, we are speaking truths from differing perspectives. We have equilibrium within current rules. But I would say the current rules are unsustainable, because they put the majority of Americans at great disadvantage. And in a democracy, the majority eventually gets its way.

Stevendad March 26, 2015 at 1:58 pm

Steven H Only reason I brought up past is you said I left because I couldn’t support my positions. Wrong. And no, you really haven’t changed.
$18T with Normal rates around 4% doubles or debt payments. That will rob all the social programs more than anything. Assuming we eventually balance the budget. BLOAT is the problem. MORE BLOAT is not the answer.
SS and MC are intended to be an insurance/ savings for old age. Thus they should not be a wealth transfer vehicle. They have already been a generational wealth transfer vehicle. I will pay in about $500k and get back 240 x $3200=$760k, assuming colas eliminate inflation and I live to about 87, which is about expected at present age. Of course, would be millions in stock / bond mix mutual fund…
Any comments on the overlay of Obama voters and income disparity maps?

Reply

JTM March 26, 2015 at 2:29 pm

I do somewhat question your total paid in amount, but I’ll let that go, and I agree that it has been a huge generational wealth transfer. One thing you are overlooking is the actual insurance factor, these programs also have provided insurance coverage for reasons other than retirement – survivor and disability for ourselves and to support our families. Yes, it’s forced insurance and by it’s nature insurance provides more compared to the input to some than others. There are “winners” and “losers”. There are those like Paul Ryan who are huge “winners” and receive thousands without ever working because their parents died while they were young. My brother was a “loser”, he died single at age 31 after years of paying in, my sister is a “winner”, she has been on SS disability for decades due to a bad car accident after only a few year of full time work, my father is a “loser” as he maintained good health, began receiving SS at 62, but died at 65, my grandfather (and many more from his generation) has been a huge winner by living into his 90’s. So, yes, you may have been able to do better in the markets yourself (though not guaranteed), but you cannot forget about the other benefits you didn’t use, but which could have made a huge difference for you and your family.

Reply

Stevendad March 31, 2015 at 4:57 pm

Max amount for 40-45 years plus lesser for 20 years. Should be around $500k.

Reply

Peter March 26, 2015 at 9:57 pm

Stevendad – I do think it is interesting that DC shows up as one of the most unequal cities in light of our discussion of the area a few weeks ago (and one or two pages back). The Federal government has been responsible for the growth in the DC area with its never-stop-spending mentality and it has truly helped the whole area. We have very little poverty in our area yet it rates “unequal”. This is likely because the top is so much higher here – the median income is over $100k at last check – not that poor people are being left behind. I don’t care what the top guy makes as long as there is a middle class and little poverty.

Reply

Stevendad March 31, 2015 at 5:25 pm

The Feds are “the Blob”. Primary interest is increasing its own size. Again, the system is inherently wasteful and inefficient. Efficiency, productivity and going under budget are punished, bloat and waste rewarded. DC reminds me of Corsucant in Star Wars.

Reply

Peter March 31, 2015 at 7:14 pm

Which is why it makes me insane when I hear that the solution is that I give them more money.

Reply

Ken April 1, 2015 at 5:33 am

No matter how much revenues go up, the federal government outspends it. We need something like a constitutional amendment to prevent unbalanced budgets — something with real consequences for non-compliance, not these fake borrowing limits that always get increased in the next “crisis”.

Steven H April 2, 2015 at 6:41 pm

Ken, your comment is a cop out: “No matter how much revenues go up, the federal government outspends it. ” That has not been true for 8 of the 12 post-war Presidents, for whom Debt/GDP declined during their terms. Only Reagan, the Bushes and Obama had this issue. And only Obama had a good excuse.

It is possible to get Debt/GDP to decline. It’s been done for 2/3 of the post WW2 Presidents. The one singular common thread among every one of those fiscally successful administrations is not that spending/GDP was lower, but that tax rates on the wealthiest were higher.

We do need a balanced budget amendment of sorts, where balanced means we at least hold Debt/GDP steady, and aim to lower it. The way to accomplish this is to raise the dues of the club members to pay for the voted expenses. Congress needs to determine the expenses and investments that are appropriate, and then set tax levels to pay the bills.

I’m sure that is not what you meant, but it actually makes more sense. When you have a golf club, you don’t ask what the members want to pay (which is nothing), and then fail to water the greens because you can’t pay the utility bills. You determine expenses and set revenue accordingly.

Steven H April 2, 2015 at 6:29 pm

So cynical. GOP reminds me of the Dark Side, but that doesn’t make it so.

Reply

Steven H April 2, 2015 at 6:43 pm

… that was to stevendad …

Peter April 3, 2015 at 7:13 am

Again you talk about debt/GDP. That isn’t what everyone else is talking about. We are talking about the government spending more than they are bringing in. Period. Clinton understood this (it’s math)…. Understand that is the point everyone is making regardless of how you want to keep framing it with debt/GDP.

Steven H April 3, 2015 at 3:04 pm

I grant that the definition of balanced budget is when expenses = revenue. My point is that we need to accomplish achievable goals. It has been remarkably rare to have balanced budgets for 2 consecutive years at any time in the last 115 years, and yet we have shown it is possible to at least get deficits less than economic growth, thus lowering the debt/gdp for decades at a time. Even Clinton never balanced the budget for even one year, as you can tell because raw debt increased every single year. Real debt per capita DID go down in his last 4 budget years, and debt/GDP went down 9 points, which are impressive accomplishments. Let’s aim for something like that, but not tilt at windmills of pure balanced budgets.

Peter April 3, 2015 at 3:08 pm

I think it is a sad state of affairs when a truly balanced budget is an “unrealistic goal”. I don’t believe this. We should be able to get awfully close to a balanced budget now with the explosion of the Information Age and record low interest rates. And to be honest we don’t have a choice. Gonna be ugly when rates go up.

JTM April 3, 2015 at 3:25 pm

Peter – It is sad that a balanced budget does not truly mean balanced, but a shrinking deficit is as best as you are going to get with even the majority of the most conservative representatives in congress. I challenge you to name one congressperson who is willing to not just cut budgets that other congresspeople are interested in but to give up enough on their own priorities to make that happen. A balanced budget with the current congress just can’t happen, it’s a pipe dream.

Peter April 3, 2015 at 4:27 pm

Agree. A balanced budget with our current state of politics is impossible. Both sides too stubborn and playing a dangerous game of chicken. It’s a myth that conservatives want to “cut expenses” and “scale back government”. They are no different than their liberal counterparts. I am continuously depressed that for the last two administrations we have had no real “meeting of mind”, no real compromise. Most of the things that have gotten done have been rammed through the process (Iraq war, ACA, etc) rather than thought out with compromise. My same frustration with some in this conversation. Just think – if it is hard for people to think outside a “platform” on an anonymous comment thread, how hard must it be when you are elected by a party?

In many ways the real pipe dream I hope for is a complete renegade (like what Gary Johnson did in New Mexico, but on a national scale) to become president and Congress to fill up with these types of people.

Normal Joe March 29, 2015 at 10:07 pm

Peter N – Please explain to this lowly accountant what you mean by “creating wealth.” From an individual perspective and by any definition I can find anywhere else wealth is defined in one word, savings. Savings that are the function of cash flow in excess of expenses. Then there are varying ways that these savings can be put to use to increase their value. The least risky is in government secured interest earning accounts insured by the FDIC through more risky investing in the stocks and bonds of public companies. The only method that places the most risk on the individual is investing into a private company to provide working capital that can be used for the means of production or inventory used to produce products. Creating or accumulating, it’s all the same thing. So, please, show me where there is a difference?

Reply

Peter N March 30, 2015 at 11:40 pm

“I can find anywhere else wealth is defined in one word, savings.”
That is a good start.

My company automates production. This allows our customers to make more products better and perhaps cheaper but the bottom line is they they get a return on investment that can be saved or spent on new automation or returned to the stock holders.

Farmers grow wealth.
Miners mine wealth.

Steven H is hung up on GDP. GDP is just a measure of economic activity. It doesn’t have anything to do with making a net gain.

Basically it comes back to what you said, cash flow in excess of expenses.
Draw a circle around any entity, a family, city, state, country. If what it consumes is greater than what it generates it will soon be in debt or broke.

Another thing that Steven H is hung up on is the diminishing share of the wealth that the workers get. It is simple, capital ( wealth ) buys machines that automate production. A greater percentage of the wealth is created by wealth in the form of capital or machines than by labor than ever before and the percentage will become greater. I don’t make the rules. This is just the way things are. Politicians can’t change it. The problem is that people aren’t adapting to the new reality and this new reality will be always changing unless something blows us all back to the dark ages where the machine don’t work. Even then the machine will come back.

Reply

Steven H April 11, 2015 at 7:20 pm

So in your simple world, workers who are displaced by automation have no value so they should die. Or they should start businesses (for which they have no capital and for which there is no market because consumers have been displaced by automation) or they should pay exorbitant fees (which they cannot afford) to get educations for careers that may also be displaced by the changing economy. The winners win it all and the losers are just discarded like old technology. Sounds very third world to me. It only is appealing if you are in that fortunate 1 or 2%. Too bad the rest are unlikely to go along with this scheme.

Reply

Peter April 15, 2015 at 9:39 am

Didn’t think Peter N said any of that. It’s not offensive to say people have to “adapt to a new reality”. They do!

Reply

Dude April 5, 2015 at 4:41 pm

I was impressed by the 4600 comments over two years, but looks like the same three dudes arguing. Lol

Reply

Steven H April 9, 2015 at 7:58 pm

Join in, dude!

Reply

Peter April 6, 2015 at 12:11 pm

Steven H: “Peter, tell me how increasing taxes on the upper 0.2% or so affects the rest of the upper 1%. Tell me how making it less profitable to invent credit default swaps hurts anybody.”

Neither of things affect the rest of the 1% or hurt anybody. Agreed. But they also don’t even come close to solving the problems you are concerned with – namely income inequality. And I love how it is now the top 0.2% when all along you were singling out the top 0.1%. This is the slippery slope…

Run the numbers…. unless you completely rape the top 0.1% (or 0.2% as you say), you don’t change anything. And jacking their taxes up exponentially could – potentially – also have adverse economic effects.

Reply

Steven H April 9, 2015 at 7:45 pm

Raising taxes not only raises revenue. It also sets priorities and changes behavior. Right now there is a battle between Wall Street and engineering firms for the best and brightest minds in America. Wall Street has been winning because their pay scale is outrageously high. Putting higher taxes on outrageous incomes and capital gains above a threshold, as well as putting fees and time delays on the high speed trading system, and maybe reinstating Glass-Steagall and putting real teeth in the Dodd-Frank laws, all might help quash the outrageous money-leech that is today’s American banking and investment and financial system. And maybe it will encourage the best and brightest minds to pick a constructive engineering career instead of a destructive career peddling junk bonds and false securities.

A few years ago, pundits were railing about how we would have trillion dollar deficits as far as the eye can see unless drastic cuts were made in the budget. There were no drastic cuts but the deficits have dropped by more than half, largely due to sensible and necessary tax increases, and a start on recovery and economic growth. Running the numbers on revenue from tax percentages alone would not make the difference that tax revenue and spending constraint and growth managed together.

The economy is a bit like a business; say an airline. You can’t run an airline by constantly cutting expenses like employee salary and airport infrastructure airplane maintenance and funnel all the savings to the big earners in top management. You certainly can’t claim that this “creates wealth”, despite the growing pot of money in the CEO’s bank account. What it creates is not wealth, but an impending disaster. Planes and infrastructure degrade, grumpy employees don’t do their best work, and eventually the airline economy has to be rebalanced. The cause of the problem is not the breakdown of employee’s families, or their education, or their lack of motivation. You can’t point to the remaining career mobility from baggage clerk to manager as a sign nothing is wrong. You can’t realistically rail about how CEOs take bigger risks than baggage clerks; they do, but that misses the big picture that baggage clerks still need to feed their families. Eventually you have to face facts and fix the problem: that the business depends on ALL of the sectors of the business getting attention, and ALL of the gears getting greased, not just the ones who have been well-oiled all along.

Reply

Peter April 14, 2015 at 7:17 am

“peddling junk bonds and false securities”

There is nothing wrong with “junk bonds”. Frankly, they are typically a part of a well diversified portfolio. Not sure what a ‘false security’ is.

“revenue from tax percentages alone would not make the difference that tax revenue and spending constraint and growth managed together”

Excellent point and one I have been making all along. Still waiting for the spending constraint though….

Your airline analogy is very confusing. Corporate America has largely done the smart thing coming out of a recession – cutting expenses. This must be done when revenues slow and you don’t have the ability to print money or borrow from the American taxpayer. This helps keep companies afloat rather than having them go under altogether (where nobody makes any money).

I’m dealing with a client who owns a mid-size engineering firm now that has had the same employees for years and continues to pay them far more than their competitors and give them large bonuses each year. Some of these people as a result have been with the firm for 30 years. The problem is now that their overhead is so high that they can’t competitively bid on the work. Prior to 2013, the company had only had one “loss” year in 42 years. They have now had two in a row. Something has to be done or the company will go out of business. The owners of the company aren’t getting “rich” at all – they may end up with nothing. In order to keep the company afloat they are going to have to get rid of some of these loyal employees – or lower their pay. This isn’t “heartless” or “greedy”. It is business and it happens every day. The error that this company made was overpaying their employees so aggressively for so many years. Eventually the bubble bursts and revenue can’t support it, no matter how good it might be. Kind of like the Federal government (or even on a personal level)….. overspending always catches up with you.

Reply

Steven H April 14, 2015 at 8:12 pm

“false securities” is a play on words of course. It indicates the false sense of security you get from owning investments that are rated higher than their real quality or value.

My point is that the financial industry is bloated. It rose from 2% of economy in 1880 to about 6% in 1930, when the crash and depression and bank failures dropped it back down to 2% in early 1940’s. It has now risen to somewhere between 7.5% and 8% of economy. We don’t NEED that many high paid people sitting around trying to invent clever ways to pull money out of the economy. We either have too many people in finance, or are paying them too well, or both.

http://tcf.org/blog/detail/graph-how-the-financial-sector-consumed-americas-economic-growth

Reply

Peter April 15, 2015 at 9:34 am

Some of the financial industry growth is due to organic (and positive) factors though. For instance, 401ks didn’t even exist before the 70’s. If you go back 60 years, very few people had investments such as stocks, bonds and mutual funds. Now, an overwhelming majority of the public holds some of these securities. More people own homes than in years’ past as well. Pensions are just about extinct as well, meaning that every citizen needs the financial services industry to help them realize their dream of retirement. This creates an expanding – or even exploding – need.

The financial industry growing as a percentage of the economy is not driven by hedge funds, “false securities” or repackaging derivatives. You are correct however, that money management and its high risk/reward structure is taking some of our brightest minds away from science, engineering and medicine.

I think you continue to think of the financial world as a bit more nefarious than it is. The problem is this – just as in any industry, companies are going to try and sell you whatever you will buy. If you will pay $200 for a handbag just because it has a certain label on it, then we will gladly sell it to you. Fortunately, there is no industry as tightly regulated (particularly after 2008) than the financial industry. Just try to refinance a mortgage and see how much paperwork you have to fill out. I get calls all the time from people wanting to pull out more equity from their homes but can’t – the banks are denying them having a higher than 80% loan-to-value ratio.

People need education – scams and self-serving greedy people aren’t going away any time soon. I mean, how are credit cards and paycheck cashing services LEGAL? Credit cards have done FAR more damage to the average American’s balance sheet than credit default swaps ever could.

Steven H April 14, 2015 at 9:14 pm

“Waiting for spending constraint”?
Obama is first President ever since 1950 (I didn’t look back farther than that) to preside over drops in real per capita spending for 4 out of any 5 years of their terms. (2010, 2012, 2013, 2014). Clinton had a better overall run with a final real spending per capita only 2.4% higher in 2001 relative to spending 10 years earlier.

If you say that it is unfair to compare today’s spending to the exceptional 2009 spending, then consider that Obama’s spending in 2014 is only 15.6% higher than 10 years back, in 2004 (again in real per capita numbers). Only Clinton’s long term spending profile (spending growth across 10 years) is better than Obama’s, even going back into the 60’s.

If you are waiting for spending constraint, wait no more. This is about as good as it gets.

Reply

Peter April 15, 2015 at 9:37 am

If this is as good as it gets, we are in BIG trouble.

Peter N April 16, 2015 at 11:40 am

It isn’t a matter of IF.
We are in big trouble.
When SHTF there will be a lot of people on the street and there will be no help for them because the gov won’t have any money unless it robs it from those that have money in the banks in excess of $100K. This is what happened in Cyprus.

BTW, I just pain my taxes. I am not happy when so many don’t pay any.

Steven H April 16, 2015 at 9:05 pm

Peter, one of the frustrations I have had is how the economic discussions in this country over the last few years (or even the last few decades) have been distorted by the aggressive marketing of political ideology and the discarding of facts. I would say one of the biggest distortions has been the hysteria over government spending.

Here are a few of the political assertions, heavily sold and marketed by billionaire funded “news” outlets, that have been completely counter to reality:
– Obama’s spending spree created the trillion dollar deficits.
– In an economic downturn that lowers revenue, government should cut spending accordingly.
– Failing to raise the debt ceiling would not impact our ability to pay our bills and would improve the economy and our credit ratings.

There are many more, but these three in particular are so obviously and demonstrably false that it has shocked me how presumably intelligent leaders could be persuaded to utter them, and that a sizable percentage of the population was ever persuaded to believe them.

Of course, the 2009 trillion dollar plus deficit was set in motion before Obama stepped in office, and most of it was due to the drop in revenue from the skyrocketing unemployment and corresponding business slowdown and drop in GDP that began in 2008. There never was an Obama spending spree. There was a great big recession. Economists agree on very few things, but most would certainly agree that governments need to apply stimulus, not proportional austerity, in an economic downturn. And the debt ceiling arguments for not raising it were absurd beyond measure.

And yet this obsession with spending persists even though real spending per capita has gone down 4 of the last 5 years, and the ten year spending rise trend is lower in percentage than just about any other post WW2 ten year spending percentage rise falling outside of the Clinton years.

I understand there is an obsession on the political right with cutting government, and cutting taxes and cutting business regulations and just letting business do whatever the heck it wants. But for gosh sakes (to keep the language clean), can’t we keep the conversation honest?

Spending trends are not worse than the past. They are better. Really. Debt has to be addressed. Fine. But it will take a little more revenue (not less) from those who can afford it (not those who can’t), a growing economy (that depends on a recovering middle class, not an expanding wealth reserve to the upper class), and long-term spending growth constraint, not short-term budgetary slash and burn. Anybody who says different is peddling snake oil.

When and if the SHTF (as Peter N says), the wants of the 1% will be heavily outvoted by the needs of the 99%. Peter N may be surprised at who actually ends up on the street. My recommendation is that we avoid the whole SHTF scenario, and stabilize the economy before it gets to that point.

Peter April 17, 2015 at 7:25 am

Steven H – from your last post….

I agree with you that the political assertions you listed are generally counter to reality. But don’t be surprised that politicians utter those phrases – of course they do! They are simply trying to juxtapose themselves against the other “side” so that they can get reelected. Logic plays little role. And please tell me you aren’t REALLY surprised the public believes them? The public’s “informed” level is so full of propaganda on all sides of the argument – and in all honesty, how is the public supposed to understand something like the impact of the debt ceiling? Most people can’t tell you how many degrees in a right angle or what an adverb is – and they were actually TAUGHT that in school. When did the masses ever learn about the debt ceiling other than from “news” or “propaganda”?

