Two-Tiered 1%--Issues With The Top 1% OR The Top .05%?

by Justitia Themis 82 Replies latest social current

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  DesirousOfChange

  2) - something should be done by society (practically, by government) to limit the wealth attainable by a person, and to re-distribute any excess gain over the set limit.

  Perhaps it should be looked at from the point of view that the government takes "x" amount of dollars to run. (It's another subject for later of whether it could run on less.) But for the time being, the 99.5% pay a greater percentage of their income to maintaining the government and their lifestyle and "freedoms" than do the upper 0.05%. Reality is, that the bottom rung of folks have a lot less to lose if we all have to start over at equal or if we suffer economic calamity do to an attack by an aggressor (nation or rogue group). If that were to happen, the upper 0.05% would have wished they'd have paid more in to support the defense dept and to keep peace among the impoverished class. Better to throw them some bread crumbs than to have them demanding an equal piece of the pie.

  DOC
• 

  Berengaria

  And my point is this - what difference does it make (the %) if everyone has what they need for a comfortable life, no matter where they are on the ladder?

  This is the whole point. A huge chunk of the country doesn't. This doesn't even include the infrastructure issues.
• 

  Justitia Themis

  ...just to correct my own mistake...it should be .5%, not .05%
• 

  talesin

  a comfortable life,

  Agreed. That's a very subjective term.

  Gagiollionaire 'X' has gold fawcetts in her bathroom, and is just settling down to 'work' (ie, play at opening a business) at age 30; after all, she has a trust fund ...

  on the other hand ...

  Carpenter 'Y' makes barely enough to feed her family, and can't afford health insurance. Hubby is sick, and they are not poor enough to qualify for free health care ...

  Is having enough to eat and shelter ,, 'a comfortable life'?

  ... maybe, compared to standards in Somalia, this is true. But let's not kid ourselves,,, here in the West, we are not 'equal'.

  *shrug*
• 

  botchtowersociety

  The notion that the bottom is wealthier than it has ever been in history is slight of hand bull, and Burn knows it. Productivity has been increasing in this country at a dramatic rate for the last 30+ years, yet wages and wealth for the majority of Americans has stagnated or dropped while the top has gone through the ceiling. What's good for the top has nothing to do with what is good for the rest. Not in the current system.

  1. In a 2009 paper, Northwestern University economist Robert Gordon found the supposed sharp rise in American inequality to be “exaggerated both in magnitude and timing.” Here is the conundrum: Family income is supposed to rise right along with productivity. But median real household income—as reported by the Census Bureau—grew just 0.49 percent per year between 1979 and 2007 even as worker productivity grew four times faster at 1.95 percent per year. The wide gap between the two measures, if accurate, would suggest wealthy households rather than middle-class families grabbed most of the income gains from faster productivity.

  But Gordon explained that this “compares apples with oranges, and then oranges with bananas.” When various statistical quirks are harmonized between the two economic measures, Gordon found middle-class income growth to be much faster and the “conceptually consistent gap between income and productivity growth is only 0.16 percent per year.” That’s barely one-tenth of the original gap of 1.46 percent. In other words, income gains were shared fairly equally.

  2. A pair of studies from 2007 and 2008 conducted by the Federal Reserve Bank of Minneapolis supports Gordon. Researchers examined why the Census Bureau reported median household income stagnated from 1976 to 2006, growing by only 18 percent. In contrast, data from the Bureau of Economic Analysis showed income per person was up 80 percent. Like Gordon, they found apples-to-oranges issues such as different ways of measuring prices and household size. But in the end, they concluded that “after adjusting the Census data for these three issues, inflation-adjusted median household income for most household types is seen to have increased by 44 percent to 62 percent from 1976 to 2006.” In addition, research shows that median hourly wages (including fringe benefits) rose by 28 percent from 1975 to 2005.

  3. A 2008 paper by Christian Broda and John Romalis from the University of Chicago documents how traditional measures of inequality ignore how inflation affects the rich and poor differently: “Inflation of the richest 10 percent of American households has been 6 percentage points higher than that of the poorest 10 percent over the period 1994–2005. This means that real inequality in America, if you measure it correctly, has been roughly unchanged.” And why is that? China and Wal-Mart. Lower-income families spend a larger share of income than wealthier families on goods whose prices are more directly affected by trade. Higher income folks, by contrast, spend more on services which are less subject to foreign competition.

  4. A 2010 study by the University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan notes that official income inequality statistics indicate a sharp rise in inequality over the past four decades: “The ratio of the 90th to the 10th percentile of income, for example, grew by 23 percent between 1970 and 2008.” But Meyer and Sullivan point out that income statistics miss a lot, such as the value of government programs and the impact of taxes. The latter, especially, is a biggie. The researchers find that “accounting for taxes considerably reduces the rise in income inequality” over the past 45 years. In addition, “consumption inequality is less pronounced than income inequality.”

  5. Set all the numbers aside for a moment. If you’ve lived through the past four decades, does it really seem like America is no better off today? It doesn’t to Jason Furman, the deputy director of Obama’s National Economic Council. Here is Furman back in 2006: “Remember when even upper-middle class families worried about staying on a long distance call for too long? When flying was an expensive luxury? When only a minority of the population had central air conditioning, dishwashers, and color televisions? When no one had DVD players, iPods, or digital cameras? And when most Americans owned a car that broke down frequently, guzzled fuel, spewed foul smelling pollution, and didn’t have any of the now virtually standard items like air conditioning or tape/CD players?”

  http://blog.american.com/2011/10/5-reasons-why-income-inequality-is-a-myth-and-occupy-wall-street-is-wrong/
• 

  talesin

  Having been around since the 80s as a non-witness (worldly person), I have seen the difference in the work situation. In 1987, I had a job making a base of $18,000, plus commissions (I ran a WP/PC centre for a personnel agency). At that time, secretaries usually made around the same.

