Wealth distribution

[Seamus Fermanagh]

The noted Commie pinkos from Google explain why stagnating and falling incomes for the middle-and-lower tier people are a bad thing all around.

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Why do stagnant middle-class wages hurt the economy?

Because the middle-class folks whose wages are stagnant are the global economy's biggest spenders.

And when they don't have money to spend, their lack of spending hurts not just them but all the companies that depend on them for revenue.

Including, Schmidt pointed out, Google.

Put differently, one company's expenses (wages) are another company's revenues. So, collectively, when companies are cutting wages, they're also cutting their own future revenue growth.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible — that wages as a percent of the economy are now near an all-time low (see chart below). And this weakness in wages is the big reason demand in the economy is so weak.

Looked at from this perspective, ruthless cost-cutting with employees is just another variant of the Tragedy of the Commons.

The tragedy of the commons is an economics theory [...] according to which the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, act contrary to the group's long-term best interests by depleting the common resource.

Or to put it even more bluntly, when a Walmart executive complains that his customers have no money, he is whining about a mess he helped create.

Good points. The problem is that so many folks fixate on wealth distribution through taxation as THE answer to this, but it is a lousy choice -- too many ways to cheat existing tax systems exist and many such taxation schemes end up punishing innovation and success.

SO.....what are some concepts that MIGHT work?

[Seamus Fermanagh]

A stronger tax system, obviously.

That's sorta like saying "World peace would be better for all humanity." The HOW of it needs just a tad more in the way of detail.

[Strike For The South]

By putting ers in jail for tax evasion for starters. By raising taxes and refusing to bow to corporations that claim to be indispensable for seconds.

Its clear by now that a class war is going on, and the poor didn't start it. Raise taxes and crack heads until everyone can afford three decent meals a day and rent, and education is free and on par with the best European systems, and our infrastructure is repaired by Americans paid a living wage to repair it.

And if that scares some rich people away, fuck em. America is becoming a banana republic because of the people that oppose stronger tax enforcement and higher taxes.

This is the most hollow, sunshine pumping, populist pandering sentence I have ever heard.

Where do you propose we get this money?

[Husar]

But low corporate taxes are great, they draw all the industry and that's super beneficial for a country, ask Ireland or Luxembourg how great this works and how the taxpayers of other countries will gladly bail out your system of enabling higher corporate profits if it should fail horribly after you made a lot of their tax-paying companies migrate to your trollcountry.

[Gaius Scribonius Curio]

The problem is that so many folks fixate on wealth distribution through taxation as THE answer to this, but it is a lousy choice -- too many ways to cheat existing tax systems exist and many such taxation schemes end up punishing innovation and success.

From my perspective, the tax system is the only viable mechanism of wealth redistribution, regardless of its (very real) problems.

If we acknowledge that wealth redistribution of some order is desirable, which I admit is far from given, then the alternatives, as I see them, are: (1) rely on the private initiatives of wealthy individuals and/or corporations; (2a) legislate in such a way as to compel private wealthy individuals and/or corporations to contribute, with little direction; (2b) use a third party (ie: the state) to manage the process.

If we were to go with (1) the likelihood of escaping the tragedy of the commons scenario is small. As in the current system, it is in the interest of individuals and companies to reduce costs/wages, even if they rely on increased wages in the long run.

If we acknowledge that private initiative would not supply a fit and efficient system of redistribution, because it would not be in the interests of private initiative to do so, then some kind of coercive force must be applied. In this case, the only possible coercive actor is the state: only the state has the means, resources and the interest to act in this role. If we agree with this point, then there are two options. (2a) Compel private individuals/corporations to divert some funds to supporting others directly. This would entail introducing a mandated, fair, minimum wage; supporting community programs; investing the local community infrastructure, etc. To a certain extent, this does happen, but sporadically, and not to the degree where it makes a noticeable difference in the grand scheme of things. The key problems here are twofold: a lack of central direction results in inequitable outcomes, and it relies on a degree of communal will. Under the present system, it is in the interests of large corporations to contribute to such schemes from concern regarding global image, but when the balance of opinion shifts, there is no guarantee that it will continue in the same vein.

(2b) Which leads us back to the state as the main driver and administrator of the redistributive process. A third, neutral, party taking funds from those companies/individuals who can afford it and giving it/investing it in the interests of those who require it (ie. taxation). The problem here arises when it is not in the interests of those who run the state to institute and administer a robust tax system. Once again, the tragedy of the commons argument would apply, if the legislative/executive body wished to prioritise austerity-type policies, or the legislators themselves were corrupt in some way. However, an elected official, in theory, representing a wider body of stakeholders, ought to be more likely than a CEO or group of directors of a private company to act in the public interest.

