Trump Seeks Tax Hike on Wealthy Earning $2.5 Million or More

[craig]

Outside of Vermont, Bernie has no real voters as the democrat party will never nominate him for president.

Trump is losing Republicans and so he is pushing populism. And like every demagogue he is using bread and circuses to do it.

 

[MAGAnificent]

Trump is losing Republicans

ROFLMAO. How many did he lose in the 2024 election? He has gained in every election. Are you living or dying by opinion polls?

 

[dobieg]

Hmm yes undercutting democrats by doing the thing Democrats have been saying we should do. Genius!

Right wingers are the ones obsessed with bathroom usage, maybe you should think less about the genitals of strangers

Fascinating.

I don't recall any Republicans pushing to allow pervy liberal men into the women's bathroom. Perhaps you can point these Right wingers out?

 

[craig]

Fascinating.

I don't recall any Republicans pushing to allow pervy liberal men into the women's bathroom. Perhaps you can point these Right wingers out?

I better use some Tic Tacs just in case I start kissing her. You know I'm automatically attracted to beautiful—I just start kissing them. It's like a magnet. Just kiss. I don't even wait. And when you're a star, they let you do it. You can do anything. Grab 'em by the *****. You can do anything.[13]

 

[Parker_Chess]

So he wants to bring back the top tax bracket to where it was during the Obama years basically. I don't buy it.

 

[Deuce]

Fascinating.

I don't recall any Republicans pushing to allow pervy liberal men into the women's bathroom. Perhaps you can point these Right wingers out?

That isn't what I wrote. Bye.

 

[ashurbanipal]

Is this your pitch for a government run confiscatory and forced wealth redistribution?

MYTH 1. Inequality Has Never Been Worse ​

MYTH 2. The Rich Didn’t Earn Their Money ​

MYTH 3. The Rich Stay Rich; the Poor Stay Poor ​

MYTH 4. More Inequality Means More Poverty ​

MYTH 5. Inequality Distorts the Political Process ​

Five Myths about Economic Inequality in America ​

September 7, 2016 • Policy Analysis No. 797​

By Michael D. Tanner​

https://www.cato.org/policy-analysis/five-myths-about-economic-inequality-america#​

I apologize for the late response, but I wanted to dig into this article before posting. Below is my response:

This article is rather voluminous for an internet article, and most people won't read it all the way through. I suspect the authors depend on Americans reading the headlines and perusing maybe a few paragraphs, rather than reading the entire thing, because they often end up criticizing their own criticisms, pulling back their points pretty substantially. For instance, they gather together a number of criticisms of Thomas Piketty's Capital in the Twenty-First Century, in which they say that his methodology is flawed because it's often unclear how he arrives at the statistics that are supposed to support his case. But then they say this:

Some of these criticisms have been answered with greater or lesser satisfaction, while others have not been answered at all. And it is important to note that other, less heralded, critiques of inequality have avoided some of Piketty’s errors while reaching similar conclusions about a general increase in market income inequality.

In other words, other economists whose work hasn't attained the same fame in the public consciousness have corrected Piketty's errors and reached roughly the same conclusions that Piketty drew--inequality is wildly out of whack and it is leading to all kinds of disconnects in our society. An article that was meant to try to arrive at the truth would state the answers made to the criticisms they gather--especially the ones made with "greater satisfaction," and would focus on the best case made about inequality.

They go on to say that Piketty-like analyses don't take into account redistribution of wealth through taxation. After several paragraphs, they reveal the punchline:

By including government transfers and in-kind compensation in their calculations, the study’s authors found that the share of income earned by the top 1 percent rose from 11 percent in 1991 to 18 percent in 2012, substantially less than, for instance, the 23 percent estimated by Piketty and his colleague Emmanuel Saez in their updated work on the issue.

While that might be a legitimate analysis, it's clear that it does not weigh in so much for your own conclusion. Income inequality grew 18% rather than 23%. OK...even if true, that's still pretty bad. They started measuring from a time where income was already not equal, in 1992, and only go to 2012. So income inequality, with taxation accounted for, rose nearly 1% per year during that period. Yeah...that's still pretty bad. It's kinda hard to fathom what point the cato.org article could be making here.

One point the above does seem to imply--and that the article avoids stating--is that redistribution of wealth through taxation does work. The article makes much of the fact that the wealthy pay a "disproportionate" share of income taxes (while later admitting that other forms of taxation tend to even things out more), as measured against their share of income. While this fact (I'll assume it's a fact for the sake of argument here) sounds good for your side of things, it's not so convincing after a few moments of thought. If you took away 99% of my wealth, or most people's wealth, it would mean I'd have to go live under a bridge. But if you took away 99% of, say, Elon Musk's wealth, he could still afford a stunningly rich lifestyle and never have to work again.

