The Wealthiest 5% Grabbed Most of the America’s Gains

http://blogs.wsj.com/wealth/2011/09/16/the-top-5-grabbed-most-of-the-americas-gains/

by privacyguru • 15 years ago

90 121 15 years ago

blogs.wsj.com

hammock5• 15 years ago

Before jumping all over the rich, consider whether you are one. For example, if you earn $100k or more per year, you are IN the top 5% of income earners. And if you have a total net worth of ~$200k or more, you are IN the wealthiest top 5%. Easy to imagine that many HN readers are in these boats.

sabat5• 15 years ago

You bet we are. But it doesn't necessarily follow that we think that the disproportion is a good thing.

jeffreymcmanus2• 15 years ago

Not even close. A $100,000 income puts you at about the 75th percentile, not the 95th.

http://en.wikipedia.org/wiki/File:United_States_Income_Distr...

stephenbez• 15 years ago

As the legend states, the graph shows family income not individual income. If you and your spouse both earn $100k, you'd be above the 95th percentile.

hammock5• 15 years ago

That's household income, not individual.

$100,000 or more; percent in group: 6.24%

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

Terry_B3• 15 years ago

Not picking on this article in particular but whenever I read these types of stories I get the feeling that people don't make a clear separation of these two very different issues:

1. The bottom is worse off relative to the top in terms of wealth than they were before.

2. The bottom is worse off in terms of wealth (quality of life) than they were before.

People seem to imply 2 when they talk about 1. but they are very different things.

sabat5• 15 years ago

But it's both, isn't it? Fewer Americans have health coverage, fewer Americans have jobs, fewer Americans can stay in homes. What you hear people saying is that #1 implies #2.

Terry_B3• 15 years ago

Sure, it might if you show the data that proves it.

But showing the data that the top has increased their % share of the wealth does not prove that.

robryan• 15 years ago

At a most basic level over the period relative wages for the poor haven't moved a lot but the absolute basics such as food and clothing prices have come down a heap.

yummyfajitas6• 15 years ago

Apart from short term fluctuations during the recession, more Americans own homes and health insurance coverage is roughly the same as it ever was.

http://research.stlouisfed.org/fred2/series/USHOWN

http://en.wikipedia.org/wiki/File:U.S._Uninsured_and_Uninsur...

drivebyacct23• 15 years ago

"A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president"

http://www.newyorker.com/online/blogs/johncassidy/2011/09/po...

(More to the discussion in the article, ) As long as we continue to structure tax cuts as we do, and as long as an attempt to get the wealthiest top percentages to pay at least as much as the middle class in taxes (on a percentage basis, mind you) is called "class warfare" by the GOP, it's not likely to change (the response to the "Buffet clause" in the last two days or so). It's not hard to understand how our politician's priorities influence the outcome embodied by the title of this post...

orangecat• 15 years ago

A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president

Which just means that income is an inadequate measurement. How many Americans would prefer to live in 1975 than today?

roel_v4• 15 years ago

"A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president"

But that's clearly, obviously and without question BULLSHIT (when you look at what you can actually do with that money, rather than just look at inflation-adjusted dollar numbers). A typical American male in that income bracket today has a house that is larger and much more comfortable than back then, has access to a much broader range of food, can communicate with anybody anywhere in the world instantly, carries in his pocket a device to communicate with people he knows in a much more efficient and convenient form than whatever was available 30 years ago, has a higher life expectancy and better access to information (not to mention that the information that is available is vastly more), etc etc.

What would you prefer, being Louis XIV who lived in a castle with no bathrooms (everybody shat where ever they happened to be standing and there were servants to sweep it up) or in the typical house of somebody in the West in the 20th-40th income percentile today (with running, hot water and functioning plumbing, electricity etc?) Or even being an early 20th century rich businessman/socialite in NYC, where the health circumstances even for the very rich were vastly inferior to what is now available to everybody except those at the very bottom of the socio-economic ladder?

bluedanieru3• 15 years ago

They aren't as different as you think. Even if wages remain the same at the bottom while wealth at the top increases tenfold, the poor are worse off. They are worse off because they will see their political power decrease, especially in a country like America where that is so tied to money, and they are worse off because income disparities decrease quality of life across the board (i.e. for rich and poor alike).

There isn't the clear separation that you are putting forward here.