I think that Gelatinous Cube has the right idea: whether the political will is there, or whether it would work in practice, however, is an entirely different matter.

[Fisherking]

By raising taxes. Its as easy as telling Norquist where he can shove it. But I guess that would threaten the entrenched system of corporate welfare so we can't do it.

It ain't populist, its what has to happen. The alternatives are all much worse.

No, raising taxes is just going to make more poor.

Your battle is not with the middle class or even the well off. It is the Ultra Rich and huge corporate interests.

You know, those guys the laws are written to favor. Just like the affordable care act. It will destroy some insurers but it will make the biggest of the big even wealthier in the end.

Taxing the corporations is only taxing the people that buy their goods or services. It will hurt the smaller businesses and benefit the Mega Corps. The little guy can’t compete.

The mom and pop businesses are gone. Chains are now swallowed by bigger chains. You are only concentrating all the wealth in the hands of few.

You need to find a way to make more people wealthy than more people poor. Taxes just make more people miserable.

[Husar]

Nationalize all corporations!

[a completely inoffensive name]

No, raising taxes is just going to make more poor.

Your battle is not with the middle class or even the well off. It is the Ultra Rich and huge corporate interests.

You know, those guys the laws are written to favor. Just like the affordable care act. It will destroy some insurers but it will make the biggest of the big even wealthier in the end.

Taxing the corporations is only taxing the people that buy their goods or services. It will hurt the smaller businesses and benefit the Mega Corps. The little guy can’t compete.

The mom and pop businesses are gone. Chains are now swallowed by bigger chains. You are only concentrating all the wealth in the hands of few.

You need to find a way to make more people wealthy than more people poor. Taxes just make more people miserable.

Raise minimum wage, accept that the new normal for employment is higher than 4% and make adjustments accordingly.

[HoreTore]

Good points. The problem is that so many folks fixate on wealth distribution through taxation as THE answer to this, but it is a lousy choice -- too many ways to cheat existing tax systems exist and many such taxation schemes end up punishing innovation and success.

SO.....what are some concepts that MIGHT work?

There is no answer that is THE answer.

Combating poverty is something requiring a wide range of answer. The most important is meaningful employment with a proper wage. I can list a few measures which will help deal with poverty:

- Government and commercial companies providing entry level jobs for those struggling(for various reasons) to enter the job market. The ideal solution is in the private sector, but state companies may be required if the private sector cannot provide what is needed.
- Education. Free.
- Free, early access healthcare intended to fix problems before they grow big, aiming at getting people back to work as quickly as possible.
- Lower housing prices. Government may be required to build housing to drive prices down.
- A functional drug/alcohol rehabilitation scheme, which doesn't involve sending addicts to jail.
- Switching focus in the justice system from revenge to rehabilitation.
- Fire/jail all academics who consider themselves post-modernists, or make positive references to Latoure or Bourdieu.
- Pump up child protective services.
- Increased wages.

Taxation won't do much to combat poverty, it's what you use those tax dollars for that matters.

[Husar]

Taxing the corporations is only taxing the people that buy their goods or services. It will hurt the smaller businesses and benefit the Mega Corps. The little guy can’t compete.

That's only true if you create a lot of tax loopholes for the big corporations because they pay for your election campaigns.
As for taxing the buyers, that is not necessarily true because the taxes can be paid from all the huge profits which only exist because they evade the taxes so well. Profits are good, the question is how high they have to be and where they go (e.g. huge management bonuses and payouts to super rich investors).

The mom and pop businesses are gone. Chains are now swallowed by bigger chains. You are only concentrating all the wealth in the hands of few.

You need to find a way to make more people wealthy than more people poor. Taxes just make more people miserable.

I already solved that seven pages ago, force corporations to find more investors instead of bigger ones. If they're clever they will pay their own employees more and then let them invest in the company, which is good for the employees and good for the company since it can then still use the money while the employees get an investment portfolio and a share of the profits. It's a win-win situation with zero drawbacks.

Raise minimum wage, accept that the new normal for employment is higher than 4% and make adjustments accordingly.

I think you already have more than 4% employment.

[The Lurker Below]

Nationalize all corporations!

With Ron Paul 2012!!! in your sig this would be fantastic if not sarcastic

[Husar]

With Ron Paul 2012!!! in your sig this would be fantastic if not sarcastic

I got the impression that it doesn't matter what I write and that explains both statements.
I'm glad I finally went far enough to make someone notice though.
Would be nicer to get replies to my more serious thoughts though, even if just to tell me why it won't work.

