Replies to This Discussion

Permalink Reply by doone on October 16, 2011 at 7:06pm

Have you noticed - a lot of the discussion about how the rich need to reduce their taxes has disappeared lately - here is some more history of how we got into this predicament

 

When Did The Rich Get So Rich?

Jeffrey Winters traces America's wealth distribution over time:

The decade from 1970–80 was the turning point in the Great American Inversion. ... By 1990, real incomes for the top 1 percent exceeded the 1920 level threefold and continued to rise thereafter, while those of the majority did not budge. Reversing the pattern of previous decades, the richer you were, the faster gains accrued. It did not matter if Democrats or Republicans were in charge of the White House or Congress. By 2007, the top 1 percent of households had almost five times the real income they had in 1920; the top 0.1 percent had around six times, and the top 0.01 percent were awash in nearly ten times the real income they had enjoyed nine decades earlier. 

Chart via Chait.

 

Permalink Reply by Adriana on October 16, 2011 at 8:40pm

Great idea for a discussion, doone!

Permalink Reply by doone on October 17, 2011 at 12:31pm

Rethinking Inequality And Growth

A new report (from the IMF!) argues the former inhibits the latter:

We discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.

Via Politicalprof, who snarks:

It turns out that the biggest advocates of restraining wealth concentration at the top should be CAPITALISTS! The only chance CAPITALISTS have to succeed is if they have access to capital, which they don’t get in wealth-concentrated societies …

So I look forward to seeing signs that say “Capitalists for the Revolution” soon!

I don't quite get the hilarity. It's perfectly clear to me - and has been perfectly clear to political theorists throughout the ages - that extreme concentration of wealth hurts economic growth and destroys political comity. Conservatism has long sought to keep this inequality in balance - between the inevitable and beneficial inequalities that come with a free market and the structural, harmful inequality that comes from one tiny segement of the society wielding such massive power over the rest. I think this recession, its causes and effects, combined with thirty years of middle class decline and uber-class enrichment, are what has brought us to this impasse.

 

Permalink Reply by doone on October 20, 2011 at 8:49am

Chart of the Day: 2010 Was a Very Bad Year

—By Kevin Drum

| Wed Oct. 19, 2011 10:49 PM PDT

Every year the Social Security Administration releases data on the previous year's wage income. It comes from SSA's Medicare tax database, which processes W-2 forms and includes all wages, salaries, bonuses, independent contractor net income, and other compensation. In 2010, total wages and salaries amounted to $6 trillion.

David Cay Johnston has all the latest numbers and reports on what they tell us:

The median paycheck — half made more, half less — fell again in 2010, down 1.2 percent to $26,364. That works out to $507 a week, the lowest level, after adjusting for inflation, since 1999.

The number of Americans with any work fell again last year, down by more than a half million from 2009 to less than 150.4 million. More significantly, the number of people with any work has fallen by 5.2 million since 2007, when the worst recession since the Great Depression began, with a massive taxpayer bailout of Wall Street following in late 2008.

There's more at the link. The chart below summarizes the grim news.

 

Permalink Reply by doone on October 21, 2011 at 11:17am

Social Security Online	Automatic Increases
Office of the Chief Actuary	Wage Statistics for 2010 October 21, 2011

Automatic increases Development of the AWI

The national average wage index (AWI) is based on compensation (wages, tips, and the like) subject to Federal income taxes, as reported by employers on Forms W-2. Beginning with the AWI for 1991, compensation includes contributions to deferred compensation plans, but excludes certain distributions from plans where the distributions are included in the reported compensation subject to income taxes. We call the result of including contributions, and excluding certain distributions, net compensation. The table below summarizes the components of net compensation for 2010. Net compensation components for 2010 Compensation subject to Federal income taxes $5,799,538,431,420.40 Deferred compensation plan    Contributionsa    Distributionsb + 212,364,705,164.50 - 2,072,080,672.79 Net compensation 6,009,831,055,912.11 a Wages on which contributions were paid by 47,852,636 workers. b Distributions, to the extent included in reported wages (see text above), paid to 59,102 workers. The "raw" average wage, computed as net compensation divided by the number of wage earners, is $6,009,831,055,912.11 divided by 150,398,796, or $39,959.30. Based on data in the table below, about 66.2 percent of wage earners had net compensation less than or equal to the $39,959.30 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $26,363.55 for 2010.