Terry_B3• 15 years ago

I don't disagree with you but I've seen a number of articles that simply present the fact that the top have increased their % and left it at that as proof of something bad happening.

If what you say is true then that is the argument that needs to be made before reaching that conclusion, that's all.

jeffreymcmanus2• 15 years ago

This is pretty damning when you consider it's being run by the Wall Street Journal.

jeffool• 15 years ago

WSJ, Economist, Forbes, none of these pull punches. You want a stark look at these kind of numbers and the issues around them, they all provide it with no hesitancy or softballing.

Don't be surprised when someone talks about the money they've made. They think they have it rightly, just as many feel slighted. No shame in the game of the wealthy.

cema• 15 years ago

Just like it should be. Of all the "mainstream" publications, the financial (and business-oriented) newspapers are the ones I distrust less, because in my experience they tend to understand it is their interest to work with the facts and real numbers.

barmstrong• 15 years ago

Some PG thoughts on distribution of wealth:

http://www.paulgraham.com/gap.html

klenwell• 15 years ago

PG asks:

Why? The pattern of variation seems no different than for any other skill. What causes people to react so strongly when the skill is making money?

I'd offer this passage from Robert Wright's The Moral Animal as one answer. This assumes the distribution of wealth serves as a proxy (inexact, even inaccurate, perhaps, but functional) for the distribution of access to sexual resources among males:

Men have long competed for access to the scarcer sexual resource, women. And the costs of losing the contest are so high (genetic oblivion) that natural selection has inclined them to compete with special ferocity.

http://books.google.com/books?id=MuI_DVZ1Xo8C&lpg=PP1...

So the argument goes something like this:

Material resources (wealth) provide access to sexual resources and reproductive success (any organism's raison d'etre). An organism hard-wired to persist its genes will probably also be hardwired to recognize the existential threat presented by unequal access to the resources required to persist its genes and take radical action to avoid it. Since among most animals (including humans), females make a greater biological investment, they enjoy the privilege of selecting among males, preferring those with resources to best provide for their offspring, which puts males in the position of scrabbling to accumulate the resources necessary to win the affections of a mate.

That probably leaves out a few necessary premises, but if you're not familiar with the argument, hopefully you at least get the picture.

Wright makes the point that a society in which there is such radical inequality of wealth that a significant number of men have not the resources to attract a mate, settle down, and marry, also tend to be the most violent and unstable.

If you had a society in which there was radical inequality of wealth, but not radical inequality of access among young males to mates, you would expect less instability. But allowing for the shortcuts in reasoning that evolution might encourage, you'd still expect some. And as various behaviorial economic experiments have demonstrated, humans seem to have a tendency to reason about fairness in relative rather than absolute terms. So in such a society, you'd probably still have a greater threat of instability than one where there was a more equitable distribution of wealth -- and, especially, the perception of it.

nazgulnarsil2• 15 years ago

okay, tax male babies and subsidize female ones. not joking.

rphlx• 15 years ago

This is a Beta male view of female sexual selection: "if I can just get rich enough, girls will like me".

The truth is that for the middle class and above, social intelligence, wit, charm, "Game", and other characteristics matter as much, or more, than raw financial net worth. Of course, these are often correlated, but there are plenty of broke bikers, musicians, and womanizers doing quite well too, in comparison to Aspie SW millionaires.

david927• 15 years ago

I like Paul but this essay is especially simplistic and poorly reasoned.

callmeed5• 15 years ago

I know this is wealth and not income, but I get sick of the media (and politicians) using the "top 1%" or "top 5%" label.

When it comes to income, the top 1% includes an attorney making $250K and a hedge fund manager making $10M. I imagine its similar for wealth. My guess is that distribution curves spike somewhere past the 1% mark.

Maybe I'm biased because I barely make the cut and don't want to pay more taxes, but it seems odd to use such an arbitrary cutoff for reporting and (especially) policy decisions.

And please tell me if I'm wrong or off here–I'm geniunely interested in this.

EDIT: downvoted? Seriously?

jfruh2• 15 years ago

I think one of the problems of wealth distribution and attitudes about it in the U.S. is that it does shoot up so rapidly in the upper 1%. We're a very upward-looking society so it's easy for someone making $250K a year to say "I'm not rich, I still have a mortgage, I have to work for a living I can't just spend whatever I want, whenever I want -- I know there are people further up the latter than me who have so much more money, I must be middle class."