We humans can only eat so much per day. We only need so much room to live. We can only travel so far in a day or a week or whatever. We only need so many changes of clothes and so much medicine, and etc. We can only watch so many movies, play so many video games, enjoy so many potted flowers, learn to play so many musical instruments or read so many books at a time.

(continued...)

 

[ashurbanipal]

(continued from above...)

Capitalism, or any form of market economics, decentralizes the decision making about how wealth is distributed, privileging local knowledge over trans-local knowledge. Socialism does just the reverse. Proponents of a mixed economy realize that both local and trans-local knowledge have value and should be respected and reflected in an economic system. The above fact about how much wealth an individual human can actually use is a trans-local fact--the same thing is true everywhere, in all times and places, even if the exact value of wealth that can be used changes based on the conditions within a society. Adam Smith would have had no use for the internet, for a smart phone, for a computer, for an automobile, etc. We, on the other hand, need access to the internet to find and apply for jobs, to schedule social events, to get news, etc. We need relatively fast transportation to sustain life, living (as most of us do) in cities that span many miles in any direction.

But the point is that purely decentralized decision making is blind in many respects, and results in inequality pretty rapidly, thanks primarily to luck more than anything else. Which brings me to the second myth this article supposedly busts--that the wealthy do not earn their wealth. I have to say that I've known a great many wealthy people, and in my experience, this is largely true. My old boss, before I went off and started my own company, used to blow into the office around 10 AM, bark out a bunch of orders to people for a couple hours, and then leave about noon and we'd sometimes hear from him as he was sitting on his boat, drinking beer and fishing. It was something of a joke among the five of us that actually ran the company--if we actually did what he said, the company would have run into the ground; we got really good at representing that we'd followed his orders when in fact we had done what good common sense dictated.

I met a great many wealthy folks just like that.

I also did meet a fair few who worked pretty hard and had a good head on their shoulders. But here's the thing: while they did indeed work hard, putting in anywhere from 50-90 hours per week, so did a lot of other folks without nearly the same success. Hard work may be a necessary condition for wealth in at least some cases; it is far from a sufficient condition, though. I was quite wealthy at one time, and I did work very hard, but I am under no illusions that my success was also due to considerable luck. I knew, and know, any number of people who work just as hard as I did, and do, who attained nowhere near the wealth I had accumulated at one time.

The uber wealthy depend on others working hard within a system that shunts most of the wealth that results from their labor up the economic chain to those uber wealthy. That's more or less definitional of capitalism--the owners of the means of production buy a person's labor and pay them less than that labor is worth, appropriating the excess as profit to themselves. Some of us--a comparative few of us--are born into families that can subsidize such ownership or that already have such ownership, and some of us--comparatively many more of us--are not. Such is obviously a matter of fortune and nothing else.

The article tries to blunt the force of this point by trying to show that many of the wealthy did not inherit their wealth. That is, they did not receive a huge sum of cash or property upon the death of their parents. But that's hardly an adequate response to the issue--indeed, most of the wealthy have figured out that if you will your estate to your heirs, they have to pay an estate tax, and there are ways to ensure they end up with it entirely outside that system. There are, in addition, other considerations and examples. Consider the case of Bill Gates. He did not inherit much from his parents, but his parents did lend him $250k and ensured that he received some lucrative contracts straight out of the gate by virtue of their strong political connections. His father was president of the Washington State Bar Association, and through that position, he hooked Bill Gates up with various local and state legislators.

How many of us are born into families that can afford to loan us $250k? How many of us are born into families with political connections?

(continued...)

 

[ashurbanipal]

(continued from above...)

You can look at the biographies of Warren Buffet, Donald Trump, Jeff Bezos, etc. and see similar factors at work. They did not inherit much (well, Donald did), they received a start from their families while they were still alive. Donald received a "small" loan of one million dollars from his dad (and, according to some reporting on the subject, he may have received a great deal more). Again, how many of us are born into families whose dads can loan us a million dollars (roughly five million in today's money) and provide guidance in an elite business environment?

For this reason, this point in the article is massively misleading. It simply does not address the point at all, while trying to convince sympathetic readers that it does address the point. I have a hard time fathoming why someone would find the article convincing on this point.