I also will stay away from your continued finger pointing to the right as the cause of everything evil. For instance, I couldn’t disagree more that the right wants to cut government. If that was the ACTUAL case, wouldn’t they have done so when they were in office? This is no different than the left being “anti-war” – it’s all politics of convenience and they all sing from the same songbook. Don’t be fooled.

And you are right – it must be contained with long-term spending constraint – which our current political structure (right OR left) does not have the b***s to do. This spending constraint would be torn to shreds by other politicians looking to get ahead. “So-and-so proposes that we cut funding to our schools, military and retirees! Outrage!!!! Vote him out!!!!”

The scenario you describe where the 1% is on the street and the 99% rule the world is a bit ridiculous too. Compare our situation to China. Almost 1 billion people live below the equivalent of $5 a day. If that country was a democracy, wouldn’t those people vote to furnish their own immediate needs? And would that be good for the long-term prosperity of the nation?

If we have a SHTF scenario – why would small business owners and people who have accumulated wealth, property and employ others be on the street?

Ken April 17, 2015 at 10:22 am

Here are the spending numbers in constant $2009 for selected administrations (source: http://www.usgovernmentspending.com):

WWII FY 42-45 Yearly avg deficit $497b; Yearly avg per capita deficit $3576.50
Kennedy FY 62-63 Yearly avg deficit $33b; Yearly avg per capita deficit $179
Johnson FY 64-69 Yearly avg deficit $348b; Yearly avg per capita deficit $161.85
Nixon FY 70-74 Yearly avg deficit $55b; Yearly avg per capita deficit $269.80
Ford FY 75-77 Yearly avg deficit $181b; Yearly avg per capita deficit $833.33
Carter FY 1978-1981: Yearly avg deficit $146b; Yearly avg per capita deficit $662.50
Reagan FY 82-89: Yearly avg deficit $306b; Yearly avg per capita deficit $1289.75
Bush 41 FY 90-93: Yearly avg deficit $370b; Yearly avg per capita deficit $1463.75
Clinton FY 94-01: Yearly avg surplus $3b; Yearly avg per capita surplus $6.50
Bush 43 FY 02-09: Yearly avg deficit $466b; Yearly avg per capita deficit $1558.13
Obama FY 10-14: Yearly avg deficit $962b; Yearly avg per capita deficit $3074.00

If you look at the individual years of Obama, again in constant $2009, this is what you get:

2010 total spending $5.868T; total deficit $1.294T; per capita deficit $4134
2011 total spending $5.935T; total deficit $1.299T; per capita deficit $4035
2012 total spending $5.819T; total deficit $1.086T; per capita deficit $3290
2013 total spending $5.630T; total deficit $679b; per capita deficit $2012
2014 total spending $5.546T; total deficit $484b; per capita deficit $1403
2015 total spending $5.685T; total (projected) deficit $582b; per capita deficit $1655

Now, if you focus only on the last few years of Obama, then yes, the deficit is less than half of what it used to be in the first years of his administration. And yes, there is a trend where the deficit has been lowered each year under his administration (except for 2015, where it ticked upwards a bit). But that’s only because the latter years are being compared to the outrageous deficits in the first years. All the deficits are ridiculously high in actual dollar terms. So is spending.

This is like raising the price of a Volkswagen Beetle to $3 million; then reducing the price to $1.5 million and claiming credit that you “reduced the price by 50%”. What a deal, eh?

While you are being factually correct that you lowered the price by 50%, you leave out the fact that you are limiting the time horizon to create a false narrative. Plus you are dealing in percentages only, not actual prices. In doing so, you are enhancing the false narrative by never mentioning the $3 million price, the $1.5 million “sale” price, or that the Beetle is nowhere close to being worth either one of those two prices.

In the case of Obama, his average deficit of $962b/year is more than twice as high as any other administration. His administrations are spending almost $6 trillion a year. In inflation-adjusted dollar terms, these have been the six highest spending years in American history. Also in inflation-adjusted dollar terms, they are six of the top seven deficits in history. Only GWB’s last year, 2009, was higher.

So getting back to the original charge that government will simply outspend whatever revenues that come in…..The only presidential administration that can perhaps claim any credit at all is Clinton’s, which is the only one which had a surplus in the last 50 years. All other administrations fit the initial charge, which was that government simply outspends whatever revenue it gets.

Peter April 17, 2015 at 10:36 am

AMEN. But it is more depressing for us to think that ALL politicians are idiots and spending our nation into bankruptcy. It makes people feel better to think that “their team” is doing things right and the “bad guys” are screwing it up. But facts are facts – we MUST get our spending in control before interest rates rise – or none of this rhetoric is going to matter one bit.

Ken April 17, 2015 at 11:38 am

And just for clarity’s sake, per capita spending in constant $2009 for the last 15 years looks like this:

2001 $14358
2002 $15106
2003 $15581
2004 $15845
2005 $16140
2006 $16597
2007 $16791
2008 $17683
2009 $19400
2010 $18972
2011 $19040
2012 $18525
2013 $17791
2014 $17395
2015 $17698

So to me it looks like per capita spending is not going down at all, but rather, continuing to go up. If you compare where we are now to where we were 15 years ago, not only are we spending more overall as my previous post noted, but we are spending more per capita as well.

If you compare 2015 versus 2001, for example, we are spending 23% more per person in 2015 than in 2001. Or take 2014 versus 2002, and we spent 15% more in 2014 versus 2002. If you compare where we are now in 2015 ($17698/person) to where we were 30 years ago, for example in 1985 ($11103/person), after adjusting for inflation we are spending 59% more on each person today than we were in 1985. The same holds true across the board. While there may be minor variations downwards in a particular year or two, the overall trend is clearly upwards.

Steven H April 18, 2015 at 7:49 am

It’s getting awkward to reply at this indention level, but one more to Ken, then I am jumping to the bottom of the page.

Ken, why are you quoting total (federal plus state plus local) government spending and debt? I think that muddies the water. Most of our discussions here have stuck to federal tax, debt, revenue, and spending. I know the usgovernmentspending.com site defaults to total unless you click federal. Were your references to total instead of federal done purposely?

Ken April 23, 2015 at 5:14 pm

The debt numbers are all federal debt.

Checking the spending numbers….

Meg April 13, 2015 at 5:05 pm

Ok I’ll admit it. I’m one of “them”. The $400k earner club. I’m on a plane returning from a business trip. I have to say that if my 5% increase will help I’m happy to pay it. The cannibalism capitalism we are employing in this country is not working.

I’m willing to pay more and for that I’d like us to have world class infrastructure built by US citizens and legal immigrants paid a fair and living wage.

Reply

Steven H April 13, 2015 at 9:49 pm

Thank you for your comment, Meg. There is nothing wrong with being a high earner, from my perspective. Congratulations on your success and your obvious appreciation of the country that helps you accomplish it.

And that term: “cannibalism capitalism”. Brilliant. I wish I’d said it. It describes our current economy very well.

Reply

Ken April 14, 2015 at 10:50 am

Meg — Can you explain what you mean by “cannibal capitalism”?

Reply

Ken April 14, 2015 at 10:51 am

I meant “cannibalism capitalism”, needless to say.

Reply

Steven H April 14, 2015 at 6:13 pm

Ken,
I am also interested in hearing Meg’s description, but meanwhile, i have found an entire book on the topic:

Cannibal Capitalism: How Big Business and the Feds are Ruining America

You can see an excerpt here:

https://books.google.com/books?id=iXcGpNyjMGIC&pg=PA21&lpg=PA21&dq=cannibalism+capitalism+define&source=bl&ots=4dISLa7R36&sig=biwk_S8GF967WfBgenwFwoOWCsA&hl=en&sa=X&ei=wLktVcnyL8acNrS5grAD&ved=0CFUQ6AEwCA#v=onepage&q=cannibalism%20capitalism%20define&f=false

Reply

Peter April 15, 2015 at 9:25 am

Not a bad read at all…. What is happening in China is fascinating. Our politicians and their self-serving, short-term motivation continue to cut this country’s growth off at the knees. This is why I think we need smart business-oriented people in Congress and in the White House rather than lifelong politicians, actors, POWs, community organizers :), etc. Business people have experience with getting things done with a long-term bottom line in mind. Think this is already starting to happen to some degree in Congress…. but it is TOO slow. We still have too many dogmatic crazy loons getting elected.

Reply

Peter N April 16, 2015 at 7:17 pm

I read the link it too. I have been to China twice. The article is right about buying natural resources and especially controlling rare earth metals. This shows strategic foresight that the US lacks. I disagree that capitalism is a problem. It is politics and lack of leadership that is the problem. Our leaders only want to get re-elected.. They are fools and fools, libtards, elect them.

You wouldn’t want to live in China. The air pollution is awful. There isn’t any place for kids to play. Traffic is crazy. There are a lot of concrete forests, apartments, that aren’t occupied. The last time I was I was there was for 2 weeks. That was about the time it took to clear my lungs from the cough from the pollution. There seams to be security or police all around but they really seem to be more helpful than anything else.

China is not a communistic country anymore. There is plenty of private property and business. China is controlled or authoritarian. A lot is permitted as long as it doesn’t challenge those in power. They are pragmatic and playing the long game.

Our current president is just trying to hold things together until he is relieved.

From a technical standpoint. I participate on a Chinese forum. They may be good at memorizing and research but innovation is lacking.

Reply

Peter April 17, 2015 at 7:08 am

Agree with you completely that the politicians (and the political system) are the problem but disagree that it is just “libtards” as you put it. While they have a giant amount of self-serving fools in office, the right has some of the biggest fools of all.

I made the same observations about China from my visit there. Have some good friends that live there as well and they talk extensively about the poverty in the countryside and low wages. They aren’t a perfect society by any means, but because they have leaders that aren’t worried about re-election they at least can (idealistically) make decisions that help the country going forward. Of course, this might mean mass poverty in the short-run. No leader in America is willing to make these sacrifices – nor are the American people. So we will just burn the candle as hard as we can until it goes out.

Normal Joe April 24, 2015 at 11:21 am

I’ve been both busy with other important chores, but also wanting to be more introspective regarding this topic. This thread is way to long to research every post so I’m just going to share a recent find by a noted economist Joseph Stiglitz published in June 2012.

“The Price of Inequality

NEW YORK – America likes to think of itself as a land of opportunity, and others view it in much the same light. But, while we can all think of examples of Americans who rose to the top on their own, what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?

Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.

This is one of the reasons that America has the highest level of inequality of any of the advanced countries – and its gap with the rest has been widening. In the “recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth. Other inequality indicators – like wealth, health, and life expectancy – are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.

It would be one thing if the high incomes of those at the top were the result of greater contributions to society, but the Great Recession showed otherwise: even bankers who had led the global economy, as well as their own firms, to the brink of ruin, received outsize bonuses.

A closer look at those at the top reveals a disproportionate role for rent-seeking: some have obtained their wealth by exercising monopoly power; others are CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence – either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights).

Likewise, part of the wealth of those in finance comes from exploiting the poor, through predatory lending and abusive credit-card practices. Those at the top, in such cases, are enriched at the direct expense of those at the bottom.

It might not be so bad if there were even a grain of truth to trickle-down economics – the quaint notion that everyone benefits from enriching those at the top. But most Americans today are worse off – with lower real (inflation-adjusted) incomes – than they were in 1997, a decade and a half ago. All of the benefits of growth have gone to the top.

Defenders of America’s inequality argue that the poor and those in the middle shouldn’t complain. While they may be getting a smaller share of the pie than they did in the past, the pie is growing so much, thanks to the contributions of the rich and superrich, that the size of their slice is actually larger. The evidence, again, flatly contradicts this. Indeed, America grew far faster in the decades after World War II, when it was growing together, than it has since 1980, when it began growing apart.

This shouldn’t come as a surprise, once one understands the sources of inequality. Rent-seeking distorts the economy. Market forces, of course, play a role, too, but markets are shaped by politics; and, in America, with its quasi-corrupt system of campaign finance and its revolving doors between government and industry, politics is shaped by money.

For example, a bankruptcy law that privileges derivatives over all else, but does not allow the discharge of student debt, no matter how inadequate the education provided, enriches bankers and impoverishes many at the bottom. In a country where money trumps democracy, such legislation has become predictably frequent.

But growing inequality is not inevitable. There are market economies that are doing better, both in terms of both GDP growth and rising living standards for most citizens. Some are even reducing inequalities.

America is paying a high price for continuing in the opposite direction. Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset – its people – is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.

The Great Recession has exacerbated inequality, with cutbacks in basic social expenditures and with high unemployment putting downward pressure on wages. Moreover, the United Nations Commission of Experts on Reforms of the International Monetary and Financial System, investigating the causes of the Great Recession, and the International Monetary Fund have both warned that inequality leads to economic instability.

But, most importantly, America’s inequality is undermining its values and identity. With inequality reaching such extremes, it is not surprising that its effects are manifest in every public decision, from the conduct of monetary policy to budgetary allocations. America has become a country not “with justice for all,” but rather with favoritism for the rich and justice for those who can afford it – so evident in the foreclosure crisis, in which the big banks believed that they were too big not only to fail, but also to be held accountable.

America can no longer regard itself as the land of opportunity that it once was. But it does not have to be this way: it is not too late for the American dream to be restored.”

http://www.project-syndicate.org/print/the-price-of-inequality

I think this better defines the source of our economic calamity and why we are not out of the woods yet due to pragmatic business leaders narrowly focusing on their shareholder value and failing to recognize their symbiotic relationship with the macro-economy. This perspective eliminates the poison well dilemma and puts a more neutral narrative that may be more easily assimilated. There is more from this Nobel Laureate in economics in the links provided below. His arguments also bolster what another economist, Robert Reich, has been trumpeting for years.

https://youtu.be/Hp9PJK-FNyg

http://www.project-syndicate.org/focal-points/stiglitz-on-america

http://en.wikipedia.org/wiki/Joseph_Stiglitz

Mark April 15, 2015 at 12:25 pm

What about sports players?

Reply

Peter April 16, 2015 at 11:17 am

Athletes salaries keep going up – as TV deals from all the major sports keep going higher and higher. The reality is that there are quite a few professions that make up the almost 4 million people that make over $400k/year.

Doctors, small business owners, lawyers, financial people, corporate executives, professional athletes, and politicians probably make up the majority I would think.

Reply

Peter April 16, 2015 at 11:17 am

Actually athletes would be a small portion – there are probably around 1500 of them making over $400k I would think….. small portion of the 4 million.

Reply

Steven H April 16, 2015 at 9:14 pm

Here is another bit of reading. It would be easy to discard it as a bit of partisan statistical manipulation, but the research seems deeper and more substantial than that. Below is a lead-in excerpt. There are some interesting stats but you will have to follow the link at the bottom to see them. I am tempted to get the book.

====== Forbes Article =======
The common viewpoint is that Republicans are good for business, which is good for the economy. Republican policies – and the more Adam Smith, invisible hand, limited regulation, lassaiz faire the better – are expected to create a robust, healthy, growing economy. Meanwhile, the common view of Democrat policies is that they too heavily favor regulation and higher taxes which are economy killers.

“Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth.”

Senator Daniel Patrick Moynihan is attributed with saying “everyone is entitled to his own opinion, but not his own facts.“ So even though we may hold very strong opinions about parties and politics, it is worthwhile to look at historical facts. This book’s authors are to be commended for spending several years, and many thousands of student research assistant man-days, sorting out economic performance from the common viewpoint – and the broad theories upon which much policy has been based. Their compendium of economic facts is the most illuminating document on economic performance during different administrations, and policies, than anything previously published.

http://www.forbes.com/sites/adamhartung/2012/10/10/want-a-better-economy-history-says-vote-democrat/
==========

Reply

Peter April 17, 2015 at 8:46 am

Not diving into partisan debates (think this divisive rhetoric is a large part of the problem) – but anyone with knowledge of the economy will tell you that the actions that the Fed, Congress, the White House takes in a given era usually don’t affect the economy until years later. We will see the effects of the current administration in the next 5-10 years for instance, not immediately. I told all of my clients in 2008 that it didn’t matter who won the election – whomever won would be the steward for a great economic recovery and get (or take) the credit for it. We were just so in the doldrums and had a tailwind of stimulus – it was inevitable regardless of which inept captain was at the helm. So, really any article that tries to line up economic growth during an administration with the credit for such isn’t really that informed in my opinion.

Reply

Steven H April 18, 2015 at 8:06 am

I only agree partially with your statements. I agree there are long term economic impacts to any administration but I counter that there are also impacts that become evident in 2 to 8 years … well within the bounds of a 1 or 2-term Presidency. It is true that economic experiments are difficult to evaluate, as you cannot rewind and run the same precise conditions with different stimuli. Yet that does not render the referenced analysis as completely null and void.

While I understand and respect your aversion to partisan political wrangling, it is also evident that there is a legitimate discussion to be had on policy vs results. The reason for bringing up GOP vs Dem is not so much “my team vs. your team” as an attempt to evaluate the effectiveness of policies that pit limited government/lower tax/laissez-faire against govt social programs/higher tax/business regulation.

So when the short-term impacts of one set of policies tend to degrade the economy, and a different policy set tends to improve the economy, I would argue that we should abandon fealty to the damaging policies and look harder at implementing the favorable ones. All within balance and reason, of course.

Reply

Peter April 21, 2015 at 7:19 am

I would believe you that it isn’t about bringing up “team vs team” if you had ever shown any diplomacy on this front. You are clearly on one side and you and I disagree on one key point about “Dems vs GOP”…. You think there is a big difference between the two. I don’t.

To be clear, I agree there is a big difference in how they try and position themselves. I don’t agree that there is a big, fundamental difference between how they act and the policies they champion when in office. We should always look to implement better policy – OBVIOUSLY…. – but to act like the Dems have had one set of policies for the last 40 years (which you think are great) and the GOP has had a polar opposite, misguided plan is just not true. Plus, not every Dem is the same nor is every republican.

Reply

Steven H April 22, 2015 at 3:43 pm

“I would believe you that it isn’t about bringing up “team vs team” if you had ever shown any diplomacy on this front.”
I think it’s a bit unfair to dismiss any argument I put forth on on policy just because I advocate for one side for the argument. That’s like saying you can’t listen to any argument i put forward claiming to prove the earth is round, because i have previously stated that I believe that it IS round, and that I have undiplomatically made fun of those who proclaim it to be flat.

“I agree there is a big difference in how they [Dems vs GOP] try and position themselves. I don’t agree that there is a big, fundamental difference between how they act and the policies they champion when in office.”
I agree that Obama’s policies have been as almost as pro-bank as the GOP, and Bush2 was lousy at shrinking government. And yet, on every policy listed below, it is pretty hard to claim that GOP and Dem are equal, and it is pretty easy to predict how different administrations will act and individual legislators will vote on these4 issues based on party. Such partisan-based predictions may not be correct 100% of the time, but they will be right well over 75% of the time.

[Dem vs GOP]
Tax Increase vs Tax Cut (especially on higher earners)
Business Regulations (More vs Less)
Military Budgets (Relatively Lower vs Higher)
Social Policy Safety Nets (Increase vs Cut spending or Privatize)
Labor Policy (Pro-union vs Anti-union; and Raise Min Wage vs Not Raise)

While you can easily find instances of Presidents or Party not following up on their ideological promises, I think that is not the same as both Parties being equal. If you carefully and honestly review how politicians of different parties vote and act on the above issues, I think you would be hard-pressed to paint the parties as anything even close to equal.