Distribution of wage earners by level of net compensation

	Wage earners			Net compensation
Net compensation interval	Number	Cumulative number	Percent of total	Aggregate amount	Average amount
$0.01 — 4,999.99	24,124,490	24,124,490	16.04035	$48,646,973,007.81	$2,016.50
5,000.00 — 9,999.99	14,029,306	38,153,796	25.36842	103,753,773,866.59	7,395.50
10,000.00 — 14,999.99	12,239,188	50,392,984	33.50624	152,427,728,694.61	12,454.07
15,000.00 — 19,999.99	11,314,730	61,707,714	41.02939	197,591,579,979.58	17,463.22
20,000.00 — 24,999.99	10,711,552	72,419,266	48.15149	240,657,454,356.43	22,467.09
25,000.00 — 29,999.99	9,920,973	82,340,239	54.74794	272,372,689,057.65	27,454.23
30,000.00 — 34,999.99	9,181,734	91,521,973	60.85286	297,856,791,084.05	32,440.15
35,000.00 — 39,999.99	8,123,718	99,645,691	66.25431	304,119,965,262.31	37,436.06
40,000.00 — 44,999.99	7,083,492	106,729,183	70.96412	300,495,102,674.41	42,421.89
45,000.00 — 49,999.99	6,097,608	112,826,791	75.01841	289,248,398,193.81	47,436.37
50,000.00 — 54,999.99	5,261,803	118,088,594	78.51698	275,827,977,102.56	52,420.81
55,000.00 — 59,999.99	4,391,809	122,480,403	81.43709	252,201,137,270.38	57,425.34
60,000.00 — 64,999.99	3,755,285	126,235,688	83.93398	234,345,106,845.96	62,404.08
65,000.00 — 69,999.99	3,152,922	129,388,610	86.03035	212,574,544,714.55	67,421.44
70,000.00 — 74,999.99	2,688,746	132,077,356	87.81809	194,725,012,743.34	72,422.24
75,000.00 — 79,999.99	2,290,214	134,367,570	89.34085	177,309,820,908.13	77,420.63
80,000.00 — 84,999.99	1,932,596	136,300,166	90.62584	159,302,114,025.99	82,429.08
85,000.00 — 89,999.99	1,628,721	137,928,887	91.70877	142,392,656,555.10	87,426.06
90,000.00 — 94,999.99	1,403,871	139,332,758	92.64220	129,742,569,123.36	92,417.73
95,000.00 — 99,999.99	1,210,074	140,542,832	93.44678	117,904,205,038.18	97,435.53
100,000.00 — 104,999.99	1,040,609	141,583,441	94.13868	106,569,974,109.48	102,411.16
105,000.00 — 109,999.99	890,767	142,474,208	94.73095	95,697,619,665.68	107,432.83
110,000.00 — 114,999.99	772,130	143,246,338	95.24434	86,816,591,986.17	112,437.79
115,000.00 — 119,999.99	672,117	143,918,455	95.69123	78,936,296,312.24	117,444.28
120,000.00 — 124,999.99	598,154	144,516,609	96.08894	73,212,549,384.88	122,397.49
125,000.00 — 129,999.99	509,430	145,026,039	96.42766	64,914,648,997.80	127,426.04
130,000.00 — 134,999.99	450,398	145,476,437	96.72713	59,634,801,743.25	132,404.68
135,000.00 — 139,999.99	391,891	145,868,328	96.98770	53,858,115,803.95	137,431.37
140,000.00 — 144,999.99	348,926	146,217,254	97.21970	49,701,898,494.99	142,442.52