Absolute percentiles are useful because they do show you where you stand in relation to the rest of society. Families making $250K may not be Scrooge McDuck-style super-rich, but they're indisputably in the top few percent of the nation in terms of income. It's hard for those folks to claim to be middle class when 90+ percent of their fellow citizens make less.

It's also worth noting that people's lifestyles and "necessities" expand to fit their income, particularly if their income goes up relatively gradually. I've literally heard people say, "Well, I make $400K a year but I'm not rich because it costs a lot of money to pay mortgage and taxes in Westchester County and send my kids to private school and drive a nice car." They think that "rich" means "disposable income I can spend a whim," when in fact living in Westchester and sending the kids to private school is part of being rich.

jfruh2• 15 years ago

I should add that I'm not definitely not exempting myself from this set of attitudes. When I was in grad school in my early 20s (in the mid-late '90s, so it's not like inflation makes a huge difference here) I made less than $17K a year for several years, but I never felt particularly deprived and don't particularly recall not doing things I wanted to do because of money worries. Now my wife and I make more than $100K combined (putting us in the top 25 percent of US workers) and yet we are constantly bumping up against the limits of our income, particularly because we enjoy travelling. I don't feel rich but I know I'm better off than a significant majority of Americans.

hammock5• 15 years ago

Income distribution is relatively uniform - there are no "spikes" - but it is uniform according to a power law distribution[1][2]. Due to the uniformity practically every division could be called "arbitrary."

[1]http://en.wikipedia.org/wiki/Pareto_distribution [2]Unless you look at the bottom end where you may find welfare trap effects http://en.wikipedia.org/wiki/Welfare_trap

rudiger• 15 years ago

Although income (and wealth) distributions are pretty smooth in dollar terms, there's an extreme social stratification somewhere in the the top 1%. The lower half of the top 1% consists of doctors, lawyers, managers, and successful small business owners. The upper half (or upper .1%, or upper .01%) form a very different group.

http://news.ycombinator.com/item?id=2844059

Volpe5• 15 years ago

top 5% you are earning more than 95% of society... you are rich (relative to the rest of society). Stop complaining, and pay more taxes.

callmeed5• 15 years ago

I initially dismissed your comment, but I think I'll counter it instead and see if you have any actual reasoning behind it.

I don't disagree with your first 2 statements. Here's my beef with "pay more taxes":

- The top 5% of earners already pay 53% of the nation's income tax revenue. The top 1% pay 33% of it. Exactly how much would you like it to be?

- Those in the top 5% are in a higher tax bracket already (usually 33 or 35%).

- 40-50% of americans pay no federal income tax (only payroll tax) and 10% receive more cash from the IRS than they contribute in federal income taxes and payroll taxes.

So, please, tell me what those in the top 1%/5% should be paying?

samfoo• 15 years ago

If you only barely make the cut, you'll only be paying barely more in taxes. Only your income above the cut is taxed at the higher rate. It's not like if you make $239,999 and you get one more dollar in income you lose money. Only that dollar is taxed at the higher rate.

sage_joch• 15 years ago

This isn't something that's communicated very well in our society. I didn't realize it until I actually did the math on the tax tables.

majorlazer• 15 years ago

It really blows my mind how many people don't understand our progressive tax system. Especially someone making 250k+...

keithnoizu3• 15 years ago

If you barely make the cut you would only be paying taxes on a very small portion of your entire income.

spenrose3• 15 years ago

Upvoted. I disagree with your perspective, but your comments are entirely relevant and appropriate.

DanielBMarkham• 15 years ago

Once again, this is a statistical aggregate. As difficult as it might be, please do not picture a filthy rich old white Scrooge character stealing cookies from poor orphans on the street when you read numbers like this. As the author clearly indicates, these numbers are in relation to averages, not real people. Movement between income groups is an area of current study, but I've seen numbers as high as 40% moving from one statistical group to another inside of a year. The rich may indeed be getting richer, but it may only be a small percentage of them who stay in that group over a period of decades. There might be many new arrivals and many people leaving each decade.