  Fast forward to 2011, secretaries (in the private sector, ie, non-unionized) make about the same, but the cost of rent, vehicles, groceries, etc. has skyrocketed.

  It's just my experience in life, and not a statistical study, but truly,,, I believe we have lost a lot, and a lot of folks are suffering.

  BTS,, you and I are, I think, a lot alike. We are SURVIVORS! We are THRIVERS! We are stronger than most, and can overcome pretty much anything life throws at us. I respect and admire you for that .... from what snippets I have learned about your life,,, you worked hard, with a good example in your dad, and you were able to have some financial success. I, too, was that kind of go-getter before illness got the better of me.

  Not everyone has our ability to survive, and yes, thrive, under great pressure. Most folks, I think, are puzzled ... they were taught that if they worked hard, maybe got a degree, that they would be okay. Perhaps even be enormously successful! The current job situation, and financial climate, have pulled the rug out from under them! It's sad, and is why I say, the dream is no more. Only Super-Achievers will be able to fight their way to the top,,, and then only if they are lucky (right place/right time, etc.).

  There's common ground here, for all of us who are debating, if we can just stand back and see what other folks are going through.

  tal
• 

  james_woods

  ...just to correct my own mistake...it should be .5%, not .05%

  But the point could be made that the .05% are actually the ultra-wealthy that the re-distributionists are tying their panties in a knot over.
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  Justitia Themis

  ...just to correct my own mistake...it should be .5%, not .05%

  But the point could be made that the .05% are actually the ultra-wealthy that the re-distributionists are tying their panties in a knot over. The point "could be made" that it is the top .005%, or the top .0005%, or the top .00005%, or the top insert-infinity-sign-here. So what? The point "could be made," but the author did not. The author referenced the top .5%, not the top .05%. I was correcting a mistake I made that mathmatically changed the author's intent.
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  Berengaria

  Burn, the comments section of that article you posted are just awesome. Here's a good one.

  http://blog.american.com/2011/10/5-reasons-why-income-inequality-is-a-myth-and-occupy-wall-street-is-wrong/

  ex0du5 says:

  October 19, 2011 at 1:00 pm

  This is the strangest econometric analysis I have seen in a while. I don’t know how a professional economist would willingly and publicly make such statements, which are easily discussed in standard theory.

  1. Yes, the rich can buy more and better things. This doesn’t mean that don’t have access to the stuff poorer people buy and must “suffer” greater inflation. They _choose_ to buy higher quality products and additional goods/services. The fact that there is “higher inflation” in that class of goods is a _symptom_ of the faster growing wealth in that segment and a quality of that choice. The average inflation of products is the proper measure for them, because that represents accessible products for them.
  2. Those products represent a much lower percentage of the wealth spent by those income groups, by major proportions. Poorer classes spend over 90% of their income directly back into the economy. The richest classes spend much less than 10%, instead keeping their wealth in land and corporate ownership and other nonliquid assets. So any increase in inflation of products must be properly accounted by usage proportion, which makes the wealthiest much less affected by inflation.
  3. Those nonliquid assets are measured in “real value”, not currency value. If there is 10% inflation, it does not affect the value of a house. The house rises in currency value if the real value stays the same (excluding artificial value changes like seen in the past meltdown – which disproportionately moved wealth to the wealthiest at the expense of poorer classes). So there is even more of a separation of effect of inflation for the wealthiest income groups, in that they are generally unaffected except in performance of businesses they may own (inflation itself does not usually affect businesses directly – prices get raised with everything else and the effect is neutral – except for businesses that have a sensitivity to unequal inflationary events).

  It is obvious that this is a transparent attempt to pretend certain numbers that allow people with preexisting beliefs to feel less uncertain about the current situation.

  For those who may ask how one persons wealth affects another person, the answer is actually again very easily answered using standard economic theory. In a fiat currency system, such as the existing one, there is a limited set of monetary resource. Money is not simply created by work. So if one group has access to more of that resource, another group has access to less (and these are proportions here, so the argument is the same with fiat publishing).

  When you see greater efficiency in the work force, and still find their proportion dwindling, it is a clear indication that the mechanisms normally discussed in free-market theory are not working. Instead, it is the access to the monetary flow held by the owners of that flow that are forcing more and more people into tighter monetary constraints.

  Normally, you’d expect free-market theorists to be alarmed by these deviations in their theory, looking for the governmental and societal actors causing this distressing deviation. However, there are so many people these days who actively seek to be apologists for wealth inequality, that such is not being done.
• 

  botchtowersociety

  Great point buried, Berengaria, in your post copy:

  For those who may ask how one persons wealth affects another person, the answer is actually again very easily answered using standard economic theory. In a fiat currency system, such as the existing one, there is a limited set of monetary resource. Money is not simply created by work. So if one group has access to more of that resource, another group has access to less (and these are proportions here, so the argument is the same with fiat publishing).

  Which in a sense seems to agree with what I have said in the past regarding monetary inflation and income inequality. When more of the resource is created, it first distributes first through certain entities, before reaching the hands of others. (Maybe you are a zealot too?)

  However, the comment really only addresses point #3, which may be the weakest one in the article, imho. What is your take on 1,2,4, and 5-- made at Northwestern U, the Federal Reserve Bank of Minn , the University of Chicago, and the deputy director of Obama's National Economic Council?

  BTS