The next "myth" the article takes on is about economic mobility. It starts by throwing up a bunch of statistics about the wealthy not maintaining their wealth...which to my mind just shows what I've said about the wealthy in the past: they get their wealth mainly through luck, most of them are incompetent weirdos who are unable to think clearly, and of course, many of them lose their fortunes for exactly this reason.

But then it goes on to the heart of the matter: economic mobility among the poor and middle classes. On this point, the article doesn't spend a great deal of time, relying on published studies on the topic. The first such study it cites is, apparently, no longer available. It was on the US Treasury website; the link to that study now goes to a photo of a very serious looking Secretary Bessent, so it's not possible to evaluate it. The second study it cites, however, is quite telling. Here's what the cato.org article says that study finds:

A more recent working paper found that 43 percent of families in the poorest income quintile and 27 percent of those in the second quintile saw earnings growth of at least 25 percent over a two-year period.

Here's what the paper cato.org cites has to say, however:

Only 56 percent of working men have earnings within 25 percent of their earnings from two years prior. One-fifth have at least 25 percent more earnings and just under one-quarter earned at least 25 percent less (or have no earnings at all).

Another way to state the above is as follows: nearly 80% of men in the working classes have income that is within the same quintile or at a lower quintile in two years. Pretty hard to figure out how the cato.org article gets its interpretation; it may be that the cato.org author combines the percentage of folks who experienced lower income with those that experienced higher income...but that's clearly not correct.

Continuing with an evaluation of the cato.org article's sources, we find that another link leads to a 404 error. The last one--the Pew Charitable Trusts survey, does indeed find (as the cato.org article says) that adult children in 2012 had a higher average income than did their parents at the same age, but then also has this to say (which the cato.org article ignores):

While a majority of Americans exceed their parents’ family incomes, the extent of that increase is not always enough to move them to a different rung of the family income ladder. Forty-three percent of Americans raised in the bottom quintile remain stuck in the bottom as adults, and 70 percent remain below the middle. Forty percent raised in the top quintile remain at the top as adults, and 63 percent remain above the middle. Only 4 percent of those raised in the bottom quintile make it all the way to the top as adults, confirming that the “rags-to-riches” story is more often found in Hollywood than in reality. Similarly, just 8 percent of those raised in the top quintile fall all the way to the bottom.

As if to hedge their bets against someone (like me) who will actually follow up sources and investigate further, the Mr. Tanner (the cato.org author) has this to say:

Economic mobility may not be as robust as we would like. In particular, upward mobility has been sluggish for decades. There is plenty of room to debate causes and solutions for this problem. But, it is simply untrue to suggest that the rich will stay rich and the poor will stay poor.

Indeed, if we take the claim that "the rich will stay rich and the poor will stay poor" in some absolute sense, to mean that literally not a single person who is poor will become rich and vice versa, that claim is false. But that's hardly what the claim itself means--it means that the lived reality experienced by most of the poor is that they will remain poor, or, at best and for a minority of them, rise into the middle class. Again, I'm not sure how someone can take the cato.org article seriously.

(continued...)

 

[ashurbanipal]

(continued from above...)

The next "myth" is that more inequality means more poverty. Tanner does not start off auspiciously, repeating the same fallacy-riddled talking point that I see many times on these boards:

There is little demonstrable relationship between inequality and poverty. Poverty rates have sometimes risen during periods of relatively stable levels of inequality and declined during times of rising inequality. The idea that gains by one person necessarily mean losses by another reflects a zero-sum view of the economy that is simply untethered to history or economics. The economy is not fixed in size, with the only question being one of distribution. Rather, the entire pie can grow, with more resources available to all.

That the economy can grow, or that, had we made different decisions, it might have been that we produced a little more wealth in some past interval of time than we did, is a red herring. The fact of the matter is that, in any given interval (say, in one calendar year), our economy, and any economy, produces a finite amount of wealth. That wealth is distributed among the population such that some receive more, and others less. Giving some more to one person does indeed mean taking it away from someone else, for the simple reason that wealth must first have been produced (past-tense, even if immediately past tense), and wealth produced in the past is finite. The fact that, in some alternate universe, we could have done something different and thereby perhaps produced more wealth than we actually did does nothing to affect conditions in the actual universe--nor does the fact that we can produce more next year have anything to do with how much we produced last year. Wealth possessed is wealth distributed (by whatever means--whether through earning, by freely entered contract, central planning, or anything else, but again, also past-tense, even if immediately so). That is, the wealth that someone possesses at this very moment was produced and distributed prior to them getting it, so by necessity, when we are talking about human wealth, we are talking about wealth produced in a finite period of time, which means, in turn, that we are talking about a finite amount of wealth. So, indeed, giving more to someone means someone else gets less. Now, by itself, that does not mean that the ones who get less are poor, though the fact that resources are scarce in conjunction with the fact that finite resources are produced in any given interval does imply that inequality has a good chance of increasing poverty.