Of course, it's perfectly fair to say that the disparity is important whether or not the same people are involved year-to-year or not. I'm not trying to get into that part of the discussion. I'm simply trying to point out the difference between stereotypes and averages and real, live people. There are lies, damned lies, and statistics. (old joke)

hammock5• 15 years ago

One thing that has always bothered me about these reports is that they are not longitudinal, as you point out. We say "the poor are getting poorer" but is it the same poor person that got poorer, or did that poor person discover his inner tycoon and move up while some terrible, lazy deadbeat took his place in the income ladder? If it's the latter, would that not be considered a success despite the fact that "the poor have gotten poorer"?

jbellis• 15 years ago

In particular, "[immigration] disproportionately brings low-skill workers into the U.S. instead of moving jobs abroad. As immigration increases the relative supply of low-skill workers, the income of individuals at the 20th percentile declines."

http://www.frbsf.org/publications/economics/letter/2007/el20...

Tichy4• 15 years ago

Why do I get the feeling that you already have answered the question for yourself? Yes of course only the terrible, lazy deadbeats fall on hard times. At least it is very convenient to think so...

lucasjung2• 15 years ago

In this case it's especially relevant: how many of those top 5% are in the top 5% because they were able to grab a disproportionate portion of the economy's gains? In other words, a lot of people will look at this and think, "Rich people used their power and influence to fleece the economy," when in many cases it might be, "People who won when others lost are now rich." Most likely it was some of each.

ansy2• 15 years ago

I actually think you're wrong with regard to the rich getting richer not being the same people from year to year, at least for the majority of rich Americans. Yes, movement is possible, but most of this happens between the upper and lower middle class. At extreme ends of the economic spectrum this mobility is severely diminished. Even across generations. This study is focused across generations, and shows that adult children of parents in the top 20% are 39% likely to be in the top 20%. Likewise adult children of people in the bottom 20% are 42% likely to be in the bottom 20% [1].

It stands to reason, then, that if the children of top earners are likely to stay in that income bracket, that people in the top income bracket are also likely to stay there.

Notice that the top 4% mentioned in this article fit quite comfortably in the top 20% of income earners. And through extrapolation, I imagine that the movement among the top 4% is even more severely diminished. It would be truly exceptional for even the child of someone in the top 4% to find themselves in poverty or for that matter the middle class.

[1] http://www.economicmobility.org/assets/pdfs/EMP_Across_Gener... (PDF! page 5)

learc835• 15 years ago

So to put it another way the study says that 61% of children born to parents in the top 20% fall out of it, and 58% of children born into poverty rise out of it. Sounds like pretty good numbers to me.

jberryman2• 15 years ago

Good point about statistics not being people, but you should really cite your own statistics if you want to suggest that movement between income groups would paint a significantly different picture than the one presented here.

graiz• 15 years ago

It drives me crazy when I see encoding issues in popular articles. Come on, it�s embarrassing.

byoung2• 15 years ago

Looks like it was composed in Word and copied into a rich text editor (without using the paste from Word feature). It converts the double spaces to space,  , and doesn't convert the smart quotes.

steve_b• 15 years ago

Wealth != income as pg says in http://www.paulgraham.com/wealth.html.

I think wealth is more equal to total free time left on the planet. So total time minus time spent working to provide things for survival minus time spent surviving (like cooking, sleeping, running from lions). The washing machine is invented, lots of peoples' wealth skyrockets. Food gets cheaper, people's wealth goes up.

Looking at income is a short-sighted definition of wealth.

prostoalex• 15 years ago

Most of the US wealth is ephemeral and is tied up to the real estate market. The poorer one is, the greater proportion of personal wealth is tied up to the value of their real estate.

If you started off wealthy before the real estate crisis, and just stayed in cash, your wealth in absolute terms would decline slightly as your house lost value and your super-conservative cash holdings earned you 0%.

In relative terms the guy who bought with no money down, easy mortgage guaranteed is now seeing his total wealth delta in severe red, so yeah, the wealthy ones are seeing their proportion rise by staying stable.

noonespecial2• 15 years ago

Has anyone ever stopped to try to get an estimate of how much of these gains this 5% have created?

I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?

Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.

spenrose3• 15 years ago

Yes. The Fed has spend 30 years ensuring that labor never has the upper hand: http://thinkprogress.org/yglesias/2011/09/14/319359/how-asym...

http://rortybomb.wordpress.com/2011/03/18/the-federal-reserv...

WRT manufacturing: http://rortybomb.wordpress.com/2011/01/21/immelt-ge-capital-...

shawnee_• 15 years ago

Milton Friedman said that most fallacies in economic thinking were derived from the "fixed pie" assumption: that one party can gain only at the expense of another. In an ideal world, the pie would always be growing, and those marginal increases in utility would spill over and everybody would increase well-being gradually over time.