Steven H April 22, 2015 at 4:09 pm

So the point is that policies that favor big-business and the financial industry while suppressing unions and pro-labor policy have generally had a negative medium and long-term impact on the economy. I ding both the GOP and Dems (e.g. Clinton’s dereg of Glass-Steagall, favored by GOP, but allowed into law by his hand) on this line. Similarly, ATTEMPTS to shrink the government by “starving the beast” (cutting taxes and revenue, but not actually cutting spending) do not improve the economy or shrink government; they just drive up deficits (Math works!). All of the above are bad policy and need to be abandoned.

Taxes need to be raised to pay the bills, and they need to be raised on people who can actually pay them, and if they need to be raised it should be done gradually to do no significant harm to the taxpayers or the economy. This is not partisan, it is just common sense. GOP and Dem alike managed to have sensible tax rates in the post WW2 years until the 80’s. The debt is not so much a partisan issue as a failure of 3 particular presidential administrations to follow mathematically sound tax policy. And income inequality (and the corresponding economic instability and slow growth we now experience) is not a partisan issue as much as it is a recurring over-confidence of politicians in both parties in the supposed virtues of deregulated capitalism and unrestrained financial speculation.

Steven H April 23, 2015 at 4:42 pm

Note: In one of posts above “these4″ issues did not mean “these four issues”. I accidentally struck the “e” and the “4” key simultaneously. And then I listed 5 issues, so I just wanted to clarify that I can count. 😉

Normal Joe April 24, 2015 at 4:32 pm

JUL 6, 2011
The Ideological Crisis of Western Capitalism
Joseph Stiglitz

NEW YORK – Just a few years ago, a powerful ideology – the belief in free and unfettered markets – brought the world to the brink of ruin. Even in its hey-day, from the early 1980’s until 2007, American-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world. Indeed, over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.

Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy – or at least the economies of Europe and America, where these ideas continue to flourish.

In the US, this right-wing resurgence, whose adherents evidently seek to repeal the basic laws of math and economics, is threatening to force a default on the national debt. If Congress mandates expenditures that exceed revenues, there will be a deficit, and that deficit has to be financed. Rather than carefully balancing the benefits of each government expenditure program with the costs of raising taxes to finance those benefits, the right seeks to use a sledgehammer – not allowing the national debt to increase forces expenditures to be limited to taxes.

This leaves open the question of which expenditures get priority – and if expenditures to pay interest on the national debt do not, a default is inevitable. Moreover, to cut back expenditures now, in the midst of an ongoing crisis brought on by free-market ideology, would inevitably simply prolong the downturn.

A decade ago, in the midst of an economic boom, the US faced a surplus so large that it threatened to eliminate the national debt. Unaffordable tax cuts and wars, a major recession, and soaring health-care costs – fueled in part by the commitment of George W. Bush’s administration to giving drug companies free rein in setting prices, even with government money at stake – quickly transformed a huge surplus into record peacetime deficits.

The remedies to the US deficit follow immediately from this diagnosis: put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the US economy in peril and that shred what remains of the social contract. Meanwhile, the US financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.

But matters are little better in Europe. As Greece and others face crises, the medicine du jour is simply timeworn austerity packages and privatization, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and it will fail in Europe this time around, too. Indeed, it has already failed in Ireland, Latvia, and Greece.

There is an alternative: an economic-growth strategy supported by the European Union and the International Monetary Fund. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments. Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.

Regrettably, the financial markets and right-wing economists have gotten the problem exactly backwards: they believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government’s fiscal position, or at least yielding less improvement than austerity’s advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.

Do we really need another costly experiment with ideas that have failed repeatedly? We shouldn’t, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the US to return to robust growth would be bad for the global economy. A failure in both would be disastrous – even if the major emerging-market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.

Read more at http://www.project-syndicate.org/commentary/the-ideological-crisis-of-western-capitalism#1F7P1DOwdHFTGT9A.99

Reply

James April 27, 2015 at 6:50 am

LOL. If we could only get the liberals in power everything would be fine. Effing right wingers….GRRRR

Reply

Normal Joe April 27, 2015 at 7:34 am

It’s not as much as getting liberals in power as it is stopping the really stupid mistakes. I’d support anyone that exhibited something other than failed ideology.

Reply

Peter April 28, 2015 at 7:01 am

Exactly my argument. But I don’t see it as one sided as some. It is rare that I see anyone LEFT or RIGHT talk in politics with any sense about the economy. And when they do (Ron Paul, Ross Perot, Gary Johnson, etc.) they are labeled as outsiders or loons and largely quieted by the press and the establishment.

Reply

Ken April 29, 2015 at 8:36 am

I think most of the reason for our national debt revolve around one basic truth….. which is that there are lots of political benefits to overspending in the short-term, and almost no political benefits to working within a balanced budget for long-term financial health. Consider……

By overspending you can create a “legacy” for yourself, albeit at the expense of your grandchildren’s generation. You can “bring home the bacon” to your constituents, proving that not only are you doing something in Washington, but that your constituents are the beneficiaries. Re-elect me because I got DC to pay for this, that, and the other thing in our state. Nevermind that the nation as a whole can’t afford it. We’ll just borrow the difference. Applause. Woo hoo. You tell ’em.

Contrast that to someone who looks to the long-term financial health of the country and says “Hey guys, sorry, but um…..we just can’t afford this kind of debt”. That just doesn’t have the right ring to it as a campaign platform. My fellow constituents, my big accomplishment in DC these past few years is that I made sure we didn’t overspend. Sure this, and that, and the other thing didn’t get done in our state, but that’s because we as a country can’t afford it. I made sure that we didn’t add more debt to a budget that is already way out of balance. Crickets.

Peter April 29, 2015 at 1:27 pm

Amen. And it is even worse than that. The first type of politician you described gets spending approved and puts it in the budget for years to come. (i.e. Obamacare) Then, when the prudent politician turns down new spending because we can’t afford it, he is actually “cutting programs”. His opponents will say he is cutting funding to the military, education, health care, etc. and that he doesn’t care about the welfare of the American people. There are none of these things you can cut without someone going crazy – and there is always a politician to come in on his horse and champion their cause.

One really cool case study of how this can be done is Gary Johnson’s tenure in New Mexico. Read about that….. not sure this can be done on a Federal level but would love to see someone try.

Peter N April 30, 2015 at 1:20 pm

I have invited all liberals and especially Steven H to create their own companies and show us how it is done. They haven’t and they can’t. Libtards only know how to take what is not theirs and buy votes with what they have taken.

Reply

Normal Joe May 1, 2015 at 1:38 am

It is well documented that the “Libtards” you so like to denounce are the only ones that have reduced deficit spending over the past 30 years. The last one to do so did such a good job there was a real possibility that the national debt could have been erased. The last of the questionably frugal “CONservatives” then promptly erased that budget surplus with giveaways to the pharmaceutical industry, a cut in the very taxes that were doing exactly what some here want to be done, and spent trillions on questionable military strategies all on the backs of the taxpayers of the future. The military industrial complex made billions off those contracts and we’re not supposed to tax them to help pay off that debt? The bozos in Washington are even trying to cut expenditures to programs promised to those brave men and women who gave their blood and friends for those military adventures whining “we can’t afford it.” Hogwash!

Nobody’s hands are clean, many economists warn that austerity measures don’t work, corporations are sitting on mountains of cash, and 90% if the gains from our economy over the past decade and more has gone to only a select few. The tax breaks given to the religious entities could completely pay for the food stamp program, which by the way, also lines the pockets of the big farmers with significant amounts of cash. Major corporations are realizing billions in profits but somehow end up either not paying taxes or getting millions in rebates?

The infrastructure, invaluable to American businesses both small and large, is in need of serious upgrading from the years of neglect by short sighted leadership. That is an investment in tomorrow’s economy akin to upgrading a factory that has nothing but upside potential. Any government money spent in that endeavor would come back in the form of increased tax collections putting out of work construction workers back in the game. As a former construction worker in housing myself, it is an irrefutable fact that in any downturn, construction feels it first and climbs out of it last.

Instead of arguing over who created the mess and who is paying for it, why don’t we do something novel and rely on time tested measures by upgrading the means of production and distribution, put people back to work paying taxes to rein in deficit spending over the long haul, and grow the economy for everyone. It is becoming painfully evident that what we are doing now, growing only the upper crust, is not only not working, but consigning the whole country to future third world status.

And, for you Peter N, I had a business. It didn’t go broke, it was sold off to pursue new opportunities due to the changes in technology and skill sets. It was successful, but in construction subject to too many variables. It was a roller coaster ride swaying from feast and famine. When times were slow, we worked on the technology we used to make it more efficient for the next wave. Like you, it was in a niche market appealing to people that wanted better quality and efficiency. The advent of the big business model for home building started to shut us out of the market because quality is not in their dna. Things change, you learn to move on, and set the sails in a different direction.

Reply

Peter May 1, 2015 at 7:43 am

AMEN – great post. Especially this part –

“The tax breaks given to the religious entities could completely pay for the food stamp program, which by the way, also lines the pockets of the big farmers with significant amounts of cash. Major corporations are realizing billions in profits but somehow end up either not paying taxes or getting millions in rebates”

It really is corporate America that is sitting on the mountain of cash as you put it. That’s where the revenue-side solution begins in my opinion – not by taking more money out of my pocket and other high wage earners. But it’s so obvious why they attack me and not General Electric or Apple. I may have money, but have no power. The corporations are electing people on both sides –

Peter N May 1, 2015 at 8:30 pm

I am not a fan of the pharmaceutilcals either. One drug I use cost $389 a for 3 months supply but only $109 from Canada but that is illegal. Obama care has done nothing to reduce the price of drugs in the US. Obamac care has only suceeded it making me pay for these drugs for other people. I am bitter.

I am a small business owner. I/we create jobs and wealth. I/we provide 401K and health care for about 30 people. Why should I be forced to provide more health care for those that don’t deserve it? Health care is not a right.

My bitch is that libtards bitch and moan but they DON’T CREATE JOBS OR WEALTH. They take from those that do.

Clinton dodged and ducked difficult issues. He let North Korea build nuclear weapons and Islamist get away with the first attack on the World Trade Center.

I think George W Bush is an idiot. I didn’t vote for him either but he had to respond to terrorism. He didn’t do anything about North Korea but I think his hands were full.

By ducking issues and maintaining peace at the cost of security the tech bubble was allow to happen but it wasn’t sustainable.

In my opinion the only decent president we have had is Reagan and Kennedy. Kennedy may have been a democrate but he was pragmatic. He cut taxes.

All the rest of the presidents have been fools. I didn’t like George H Bush’s new world order.
Obama has been a complete disaster but the resulting disaster hasn’t happend yet. Who ever wins the next election will have his or hers hands full and will probably preside over an economic melt down.

Peter May 1, 2015 at 8:36 pm

Agree……although I would add Clinton in there.

Steven H May 9, 2015 at 7:10 am

Peter n ============
Why should I be forced to provide more health care for those that don’t deserve it? Health care is not a right.
==================
“life, liberty, pursuit of happiness” are rights in the US. You have none of those without sound, affordable, available healthcare. So it is a right. And who are you to decide who is “deserving”? You are not a god.

Peter n ==============
My bitch is that libtards bitch and moan but they DON’T CREATE JOBS OR WEALTH. They take from those that do.
====================
Complete BS. The country always does better under Democrat leadership that adheres to serving the greater population. The country always falls apart when adhering to principles that primarily serve the needs of the richest constituencies, as Republicans most often do. Democrat principles create jobs and wealth. GOP principles accumulate the wealth created by all and hand it to the rich.

The “Creator” deistic arrogance that you espouse is a complete myth and self-promoting foolishness. You, Peter N, don’t create a single job. The market and the disposable income of the economy create the opportunity for job growth and you and businessmen like you service that opportunity to make a profit. The market creates jobs, and the market consists of all elements, yet by glorifying your small (yet important) part in the process, you diminish and deny the importance of everyone else. This is how you and people like you justify the extraordinary redistribution of wealth from the poor and middle to the rich, by exalting yourselves as “Creators” and accusing all others as “undeserving” of even the basics required for a decent life.

Not all GOP or businessmen are as arrogant and self-promoting as yourself (note the more reasonable posters here, such as Peter and Ken) , but the attitude is certainly widespread. The “Creator” arrogance has permeated the political talk of the GOP leaders and has sickened most of the rest of us with its disregard for the greater populace. Recall that whole 47% thing that torpedoed Romney’s chances. It is almost inconceivable to me how our political process has become so divisive that a major Presidential contender feels comfortable completely disregarding the humanity and relevance of half the population, even in a private talk to the monetary elite.

As long as this “Creator” arrogance is the prevalent attitude of you and those like you and the leaders of your party, you will be despised and reviled by the rest of us who understand the truth.

Peter May 13, 2015 at 9:12 am

Steven H – you ask Peter N “who is he to decide who is deserving?”….. that is all you do on here! You have constantly passed judgment – more than anyone else on here – about who deserves what credit or income and how much of it they should receive. With all Peter N’s language and shots at you, I think one place he outclasses you is in this particular vein. Your posts have been downright offensive to those of us that have sacrificed EVERYTHING for years to build the businesses, wealth and income we have accumulated. You my friend are the one who is telling people what they do and don’t deserve.

Steven H April 27, 2015 at 2:23 pm

Thank you, Joe for posting the above article, and the one just a few posts above that. The writing of Stiglitz is both plain-spoken and authoratative, lending greater understanding to the sources of excessive income and wealth inequality, and great weight to the arguments that it MUST be turned around. Surely, such concrete and well-founded arguments can help persuade Peter and Ken and James. But I have been disappointed before …

Reply

Peter April 28, 2015 at 7:04 am

LOL – once again an article that starts to have some interesting thought processes is tainted by accusations and one-sided politics. This article is like something that would be on Fox News – a narrative that speaks to one faction of people. I’m exhausted by this.

Reply

Peter April 28, 2015 at 7:20 am

Actually let me rephrase…. it is just too transparent that a left-wing article (which has some excellent points and breakdown of the problem, by the way) gets labeled as “plain-spoken, authoritative, well-founded, concrete, etc.” by you, Steven H….. Yet a similar article written from a right-wing source or even a neutral one (like Ken posted a few months ago) gets met with cynicism and is discredited.

It’s ridiculous and painfully transparent and makes it hard to even work through a solution. Again, I think this illuminates the problem with our politics today. Nobody is open-minded – everyone is sticking to a “script” or “platform” and refusing to budge from their side. The days of master negotiators who can work out compromise like Reagan, Clinton, O’Neill, Gingrich, etc. are waaaayyyy behind us unfortunately.

So we continue to spin our wheels and talk AT each other….and we spin into debt and financial trouble.

Reply

Ken April 29, 2015 at 1:16 pm

I, too, thought the article was very far left of center, though I did not find this surprising, coming from a professor at Columbia University.

I found his viewpoint on Eurozone and Latin American countries not particularly compelling, nor did I find what I read particularly intellectually honest. He mentions Greece, Ireland, and Latvia as examples of failed austerity, but never mentions that his own approach to governing — i.e. tax-and-spend, cradle-to-grave social engineering — is what got these countries into their financial mess in the first place. He then implies that the solution is more of the same, i.e. more tax-and-spend.

Steven H April 30, 2015 at 7:24 pm

Peter ==========
Actually let me rephrase…. it is just too transparent that a left-wing article (which has some excellent points and breakdown of the problem, by the way) gets labeled as “plain-spoken, authoritative, well-founded, concrete, etc.” by you, Steven H….. Yet a similar article written from a right-wing source or even a neutral one (like Ken posted a few months ago) gets met with cynicism and is discredited.
==============
I’m not sure which post of Ken’s posted articles was “neutral”.

Surely not the one (or two actually that he posted) from the National Center for Policy Analysis (usually characterized as right-wing think tank) that dismissed the disparity between the upper 1% and the lower 99% by stating that poor people get divorced, economic tax-unit quintiles have some variations in actual population, and that there is still some economic mobility among the quintiles, none of which addressed the actual issue that the lower 4 quintiles and most of the upper quintile are being impoverished by the small minority at the top of the upper quintile.

I stated my detailed objections to at least one of those right-wing articles in a couple of posts,
http://moneyning.com/career/who-actually-earns-400000-per-year/comment-page-10/#comment-997864

pointing out the factual errors and inconsistencies in the arguments. I did not just dismiss it because it “sounded right-wing”, and certainly not for any neutral analysis. I dismissed it because it mangled its facts and arguments.

This article of Joe’s did not pretend to be as analytical as Ken’s but it also has a more logical argument. Maybe reading its core point without the distracting adjectives and opinionated language states the message better …

===
The remedies to the US deficit follow immediately from this diagnosis: put America back to work by stimulating the economy; end the wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right instead is pushing for more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the US economy in peril and that [effectively breaks] the social contract. Meanwhile, the US financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous [destructive] ways.

But matters are little better in Europe. As Greece and others face crises, the medicine is austerity packages and privatization, which leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and has already failed in Ireland, Latvia, and Greece.

There is an alternative: an economic-growth strategy supported by the European Union and the International Monetary Fund. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments. Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.

Regrettably, the financial markets and right-wing economists have gotten the problem exactly backwards: they believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government’s fiscal position, or at least yielding less improvement than austerity’s advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.
===

Reply

Peter May 1, 2015 at 7:03 am

Like Ken pointed out there is a great deal of this article that is fundamentally wrong. But like most articles if you don’t take everything for face value you can extract some good points amidst the political agenda.

Reply

Steven H April 30, 2015 at 8:18 pm

Ken =========
I think most of the reason for our national debt revolve around one basic truth….. which is that there are lots of political benefits to overspending in the short-term, and almost no political benefits to working within a balanced budget for long-term financial health.
============

I actually agree with this as an observation of political and human nature. (Shock!)

And it certainly appears that this is a critical volley to be applied to both sides of the political divide. Dems spend on their priorities while taxing those not in their political base, while GOP spend on THEIR priorities while cutting taxes to their base and cutting benefits to those NOT in their base.

But this (no political benefits to working within a balanced budget for long-term financial health) is not really a perpetual truth. Consider that in the post WW2 economy until the Great Recession, Presidents and Congresses of BOTH parties regularly reduced Debt/GDP with the exception of the administrations of just three Presidents: Reagan, Bush and Bush2.

And if we look at traditional economic/social arguments of the two parties, they might go like this:
GOP: Minimal government interference, low taxation, and free exercise of capitalism with a minimum of business regulation will allow all people to earn their wage fairly and will most efficiently lift up all people and the economy.
Dem: Unrestrained capitalism tends to shift power, income and wealth up the ladder, and thus a strong government is required with the ability to create and enforce regulations that prevent fraud of business against business or business against customer. Additionally, safety nets are necessary to lessen extremes of poverty, and economic protections are required to minimize the excesses of extreme wealth.

This small govt/big govt argument is nothing new. And both arguments seem to have their merits in theory. What is new and what has devastated the economic arguments are the following flagrant violations of common sense that got passed off as essential political dogma for decades and are still espoused even today among the mathematically challenged:

1) Deficits don’t matter. (Quote from Cheney)
2) Tax Cuts pay for themselves. (Reaganomics)
3) You should never ever ever raise taxes. (Grover Norquist)

1 and 2 are slowly losing potency as sound economic arguments (but were fiercely defended just a few years ago), yet even today, GOP politicians still swear allegiance to Grover rather than to mathematically sound tax policy.

You and I know that Deficit = Expense – Revenue.
If you agree on expense (which is almost Congress only purpose: to determine spending to meet the needs of the country), then you must establish revenue to match expense or you will have a deficit. If the tax rates to meet such expense are truly unbearable, then expenses should be cut. This is the eternal political tug of war.