And maybe an explanation why this is suddenly a US-centric problem now, like wealth distribution is only a problem in the USA....

[Tellos Athenaios]

Good points. The problem is that so many folks fixate on wealth distribution through taxation as THE answer to this, but it is a lousy choice -- too many ways to cheat existing tax systems exist and many such taxation schemes end up punishing innovation and success.

The alternative is the Athenian system: force wealthy citizens to pay for the cost of procurement, outfitting and manning of your navy. Force them to pay for the cost and supply of feeding the poor (temples). If they don't, then forcibly exclude them from social and political life, possibly ostracise them or set up a kangaroo court or two to confiscate property.

Another alternative is the medieval system of executing the rich on some pretext and seizing their property if it's more convenient.

On the whole taxing is not perfect but it is a whole lot more civilised, less troublesome and preferable to the alternatives.

[a completely inoffensive name]

I think you already have more than 4% employment.

Well duh. So why are we still trying to reach that goal?

[Fisherking]

Nationalize all corporations!

Just the banks might work.

I got the impression that it doesn't matter what I write and that explains both statements.
I'm glad I finally went far enough to make someone notice though.
Would be nicer to get replies to my more serious thoughts though, even if just to tell me why it won't work.

And maybe an explanation why this is suddenly a US-centric problem now, like wealth distribution is only a problem in the USA....

US is just a good example. The EU is a US wantabe.

Individual countries may vary.

[Husar]

Well duh. So why are we still trying to reach that goal?

It may look like some corporations try to reach that goal but I think governments generally tend towards a goal of 96% employment.

Just the banks might work.

Well, I would go for national banks perhaps since they're meant to be sort of...national.

US is just a good example. The EU is a US wantabe.

Individual countries may vary.

The problem is that the problem is global and if the solution is done wrong then the corporations can either migrate, blackmail or just increase prices by a whole lot which will lead some of them to fail as they cannot get customers any more due to limited purchasing power. What you want is a solution that stops the wealth distribution from constantly going upwards and IMO this starts with a distribution of investments because those are IMO largely responsible for the upwards stream as poor people cannot invest and wealthy people only invest if it increases their wealth. The least that cut happen is that poor people get a cut of that investment-pie.

[Strike For The South]

By raising taxes. Its as easy as telling Norquist where he can shove it. But I guess that would threaten the entrenched system of corporate welfare so we can't do it.

It ain't populist, its what has to happen. The alternatives are all much worse.

Raise taxes on whom, exactly? How would it threaten corporate welfare?

I mean, it's not this simple. You're just angry and spewing vitriol.

[a completely inoffensive name]

lol I just realized my typing mistake. whatever, you all got my point.

[Strike For The South]

Thats why we have a legislature. They should be working out whom exactly they want to tax in terms of income brackets. In the absence of that eminent body's sage judgement, you get vitriol. Norquist's anti tax pledge is going to lead congress (which is full of sorry ass millionaires anyway) right into some very real populist rage.

Christ almighty, despite what Jon Stewart tells you, Gorver Norquists tax pledge is not shackling anyone from doing anything.

[Strike For The South]

Then they should stop using it as an excuse. Jon Stewart's a sell out anyway.

Who is using it as an excuse

[Strike For The South]

First thing on google and a year old

http://thehill.com/blogs/congress-bl...ist-tax-pledge

Norquist is a sideshow to sideshows.

[Montmorency]

Where do you propose we get this money?

Nationalize the Fed.

[Strike For The South]

What he stood for is still alive and kicking. You say "Raise Taxes" and a chorus of very wealthy congressmen say "Not a chance in hell" (mostly Republicans, but the Dems are just happy the Republicans take the position for them so its not exactly one-sided). You know full well that the kinds of tax increases I'm talking about would make every single member of congress laugh all the way to the bank.

Americans have always hated taxes, it has nothing to do with Grover. "What he stood for" is not his idea, he simply co-opted it for a short time and got on television. Congress finds new ways to tax us all the time. Most of the time, if only to ensure their re-election/not rankle the constituency, they do it in a very roundabout way (see: Obamacare). Trust me congress would tax us a lot more if we REALLY wanted it, but people are not rational actors and we get what we want.

But like I said, its not just tax increases. The enforcement needs to be stronger, the tax code needs to be far simpler with less room for error, and there needs to be a real war on those who send all our money off-shore. And, indirectly related but still important, Citizens United v FEC needs to be overturned. What needs to happen, in my opinion, is what the Romneys of the world are most afraid of: a targeted campaign of revenue gathering against the wealthy, and a total purge of corrupt politicians from the political arena.