But that's not what happens.

The top 5 percent may create some gains for the other 95, but their gains that "trickle down" do so very, very selectively, and only go so far. Probably the most obvious evidence that trickle-down economics doesn't work is this:

The share of wealth held by the bottom 60% dropped 7.5%.

When over half of the people are on the shrinking pie side of the table, it's pretty tough to spell "Net win"

yummyfajitas6• 15 years ago

The key word here is share.

I.e., if I become 10% richer, but some other guy becomes 20% richer, my share of the wealth is lower but I'm still wealthier.

webwright2• 15 years ago

So the pie hasn't grown? I'm serious asking-- I don't know.

It it has, then it COULD be a net win. Example: Pie consists of $100. I (rich guy) have $50, the rest of the folks (5 people) split the other $50, and have $10 apiece. I cleverly invest abroad and double my money. I now have $100. The rest of the folks invest less cleverly, and turn their $10 into $12. Their share of the wealth declines, no?

jberryman2• 15 years ago

> Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.

IANAE, but I don't think wealth creation works like that (the Randian hero as the engine of humanity). I'm inclined to think that parents are the greatest wealth creators, followed by teachers

http://economix.blogs.nytimes.com/2010/05/21/who-creates-the...

aj700• 15 years ago

I supported (absolutely past tense) capitalism on the basis that the right people would end up with the money. Maybe they will. Waiting another 30 years isn't on.

Things shouldn't go to people "according to his need".

But now things are going to people "according INVERSELY to his need".

Endless claim checks on future productivity are being stockpiled by precisely those who have no need of 99% of that productivity. In many cases they also have very little future, because they are old.

Politics is bought and paid for. People will not pay taxes. Inflation must now be used as a regressive wealth tax of last resort. At least it transfers purchasing power from the old to the young.

Poor people should, if they were intelligent, stop spending their disposable income and use it to buy the thing that gives the best return on investment - which is bribing politicians. And no, corporations aren't people, and money isn't speech.

ender7• 15 years ago

It's easy to start filtering yourselves into the camps of "the rich are too rich, tax them!" or "the rich earned their money, you have no right to take it away!". Then you can yell at each other from across great echoing divide until the sun grows dark.

The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn. Or that pay a salary worth a damn.

We still make some things. Software. Circuit designs. Entertainment. Product design (to sell things to ourselves). Pharma. People who work in these areas are paid well.

Oh, and the financial industry. Which, despite demonstrating a wonderful ability to make itself mountains of cash, has failed to demonstrate how it benefits the rest of the country. (obviously, its ability to provide lines of credit is valuable, but we had that long before investment banking came to dominate the entire financial industry)

I remember reading Snow Crash for the first time and coming across this line:

  There's only four things we do better than anyone else: 
  music 
  movies 
  microcode (software) 
  high-speed pizza delivery

and thinking "what an alien dystopia that future must be".

suking• 15 years ago

It's not even investment banking anymore, GS might as well just be a prop trading firm - how many companies are raising cash now or doing private placements.

yummyfajitas6• 15 years ago

The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn.

This is incorrect. We make plenty of things, more than in most historical periods.

http://research.stlouisfed.org/fred2/series/INDPRO

We just do it more efficiently, resulting in fewer manufacturing jobs.

http://research.stlouisfed.org/fred2/series/MANEMP

nerfhammer• 15 years ago

Not really.

http://www.ourfuture.org/blog-entry/2010020825/no-virginia-u...

Manufacturing output is up and has increased at a relatively stable clip over the past 50 years. Manufacturing productivity has increased at a faster rate, however.

webwright2• 15 years ago

More data: http://en.wikipedia.org/wiki/List_of_countries_by_exports

The US is the #3 country in terms of exports.

pbsurf• 15 years ago

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

Scroll all the way to the bottom.

rubiety• 15 years ago

"The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn."

This makes just about as much sense as a similar statement does 100 years ago:

"The sad fact is that America is no longer a country of farmers producing food, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn."