But to insist that Congress establish a spending budget and then simultaneously demand that tax rates must not ever be raised to match that budget, or to profess a belief in magical drastic tax cuts that don’t create deficits or even to deny the significance of deficits at all, is lunacy.

For the sake of political balance, I would like to offer corresponding statements from the left, but there seems to be no such counter-balance in craziness. In general, the left quotes economics experts and the leaders of the current TP right-wing (who are not intellectual economic conservatives by the way, and also not in line with most of the conservative posters here) quote the needs and wishes of their richest constituents, no matter how crazy the economics comes out.

Reply

Peter May 1, 2015 at 7:02 am

This is so full of a partisan script I won’t touch most of it – but have to throw out one comment I’ve made at least 20 times before.

“But to insist that Congress establish a spending budget and then simultaneously demand that tax rates must not ever be raised to match that budget, or to profess a belief in magical drastic tax cuts that don’t create deficits or even to deny the significance of deficits at all, is lunacy.”

I have never suggested “magical drastic tax cuts” or denied the significance of deficits. Quit raging against the machine and talk logically to those of us that talk logically to you.

I’ll say it for the 100th time – WE HAVE raised taxes – and entirely on the rich. Mine went up about 40% from last year. But that’s not enough to “pay congress’ bills”. The analogy is like my wife joining a country club and a gym and then explaining to me that I don’t make enough to cover these expenses, even though my pay keeps rapidly rising.

Reply

Steven H May 1, 2015 at 7:41 pm

Calm down Peter. For the 100th time, I am asking, not for YOU to pay more taxes, but for you to stop supporting the flat tax on the 1%; meaning that it is in the best interest of you at the lower echelon of the 1% and all of us if there were additional tax brackets above your pay level. It would increase revenue AND provide less incentive for destructive economic behavior.

And I am pointing out that there is insanity in the economic arguments but that it is not from all politicians. It is just as damaging for you to discount all politicians as equal as it is for others to take blind partisan sides on teams. All politicians are NOT equal, and it would help if we all came to agreement on which arguments are ridiculous, even when they come primarily from one party. Government can make a difference, and there are differences in how some policies favored by a given party impact the economy. Sometimes truth is inherently partisan.

As Normal Joe pointed out in the post you praised, “It is well documented that the “Libtards” [Peter N] so like[s] to denounce are the only ones that have reduced deficit spending over the past 30 years. The last one to do so did such a good job there was a real possibility that the national debt could have been erased.”

But when I say “Consider that in the post WW2 economy until the Great Recession, Presidents and Congresses of BOTH parties regularly reduced Debt/GDP with the exception of the administrations of just three Presidents: Reagan, Bush and Bush2.”, it’s the same truths, but you don’t listen to me.

Of course, I also liked the rest of Normal Joe’s post, which was also very very good. I guess if I have to be the bad cop that makes his post sound more reasonable, then so be it.

Reply

Peter N May 1, 2015 at 8:37 pm

“As Normal Joe pointed out in the post you praised, “It is well documented that the “Libtards” [Peter N] so like[s] to denounce are the only ones that have reduced deficit spending over the past 30 years. ”
Only by ignoring real problems like North Korea, Iran and Islamic terrorist.

Reply

Steven H May 1, 2015 at 9:15 pm

Yeah. Right. Except it was Bush2 who ignored Bin Laden that Clinton’s administration had been closely tracking, even though the spy agencies begged W to stay focussed. W’s foreign policy set us back decades. But that’s another topic.

Normal Joe May 2, 2015 at 9:12 am

Peter N, your opinion presuming ignorance by your loyal opposition is pure ideology, not fact. The two parties we have been relegated to serving, instead of them serving us, have historically approached problems in different ways. While conservatives chose to engage in overt mechanisms (big stick), liberals, on the other hand, engage in covert mechanisms (speak softly). Both are correct when the situation warrants it. Situational leadership a core competency of any entity, private or governmental. To infer that something is ignored when it is just approached differently comes off as superficial and divisive. You are entitled to your opinion, but to assert it as fact is a specious argument. How quickly we forget how the Clinton administration had Al Qaeda on the radar screen and the Bush administration just dropped the ball.

Steven H May 1, 2015 at 9:05 pm

I should clarify:
“All politicians are NOT equal, and it would help if we all came to agreement on which arguments are ridiculous, even when they come primarily from one party, or from both parties, or from ‘our’ side or the other side.”

As you even said Peter: “Agree with [Peter N] completely that the politicians (and the political system) are the problem but disagree that it is just “libtards” as [Peter N] put it. While they have a giant amount of self-serving fools in office, the right has some of the biggest fools of all.” I am just trying to call out the fools. Stop taking it personally when the shoe does not fit.

Reply

Peter May 2, 2015 at 5:44 am

Pointless…. You and I have different goals in the debate. I’m trying to think through the problem and explore solutions. You are trying to blame Republicans for the problem and fit the problem into a rhetoric and ideology. The last few posts are about as obvious as any.

Peter May 2, 2015 at 5:45 am

And the shoe doesn’t fit what?

Steven H May 5, 2015 at 9:26 am

Peter: How can you honestly be searching for solutions if you are not willing to critique the obviously ridiculous solutions and also apply a fair evaluation to proposed solutions?

You and I agree that taxation and regulation of big corporations will help reduce their outsized influence and raise needed revenue to pay down government deficits and debt. Yet you are unwilling to make such a statement about highest earners (way above your income scale) who obtain extraordinary shares of wealth and income from capital gains and “carried interest”. Why is that?

James May 5, 2015 at 2:44 pm

I don’t agree with that though – I don’t think that there is anything wrong with people earning “extraordinary” (subjective) shares of wealth and income through capital gains. And carried interest is only an issue for hedge fund managers, so not really the crux of the issue here. Just more politics. You refuse to ever point the finger as the “liberal” constituents – only attacking right wing policy and supporters. This is a much bigger problem.

Peter May 5, 2015 at 2:45 pm

Well said James….was just about to reply and you said it better than I was going to. :)

Peter May 5, 2015 at 3:04 pm

Along those same lines, I bet if I tried to tell you that there was a severe problem with our welfare system and it should be reformed, you would jump all over me. Is it possible that our flawed welfare program is more of a problem than hedge fund managers paying capital gains rates instead of income tax rates on fund gains? Is that even a possibility in your ideology?

Steven H May 7, 2015 at 2:55 pm

Peter,

Yes there is a problem in our welfare system. As in every economic venture of humans, there is inefficiency and fraud that can vbe rooted out. It is not unique to welfare or government programs, however. I have seen similar inefficiencies in big corporations.

In fact, one of my gripes about excessive income inequality is that it is a huge inefficiency in our system. Too much money goes where it does not improve the lives of the people it goes to in any meaningful way, and it is taken from people whom could really use it to improve their lives. It also damages the economy, removing money from the middle class who will spend it and stimulate the economy and giving it to the wealthy class who seek primarily to retain it for their heirs or spend on frivolities.

Aside from that, the biggest problem with our welfare system is that it is a constant reminder of the very income inequality which produces so much poverty and amplifies the need for government aid to the poor. The biggest reduction to food stamps and welfare spending would occur when we educate people to be skilled at the jobs that this country requires them to do, and pay a living wage for the jobs we require them to do. Even if it is serving us fast food or cleaning our hotel rooms. Raising minimum wage, and establishing a sane trade policy that restricts the unfair advantages of foreign countries that they obtain through currency manipulation and oppressive labor practices would be a good start. Free college for qualified candidates in needed fields of expertise would be another.

But do I believe “reform” should consist of privatization, block grants to states, or blanket budget cuts? No, because that is not reform. That is just spending cuts.

What reforms would you have in mind?

Peter May 8, 2015 at 5:35 am

Missing the point really….just saying there are much, much greater problems with our budget and Fed Govt’s role in the economy than whether hedge fund managers pay capital gains rates.

Steven H May 8, 2015 at 8:50 pm

“just saying there are much, much greater problems with our budget and Fed Govt’s role in the economy than whether hedge fund managers pay capital gains rates.”

No actually the very largest problem in out economy is income disparity and lack of economic growth which are tightly related. It also produces (or at least exacerbates) the very poverty that costs government so much money in food stamps and welfare. The economy is inefficient. You cannot fix ANYTHING in the economy without addressing income disparity.

It’s all tied together. Take money from the poor and middle class, and consumption is reduced, the economy slows, poverty increases, government spends to compensate for the increased poverty, taxes have to go up on the rich, they complain and take control, reducing taxes on themselves, cutting poverty programs, all amplifying the original problems.

We have to stop the cycle of insanity. High income disparity was disastrous in the late 1800s, in 1929, in 2000, in 2009, and now. We MUST fix it. Or nothing else will ever get fixed.

Steven H May 9, 2015 at 8:11 am

Peter,

I guess what I am saying is that I believe YOU are missing the point.

A business story may help. My wife worked of a while at one of those boutique exercise gyms for women. The business changed hands and the new owners promptly focussed on cutting costs to balance the costs and expenses. They stopped providing free water for customers, eliminated the refrigerator that kept the water cold, cut out the competitions and prizes that were used to motivate the exercisers. Basically an economic austerity program focussed strictly on cutting costs. The error in their assumptions was that membership would stay constant or even increase with such a policy. Customers left and failed to renew. New customers dwindled. The business failed.

Had they simply controlled costs, maintaining customer benefits, while focussing on increasing membership, they would have had a much higher probability of success, but they couldn’t see it.

Similarly, the focus on cutting welfare programs to reduce deficits misses the real need. Welfare costs will decrease if we improve our economy and reduce poverty; if we invest in our middle class which will grow markets and opportunities for businessmen; if we focus on reducing the high income disparity that makes our economy inefficient. If we just focus on cutting poverty relief programs, we just get more poverty and more costs down the road to alleviate its effects. And that model will fail.

Steven H May 10, 2015 at 6:41 am

James =========
I don’t think that there is anything wrong with people earning “extraordinary” (subjective) shares of wealth and income through capital gains.
==============
Of course you don’t. That is due to the inherent human ego that says what we do and long and strive for is the most important thing and cannot be overemphasized. A drummer in a band may think there cannot be too much drum, and the trumpet player thinks there cannot be too much trumpet. It takes a suppression of ego and an awareness of the contributions of all instruments to strike a successful balance.

The problem with people earning extraordinary wealth through capital gains or any other means is not due to what they receive, but due to what others do NOT receive as result. You can’t spend all your time focussing on the plight of the rich people whose taxes might increase (“punishing the successful”, so they claim) and ignore everyone else, and still get a balanced view of what needs to be done.

The repeated claim that what very rich people make has no impact on what you or what middle class people make is incorrect. We are all part of a system that allows and perpetuates high income disparity. CEOs, bankers, hedge fund managers, all make high incomes because a stystem has been put in place that allows almost all GDP gain each year to go to just 1% of the population. The system is clearly broken and must be fixed.

James May 11, 2015 at 11:22 am

What did others “not receive” due to Bill Gates and Steve Jobs’ accumulation of massive wealth and income? Your logic sounds good for politics, but doesn’t make any sense. Once again a lack of understanding of the economy. It is not a zero sum game.

Steven H May 12, 2015 at 5:21 pm

James,

1) A few business superstars do not represent the whole economy.
2) What did the heirs of Jobs and Gates do to earn their extraordinary fortunes? Wouldn’t that money be better served going to people who will build new businesses?
3) “Not a zero sum game” is a tired argument already addressed. It is also not a zero-gain loss. Just because business leaders and bankers help increase national profits a little does not make them deserving of nearly 100% of GDP increases.

Steven H May 12, 2015 at 5:23 pm

sorry – messed up my own term. It’s not a zero-loss gain. Meaning high incomes and wealth increases come partly from wealth creation but most often also from wealth accumulation of other people’s contribution.

oregonbowguy the May 2, 2015 at 7:38 pm

So…while it’s great that folks outside WA and Oregon talk about all the new jobs being created, the absolute FACT is employers cut 40 hour jobs to 30 hour jobs to avoid Obama care mandates. My son lost his 32 hours each month in a company that had 300 employees. Now they have over 425 employees and NOT ONE is full time.

Reply

Peter N May 3, 2015 at 8:33 am

I believe you.
So who do you blame?
The business owners or obama care?
Do you know how much it would cost that business to pay the $2000 fine or provide healthcare for that many people?

Reply

James May 4, 2015 at 2:03 pm

One of the most direct unintended results of the plan. As is typical – most of these behemoth government plans have unintended consequences or aren’t totally thought out as they should be because they are built by politicians.

Just imagine this – say your family of 5 “elected” me to run your household finances. What would I change once I got “in office”? I would try and improve your lives of course….maybe some productive things like better nutrition, education for your children, environmental quality, etc. Of course, all of this would cost you. But if I could structure it to where it didn’t really hurt you today – but maybe some point down the road….or if it didn’t hurt you particularly, but maybe your neighbors – you wouldn’t really mind, would you? First of all, it is unlikely you would even know. You would just be so happy that your life is so much better and that finally someone is running your household who cares about your needs.

Juxtapose this with someone who takes over your household, makes you eat smaller portions and cuts out junk food from your grocery budget, eliminates this expense and that and has you saving 20% of your pay each month. No chance that guy gets re-elected. Politics…..

Reply

Steven H May 5, 2015 at 9:18 am

Excellent point. I haven’t figured out why there has not been a push to implement the obvious solution: Charge businesses a proportional share of healthcare costs for hours below 30/week. If employee is 15/hr a week, business still pays half of what they would owe for 30 or 40 hr work week. This makes full time employees a bargain and removes the incentive to cut just below the step function threshold of 30 hours.

Step function thresholds are almost always a bad idea.

Reply

Peter N May 5, 2015 at 9:15 pm

“Excellent point. I haven’t figured out why there has not been a push to implement the obvious solution: Charge businesses a proportional share of healthcare costs for hours below 30/week.”
Well you are smarter than most libtards.

“Step function thresholds are almost always a bad idea.”
yep.

@OregonBowGuy. My company is in SW Washington. We have created 2 new jobs so far this year. We are about a 30 people company now. These jobs include healthcare and 401Ks. Mr OregonBowGuy I understand your concerns but you must ask yourself are the libtards really helping? The libtards have been in control of Detroit and Baltimore and see where that has got them. I am not a libtard. I create jobs and wealth for me, my company and my customers.

Now can you create jobs that pay the wages and benefits you think everyone deserves? No.

Reply

Steven H May 7, 2015 at 8:54 pm

Wow. A compliment from Peter N, backhanded though it may be. I’m glad that you agree with the suggestion.

Reply

Peter May 7, 2015 at 8:05 am

Steven H – “For the 100th time, I am asking, not for YOU to pay more taxes, but for you to stop supporting the flat tax on the 1%; meaning that it is in the best interest of you at the lower echelon of the 1% and all of us if there were additional tax brackets above your pay level”

Let me recap your points and see if I’m understanding….
– you are not asking those with under $1m in income to pay more taxes.
– taxes have already gone up enough for people under $1m in income.
– you want there to be a few higher brackets beyond the $1m barrier

I would love for you to – with actual numbers – give me a proposal here. What would the income tax rate be on income over $1m. Currently, those people are in the 39.6% tax bracket, but also have the 3.8% ACA tax on top of this. So they are at 43.4% currently. Where should we take this bracket? And please confirm that you are leaving those of us under $1m in income alone in your proposal.

Reply

Steven H May 8, 2015 at 9:17 pm

I would love to give you a proposal with actual numbers spreadsheeted out. That will take some time to put together. Here is the rough idea however.

The ACA tax of 3.8% is currently applied to “certain investment income” of joint filers with > $250K income. I assume this creates somewhat of a effective sliding tax bracket from 39.6% to 43.4% as percentage of “new” income consists of these applicable investment types. I’ll treat incomes of $40oK to $1M as being in a 43.4% bracket. I’d add new brackets approx as follows
$1M to $4M – 48%
$4M to $16M – 53%
$16M to $100M – 58%
$100M up, and corporations – tax incentives introduced to compel reinvestment in US companies, domestic hiring, living wage scales for employees, and investment in training and education.

Indeterminate areas that need refined plan:
Capital gains rates may need to increase on $1M plus earners.
Inheritance loopholes introduced in last 3 decades may need closing.
Carried interest rules need to be adjusted to account that this is really just wage income for many high earners like hedge fund managers.
Education funding from federal and state governments must be increased, and education costs must be better controlled.
Incentives should be devised to promote small business creation over corporate mergers and big corporation monopolism.

After the economy absorbs these changes, grows some more, and stabilizes, EVERYBODY’s tax rates go up 2% if needed to pay the bills. Thus top tax rate will be at effective 60%.

Other than the future projected 2% increase that everyone pays, you pay no more of a rate than now.

Detailed projections of such a plan are difficult. I am not the CBO. But I may be able to spreadsheet out some rough projections. Just realize that revenue from tax increases will not remove 100% of deficits by themselves. Economic growth will cover a large part when we get the economy back on a sound track.

Reply

Peter N May 9, 2015 at 8:30 pm

I would simply move to another country that is freer. The US is no longer the home of the free and the brave.
I am taxed at the highest rate.
I create wealth. I create jobs.
Why should I bother?
Tell me.
I am sure there are other places that would appreciate my skills more.

I like this guy
https://www.youtube.com/user/stefbot
He is more libertarian/pragmatic than conservative or libtard.
I think he is canadian.

Reply

Steven H May 9, 2015 at 8:40 pm

Well since I am not proposing taxing YOU at a higher rate, at least not right away, and 2% more of your income at some indeterminate future time is a pittance, I’m not really sure why you would move. As for the other uppermost earners, where would they go? Most first-world nations have higher tax rates than I propose on high income. 3rd world nations are not particularly safe. People always threaten to leave the US if rates go up, but its not all that likely. And frankly, we have other entrepreneurs who would love to take their place.

Reply

Steven H May 9, 2015 at 8:45 pm

And even if you are in the $1M club, Peter N, a 5% increase is hardly worth complaining about to live in the greatest country with the greatest opportunities. This country charged much higher tax rates for your relative income level in earlier decades and the country was plenty free and brave. It still is “free” for you. Why do you so object to freedom and prosperity being restored for everyone else?

Peter N May 9, 2015 at 9:05 pm

$1M, not quite yet but that isn’t the point. You are willing to kill the goose that lays the golden eggs.

There is even an exit tax where you pay taxes on wealth you have already paid taxes on. The US is not free.
http://www.forbes.com/sites/robertwood/2014/08/07/many-americans-renounce-citizenship-hitting-new-record/

Peter N May 9, 2015 at 9:40 pm

” we have other entrepreneurs who would love to take their place.”
If they could they would. It is a global economy so they would have to compete with me no matter where I was or where they are.

Peter May 11, 2015 at 10:34 am

Steven H – Let’s focus in on this….
$1M to $4M – 48%
$4M to $16M – 53%
$16M to $100M – 58%

There are about 140,000 people who fall in these brackets. Those 140,000 people currently pay slightly more than 16% of all income tax receipts. (more than the bottom 80% combined) This dollar figure is around $270 billion.

So – your brackets are basically increasing their income taxes between 5% and 15%. (just assuming all are at the 43% as you did in your example) Based on this scale, you would raise somewhere around $25-35 billion. And this is assuming that all of these people stay in the US. Many are types that could do their business anywhere in the world, so it is somewhat silly to think none of them relocate.

You said it yourself – this is already the greatest country with the greatest opportunities. Just not buying that taking more money from less than the most successful 150,000 people (who are already footing the bill for more than 80% of our country) to cut 20% off of our deficit is really a solution. Feels good politically though…..