How much liquidity do you think these people have? In fact what kind of people are we talking about here? I personally attribute the "wage gap" in this country to increasing automation, which is something we can't and wouldn't try to stop. Now certainly this has, on some level, been exploited but taxing the "rich" is a drop in a bucket.

If that sounds scary, see what they're saying in ten or fifteen years when its clear that the government doesn't have the will or the power to do it the nice way.

:eyeroll: The most powerful economy in the world is in a rough patch, and the plan B is armed revolution

You are a charlatan

Also all this talk about the "rich" and yet nary a peep about the shit debt the "99"% has racked up "keeping up with Jones". Piss poor credit, houses too big, too many cars, and yet it's the "rich" peoples fault.

You're making sound like der fuhrer Panzer, that's very difficult

[Lemur]

As this thread demonstrates, the problems are obvious. The solutions ... less so.

America's Founding Fathers were very scared of concentrated power, so they divvied up the government into three mutually balanced branches. But at the time America was a rural, agricultural, relatively poor country. The Founders never foresaw our version of the Punic Curse, nor does our system of government have any checks or balances against the power of great and concentrated wealth. Nor is there any structural limitation on the power of multi-national corporations, which may or may not have interests in alignment with the U.S.A.

And I'm sorry I keep bringing this back to the States—in fairness, most nations struggle with these issues.

[Husar]

Also all this talk about the "rich" and yet nary a peep about the shit debt the "99"% has racked up "keeping up with Jones". Piss poor credit, houses too big, too many cars, and yet it's the "rich" peoples fault.

Who is giving the poor people all these loans and why? Where is the money coming from that allows them to get so indebted? And who pays millions advertising favorable loan conditions for consumer goods to them?

[HopAlongBunny]

Violence if it does occur likely won't come from the bottom up. The probable source would be gov't coercion to keep the "rubes" in line with the policy of exporting labor jobs to beneficial jurisdictions.
The gov't can and will "crack heads" to maintain labor discipline.

[Montmorency]

Also all this talk about the "rich" and yet nary a peep about the shit debt the "99"% has racked up "keeping up with Jones". Piss poor credit, houses too big, too many cars, and yet it's the "rich" peoples fault.

Hasn't this narrative been discredited?

[a completely inoffensive name]

Also all this talk about the "rich" and yet nary a peep about the shit debt the "99"% has racked up "keeping up with Jones". Piss poor credit, houses too big, too many cars, and yet it's the "rich" peoples fault

I subscribe to the notion that individuals are not perfectly rational actors and that when a bank tells an individual they qualify for a loan, the individual will take such an evaluation at face value because they will not go through the logic and uncover for themselves that the banks want them to miss payments so they can charge exorbitant fees and interest rates.

Likewise, I do feel as if we must also accept the consequences of this idea when it comes to the "elite", the bankers and CEOs and such who gave out/authorized these high risk loans. However, since it has been proven that their culpability does not end in ignorance but in willful fraud of the legal system, I think GC has a point that we may point the finger at them as being at the very least, subject to more moral and legal scrutiny than the average citizen.

Keeping up with the jones has fueled the american economy for decades, you cant blame people for doing what their parents and grandparents did because they took their non-finance background and did not look into the business model of handing out predatory loans.

[Husar]

There is also a psychological component because in a huge corporation decisions are often made not by a single person but by several people.
As with accidents, the more people have to make a decision, the more likely each one is to think that the others are as or even more responsible than they are. And if the others agree then it can't be so bad and what not. (with accidents it is so that people are less likely to help the more people are around because they think the others can help, not exactly the same but similar)

Counter to this one also has to remember that most really rich people have some kind of education that a lot of factory workers do not have. They can calculate financial deals or even get a good feeling for the numbers right away. They also know better about the consequences of what they are doing and so on. Blaming the poor guys for not having the same education is not fair if getting that education costs more per month than a poor guy earns in a year...

[Fisherking]

You guys are missing an important point.

Our money system is based on debt creation. Banks make their money from lending. The fractional reserve system allows the creation of money based on that debt.

It makes no difference if it is the government borrowing the money or the family buying a house or just taking a cash advance from their credit card.

Money is not based on any real assets. There is no gold or silver involved as in the past.

Banking interests loan you what they don’t have to pay for real things. Then when you default they are covered by insurance of the loan but also get to take the real assets and resell them, usually creating more debt.

Convincing some poor sod to go into debt just makes them wealthier. You put the focus on individuals. What about what our brilliant governments owe.