Who Actually Earns $400,000 Per Year?

by Emily Guy Birken · 4,673 comments


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? 

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{ 4673 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?


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.


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.


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?






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.

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.


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,
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.


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.


Steven H March 24, 2015 at 6:22 pm

“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.


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.”

“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.


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.


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.


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.


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.


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…..


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.”
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.


Peter March 25, 2015 at 7:38 am

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


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.


Peter March 25, 2015 at 4:42 pm

That’s fair enough….


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?


James March 26, 2015 at 9:16 am

your position is absurd enough without exaggeration


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.


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.


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.


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.


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.


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.


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?


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.


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?


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).


Ken March 26, 2015 at 6:20 pm

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


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.


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.


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?


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?


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%?


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?


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.


Stevendad March 31, 2015 at 4:57 pm

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


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.


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.


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.


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.


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?


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.


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.


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!


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


Steven H April 9, 2015 at 7:58 pm

Join in, dude!


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.


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.


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.


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.



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.


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.


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.


Ken April 14, 2015 at 10:50 am

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


Ken April 14, 2015 at 10:51 am

I meant “cannibalism capitalism”, needless to say.


Steven H April 14, 2015 at 6:13 pm

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:



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.


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.


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.”


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.




Mark April 15, 2015 at 12:25 pm

What about sports players?


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.


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.


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.



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.


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.


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.


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


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