Peter N May 12, 2015 at 12:59 am

“Well since I am not proposing taxing YOU at a higher rate, at least not right away, ”
You are a libtard. You simply don’t get it. You libtards have already raised my taxes to 43% and I don’t make $1M.
You think your taxes will only affect the very rich but they don’t. They affect small business owners too. These are main street people not wall street people.
You simply don’t get it. There isn’t enough money in taxing the 0.1%.
There will be a big financial disaster sooner or later. I will have no sympathy for the libtards rioting in the streets. They better not come my way.

Peter May 18, 2015 at 1:10 pm

And no reply to my post about the fact that he is talking about taxing only 140,000 people more to pay for all the spending.

Steven H May 12, 2015 at 6:58 pm

Peter N,

The “goose that lays the golden egg” is not the rich folks. It is the middle class, and they are the ones being hurt and that need saving.

Reply

Peter N May 17, 2015 at 8:42 pm

They, the workers, can only work with stones, knives and bear skins without capital.

The middle class need to save themselves. They need to be better than the machines and foreign workers. There is little hope.

Peter May 11, 2015 at 10:52 am

Steven H – since you like history so much and seem to long for the rates of the 1950’s and 60’s. Let’s examine that 1950’s 90% tax rate myth a little bit closer…..

– Did you know that from 1950 to 1963, income tax revenues were 7.5% of GDP – lower than during the Reagan Administration (when rates were being cut dramatically) and in any era since?

– The reality was, nobody was paying those egregious tax rates. There were only a few people in that bracket and there were TONS of loopholes at the time.

– The economy was very stagnant in the 1950’s – in spite of the dominant world position we had coming out of WW2. In fact, we had 3 recessions in that era.

Economic growth has a MUCH greater effect on the income tax receipt revenue the government receives than playing with the brackets. The 1950’s evidence shows this. The obvious solution here is to cut spending or at least minimize spending to things that help grow the economy. But that doesn’t work politically.

Also – did you see the recent study in the UK that determined that cutting the top tax bracket from 50% to 45% was revenue NEUTRAL? Basically, this is where revenue maximization tops out. Which is just about where we are today.

And don’t think for a minute that all that the current administration wants to do is tax the 140k people making over $1m. They know this doesn’t solve anything, so they will be forced to tax those between 250k and $1m as well. And THAT slows the economy for sure as these are high spenders, employers and small business owners.

Reply

Steven H May 16, 2015 at 9:48 am

Peter ==========
– Did you know that from 1950 to 1963, income tax revenues were 7.5% of GDP – lower than during the Reagan Administration (when rates were being cut dramatically) and in any era since?
===============
What source are you using?
usgovernmentrevenue.com indicates 1950 federal income tax revenue was 8.73% GDP but 1951-1963 all hovered from 10 to 13% GDP.
http://www.usgovernmentrevenue.com/revenue_chart_1950_2017USp_16s1li001mcn_F0f10f
You may be referring to INDIVIDUAL income tax revenue vs TOTAL income tax revenue (which includes corporate income tax). Individual federal income tax may have been closer to 7.5%.

Of course, this forces the question: Since revenue from corporate income tax has dropped, and there is continued pressure that corporate rates are too high, doesn’t individual income tax need to be increased more, to compensate? Or do we need to actually increase tax rates on the big corps? Or both?

Reply

Steven H May 16, 2015 at 9:52 am

Peter =======
– The reality was, nobody was paying those egregious tax rates. There were only a few people in that bracket and there were TONS of loopholes at the time.
============
No one paid the high rates because there was little incentive to pay anyone at the salaries that would put people in those high tax brackets. Thus suppressing high corporate wages and reducing inequality. Which is precisely the point.

IMHO, the primary function of high marginal tax rates on high wages is not to raise revenue from those high wages, but to prevent people from making those wages in the first place. Sounds like it worked.

Reply

Steven H May 16, 2015 at 10:10 am

Peter =====
– The economy was very stagnant in the 1950’s – in spite of the dominant world position we had coming out of WW2. In fact, we had 3 recessions in that era.
=========
Real per capita GDP growth in 1950s averaged just slightly under 2% annually vs just slightly over 2% for 70’s, 80’s, 90’s. Only the 1960’s stand out as remarkable with average annual GDP growth of about 3.5%. So despite the small recessions and fluctuations in the post WW2 economy, 1950’s were no more “stagnant” than most decades since, including the Reagan and Clinton years.

See first chart. (Ignore the text. It has lots of adjectives and you seem to dislike those.)
http://www.motherjones.com/kevin-drum/2011/01/myth-slow-growth-revisited

Reply

Peter May 18, 2015 at 12:03 pm

If the economy was so strong in the 50’s, then I find it odd that JFK ran in 1960 on a mantra of “getting the country moving again”. And by the way – once in office, he then lowered taxes.

Reply

Peter May 12, 2015 at 8:15 am

Here’s a thought we haven’t explored…..

What if we didn’t tax income anymore? Or at very least went to a flat 10% tax or something like that. Then, we jack up taxes on earnings from capital – capital gains, dividends, rental income, interest, etc.

Would be curious to hear from some of the more economically astute posters in here about what impact they think this would have. This would certainly hit the wealthy much harder than the poor.

The question is, would this discourage savings? Savings and investing are the key to our public being able to take care of themselves. The lack of it is why so many people are in such poor financial shape. However, more spending is good for the economy, which does create more jobs. Food for thought…..

Reply

Ken May 14, 2015 at 7:02 am

Interestingly, I had been thinking something similar, but not about the 1950s versus today. My thought was more about what has gone on in the last three or four decades, as it relates to who is paying what portion of the federal tax bill.

So I went out and did some research. The purpose of the research was to verify, or challenge, the claim that the top 1% are paying less of the nation’s federal tax bill now than they did 30 or 40 years ago. This assertion has been made numerous times, along with the allegation that tax laws have been rigged to favor the 1% over that time period. Yet no compelling evidence has ever been offered to prove these claims. At least not in my mind there has been not been compelling evidence.

So I thought that in order to make a judgment, I would need to look at two things: 1) the percentage of the nation’s federal income tax bill paid by households in the top 1% over the past several decades, and 2) what the effective federal tax rate was for taxpayers in all tax brackets, including the 1%, in those decades.

To answer the first question I found this website from the National Taxpayers Union. http://www.ntu.org/foundation/page/who-pays-income-taxes For some reason its data includes years 1980 through 2012, but stops at 2012. Not sure why. Anyway, I think this website clearly shows that the answer to question #1 is that the top 1% have steadily borne more and more of the federal tax burden over the past three and a half decades. So if there is rigging of tax laws going on to favor the 1%, the rigging doesn’t seem to be working. Whether the share of tax burden borne by the 1% is “enough” or not is, I think, the substance of the ongoing debate in these threads.

To answer the second question, I found this website from the Tax Policy Center http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456 . It shows that the top 1% are being taxed less at the federal level, as a percentage of their incomes, in 2011 than they were in 1979. The top 1% paid an effective federal tax rate of 35% in 1979 versus an effective rate of 29% in 2011. But it also shows that ALL taxpayers are paying less in 2011 as a percentage of their income than they were in 1979. In 1979 the lowest quintile, for example, paid an average of 7.5% tax rate, while in 2011 they paid an effective rate of 1.9%. And that’s true across the board for all income levels. So everybody’s taxes went down between 1979 and 2011, at least on a tax percentage basis.

So at this point I am leaning in the direction that the 1% are not soaking the rest of the country, nor rigging the system to get away with scandalously low tax rates. In fact, it seems they are shouldering more of the burden of the federal system than they were 36 years ago, albeit at lower rates than 36 years ago.

Thoughts?

Reply

Ken May 14, 2015 at 7:12 am

Looks like I clicked on the wrong “Reply” button. My previous post is in response to Peter’s previous post re: 1950s taxation vs. today.

Reply

Peter May 14, 2015 at 8:31 am

Don’t see your reply anywhere. ??

Reply

Peter May 14, 2015 at 10:14 am

Oh there it is…haha

Ken May 14, 2015 at 11:56 am

It was “awaiting moderation” for a long time due to its length, I think, but the follow up comment of mine was short so that got posted first.

JTM May 15, 2015 at 3:31 pm

Been gone a while as I hadn’t been receiving updates until a bunch flooded my mailbox yesterday and kind of forgot about it.

At first blush, my question is why have we cut taxes so dramatically that we now owe Trillions with no end in sight? We are only crippling our future. Also, why are many wealthy continuing to fight to lower taxes even more, often using the argument that taxes have been raised dramatically on them? This seems to refute their reasoning, and while I’ll give that some rates have been raised, it’s only on portions of income.

This all seems to point to the debt problem being at least equally a revenue as a spending problem. The debt problem is what scares me the most as the debt service will soon start to overwhelm all discretionary spending.

Obviously not likely, if we act soon social security can become less of a problem without dramatically hurting anyone as small changes can make big differences while we still have decades. This problem is also somewhat temporary as the boomers die out and the millennials become the next boom. Medicare is in more dire straights, but changes will be less dramatic the sooner they are implemented. One thing that seems to often be overlooked (on purpose by some) is that changes don’t have to come from increased costs or decreased service, both of the programs have huge overhead/running costs. I’ve never heard of any real discussion on controlling those parts of the equation, why is that?

Personally, I feel the problem is too big to grow our way out of. I don’t see a way out without raising taxes in some way, be it raising/eliminating the taxable limit for FICA, raising the retirement age, charging higher rates for medicare to the wealthy, or something else. Too many people have paid in expecting these programs to be there when they retire that pulling the rug out from under them would likely cause more harm to the economy than raising taxes.

Reply

Peter May 15, 2015 at 7:00 pm

Great points JTM. Well put. I think we don’t talk about those things because of politics. Reforming social security with slight changes or cutting fat from the budget, making things more efficient, etc aren’t headline grabbers and vote getters. I totally agree….pretty soon it won’t be an issue as the debt problem will swallow all discretionary spending whole.

Reply

Steven H May 16, 2015 at 4:04 pm

Nice post, JTM. It does seem like raising the retirement eligibility age for Medicare and Social Security would stabilize costs on those programs, but i wonder how the business community will react to the extra years THEY are then expected to pay for their older employees health care and continued employment. Will it motivate more firings of employees in their 60’s? What will happen to people in the gap? Will it end up costing even more for government to have to pick up costs for care of people that fall in the gap?nIt just makes me think even more strongly that universal health care along the lines of the Canadian model is a better way to go. It has saved costs and kept the Canadians quite happy.

Reply

Peter May 16, 2015 at 7:45 pm

Wait…..have to chime in here. Canadians from what I hear by and large HATE the health care system there.

Steven H May 16, 2015 at 8:44 pm

Peter, it is a myth, propagated by conservative politicos this side of the US border, that Canadians hate their healthcare. From a 2012 poll of Canadians:
The online survey of 2,207 respondents by Leger Marketing found universal health care was almost universally loved, with 94 per cent calling it an important source of collective pride – including 74 per cent who called it “very important.”

Look here for more info.
http://www.marketwatch.com/story/myths-about-canada-us-health-care-debunked-2012-08-09

Steven H May 16, 2015 at 8:45 pm
Peter May 17, 2015 at 6:12 am

I don’t read conservative media stuff (or really any political media) – I was just going off of anecdotal stories from friends and clients that live in Canada.

Things like epidurals being “extra” when having a baby…..two aspirin are included. Or another friend who broke their ankle ice skating and waited 10 hours in the ER. But I stand corrected…..the poll must be correct.

Steven H May 17, 2015 at 1:25 pm

Peter,
While I believe you when you say that you don’t read political information and that your information comes from Canadian clients, I still have to point out how effective the political propaganda and whisper campaigns have been at getting out bad information. On this topic and many others, outright lies are spread initially through political channels and then to the conversations of like-minded people everywhere. When people hear the same misinformation repeatedly, it begins to seem true.

I know I have heard how bad the Canadian healthcare system from all over … except when I look up actual Canadian polls and writers and users of the system, and then I find that it’s popularity is overwhelming. It’s not perfect, of course. What is?

Just out of curiosity, I looked up the epidural thing, and found this article and these posts in comments:

“Louise
November 23, 2009
I live in Canada, in Alberta actually. I have had both my children here and I work for myself so I don’t have ’employer’ benefits. I had a private room both times with my own bathroom and shower. I had a great view from the window that was the size of the entire wall and my child slept in the same room with me. There was also another bed brought into my room for my husband to sleep on. We were fed all the proper meals, given the pads, creams and diapers. I had an epidural with my first and equal care with my second…at the end of the journey…I went home without a single cent out of my pocket for my care nor my childs.”

“mommyingaround
October 7, 2009
We had our baby in Vancouver, BC – well specifically at the Burnaby hospital and we didn’t have to bring anything. Everything was provided for us such as newborn diapers, wash cloths, towels, ice packs, pads, breast cream, pills, food… everything! And when we left, they allowed us to take extra supplies home such as ready to feed formula, syringes so we didn’t have to go shop for it right away. Our private insurance paid for the semi-private room and we had no bills in the end. We stayed for 3 1/2 days. Everything was covered and the service was awesome! I was so grateful and think everyone having a baby should have that kind of care and not worry about paying more bills.”

http://www.assertagirl.com/2009/10/07/giving-birth-in-a-canadian-hospital/

Peter May 17, 2015 at 4:14 pm

Great to hear. Now I know.

Peter N May 17, 2015 at 9:02 pm
Ken May 18, 2015 at 5:35 am

I had an interesting interaction with a few Canadians a few years ago about their health insurance, too. Again, this will be anecdotal evidence, but I think it’s interesting to note….

Like many others I remain skeptical that their health insurance system is as good as ours, mainly due to long wait time for routine services.

So some Canadian employees of our company were here in the US on business, and I had a chance to talk to two of them, both women. So I asked an open-ended question about their health insurance system, what do they think of their health insurance system?

To my surprise, both were very positive about it. So I pressed a little further and asked about wait times for services. They both said they never had to wait excessively long, and were surprised that Americans have that perception.

Now, those were just two people, but again both were positive about the system. I still wonder to this day, however, why it is that so many people come to the US rather than going to Canada to have complex, high-risk surgeries performed.

Peter May 18, 2015 at 5:43 am

And in no way should it be suggested that a universal health care system is bad for a people anyhow. Even if there are wait times and inefficiencies.

Steven H May 15, 2015 at 3:53 pm

I have long contended that “the percentage of total taxes paid by the rich” is the wrong statistic to evaluate, and is rather deceptive. Yet it keep getting repeated as if it has meaning.

Consider the following hypothetical, which is roughly based on stats comparing 1979 to 2011. Let’s say the richest 1% more than doubles their share of all income from 10% of all national income to 24% (this includes capital gains and differs from some other charts that exclude them). Simultaneously, their effective tax rate (the percentage of their own income that they pay in taxes) drops from 35% to 29%. The total effective tax rate of the total population drops from 22% to 18% in that same time period. So who wins and loses?

You have to spreadsheet this all out to solve the percentages but here are results:

a: Income shares of: (Everyone, Upper 1%, Lower 99%)
1979: 100%, 10%, 90%
2011: 100%, 24%, 76%

b: Effective rates of (Everyone, Upper 1%, Lower 99%)
1979: 22%, 25%, 20.6%
2011: 18%, 29%, 14.5%

c: Percentage of all income paid as tax by (Everyone, Upper 1%, Lower 99%)
(product of (a) and (b))
1979: 22%, 3.5%, 18.5%
2011: 18%, 7%, 11%

d: Percentage of all taxes paid by: (Everyone, Upper 1%, Lower 99%)
((c) x 100/22 for 1979 or x 100/18 for 2011)
1979: 100%, 16%, 84%
2011: 100%, 39%, 61%

So, since the upper 1% went from paying 16% of all taxes in 1979, to 39% of all taxes, they are getting a raw deal, right? Wrong!!

e: Let’s calculate post-tax income as share of all income: (all, 1%, 99%)
(a)-(c)
1979: 78%, 6.5%, 71.5%
2011: 82%, 17%, 65%

So post-tax income shares went up from 6.5% to 17% (a relative increase of 162%) for the upper 1% and it went down from 71.5% to 65% (a relative decrease of 9%) for the lower 99%.

It’s as if (using similar ratios to above) 100 guys together make a million dollars, and 1 guy has 10% of that or $100K, but has to pay 35% in taxes or $35K. A few years later, the one guy manges to get $240K of the million dollars and has to pay taxes of 29% of the income which is about $70K in taxes. He then complains because his tax bill doubled and his percentage share of taxes also went up!!!! But he is clearly the winner because his pre and post-tax income more than doubled at everyone else’s expense!!!

Clearly, the “we paid a higher percentage of all taxes” argument is a complete canard. Who cares what you have to pay in taxes if your share of pre and post tax income more than doubles? Their share of taxes doubled becuse their share of income MORE than doubled.

Reply

Steven H May 15, 2015 at 3:55 pm

Typo correction
b: Effective rates of (Everyone, Upper 1%, Lower 99%)
1979: 22%, 35%, 20.6%
2011: 18%, 29%, 14.5%

Reply

Peter May 15, 2015 at 7:02 pm

This is so silly. If you can constantly twist stats and use things like “debt as a percentage of GDP” as some sort of valid measure and make up things like “zero loss gain” that isn’t even a real thing, how can you be the stats police for this forum? Seriously. ….

Steven H May 16, 2015 at 8:08 am

I’m not twisting stats and it is not silly. It’s mathematically obvious to anyone who can use a 4 function calculator, that even with a flat income tax rate, if you double your share of national income, you will naturally double your share of national taxes paid. To act like it is some sort of burden on the rich for that to occur is the really ridiculous thing. And yet it gets quoted over and over and over.

The crazy thing is that effective income tax rate on the rich DROPPED 6 points (to just 83% of what they would have paid with steady effective rate) while their income share more than doubled from 1979 to 2011. Explain to me again how this is worthy of complaint.

There is no validity to complaining about a rising percentage of taxes paid by the rich when almost all of the growth in national income goes to the upper 1%. It’s just crazy.

As for the continued complaints about using comparisons to GDP, go read an economy text, or talk to an economist. Stop complaining to me about your dispute of a universally referenced economic measure. GDP is proportional to the national income and it measures a very real tangible thing. When the country has more national income, it can afford to spend more on infrastructure and programs to help and promote the community. That is why spending and revenue and debt as a percentage of GDP are relevant measures. Your complaint against that measure is political and ideological and not economic.

Steven H May 16, 2015 at 8:20 am

As for “zero loss gain”, that is just as real a concept as “zero sum game”. In case you missed the earlier post where it was explained:

“Zero sum game” is a game where every gain by one person is balanced by a loss by someone else. Economies re said to not be a zero sum game, because inventions, processes, and businesses can create efficiencies that increase the overall wealth in the game, such that gains by one person do not necessarily indicate losses by someone else.

“Zero loss gain” is the idea that gains by one person NEVER mean a loss to someone else. It is used to imply that all gains by some players in a game have zero impact to any one else in the game. It is also used to suggest that rich people create all of their wealth and income with their own efforts and that any losses by other people are due solely to their own failures.

Rich people often proclaim “It’s not a zero sum game, you know”, which is true, but what they are usually trying to convey is that “it’s a zero-loss gain”, which is NOT true.

Steven H May 16, 2015 at 8:35 am

Peter,
So explain to me how anything I stated in my statistical post was “twisted”. I worked hard to make it mathematically robust and am offended that you dismiss it, seemingly due to your objections to its conclusion and not its argument.