145,000.00 — 149,999.99	311,559	146,528,813	97.42685	45,943,416,303.38	147,462.97
150,000.00 — 154,999.99	285,585	146,814,398	97.61674	43,518,448,133.81	152,383.52
155,000.00 — 159,999.99	248,689	147,063,087	97.78209	39,150,566,369.42	157,427.82
160,000.00 — 164,999.99	217,907	147,280,994	97.92698	35,392,486,406.72	162,420.14
165,000.00 — 169,999.99	194,939	147,475,933	98.05659	32,640,763,728.60	167,440.91
170,000.00 — 174,999.99	173,966	147,649,899	98.17226	30,000,284,388.51	172,449.12
175,000.00 — 179,999.99	158,372	147,808,271	98.27756	28,098,893,722.00	177,423.37
180,000.00 — 184,999.99	145,880	147,954,151	98.37456	26,606,092,824.50	182,383.42
185,000.00 — 189,999.99	129,145	148,083,296	98.46043	24,208,233,519.82	187,450.03
190,000.00 — 194,999.99	119,376	148,202,672	98.53980	22,972,949,697.47	192,441.95
195,000.00 — 199,999.99	115,214	148,317,886	98.61641	22,748,330,596.58	197,444.15
200,000.00 — 249,999.99	754,976	149,072,862	99.11839	167,770,686,013.48	222,219.89
250,000.00 — 299,999.99	400,691	149,473,553	99.38481	109,147,681,171.06	272,398.63
300,000.00 — 349,999.99	239,537	149,713,090	99.54407	77,330,214,517.35	322,832.02
350,000.00 — 399,999.99	155,994	149,869,084	99.64780	58,236,608,391.83	373,325.95
400,000.00 — 449,999.99	109,488	149,978,572	99.72059	46,369,580,509.46	423,512.90
450,000.00 — 499,999.99	78,367	150,056,939	99.77270	37,125,440,813.66	473,738.19
500,000.00 — 999,999.99	248,132	150,305,071	99.93768	165,132,665,514.88	665,503.30
1,000,000.00 — 1,499,999.99	47,058	150,352,129	99.96897	56,407,545,099.25	1,198,681.31
1,500,000.00 — 1,999,999.99	17,624	150,369,753	99.98069	30,281,661,733.66	1,718,205.95
2,000,000.00 — 2,499,999.99	8,767	150,378,520	99.98652	19,483,916,134.04	2,222,415.44
2,500,000.00 — 2,999,999.99	5,094	150,383,614	99.98991	13,898,453,753.59	2,728,396.89
3,000,000.00 — 3,499,999.99	3,276	150,386,890	99.99208	10,587,274,867.50	3,231,768.89
3,500,000.00 — 3,999,999.99	2,296	150,389,186	99.99361	8,582,789,583.21	3,738,148.77
4,000,000.00 — 4,499,999.99	1,685	150,390,871	99.99473	7,136,341,859.33	4,235,217.72
4,500,000.00 — 4,999,999.99	1,221	150,392,092	99.99554	5,777,737,172.66	4,731,971.48
5,000,000.00 — 9,999,999.99	4,607	150,396,699	99.99861	31,219,871,728.03	6,776,616.39
10,000,000.00 — 19,999,999.99	1,537	150,398,236	99.99963	20,800,268,400.87	13,533,030.84
20,000,000.00 — 49,999,999.99	479	150,398,715	99.99995	13,975,877,397.41	29,177,197.07
50,000,000.00 and over	81	150,398,796	100.00000	6,447,878,556.79	79,603,438.97