A service economy and relative decline of manufacturing output (NOTE: I said relative - manufacturing output is at an all time high) is something to be celebrated, not bemoaned.

gamble2• 15 years ago

Except that productivity and GDP have been rising as steadily as ever. The wealth is there; it's just being entirely captured by the wealthiest citizens.

functionoid• 15 years ago

GDP is currently less than 2%. It is every decreasing for this decade and especially in last few years. Not sure where you are getting your numbers from.

linuxhansl• 15 years ago

I am quite tired reading the top x%.

Many people living in the SF bay area for example technically belong to the richest 3-5%... But cannot even afford a nice house here.

And with "nice" I do not mean a pool, 10 rooms. movie room, etc, but just enough rooms for the kids and in a neighborhood with good schools.

Now I have a very liberal viewpoint, and above categorization mostly fits me. Still I personally do not mind to be taxed a bit higher.

But all that talk about the richest 5% living the life of riches is just not accurate.

Game_Ender• 15 years ago

> But all that talk about the richest 5% living the life of riches is just not accurate.

It's relative. You seem to define rich as basically being able to spend whatever you want and not have to worry about money. As another commentor has stated, being able to own a home in an area like the SF bay area is rich. It is a very desirable area, with good climate, and jobs.

nazgulnarsil2• 15 years ago

"neighborhood with good schools"

examine this condition more closely. you will be surprised and disgusted.

kitsune_• 15 years ago

The cute thing with this argument is the idea that your hardships are similar to the bottom 5% somehow. If you're not happy with your income, what should the people making less than you be?

MarkPNeyer2• 15 years ago

divide (rather arbitrarily) the population into a few groups.

  very wealthy: anyone with net worth exceeding $10M.
  wealthy: anyone with net worth between $1M - $10M
  upper middle class: anyone with net worth between $100k - $1M
  middle class:  anyone with net worth between $10 and $100k
  poor: anyone with  net worth < $10k

now let's make some overt generalizations!

the very wealthy seem to fall into one of two groups: successful business owners and venture capitalists on the one side, and bankers, traders, and some classes of lawyers on the other.

the wealthy and middle classes all seem to consist of professionals and small business owners, who have met with varying degrees of success.

the poor consist largely of immigrants, people living in impoverished urban and rural areas, as well as people without a trained skill.

here's what i think is happening: a group of the very wealthy, mainly those on the banker-trader-lawyer side of the divide, have this country by the balls. they have accomplished this by having their politician friends (how many politicians are former lawyers? and how many came from wall street? ok, now how many are former business owners or venture capitalists?) convince the poor that the "rich" are responsible for their plight. to fix this problem, they propose raising taxes on the "rich."

this proposal invariably means raising income taxes, which the very wealthy rarely pay because their income is mostly in the form of capital gains. the democrats propose a tax raise, the poor vote them into power, and income taxes go up. the wealthy and the middle class both feel like they're getting fucked, probably because they are. so they fight back, saying they want to lower taxes, reduce government spending, and cut social programs. the republican party says they support these ideals, so they get this type of vote. once in power, the republicans pass a tax cut on both income and capital gains taxes. they also increase government spending, because, hey, why not, fuck you buddy. the poor see this response and it confirms to them what the very wealthy have been saying through their proxy politicians, so the fight goes on.

if this process is going to stop, we need a new word to describe the members of the very wealthy who are contributing nothing but misery to the economy, whether by gambling with other people's wealth and getting bailouts when they lose, or simply by using the broken legal system as a weapon to extract wealth from the venture capitalist / successful business owner side of the divide. if we had a single word to embody this concept, i think more people would become aware of the distinction between the 'productive rich' and the 'destructive rich' and we could fix the problem. since 'destructive rich' isn't exactly catchy, i propose we call those people 'dicks.'

ryanlar• 15 years ago

There's a a real word for this. 'Plutocrat.' A member of the 'plutocracy': a government controlled by the wealthy.

If we had a flat tax (say, 20% on both capital gains -- short and long term -- and income tax), we wouldn't have any of this nonsense. But then, we'd have a lot of out-of-work lobbyists (read: politicians in 'retirement') and people who work for non-profits and charities...

MarkPNeyer2• 15 years ago

i would argue plutocrat doesn't have a ring to it, and makes the user sound like onna them lib'ral elitists

charlesju• 15 years ago

There are a lot of stats everywhere. Here is one I like. The top 1% pays for 38% of all taxes. The top 10% pays 70%. If I showed you this stat, you would lean on taxing the poor more, but that isn't right either. Everyone should look at the problem in aggregate and decide for themselves what is fair for our system as opposed to analyzing individual stats and extrapolated analysis from that alone.

http://ntu.org/tax-basics/who-pays-income-taxes.html

danssig• 15 years ago

>If I showed you this stat, you would lean on taxing the poor more

No I wouldn't. The ones who are getting most of the benefit should be paying the most for the service.