James May 17, 2015 at 9:50 pm

Dude – you are just going round and round here. Think there has been ample rebuttals of your core ideas which are so extreme and politically motivated. Just read back. Statements like “rich people create all wealth with efforts and all losses by others due to their own failures” is a straw man argument. Neither Peter, Ken or even Peter N has suggested that ALL is caused by this. Are there any OTHER people who think like Steven H who can offer a more sensible argument without made-up economic terms and convenient statistics and polls? Where are the liberals who think for themselves? I would love to hear their point of view…..seriously

Peter May 18, 2015 at 8:23 am

—-As for “zero loss gain”, that is just as real a concept as “zero sum game”—–

Actually, no it is not. The zero sum game is an actual mathematical theory – and one that no rational economist believes that economies work in this construct. If that were the case, the “pie” would never grow.

The zero loss gain is a theory pioneered by an individual in a comment section on the internet. It is made up. It makes no sense. It doesn’t exist.

Can you just admit that you think the economy is a zero-sum game? Please?

Ken May 18, 2015 at 6:01 am

“….It’s as if (using similar ratios to above) 100 guys together make a million dollars, and 1 guy has 10% of that or $100K, but has to pay 35% in taxes or $35K. A few years later, the one guy manages to get $240K of the million dollars and has to pay taxes of 29% of the income which is about $70K in taxes. He then complains because his tax bill doubled and his percentage share of taxes also went up!!!! But he is clearly the winner because his pre and post-tax income more than doubled at everyone else’s expense!!!……”

OK, so here we go, Steven. You’ve gone to some lengths in previous posts to say that you agree that income is not a zero sum game, yet this example is a zero sum game, is it not? And by providing this as the example, does it not show that you really think income is in fact a zero sum game? Well, whatever. I don’t want to get all legalistic. It’s could be just an analogy for illustrative purposes.

So setting that aside for the moment, I have what I think is a better analogy of the federal tax system. Many have probably heard this analogy before, but I have my own twist to it at the end….

Suppose that every day ten men go out for lunch and the tab for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
All for the same meal.

So, that’s what they decided to do. The ten men ate lunch every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. He said, “Since you are all such good customers, I’m going to reduce the cost of your daily lunches by $20. Food for the ten will now cost just $80.”

The group still wanted to pay their bill the same way we pay our taxes, so the first four men were unaffected. They would still eat for free. But what about the other six men — the actual ‘paying’ customers? How could they divide the $20 windfall so that everyone would get his “fair share”? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being “paid” to eat his lunch. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same formula based on what was paid, and he proceeded to work out the amounts each should pay!

And so: The first four continued to eat lunch for free (no change)
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $50 instead of $59 (15% savings).

Each of the six who had been paying was now better off than before, and they all still ate the same meal. But once outside the restaurant, the men began to compare their savings. “I only got a dollar back out of the $20 savings,” declared the sixth man. He pointed to the tenth man, “but he got $9″! “Yeah, that’s right,’ exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got back nine times more than I!” “That’s true!!”shouted the seventh man. “Why should he get $9 back when I got only $2? The wealthy get all the breaks!” “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. This payment system exploits the poor!”

So the nine men surrounded the tenth guy and beat him up. The next day the tenth man didn’t show up for lunch. He moved to the Cayman Islands where he ate lunch for free the rest of his life. The other nine men sat down and ate without him at their same old restaurant. When it came time to pay the bill, however, they discovered something interesting. Between them all they didn’t even have enough money to pay half the bill!

And that, in my mind, is a much better analogy of how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much or attack them for being wealthy and they might not show up to eat any more. In fact, they could start eating lunch some other place, or some other country, where the atmosphere is friendlier.

So I guess what I would say in all of this is that my original point was about who pays what of the federal tax bill. While I understand your point that wealthier people can afford more, that doesn’t erase the fact that they are paying everyone else’s way. I also don’t agree that wealthy people become wealthy by taking money from the poor.

Reply

Ken May 18, 2015 at 6:03 am

p.s. I also don’t believe that the income pie is a fixed size.

Peter May 18, 2015 at 8:14 am

I don’t think there is any proof whatsoever in academic and economic research that the wealthy are becoming wealthy by taking money from the poor. (this would imply a zero sum game) Steven H clearly believes this to be the case – as evidenced earlier by the comment that Jobs and Gates’ money might be ‘better served going to those that might start a business’ (i.e. the middle class). He clearly believes that the more money Bill Gates or anyone of means makes, the less there is to go around for everyone else. And he believes policy – mainly income tax law changes – can change this. He also doesn’t put weight in the possibility that higher tax rates on the wealthy might:

a) slow economic growth
b) cause some wealthy individuals to operate in other countries
c) increase unemployment

I categorically disagree.

Ken, you have stated this to Steven H many times before – and although he denies it, he clearly believes that the economy is a zero sum game. He tries to get around it by using some made-up philosophy of a zero-loss gain, but at the heart of it he believes that the …. and I quote…. “lower tax rates on the rich enabled high income disparity” and that this disparity isn’t FAIR. The interesting concept is that I think he believes that if we had much higher rates on the rich in the past 10-20 years that we would have had the same economic growth but a more even income curve. Somehow the cashiers at WalMart would be making more money and the CEO’s would be making less. There is no sound economic evidence to show that this would have indeed been the case.

Ken May 18, 2015 at 11:41 am

I think the point Steven is trying to make is that non-owners help create profits, yet don’t share in company profitably beyond their level of contracted salary. And there is a point to that. Without rank and file workers, some level of profitability would not happen. Profits would surely be lower.

I think the missing piece in Steven’s view, however, is the risk-reward equation. Owners participate in profitably because owners take the downside risk of failure. They risk bankruptcy, for example, if the business fails. They risk not being able to meet payroll and having to take out short-term loans. More generally they take on all the risk of owning and managing the business.

Non-owners avoid the downside risk of ownership and the downside risk of failure, trading their labor for a fixed income via an employment contract. In other words they do not have an ownership interest in the business. But by avoiding downside risk, non-owners forego their opportunity to participate in upside profits. At least under the capitalist system they do. Their compensation instead is limited to their salary as reflected in their employment contract because they are not owners, and do not take the risks that command those kinds of rewards. That’s it.

Stated another way, I think Steven’s main objection is to the capitalist system in general, and the risk-reward structure. I think this is the crux of the matter.

Peter May 18, 2015 at 11:55 am

OK – thanks for the reply, Ken …. but isn’t your example more true of small business? To play devil’s advocate, his beef is probably better aimed at corporate CEO’s vs. the rank and file employees. While a CEO definitely shares in the risk/reward equation through bonuses, stock options and general job security – they don’t risk bankruptcy or not being able to meet payroll.

That gets to your point about Steven H being against capitalism. I have tried to have the debate in the context you just described – with small business owners and risk/reward systems. And several of us SBO’s on here have shared how we manage our cash flow and pay our employees, which hopefully opened his eyes that at least in the small business spectrum, capitalism isn’t as evil as he might have read or heard. He eventually somewhat backed off of small business owners being the real “problem” in income disparity.

Most of his issues have to do with people not being paid “what they deserve” or “what they are worth”, which lies in the fundamentals of capitalism. How would you argue that a CEO’s pay being 10’s of millions of dollars vs. the regional supervisor getting $50k being OK? And does taxing the CEO more change ANYTHING?

JTM May 18, 2015 at 2:36 pm

Problem is, with the government it’s more like the owner is saying he’ll offer a line of credit that needs to be eventually paid off. Those at the top get an increasingly larger piece of pie. If the economic pie doesn’t grow big enough, fast enough, when this line comes due it will disproportionately effect the lower income levels who are less able to handle a cut in spendable income. At the same time, the wealthy will wag their finger and say “we told you so”, though the problem originated with many of them either saying they pay too much taxes or others get to much (much like the poor in your story complaining the wealthy get too much).

There is a balance that must be made. We are far from it. There are good arguments for the wealthy, yet they ignore that there are equally good arguments from the poor. When the vast majority of our current spending comes from SS, Medicare and Defense with interest soon to overwhelm, where do you make cuts/tax increases? That is reality. We have to start making hard choices as the future deficits portend to dwarf any spending you label as waste.

I’m sorry Peter N, but there are going to have to be some hurt for the wealthy as there will for the rest of us, we are not the leaches you are looking for. The lower 50% (43% as of 2013 don’t pay federal, the number is shrinking as the economy gets better) may not pay much in income taxes but they do pay many other taxes and are a large part of the economy. Everyone who works in that lower half pays FICA, which comes to as high a percent as many wealthy individuals/corporations. They are contributing to where the vast majority of spending goes, yet you would give them no credit for that.

JTM May 18, 2015 at 3:23 pm

The major issue with this analogy is that it’s quite simply not true. Federal income taxes are NOT the only source of income, they are only 42% of the federal pie, FICA covers another 40% and this is overwhelmingly paid by not in the upper echelons of income both because there is a cap and because many upper income people have earnings that are not taxed by FICA.

Ken May 19, 2015 at 5:11 am

Actually, JTM, I think the analogy mostly holds true.

First, the 42% part holds true in its entirety.

Secondly….the part about 40% of revenue coming from FICA…. You’re right that the percentages don’t hold entirely true as per the lunch analogy. However, they still hold mostly true.

I think you’ll agree that the big guys always pay the maximum in FICA taxes, whereas the guy earning the average salary of ~$38,000/year pays about one third of that.

Now, if you compare on a percentage basis of salary, the little guy is paying a higher percentage of his salary for FICA vis a vis the big guy, which I think was your point. And yes, the percentages represented in the analogy were only for federal income taxes, not federal income taxes plus payroll taxes.

However, the analogy was about who pays what percentage of the entire federal tax bill, not who pays what percentage of their own salary in FICA taxes. Further,, if you look at who pays what of just the FICA portion of the bill, the big guy still pays on average three times as much as the little guy. So the analogy generally holds true, just not at the same percentages as for federal income taxes.

Finally, I’m not sure how the portion of the big guy’s income not subject to FICA is relevant to the conversation. Again, the analogy was about who pays what portion of the total tax bill, not who gets away with not paying FICA on portions of their income.

Moving on, I actually agree that FICA limits probably can and should be raised. For most of us, I think that makes intuitive sense. But that also assumes that the feds would handle the additional revenue stream appropriately. To say the least, I am skeptical about this part of the equation. The federal government’s track record on handling our money is not good.

JTM May 19, 2015 at 2:28 pm

Ken – Fine, yes, strike my second statement. It just gets a bit irksome when people say 40-50% don’t pay income taxes because they generally conflate that to no taxes at all which is terribly not true. Also, many of those who don’t pay any taxes are retired and already paid for decades. They are not the bottom feeders many on the right claim them to be. Stories like yours and statements like Romney’s 47% statement put down the many retirees that paid taxes for decades and many of which are Republican.

What do you have to say about my first response?

Ken May 19, 2015 at 5:17 pm

JTM — I would say that the reason our national debt is so high and so out of control is because the federal government consistently overspent (and related to that, over-promised benefits), and either mismanaged or was outright dishonest with the money with which they were entrusted on the public’s behalf.

I would say that the cause for most of the problems lie in what I said a few pages back, which is that there are a lot of short term political benefits to overspending (re-election being one of them), and that there are few political benefits for making the hard choices needed for long-term financial health.

I’ll pick Social Security as my poster child example. Back when first proposed, the public was told that the money taken from their paychecks would go into a special account with their name on it. As we now know, only half of that statement was true. People did get an account with their name on it. The money part? Well… big shocker here…. that disappeared pretty quickly, replaced by IOUs. Lots of reasons for why the system started going bankrupt, but most of it had to do with over-promising of benefits (overspending), and mismanagement of funds (ineptitude).

I would say that, more generally, when 60% of the country is receiving some form of government assistance, something is desperately wrong. There are too many people in the cart, and not enough people pulling the cart. For example, it used to be that back in the beginning of SS, there was a 16:1 ratio of workers to SS beneficiaries. Taxes were the lesser of 1% of your income, or $1000. Now there is a 3:1 ratio, moving towards a 2:1 ratio, and you know what the numbers are for tax rates..

Anyway…. I agree that the country is in deep financial trouble. I see it mostly as a spending and mismanagement problem. But that is neither here nor there. Political nitwits past and present got us here, and now we need to make some hard choices before things come crashing down. Unfortunately, nobody so far has been willing to do that. And when hard choices are offered, such as reductions in benefits, all the usual political interest groups come out squawking, and the politicians do nothing.

Peter May 20, 2015 at 6:51 am

Ken – Very well said. I completely agree and could not have worded it better myself. The problem on the spending side is due to overpromising and short-term gratification like you mentioned.

But there is one additional problem inherent in government with how it is run. I see here in the DC area situations where a Federal agency has “money to spend” before the fiscal year is out – since it is in their budget – and they scramble finding “something to do with it”. Nobody would manage their personal budget this way – nor would a corporation do this. Both would simply save the money for later use. The government budgets don’t often operate this way – if they don’t use all of the money, then they will be susceptible to losing the same allowance the next year. The system is built for waste, which makes it so inefficient and results in SS, Medicare, etc. (and soon to be ACA) such a mess.

The spending side is so flawed – and on the revenue side you have “too few people pulling the cart” as you mentioned. When looking at this total equation, this is why I find it foolish to blame the “few people” that are pulling the cart for being the primary problem. I also think it is crazy to blame those on government assistance or struggling in poverty. The problems lie in our own government officials, the system of spending itself and the irresponsible short-sighted behavior of our leaders. There must be some movement to have visionary business-types get involved in government and right the ship before it all blows up in our faces.

Steven H May 16, 2015 at 3:31 pm

So, Ken, to condense my response:
1) People believe the richest 1%, 0.1% and 0.01% are soaking the rest of the country, not primarily because of lower tax rates on the rich, but because of the income dollars shifted from middle class to wealthy, and the high proportion of new national income that is redirected to those uppermost tiers. The lower tax rates on the rich ENABLED high income disparity, and that is why most of us object to them.
2) The percentage of taxes paid by the rich increased because the percentage share of income of the rich increased. This is not a burden on the rich but a natural consequence of the rich getting a much larger share of the pie.

Reply

Peter N May 17, 2015 at 9:20 pm

“) People believe the richest 1%, 0.1% and 0.01% are soaking the rest of the country, not primarily because of lower tax rates on the rich”
Libtard lies. I pay heavy taxes. Half the people pay little or nothing.

” but because of the income dollars shifted from middle class to wealthy,”
Because the most of the wealth is produced by knowledge or machines.

Reply

Peter May 18, 2015 at 8:17 am

As insane as it is to some that there is high income disparity or wealth disparity….it is also insane to many that half of our country pay little or nothing in taxes. Both “complaints” have validity.

Reply

Steven H May 18, 2015 at 4:30 pm

Let’s make a deal.
I double your income for the same work and double your taxes. Is that a great deal? Will you appreciate the windfall, or will you complain about the tax increase.

Let’s make another deal.
I drop your effective federal income tax rate from 4% to zero, and your effective total federal tax rate from 14% to 7%, but to get this deal you have give up 20% of your income. And by the way, you don’t get a choice in the deal, but you do get to choose how you feel about it. Do you rejoice in the fact you pay less taxes or do you feel cheated that you were forced to give up more salary than the tax savings? Do you think it’s fair that the same people who received the windfall of your lost income now deride you for not paying a federal income tax?

Reply

Steven H May 18, 2015 at 4:18 pm

The “half pay no taxes” argument is weak.
1) The lower 90% are effectively paying a 20% “tax” of lost income due to that income being shifted to the 1%. If they were given their due in wages, I’m sure they would be happy to pay more in federal income taxes.
2) The federal income tax is not the only tax. Even the workers in the lowest quintile pays 20% of their income in some sort of local, state or federal tax (in addition to the lost wages “tax”). So pretending that they do not contribute to government and society is not true.

Reply

Steven H May 18, 2015 at 4:20 pm

“Because the most of the wealth is produced by knowledge or machines”
You left out political bullying and economic manipulation.

Reply

JTM May 19, 2015 at 4:19 pm

Peter N – While asking Steven to cut his Libtard lies, you should refrain from your Conservi-dunce lies as well. Half the people pay little or nothing IN FEDERAL INCOME TAXES. Which ignores the fact that a very large percent of this number is retirees, that the number of non-retirees in your scope has been dropping fast and that these same “dead-beats” pay plenty of other taxes.

“Because the most of the wealth is produced by knowledge or machines.” -Well, sure, but where would we be without the peons being able to spend on the junk put forth by those who own knowledge and machines? or the workers they continue to want to push down wages on? Whether you want to admit it or not, trickle down doesn’t work, our economy is built on lower levels being able to buy which creates profit for those higher up. Investment depends on having customers, investment doesn’t create customers. No customers means no investment.

Also, while you complain about federal income taxes, the reality is they are historically low with recent tax cuts such as those by Bush being paid for with increased debt not decreasing spending (yes, I understand there have been some minor increases on certain income, let’s just put a hold on that for a moment). We need to curb the deficits and due to increasing spending on interest, SS and medicare which are required spending, these deficits will be almost impossible to cut significantly without increasing tax rates or cutting SS, Medicare and Defense.

How do you propose the US government give you your “much needed” tax relief without dramatically hurting the rest of the economy or further increasing the debt?

Reply

Steven H May 18, 2015 at 4:42 pm

Ken,
1) Thanks for attempting to express my side of the argument.
2) Yes the “fixed pie” in my example was illustrative and for simplification. I don’t believe the economy is fixed and I am well aware that the economy grows on a real per capita basis. . How could I quote all the statistics I express here and not recognize that?

Reply

Steven H May 18, 2015 at 5:07 pm

Ken (continued),
===============
I think the point Steven is trying to make is that non-owners help create profits, yet don’t share in company profitably beyond their level of contracted salary. And there is a point to that. Without rank and file workers, some level of profitability would not happen. Profits would surely be lower.
===============
Correct, that is part of my point.

===========
I think the missing piece in Steven’s view, however, is the risk-reward equation. Owners participate in profitably because owners take the downside risk of failure. … More generally they take on all the risk of owning and managing the business.
============
I am aware of the risk/reward equation and it was the basis of an earlier discussion you and I had. I queried whether it is possible for entrepreneurs to be either under-paid or over-paid for a given level of risk. I believe it is possible for either to occur. So my contention is that entrepreneurs and business owners need a suitable reward for risk, but that the current reward is excessive.

Market forces are not perfect at assessing reward, although they do a good job of “sorting” reward; i.e. generally (but not always) those who work harder and/or have the more valuable skill get paid more. But the slope of how MUCH more is subject to political and social manipulation. That seems pretty obvious. And that is where I have a dispute with the current risk/reward equation.

==============
More generally they take on all the risk of owning and managing the business.
==============
Do business owners really take on ALL of the risk? I’m a parent. I invest in my children, in their moral training, in their education, in their health, in their attitudes and manners. I put a huge investment in time and money and preparing them for life. Additionally, they put a huge amount of their own effort in those same ventures. There is huge risk in all of that effort. If my children start their own business, they will take another type of risk. But if they seek to work for an employer, they also take a risk with the direction of their entire life. Will this business be worth the investment in time and energy? Is the employer honest? Will pay raises be accorded fairly? Just because every single employee takes these same risks and makes these same efforts does not make those efforts worthless, nor the risks without measure or value.

Business owners are not Creators of jobs or wealth nor the sole risk-takers in creating a functional society. Such statements go beyond recognition of entrepreneurs and instead diminish the humanity and very essence of the rest of society.

Reply

Peter May 18, 2015 at 6:16 pm

But the second you “appoint” some authority to determine what a “just reward” for any given level of risk – you are changing the game from capitalism to something else entirely. Who should make this call? The American worker? The voter? How can one determine how much creators, innovators and small business owners should make? If I open a restaurant is there a cap as to how fast it can grow? If it becomes a nationwide franchise is that too much reward for me?