 

Permalink Reply by doone on October 24, 2011 at 4:51pm

Forget the top 1% — Look at the top 0.1%

 

By Barry Ritholtz - October 24th, 2011, 2:30PM

Just today, I overheard someone say that income inequality must not be that bad, because you only need a few $100,000 to be in the 99th percentile (see CNN/Money) — that works out to be about $343k to make the top 1%.

That is factually accurate, but misses the full wealth disparity issue. To see where the big bucks are, you need to look into the top 0.5%, 0.1%, 0.01% and lastly, and lastly, the top 0.001%.

The details of this were delightfully illustrated by Catherine Mulbrandon at TBP conference – PDFpresentation here, video here.

Top 1% = $368,238 (20.9% of income)
Top 0.5% = $558,726 (16.8% of income)
Top 0.1% = $1,695,136 (10.3% of income)
Top 0.01% = $9,141,190 (5% of income)

>

click for larger chart

 

Permalink Reply by Michel on October 24, 2011 at 5:20pm

Permalink Reply by doone on October 25, 2011 at 7:07pm

TPMDC

CHARTS OF THE DAY: Where’d All The Income Growth Go? To The 1 percent!

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BRIAN BEUTLER OCTOBER 25, 2011, 3:47 PM 7093 112

At the request of the Senate Finance Committee, the Congressional Budget Office has produced a report analyzing trends in the distribution of household income from 1979 until 2007 — just before the economy fell off a cliff.

The results will be familiar to economists and policy wonks, but they’re eye-popping. These charts and graphs tell a story of a massive income growth in the Reagan and post-Reagan years, and particularly during the George W. Bush administration — but only for the famous 1 percenters.

CBO found that, between 1979 and 2007, after-tax income grew by 275 percent for the top 1 percent of households. That dwarfs income growth for middle and lower income households over the same time frame — nearly three decades during which the rising tide vaulted yachts and cruise ships, but barely nudged house and tugboats.

Specifically:

CBO finds that, between 1979 and 2007, income grew by:

 

* 275 percent for the top 1 percent of households,
* 65 percent for the next 19 percent,
* Just under 40 percent for the next 60 percent, and
* 18 percent for the bottom 20 percent.

 

There are many reasons for this, but the biggest, according to CBO, is a concentration of pre-tax income toward the top of the pay scale.

CBO notes, “the highest income quintile’s share of market income increased from 50 percent to 60 percent [between 1979 and 2007]. The share of market income for every other quintile declined…. In fact, the distribution of market income became more unequal almost continuously between 1979 and 2007 except during the recessions in 1990-1991 and 2001.” There’s no professional consensus about why this happened, though the explosive growths of the financial sector, executive compensation, and celebrity pay are among the likeliest culprits.

But federal policy has exacerbated the trend. Income taxes have become less progressive in the last three decades, and federal programs that used to benefit poor people have shrunk or disappeared altogether. That’s left Social Security and Medicare as the biggest federal wealth transfer programs, both of which benefit people at all income levels, not just the poor and middle class. In other words, federal programs have become less progressive in their distribution.

If you think of all income as a single pie, almost everyone’s slice has shrunk since 2007 thanks to the explosive growth of the top 1 percent relative to fairly minor gains for everybody else.

Check out the full report here:

cbo-25-oct-2011

 CBO, George W. Bush, Medicare, Occupy Wall Street, Recession, Ronald Reagan, Social Security, Tax Cuts,Taxes, Wall Street

 

Permalink Reply by doone on October 25, 2011 at 7:52pm

Yet More Grim Inequality News from the CBO

—By Kevin Drum

| Tue Oct. 25, 2011 3:54 PM PDT

The Congressional Budget Office is out with a timely new report on income inequality, which you can find here. Nickel version: the rich are getting richer, the rest of us are just kind of drifting along.

The main summary chart is the one on the right. Since 1979, adjusted for inflation, incomes of the broad middle class (solid blue line labeled "21st to 80th percentiles") have increased about 40%, which comes to a sluggish 1% per year. During the same period, the incomes of the richest 1% have increased about 280%, or 7% per year. This is a pretty familiar chart by now, but one thing to note is that the incomes of the rich are pretty volatile: they drop a lot during recessions, but they also bounce back pretty quickly and regain their high growth rates as soon as the recession is over. This chart only goes through 2007, but the same dynamic has been at work in the aftermath of the Great Recession: a steep drop followed by an equally steep recovery.

Another set of charts is below. These are a little less familiar and need a bit of explanation. They show Gini inequality coefficients for different kinds of incomes, and the more distorted the chart the higher the inequality.

The top left chart shows the inequality of labor income in 1979 (light blue) and 2007 (dark blue). As you can see, it's moderately unequal, and the level of inequality hasn't changed a lot over the years. Likewise, the bottom right chart shows the inequality of capital gains income. This is extremely unequal, but again, the level of inequality hasn't changed too much. Both the light blue and dark blue lines are pretty close to each other.

The other two charts show business income and capital income, and they're quite different. Both show a fairly heavy amount of inequality, and more interestingly, they show that the level of inequality has widened dramatically over the past three decades. Business income, which means income going to owners of private businesses, has grown much more concentrated, probably due to the growth of high incomes among privately owned professional firms (law, medicine, and finance). And capital income, which is largely dividends and rental income, has become far more concentrated as well. I'm not quite sure what story this tells, but one thing it tells us for sure is that most of the growth in income since 1979 has been in non-labor income. Which is to say, not the kind of income that people like you and I get much of.