Tichy4• 15 years ago

I usually defend capitalism, and I read and mostly agreed with PGs wealth essay. But having seen pictures of how the poor live in the US (I am not from the US), this just feels wrong. How much wealth do you really need? It is one thing if everybody lives a happy live, and some people live in slightly bigger houses by the seaside. It is another if lots of people live in squalor at the same time.

I think some things should be rewarded. If you find a cure for cancer, you deserve to be rich. But even then, maybe a couple of million $ would be enough, even if what you gave to society is worth trillions. Perhaps related: Joel Spolsky's article on how to compensate an intern who created a lot of value for the company. Can't find the article atm, but I think he ended up giving hardly anything. Cancer researchers are just interns of society, when seen from space.

HSO• 15 years ago

I agree with your sentiment but ask how questions such as "how much is enough" can be answered? I could imagine an arrangement analogous to "floating currency rates" where you define a band within which the market price can fluctuate. Progressive taxation coupled with social safety net can have this effect if taken to its combined extreme. But how realistic is that sort of thing in today's monetized society?

On a tangent, I find it curious how we all seem to have been brainwashed somehow into taking certain assumptions _automatically_ for valid that then frame the entire discussion.

I mean, where does the connection between "what you gave to society" and your financial profit come from? It's not at all clear to me, on second thought, that they are connected so closely. Also, what exactly does it mean to "give to society" when your (more neutrally formulated) net effect on your environment is determined not just by "effort" but also by randomness and by the very environment you interact with? Finally, it's not clear to me that everything can be quantified (in the special sense of putting a competitive market value on it). The concept of value is, I suspect, a strict superset of "monetary value", and it's important we understand (as a society) better what are the special conditions under which a mapping to "money space" makes sense.

Big, hairy questions, sure, but to give a concrete example for the last one: Since when does it make sense that the "performance" of museums or orchestras is measured in how much tickets they sell? (Incidentally, see how far today's terminology is off?) Yes, I can't pull a better answer out of my hat right now but I _am_ quite sure this question itself is framed in the wrong way because we already presuppose the applicability of concepts like "competitive exchange" and "valuation".

Don't get me wrong, I'm a big believer in competitive markets, private property and responsibility, and entrepreneurship. The thing is, I feel more and more that this type of thinking can only be applied to a subset of political issues, it is not a universal acid. And I just got reminded of how deep these issues are because even in your post, which goes generally in the same direction I am currently thinking, I can see certain ideas "embedded" already.

learc835• 15 years ago

I'd be interested to know where you saw these "pictures".

There's a group of people who like to paint the picture that the US is devolving in to a Dickensian nightmare. There is always room for improvement, but as someone who lives here and has traveled extensively I don't think you can say that "lots of people live in squalor".

Sure, we have 300+ million people, so you can find people who are homeless and living on the street, but that would still be the case even if the government offered unlimited free housing.

Tichy4• 15 years ago

I saw them on German TV, and OK, maybe also in Michael Moore's movie (not sure, I watched it recently but I am foggy about the details). For example there are pictures of the tent cities that emerge.

To be honest lots of stories from the USA sound disturbing, but then again I can not claim to know every corner of Germany. Perhaps there are lots of people living in squalor here, too.

paulnelligan• 15 years ago

I would say that the problem is systemic - you have two political parties which are basically at eachothers throats the whole time, and a historical belief in a very pure form of capitalism - money is the bottom line, and the markets should govern themselves - the result? - all of the manufacturing has moved abroad, effectively killing the working classes ...

Any attempts to change this system gets vigourously branded 'socialism' both by the media (fox news) and by republican opposition which also has historical connotations harking back to McCarthyism and the Cold War ...

I don't think this is going to change anytime soon unless we see some sort of systemic collapse ... I would argue that this is possible ...

Hyena• 15 years ago

Of course they did. As more gains are realized in capital rather than wages, the rich will literally get richer. At the same time, it's becoming ever less clear that many of them serve a useful purpose. Justifying executive pay is losing ground in economic literature and, frankly, has always required recourse to casuistry.

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