Reply

Steven H May 18, 2015 at 7:39 pm

Who said anything about “appointing” someone? Markets are not perfect nor standalone. There are always competing interests at the controls. Surely you recognize this. Tax policy, business policy, regulations, all impact income disparity.

Come on now. How is it that changing policy to your advantage is capitalism, but changing policy to the advantage of the lower 99% is “something else”. It’s a sliding control, a pendulum, a variable control with many hands on the lever. It’s all capitalism and democracy. No one is changing that. The redeeming virtue of democracy is that wealth and income can be taken away from the majority for only so long, and then the voters start to take notice and rebalance the equation.

Reply

Peter May 18, 2015 at 8:11 pm

I don’t want to change the policy. You do. You think our economy is unfair. I don’t. You think that there is a lever you can pull (income tax rates) that will somehow make everything fair (which would need an appointee to determine what fair really is). I don’t agree.

Fair and “deserved” or “like it was in years past” are all arbitrary subjective measures. They are not pure economics nor are they any part of capitalism.

Peter May 18, 2015 at 6:19 pm

Your analogy about your children is asinine. You are missing the point. We all take risk when we drive a car or go outside. We are talking about economic risk. Giving up salary or security for upside. The backbone of American capitalism. The gold rush….. small businesses…..pioneers….start up companies…..venture capital…..mom and pop stores…..the list goes on and on and no country provides the opportunity that America does for this. And you want to cap the upside.

Reply

Steven H May 18, 2015 at 7:56 pm

Rather tactless comment, Peter. YOU are missing the point. People create markets and market needs. Businessmen don’t. And if you don’t understand my defense of the people who become your employees, and their essential contribution to your success, then you are the one who is donkey-like. Businessmen merely service the market needs to make a profit. Society creates all of the infrastructure, experience, tools, supplies, security, monetary instruments, and education institutions that the businessman requires to do his job. Self-exultation of businessmen as the only people who take risks, as Creators of jobs and wealth, as the irreplaceable gods of prosperity, is absurd and arrogant. Businessmen are important. Just like everyone else.

You seem to forget that the US exists as an entity of the people, governed by the people, and benefitting all the people. We are not a capitalist society serving business first and a democratic society second. Capitalism is a tool to motivate and reward effort that benefits the country. Nothing more. It is not a game intended as “winner-take-all”. When the actions of the bankers and investors CEOs end up damaging the economy (as they just did), and depriving the majority of the country of the rewards of rising GDP (as has been happening for decades), and creating historically high income disparity, then the rules must be adjusted to correct the imbalance.

Reply

Peter May 18, 2015 at 8:14 pm

Never said or implied any of this. There is that straw man again.

Although I will say this. My employees are not essential to my success. I am. If my employees all died tomorrow I would go hire more of them. There are more people that can do their jobs than can do mine. And they make enough to be in the 1-5% themselves. The woman that sits at the reception desk could be replaced by hundreds of people.

Steven H May 18, 2015 at 8:34 pm

If your company disappeared tomorrow, another would take it’s place run by someone else, if there was a market need. That’s all I’m saying. No one is irreplaceable.

Peter May 19, 2015 at 6:55 am

Let’s explore that…. so if another company replaced mine – would they be as efficient? I think it is fair to say they wouldn’t, since if they would they would already be doing what I’m doing. There is clearly a market need or I wouldn’t be successful – the question is what would the quality of the business be? That is driven by the entrepreneur or the “talent” that is the heart of the business – not by the replaceable employees that file papers, answer phones or do other tasks that run the day-to-day of the business.

Under your philosophy, businesses would slowly be weakened, as would productivity and real economic growth. If my replacement did 70% of the revenues, he/she would only be able to carry 70% of the overhead. Hence, people that you are looking to protect would lose their jobs.

Steven H May 20, 2015 at 1:37 pm

Peter =========
[with Steven H responses in brackets.]

Let’s explore that…. so if another company replaced mine – would they be as efficient? I think it is fair to say they wouldn’t, since if they would they would already be doing what I’m doing.
[No, if you already productively fill the market niche, there is no hole in the market for them to fill.]

There is clearly a market need or I wouldn’t be successful
[Yes there is. And if your company disappears, it will create a hole in that market need which someone else will fill. If you decided to take a permanent vacation to Bermuda, someone else might even be so clever as to set up shop in a similar location, with similar marketing, and with many of your same employees who already have expertise in the industry. We all think we are irreplaceable, but it is not true.]

Under your philosophy, businesses would slowly be weakened, as would productivity and real economic growth.
[I don’t see how my philosophy has anything whatsoever to do with weakening business or economic growth. I can’t see that you have established any connection between the two.]

Peter May 20, 2015 at 2:04 pm

I am not sure you will see this the way I’m describing, but to clarify….. My industry in particular is highly competitive. There are scores of people doing what I do and some are more successful than others. The reason why I am more successful than some is due to the fact that the service I provide is superior to others in some way. (Otherwise, they would have never changed over to my services)

Remove me from the world and you are right – there are others that do what I do. However, they were options when I was alive and the public didn’t choose them over me. This means that my clients will then be forced to choose a substandard option. Sure, there will still be options but they will be substandard.

You are right that not everyone is irreplaceable. But many are. What makes our country great is the competitive capitalism that allows the cream to rise to the top. You made this argument months ago with professional athletes – and it was as invalid then as it is now. If the whole NBA walked away to play overseas because of severe pay cuts, there would indeed still be an NBA as there are lots of people who would love to play basketball for money. However, isn’t it better to have the BEST basketball players in the NBA? That’s why it pays the way that it does. If a league started in France that paid 10x the salaries, you would see the NBA players leave. Despite your best intentions, these are irreplaceable employees. The league would die if they didn’t have the best players.

You insult and cheapen the talented people that have made this country so successful. And people on the other side cheapen the impact that the laborers and rank-and-file employees contribute. All are important, but the rank and file are far more replaceable than the jobs that require talent, risk-taking, education or experience.

Steven H May 18, 2015 at 8:23 pm

Ken, I think that focussing on the “risk/reward” equation is at the heart of understanding this discussion. I think your point is how relatively higher risks earn relatively higher rewards (when the risky venture is successful). I think we can all agree with that.
$Reward = K * Risk * Success_multiplier.
What we are disputing is the value of K.

What is difficult to dispute is that the function K has gone up for high earners and down for low earners. I mean, that is basically what the income disparity charts express. The upper echelons of incomes within the 1% earn 2 or 3 or 4 times the income share of the historical norm, while the lower 90% have 20 to 25% less total income share than past norms. Yes, history changes, globalization, tax policies, mechanization, loss of manufacturing, all of those things changed and impacted the equation. But those are just detailing the mechanics of how K has changed at different income levels. Whatever the mechanism, it is now harder for lower income people to advance, and the rewards for the same risks at the top are greater. That is the only possible interpretation of increasing income disparity. Human genetics have not changed in the last century. People are the same. Mechanization has been happening for 2 centuries or more. Globalization has been increasing since ships started sailing the world. But something else must have happened in the early 80’s. This is when US median income stopped growing and upper incomes took off, when most families’ personal debt increased, when government debt skyrocketed. What happened? What changed K?

What massive economic changes can be traced to those few years that changed the country and stalled the advance of the middle class for decades and pushed us into ever more frequent and damaging recessions? Most causes discussed here have been decades or centuries in the making, with slow incremental changes in any decade. Only a massive disruption in government economic policies could cause such an abrupt change in national economic fortunes. Isn’t it about time we got back to more proven stable policy? Like taxing at rates that pay the bills, and not over-rewarding high risk?

Reply

Peter May 19, 2015 at 6:50 am

The market determines K – not tax law. Since 9/11 and the post-dotcom boom recession, and consecutive administrations that can’t seem to see across the aisle, people have become more risk averse. This is one of the main reasons why the Fed has kept interest rates so low – to encourage risk taking (i.e. investing in the stock market). There is a huge premium (K, as you call it) for taking risk in this environment because so few people are willing to take it.

Sure, I suppose you could do things like increase the risk-free rate, increase minimum wage, increase entitlement programs to help those that do not want to take any risk in their investments or careers – and we have done some of this in recent years. But that is just a knee-jerk reaction to a period where “K” is higher than normal.

Plus, if you do something like increase interest rates you bring along a whole other source of problems. Low interest rates really hurt the non-risk taker – but help those that are starting or growing businesses IMMENSELY. This just widens the gap between the risk takers and the conservative. However, if you were to raise interest rates you would absolutely, 100%, without question slow the economy which hurts everyone.

These are the factors that affect this “K” you discuss…..and it has happened over and over again in these types of periods in the economic cycle. It is not a democrat or republican issue. It is not a masterminded plan by the 140,000 people you want to tax heavier. These are economic cycle issues – difficult as they may be to manage – and not solvable by simply taking more money from a handful of people.

Reply

Peter May 24, 2015 at 4:54 pm

<<>>>>

Steven H May 18, 2015 at 5:10 pm

===========
Stated another way, I think Steven’s main objection is to the capitalist system in general
===========
No that is not it at all. Reducing high income disparity does not diminish capitalism.
Increasing taxes on the richest of rich back to previous tax levels does not diminish capitalism.

Reply

Steven H May 18, 2015 at 5:17 pm

Ken,
I don’t really understand why people think that lunch group (sometimes expressed as drinking group) story is so well loved. I find the inherent assumption in it flawed.

It assumes that the ten guys are all paying different amounts for the same product. That is not the case with taxes. Taxes are a fee based on the reward you receive from working in society. You receive more reward, you pay more tax. And ultimately if one emtrepreneur leaves the “restaurant” and their is a market niche left behind, another entrepreneur steps up to fill it.

Reply

Peter May 18, 2015 at 6:13 pm

We are all paying taxes for the same public good – education, roads, security, infrastructure, etc. That’s the point of the story. And that last assumption is a big one. You view entrepreneurs as disposable and replaceable, when in reality – it is the unskilled laborer or common worker that is the replaceable one. Again, you have it backwards.

Reply

Steven H May 18, 2015 at 7:32 pm

… But the entrepreneur extracts more out of the public good for himself. Granted, he puts in extra effort, but also would never make profits without the efforts put in by everyone else. The businessman makes use of more resources to support his business. Historically, almost everyone recognizes this: businessmen pay a tax back to society as a portion of what they profit from society. To rewrite the story to imply they are voluntarily contributing a gross excess of their share of cost of “the public good” is a little crazy and certainly out of the mainstream.

We are ALL expendable, Peter. Clever new businessmen replace clever old businessmen all the time.

Reply

Peter May 18, 2015 at 8:16 pm

We ready pay back a portion of what we earn to society. I think mine was around 40% this year just on the Federal level. But still not enough…..

Reply

Peter May 18, 2015 at 8:17 pm

Should real “already” pay. But God knows I have said this 100 times by now.

Ken May 19, 2015 at 6:51 am

I disagree. We are talking about who pays what for the services that we all share equally. People who pay most of the bill are not getting any more services from the government than people who pay less. In fact, I think it can be reasonably argued that people who pay less typically receive more services than those who are paying more. The lunch group clearly expresses this point.

I understand your position is that the people who are paying more should be paying more, because they earn more money. But the analogy is more about how payment of the federal tax bill is spread across society, at least in terms of federal income taxes, and the fact that some people pay a lot of the federal tax bill while others pay very little, yet everyone receives roughly the same level of services.

Reply

Ken May 19, 2015 at 7:13 am

In my first paragraph above, I meant that the lunch group analogy clearly expresses the idea that some people pay most of the federal income tax bill, but everyone shares in government services on a roughly equal basis. That’s the main point, not that it can be argued that those who pay less often receive more in government services while paying less. I think that latter point is also true, but that is a minor point, and not central to the lunch group analogy.

Reply

Steven H May 20, 2015 at 1:28 pm

Ken ======
… the lunch group analogy clearly expresses the idea that some people pay most of the federal income tax bill, but everyone shares in government services on a roughly equal basis
==========

And this is where you and I are not in agreement. I understand your perspective, that we all live in the same society, and we all receive certain benefits in equal measure from government. We all drive on the roads, use the banking system, and benefit from the national safety provided by the military.

However, there is another idea that what the government provides is not a set of services to individuals, but instead the establishment and maintenance of an infrastructure that is necessary to have a productive society. And since it is known and expected that some individuals will personally profit more from that infrastructure than others, it also makes sense to charge a fee as a percentage of economic benefit received from the overall infrastructure (hence, a tax) rather than a flat fee per individual for direct government services.

In other words, the government establishes and maintains the economy, and you are paying for use of the economy, and your taxes are proportional to the benefit you extract from use of the economy.

Some other reasons it makes sense to have a fee per economic benefit are several, a few of which come to mind immediately.
.1. Persons who profit more from society actually use more of the resources. Businesses and businessmen rely more heavily on all aspects of infrastructure, including roads (for supplies and product delivery), the banking system (more economic transactions), and even the courts (copyright, civil lawsuit, etc). Right away, this refutes the notion that each individual is receiving equal services, and contradicts the assumptions of the lunch analogy.
.2. As a practical matter, a fee per economic benefit (a tax) is the only way a government can be financed. This is always how it is done for national governments, whether that be a fee on economic trade (import/export taxes), a fee on purchases (excise or consumption tax), or an income tax, or some combination of above. A flat equal fee per capita would not provide enough funding and would bankrupt poorer members of society.

Lastly, the lunch analogy separates the bar owner (proxy for government), lunch fee (taxes), and lunch service (government services), from the wealth and income status of the customers (citizens). In reality, government services are essential to the society and economy which enables citizens to establish businesses and earn a living. By severing the link between the services and the economy/wages infrastructure, the lunch analogy is able to create an absurd parody of reality, rather than reflecting reality itself.

Reply

Peter May 20, 2015 at 2:13 pm

There is so much I disagree with in this last post. Let me start with one item that is the most outrageous….

“Persons who profit more from society actually use more of the resources. Businesses and businessmen rely more heavily on all aspects of infrastructure, including roads (for supplies and product delivery), the banking system (more economic transactions), and even the courts (copyright, civil lawsuit, etc). Right away, this refutes the notion that each individual is receiving equal services, and contradicts the assumptions of the lunch analogy”

I am definitely in the top 1/2 of the top 1% in income, but none of this applies to me. I don’t ship anything, nor do I import tons of supplies. I don’t use the courts AT ALL. And what are these “economic transactions” that the government is covering for me? I pay all of my own overhead and the only government services I can think of that I use are the Postal Service and the road back and forth to my house.

My brother makes almost nothing as a musician in a major city but rides the bus or subway everywhere he goes, received Federal and state assistance to go to college, lives in rent-controlled housing, and relies tremendously on local, state and Federal government to improve his surroundings (parks, roads, trash, etc.)

If you had actually ever been a businessman you would understand. The difference is I have lived on almost no income AND been a 1%’er. The reality you think exists is in a straw man’s world.

The fact that you put the road system or my employees who answer my phones on somewhat equal “essential importance” to my talents and expertise as determining factors of my rise to the 1% is so offensive and misguided. But I have said it before…..

Reply

Peter May 19, 2015 at 7:52 am

Steven H – “Taxes are a fee based on the reward you receive from working in society. You receive more reward, you pay more tax.”

This implies that we are all contributing the same to society. If we all contributed the same, but received different rewards, then this would be valid. The reality is that we are all contributing unequally – and “rewarded” unequally as well.

However, the point of the analogy is that we are all contributing unequally to the tax revenue bottom line – but “rewarded” equally there. In fact, like Ken says – those that contribute the most are likely receiving less than those that contribute the least.

Reply

Normal Joe May 19, 2015 at 7:19 pm

Whew! I got an email message that Ken replied to JTM regarding taxes and it took me an hour running through the thread and couldn’t find the specific post. I hate that. I hope I haven’t forgotten what I wanted to add, but here goes.

The discussion was primarily about FICA taxes and benefits. From what I understand, mostly because I am rapidly approaching that point where I have to make some tactical decisions, is that the benefits paid out is linked to what you have paid in. That means that those who haven’t really generated much wealth will recieve less from the pot.

I’ve been lucky in that I’ve been hovering right around the limit for two decades despite it’s annual increases. That qualifies me for the maximum payout. If I continue to work while collecting, my payouts can be reduced if I earn too much. The longer I delay collecting up to age 70, the more I can receive. But I increase my risk in dying too early to collect that amount. Bottom line, nothing is guaranteed and I think that reality is grossly overlooked by the critics.

I’ve stated it before and I will remain consistent, the limit should be eliminated, or at least increased to $1,000,000. I would suggest an according increase in benefits payable for those contributing more, but it should be limited by any passive income earned at retirement. The original intent of the Social Security program was to deal with the very real problem of senior poverty that was rampant at the time of it’s inception. That remains a noble and worthy goal.

I do share your concern about the uses of those funds. It has been very unfortunate that those in power made the decision to invest those funds in Treasuries. That is the crux of our conundrum. It essentially made those funds accessible to the Federal General Fund creating a giant Ponzi Scheme for our government. We must separate these funds from Treasuries into a blind managed trust with minimal investment in Treasuries and manged like a professional mutual fund with performance standards and remedies for mismanagement. Only then can we be assured that the hard earned dollars of every American is never misappropriated again.

Reply

Normal Joe May 19, 2015 at 7:24 pm

A quick follow-up. I find it particularly disturbing that it is those who don’t need Social Security are the most vocal about it’s cost versus value. Maybe it’s just a lost perspective of it’s genesis coupled with an underassessment of it’s value.

Reply

Peter May 19, 2015 at 9:05 pm

I for one would much rather give up my SS than have some sort of wealth or passive income tax. Can you explain further how that would work anyway? Would I pay annual taxes on unrealized capital growth?

Ken May 20, 2015 at 5:21 am

Normal Joe — I just happened to pick SS as my example because I remembered some specifics about it. I am well aware of its genesis and value. It’s not because I devalue it because I don’t need it as much as others.

The point I was making is that I could have picked any government program — SS, Medicare, Medicaid, WIC, Amtrak, whatever — and all of them are in financial trouble, mainly due to overspending, over-promising of benefits, and either managerial ineptitude or moral turpitude.

Can you think of any federal program offhand which can be described as financially healthy? I can’t. Not the big ones, anyway.

Normal Joe May 20, 2015 at 9:43 am

Thanks Peter and Ken for your replies and observations.

Peter – I think the objective of SS is to prevent poverty from creeping up on the aged in society as an unintended consequence. Allowing a person to forego their SS contributions in lieu of taxes on subsequent investment income is consistent with that objective, but I would not be the one to make that decision for another. Passive income as it is realized essentially becomes ordinary income for the retiree and should be included in the determination of benefits distribution imo. Unrealized capital growth is only paper income that could vaporize as we observed in the financial services meltdown we just endured and should not be taxed. This gets into one of the many reasons the tax code is so cumbersome, trying to address every contingency when some, if not many, are unknown.