 

Permalink Reply by doone on October 26, 2011 at 2:28pm

Share of the Nation’s Income Earned by the Top 1 Percent

The top 1 percent of American earners controls as much of the nation’s total income as it did on the eve of the Great Depression. Now, however, their money comes from skyrocketing paychecks more than from unearned income, as it did in 1928. Related Article »

 

Permalink Reply by doone on October 26, 2011 at 5:19pm

CHART OF THE DAY: Paul Ryan Wrong About Upwardly Mobile America

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BRIAN BEUTLER OCTOBER 26, 2011, 4:08 PM 3489 30

In his widely trumpeted speech at the conservative Heritage Foundation Wednesday, Republican budget guru and liberal boogeyman Rep. Paul Ryan of Wisconsin rejected the notion that wealthier Americans should pay higher taxes to sustain or broaden a social safety net for poor and middle class workers and retirees.

Instead, he argued, policy should be geared toward allowing high earners to grow the economy, and to facilitate upward mobility for the working class.

America, he argued, exemplifies the latter model while European economies illustrate the perils of the former.

“We are an upwardly mobile society with a lot of income movement between income groups,” he argued. “Telling Americans that they’re stuck in their current station in life, that they’re a victim of circumstances beyond their control, and that the government’s role is to help them cope with it — that’s not who we are, that’s not what we do.”

That is what they do in class-riven Europe, he said, where “Top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class. The United States was destined to break out of this bleak history.”

Turns out that is — not true.

There are a lot of data available on this issue, but the clearest chart comes courtesy of theEconomic Mobility Project, which looked at the correlation between parent and child income in various countries. Turns out in America, you’re more likely to stay rich if born rich, and stay poor if born poor, than you are in most European countries.

“Most studies find that, in America, about half of the advantages of having a parent with a high income are passed on to the next generation,” their report concludes. “This means that one of the biggest predictors of an American child’s future economic success — the identity and characteristics of his or her parents — is predetermined and outside that child’s control. To be sure, the apple can fall far from the tree and often does in individual cases, but relative to other factors, the tree dominates the picture. These findings are more striking when put in comparative context. There is little available evidence that the United States has more relative mobility than other advanced nations. If anything, the data seem to suggest the opposite.”

You can read their entire report below.

Economic Mobility

 

Permalink Reply by doone on October 27, 2011 at 6:19pm

Inequality And Stagnation

By Matthew Yglesias on Oct 27, 2011 at 4:45 pm

Tyler Cowen and Peter Thiel argue that median incomes are stagnating because we don’t have enough innovation. Along the lines of yesterday’s suggestion that maybehigh inequality is driving financialization rather than the other w... let me suggest that perhaps this is backwards. Perhaps we’re not having much innovation because our median incomes aren’t growing fast enough. Consider, for example, the fact that even though “everyone” has a smartphone these days, most Americans actually don’t have a smartphone.

There are a whole bunch of other things like that. Useful fairly recent innovations that aren’t so expensive that only a tiny elite can afford them, but that most people don’t own because they’re pretty expensive. Laptops, tablets, hybrid cars. These are, I think, the kind of things more people who own if they had more money. And the issue here is that it’s not as if Robert Nardelli is going to say “I’m rich, so why not go buy eleven iPads.” If the income distribution were flatter, you’d see higher sales for all these affordable luxuries. And if sales for that kind of product were higher, there’d be more return to dreaming up new categories of product. But in a world where lots of people who love to cook nevertheless don’t own stand mixers because they’re too expensive, how much sense does it make to invent new high value kitchen gadgets? You can think about this in terms of big infrastructure projects, too. Something like the Verizon FiOS network is only being rolled out very slowly. There are a number of reasons for that, but you can leave them all constant and just imagine that the median household income were growing faster. That would increase the anticipated share of the people in any given neighborhood who you could upsell on FiOS, which would increase the expected return on investment, which would increase the pace with which the network is built out.

A lot of U.S. tax policy over the past twenty years seems to have been driven by the idea that we suffer from some kind of investment drought. It seems much more plausible to argue that we’ve been suffering from a shortfall of worthwhile investment opportunities, at least in part because we’re suffering from a purchasing power shortfall.

 

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