Ken – If you look past the some three decade assault on SS by the Koch brothers the numbers tell a different story. On May 31,2013 the Kochs’ Heritage foundation reported:

“Social Security ran a $55 billion deficit in 2012, closing out three years of consecutive cash-flow deficits as the program’s unfunded obligations continue to grow.”
http://www.heritage.org/research/reports/2013/05/2013-social-security-trust-fund-reports-massive-deficits-benefit-cuts

While the Social Security Office of the Chief Actuary reported surpluses of 68.6, 69, and 54.4 billion consecutively. Ironically this was a little less than a third of what was recognized in 2007 due mostly to the effects of the great recession and the combined impacts of a decreased tax base and increased distributions that recession created.
http://www.ssa.gov/OACT/STATS/table4a3.html

A graphic presentation of the past 28 years tells the story of the impact of homes converting to two income families and the subsequent double whammy of the Great Recession and the wage stagnation of the latest anemic recovery.
http://www.ssa.gov/OACT/ProgData/assets.html

Despite many claims to the contrary, Social Security has been a world class success when the filters of the Koch echo chamber are removed. What is really happening is the Social Security Trust Fund is going the way of the Transportation Highway Fund. A systemic failure to anticipate future expenses with those in rural states condemning any moves to increase revenue resulting in a self fulfilling prophecy.

The US Postal Service has served this country extremely well with the best service in the world for almost three centuries. But once again, the forces that believe government can do no good have hamstrung the Postal Service Administration with financial standards no corporation has to match with the thinly veiled objective of proving that success as a failure. The current challenges facing the USPS are substantial now that email and social media are stripping from them one of their traditional sources of income. Surprisingly, junk mail (as I like to call it, direct marketing to those who embrace it) is apparently continuing to grow, but it’s future is very clouded.

Both of you state very honest and valid claims that bear careful consideration. The fact remains that there are government programs that do provide utility and support the growth of wealth. The wealth enablers are just as important as the wealth creators of which we all are in one way or another, except for the poor who live from hand to mouth.

Peter May 20, 2015 at 2:21 pm

Interesting post, Normal Joe. Thanks for sharing.

Ken May 23, 2015 at 8:37 am

Normal Joe — Read through your post, and have some comments, but will save them for another post.

First, it seems like one of your links is pointing to the wrong article. The link from this passage refers to a SS article, not an article on the effects of two income families. I’d be interested in reading the article about the effects of households becoming two-income families. Thanks.

“….A graphic presentation of the past 28 years tells the story of the impact of homes converting to two income families and the subsequent double whammy of the Great Recession and the wage stagnation of the latest anemic recovery.
http://www.ssa.gov/OACT/ProgData/assets.html
….”

Ken May 24, 2015 at 7:41 am

Normal Joe —

Here are a few articles on the USPS’s financials which seem at least to indicate that things are not that great.

http://www.logisticsmgmt.com/article/financial_issues_continue_to_weigh_on_the_usps/

http://fas.org/sgp/crs/misc/R41024.pdf

http://www.gao.gov/key_issues/us_postal_service_financial_viability/issue_summary

How do you interpret these, in light of the article you posted? I noticed that these three articles are not authored by the USPS. One is from the GAO, and one other is from Congressional Research Service.

Ken May 25, 2015 at 8:05 am

Normal Joe — Doesn’t the lone fact that SS does not have any of the actual money that is supposed to be in the trust fund, and instead has IOUs, mean that the program has been fatally mismanaged?

Interestingly, we have a similar thing going on here in Illinois. For the last several decades (and perhaps longer, nobody quite knows for sure) money which was deducted from state workers’ paychecks and which was supposed to be deposited in their pension fund (by law), instead was illegally redirected and used somewhere else. Nobody knows where it went, either, of course. The pension fund now has a $105 billion shortfall.

Peter N May 22, 2015 at 10:37 pm

“Steven H – “Taxes are a fee based on the reward you receive from working in society. You receive more reward, you pay more tax.””
More libtard speak. Change receive to earned.

Reply

Peter May 23, 2015 at 8:22 am

No, you just happened to be the businessman standing there when the revenue came in. If you weren’t there, someone else would be. Has nothing to do with you. So receive is the right word.

Reply

Steven H May 24, 2015 at 12:52 pm

Well said, Peter. Thanks for the unexpected defense.

Peter May 24, 2015 at 4:53 pm

LOL the fact that you agree with that sarcastic reply is amazing….. Wow.

Steven H May 24, 2015 at 10:20 pm

The fact that you don’t speaks worlds.
You know if people are hungry, and the restaurant on the corner goes out of business, a new restaurant usually pops up. It is sometimes better, and sometimes worse, depending on the skills of the management, cook and staff. But no one is irreplaceable. And the business both “earns” and “receives” its income. And when it goes away, another does indeed replace it.

Just as long as the wealth creators (the customers) continue to have disposable income to spend.

Steven H May 20, 2015 at 1:33 pm

Peter =========
Steven H – “Taxes are a fee based on the reward you receive from working in society. You receive more reward, you pay more tax.”

This implies that we are all contributing the same to society. If we all contributed the same, but received different rewards, then this would be valid. The reality is that we are all contributing unequally – and “rewarded” unequally as well.
==============

No I don’t state or imply anywhere that everyone contributes the same to society. What I state is that the vast majority of people contribute something. If you just a buy a drink at the corner store, you have paid a government tax. If you clean a hotel room, you contribute to the nation’s commerce.

All I am implying is what is plainly on the surface of my statements. Government establishes an economic infrastructure. People benefit from the infrastructure. People should pay tax in proportion to their benefit, to the government which establishes the infrastructure which enables the benefit.

Furthermore, “in proportion” includes the idea that progressive taxation may be necessary to balance the risk/effort/reward equations at all income levels to keep the system balanced.

All of the above is widely held as both fair and practical and successful in implementation.

So I am confused at the point of any serious advocation of the lunch analogy. It imparts a set of distorted assumptions (that government services are for individuals rather than infrastructure; and that government services are disconnected from the means to acquire wealth and income) and implies an impractical solution (that everyone should pay an equal dollar amount for lunch, aka government services), and a warped set of conclusions (that any other taxation solution is inherently unfair; that rich people are exhibiting extraordinary generosity in paying higher amounts for “equal” services, and that if we chase rich people away by taxing them in a way they disagree with, they cannot be replaced.)

Over time, I have had several people present this analogy to me as if they expected me to be swayed by some deep truth in it, and they then await my inevitable revelation to a new point of view. It may be useful for you to know that this story only preaches to the choir of people who already agree with it in the first place, and it has little or no persuasive ability. Those of us who disagree with its conclusions are just irritated by it, and can see through its facade to its glaring flaws. Therefore, quoting this story, or advocating for its perspective, actually does more harm than good to your’s and Ken’s argument. For if the best arguments you can express are on such shaky foundations as this story, then your philosophy really begins to look fragile and indefensible.

Reply

Peter May 20, 2015 at 2:18 pm

I never trumpeted this analogy or took it as seriously as you just did. But the quote of mine you highlighted up there is still the truth.

And don’t forget, we already have progressive taxation, which I completely support. I absolutely don’t mind paying more than others. But it isn’t because I received more of a “reward” from society or because I used for government infrastructure. It’s the same reason I give more to charity than most of the population – it is simply sharing the wealth to help the less fortunate.

But again…evidently it’s not enough.

Reply

Peter May 20, 2015 at 2:19 pm

(Why can’t I avoid typos…should read “used MORE government infrastructure”) You have had some crazy arguments, but the fact that the rich use more government infrastructure and thus should pay more is the craziest one yet.

Reply

Steven H May 20, 2015 at 7:36 pm

Crazy but true.

But the more important point is that the rich extract more benefit from the infrastructure and that is what ultimately justifies a taxation on income and profit.

Reply

Peter May 21, 2015 at 7:08 am

No kidding….hence the progressive tax system that we have.

Steven H May 20, 2015 at 7:40 pm

You defended the analogy so I brought it up in my reply to you. I don’t take it seriously at all. It is silly in my opinion. But it seems important to many people of the conservative ilk. So I thought it was worth taking a few minutes to detail its flaws from my perspective.

Reply

Peter May 20, 2015 at 8:12 pm

Nope. I didn’t.

Reply

Steven H May 24, 2015 at 1:20 pm

Peter, I have to correct something technical about our differing understandings of the term zero-sum game. I thought I had explained this before, several times, but I tend to get wordy, so perhaps my intent was lost in the excess verbiage.

Zero-Sum Game is NOT actually a mathematical theory (as you stated) but is instead a named idea or concept or situational representation USED in Game Theory and Economic Theory. It is just an idea with a nice title to reference the idea. According to Wikipedia:

“In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which each participant’s gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s).”

In economic terms, it represents a zero-growth economy.

It actually has absolutely nothing to do with whether or not income inequality involves rich taking from the poor or not. You can hypothesize economies where the rich DO take from the poor in both zero-sum and non-zero-sum games. Conversely, you can hypothesize economies where the rich do NOT take from the poor in both zero-sum and non-zero-sum games.

So when you say:
“I don’t think there is any proof whatsoever in academic and economic research that the wealthy are becoming wealthy by taking money from the poor. (this would imply a zero sum game)”
… you are then equating 2 ideas which are almost completely independent. The existence of one thing does not require or even imply the other.

Still don’t see it? Let me explain once again, with an example.
A society can improve its efficiency in business and have a net per capita real annual increase in income of 2.5%. This, by its very definition is NOT a zero-sum game.

Now, that income can be distributed in many many ways throughout the economy. My position has been that this distribution is heavily influenced by many policy factors: tax policy, labor policy, trade policy, education policy and costs, etc., all of which are adjustable and changing year to year, and almost none of which are directly attributable to “the free market”.
One way of distributing new income growth throughout the economy is [Plan A] to set policies such that everyone receives roughly an equal percentage of growth; i.e. approximately a 2.5% real raise each year across all industries and pay grades for the 2.5% net growth in national income. Another possibility [Plan B] is to set policies such that all of new income goes to only the richest individuals in society, say the richest 1% for this example. A final example [Plan C] is to take all of the income growth PLUS some previously existing income and add it to the income of the upper 1%, which necessarily lowers the average income of the lower 99%.

The existence of Plan A or Plan B or Plan C are ALL within the confines of a Non-Zero-Sum Game, as I already established. My claim that either Plan B or C are truer representations of our current economy have absolutely nothing to do with implying a zero-sum game.

Get it?

Reply

Peter May 24, 2015 at 4:52 pm

I get it. But nothing you say works. You want a desired result but your cause and effect logic with economies is very flawed.

What if all of that 2.5% growth is attributable to the technology sector? Should dry cleaners get a raise? Construction workers?

The problem you continue to have is that you have a desire for a certain solution but aren’t open to following the logic of how what you want might come to be. You want the solution to be one way and no matter what anyone tells you, you dig in.

I think you are just going to remain frustrated with the current situation with the perspective you carry.

Reply

Steven H May 24, 2015 at 9:42 pm

I’m proceeding one step at a time. I think we now understand and agree what a zero-sum game is.

Now let’s talk about the concept of a zero-loss gain. It is also just an idea or concept with a name. It is not a theory that can be proved or disproved or that requires some vetting by an official trade group or publication. Humans express ideas all the time. They are all over this blog. Your rejection of the very existence of an idea or concept just because I came up with a unique three word shorthand for it is unjustified, and a bit illogical.

A zero-loss gain is just a shorthand for the concept that “wealthy people do not take money from the poor”, which is a phrase I hear (in various forms) from you and Ken and James all the time. . You said the concept that they DO implies a zero-sum game (which we now agree and understand is incorrect; no such connection is implied). What I am saying is that the concept that the rich never get rich at the expense of the poor can be called a concept of zero-loss gain. Meaning that the gain of the rich (supposedly) creates zero loss to the middle class or poor.

James called this a straw man, that:
=== Statements like “rich people create all wealth with [their own] efforts and all losses by others [are] due to their own failures” is a straw man argument. Neither Peter, Ken or even Peter N has suggested that ALL is caused by this. ===
Well pardon me. I thought that was precisely what was being proclaimed, if not completely 100% of the time, then certainly mostly, like 80 or 90%.

What do you say? Do you believe that the distribution of most of the nation’s gain in national income to the 1% has any impact on the stagnancy or decline of income to the rest of the nation? Or do you believe that our economy is better described by zero-loss gain?

Reply

Peter May 24, 2015 at 9:55 pm

I didn’t say I agree. I said I get it. And that your logic about how economies work is so flawed. And you doubled down with an even longer post that makes no sense. I’m not sure how you expect anyone to debate with you. Read your last post back. What is your point? We all know your very extreme opinions, what do you hope to gain from the debate?

Reply

Steven H May 24, 2015 at 10:03 pm

How can we debate if the terminology has no definition?

I am trying to express ideas precisely. You and Ken keep trying to use the concept of zero sum game incorrectly. This is not a matter of opinion. The concept has a very specific definition and I am trying to use it precisely, and also express another precisely defined concept of a “zero loss gain”.

All I am getting from you is that you “get” my definition, but do not agree with it and that my expressions of a concept “don’t exist” because you didn’t read the precise name of the concept in a journal.

Precisely what do you not agree with in my post about zero sum game if you “get” what I am saying? How can we talk if you will not even discuss precisely what your words mean and accept my plain definitions of what I mean?

Steven H May 24, 2015 at 10:12 pm

In Plain English:
1) Do you believe that changes in government policies (tax, trade, labor, regulation) can change the distribution of national income across various income levels (either low to high or high to low) or not?
2) Do you believe that the progressively higher percentage increases in income of the 1%, 0.1% and 0.01% over the last 35 years have anything to do with the stagnation or decline of most American’s income in that same time period? Or are they separate events?

Peter May 24, 2015 at 10:26 pm

1) barely if at all unless extreme changes
2) of course – that is the very definition – your question answers itself

Peter May 24, 2015 at 10:33 pm

I mean I follow your incorrect understanding of the economy. With all due respect, though….. You and I just don’t see the mechanics of the economy the same way. You value the common man’s role more than the entrepreneur. You value brains, drive and ingenuity much lower than I do. But I’m not going to try and have this debate with you on an economic level. I have tried to be patient and even educate (in as unbiased a way as anyone on here) and you will have none of it. You think you understand cause and effect in the economy but you do not. This is the chasm that exists between you and almost every other poster on here. Your passion and persistence is impressive however and I do believe that you truly care about people. But the logic is deeply flawed. I’m sorry, but it just is.

Steven H May 24, 2015 at 9:56 pm

Peter =====
What if all of that 2.5% growth is attributable to the technology sector? Should dry cleaners get a raise? Construction workers?
=========
You are missing the point. My “Plan A” was just a vastly simplified expression of a concept. Your statement is taking it to absurd extremes. However, “Plan A” does actually roughly represent the economy in the 50’s, 60’s and early 70’s. Overall national gains in income were spread throughout all income levels roughly equally. Individual companies and industries still had profits and losses based on their own competitive efforts, but income gains within those companies and businesses were distributed with roughly equal percentage gains at different income levels.

Reply

Peter May 24, 2015 at 10:27 pm

And in circles you go again……I ask once more….what is your point?

Reply

Peter May 24, 2015 at 10:29 pm

We have progressive taxation. The wealthy already pay far more than the poor. Your other proposals that only go after a little over 100k people don’t raise enough revenue. Let’s get away from you explaining the economy to us all through your prism and tell me…… What exactly do you hope to gain from the debate? What is your point?

Peter N May 24, 2015 at 9:13 pm

“One way of distributing new income growth throughout the economy is [Plan A] to set policies such that everyone receives roughly an equal percentage of growth; ”
Why should everyone get a equal percentage of growth when they have contributed nothing?

BTW, my company is in the process of creating another high paying job. That will be 3 this year or a 10% increase. That is 3 more people where we are paying into their health care and social security. What have the libtards on this forum done?

My company creates wealth and jobs. I don’t see why the libtards want to punish me so with high taxes. I could just take my ball and go home and then what? There would be a lot of people without jobs and health care and the gov wouldn’t get their income taxes. I have more than I need. I can live for 4 years on what I paid in federal income taxes alone.

At some point the whole economy will crash do to crushing federal debt and fiat currency. This disaster will be cause by libtards and their policies. Then what libtards? You have killed most small businesses and imposed rules so that others are not profitable.

I can tell that Steven H is a libtard through and through. He doesn’t give those that earn money any respect. Some how he thinks we magically receive money. He and other like him have my contempt.

Reply

Steven H May 24, 2015 at 9:46 pm

You think 90% of America contributes nothing?

Reply

Steven H May 25, 2015 at 7:10 am

Peter =======
You and I just don’t see the mechanics of the economy the same way. You value the common man’s role more than the entrepreneur. You value brains, drive and ingenuity much lower than I do. But I’m not going to try and have this debate with you on an economic level. I have tried to be patient and even educate (in as unbiased a way as anyone on here) and you will have none of it. You think you understand cause and effect in the economy but you do not. This is the chasm that exists between you and almost every other poster on here. Your passion and persistence is impressive however and I do believe that you truly care about people. But the logic is deeply flawed. I’m sorry, but it just is.

… What exactly do you hope to gain from the debate? What is your point?
=========
You ask about my goal. Partly I am trying here to cut through the BS and false narrative to discuss factual statements about the economy. I thought at least that part would be easy. But even here I strike resistance.

1) I value the role of the entrepreneur AND the common man. Most of the arguments from you and Ken and James and Peter N diminish the importance, the intelligence, and the value of most Americans . I don’t have time to search for everyone’s precise quotes, but you have each basically (if not in these precise words) indicated that only the businessman is irreplaceable, only the entrepreneur has truly earned a pay raise, and that it is entirely fitting and proper that only the 1% benefit from the entire increase in GDP and national income while everyone else’s incomes stagnate or decline. This is BS.
2) Economic discussions – I don’t pretend to be an economic expert. But I am disappointed at the level of discussion I see here that purports to explain the economy. The following are a few of the ideas that get repeated that are false narratives or just blatantly in error:
(a) Misuse of Zero Sum Game – Stating that the rich benefit PARTLY at the expense of everyone else is equivalent to belief in a “zero sum game” and is therefore proven wrong. No its not. You are misusing the concept.
(b) Tax Blame – It is a worthy complaint that about half of Americans pay no income tax, and this indicates those who don’t are lazy and being carried in the wheelbarrow by everyone else. No its not.
(c) Benefit Blame – It is a worthy complaint that around half of HOUSEHOLDS contain at least one individual who receives a government benefit (food stamps, unemployment, SS, Medicare, Medicaid, income tax transfer payments for being poor). This indicates that about half of Americans pay no income tax, and this indicates those who receive benefits are lazy and being carried in the wheelbarrow by everyone else. It’s not and it doesn’t.
(d) High Tax Woe – It is a worthy complaint that the highest incomes pay a higher percentage of income taxes than in the past decades. No it isn’t. Shares of taxes go up with shares of income. It’s silly to complain about a natural consequence of being richer than everyone else.

3) Economic cause and effect – You have tried to “educate” me with nonsense.
(a) You say that high income disparity is a part of the business cycle. It clearly is not. Unless you consider rise of labor unions, increases in federal tax rates, and economic collapse part of the business cycle. High income disparity has not changed as part of the increasingly volatile recessions over 35 years. Only labor unions and govt policy changes have ever reduced income disparity. Try to prove me wrong with historical example
(b) You say you are not aware of any economic theory that indicates the rich have taken from, or benefit at the expense of, the middle class and poor. Read Piketty, or Reisch, or Krugman, or any of the other major economists who state that theory rather precisely. It is what high income disparity is all about. You can disagree, but pretending these theories don’t exist is BS.

There is more but I am out of time.

Reply

Steven H May 25, 2015 at 11:19 am

2(C) above had a cut and paste error it should have read:

(c) Benefit Blame – It is a worthy complaint that around half of HOUSEHOLDS contain at least one individual who receives a government benefit (food stamps, unemployment, SS, Medicare, Medicaid, income tax transfer payments for being poor). This indicates that those who receive benefits are lazy and being carried in the wheelbarrow by everyone else. It’s not and it doesn’t.

Reply

Leave a Comment