Which brings me to another point about the way this "myth" is phrased: let's suppose I credit the findings of the studies the cato.org article cites--that is, suppose I agree with everything they say (see below--I have some things to say about this). Must I abandon the point I just made, above, if I am to remain reasonable? The answer is no. In fact, I can agree that greater inequality does not affect the number of people who are in poverty, and consistently believe that the giving someone more part of inequality directly implies that others will have less.

Suppose there are only two people in an economy, but wealth is very unevenly distributed among them. One person gets 90% of the wealth they both generate, the other person gets 10%. Now, we define poverty (in this hypothetical example) as having less than, say, $20,000 per year. The economy in question generates $150,000 per year, so the person who gets 10% gets $15,000 per year, the other $135,000 going to the wealthy person, so the poor guy really is poor by our definition. Now let's suppose we change up the percentages a little bit, and make it so that the rich guy gets $140,000 per year, while the poor guy now gets only $10,000 per year. The poor guy, perforce, gets less, since the rich guy gets more, and the economy always generates a finite amount of wealth. But did that greater inequality lead to greater rates of poverty? No, obviously not--it just meant that the poor guy was made even poorer. The lesson here is that measures like the bottom quintile of income or the federal poverty level or what-have-you still has a range to it; and if we give the rich more, it likely does mean that the poor get even less, but at the same time, poverty will not have increased in terms of the proportion of poor people in the economy. So the way the "myth" is stated is pretty weird and simply doesn't address the real issue...which I could say about all five of the supposed myths. Again, they are all rather slick straw men; there's no attempt made here to understand what the authors opponents are really saying before launching forward with counter-arguments.

(continued...)

 

[ashurbanipal]

In that spirit, I will say that the cato.org article does make one good point, which is this: suppose we continue with the above hypothetical example, but suddenly, the economy grows to where it is producing $1bn per year. The guy getting 10% of that economy suddenly gets $100m, lifting him immediately out of poverty. Inequality remains the same in such a case, but it's suddenly not so bad for the poor guy. Generally speaking, a rising tide does lift all boats--or, well, most of them, and so, this way of reading what the cato.org article says (which is a talking point trotted out many times in discussions like these by conservatives) is correct. We do not necessarily need to reduce inequality to reduce poverty (that is, there is at least one possible world in which poverty is reduced, but inequality is not).

How good a point is this? For it to have any kind of force, the possible worlds in question would need to be sufficiently like the actual world such that the actual world has a good chance of manifesting just those possibilities. It's not realistic that we could increase our economic output by many thousand percentage points next year; we're lucky these days to get around 2-3%, and with inflation thrown into the mix, those gains are basically wiped out at the lower and even the middle rungs of the economic ladder.

But let me address the central point the author makes as to this "myth":

Perhaps the reason that there is so much concern over economic inequality is that we instinctively associate it with poverty...But, it is important to note that poverty and inequality are not the same thing. Indeed, if we were to double everyone’s income tomorrow, we would do much to reduce poverty, but the gap between rich and poor would grow larger. Would this be a bad thing?

Again, I don't know that this quite captures the issue. The problem, as I and many others see it, is that an economy is set up according to certain rules we adopt. It's not like gravity or the collapse of the wave function or what-have-you--whatever relationships hold of our economy, they're ones that we can change. Given that fact, can we say that we actually want an economy that leads to the levels of inequality we are starting to see? It seems to me that some inequality is probably inevitable, and it may well help to motivate people to give their best, but that too much inequality becomes inherently bad, because it means that even people who work full time, and who really do give their best, are rewarded rather less than they should be. People lose their motivation to try for anything more, and as a society we lose the incentive to find people of talent and help them develop that talent--most of those folks won't do it, because it does not benefit them.

But even that is not the really bad part. One of the reasons that the Medieval period tends to be thought of as not a great time to be alive is that the vast majority of people were peasants. Roughly 90% of the populations of every European nation had to be devoted to production of food, leaving only 10% to take care of every other function. Inequality was probably the highest it had been in at least 4,000 years during that time; the highest ranking members of the various aristocracies often had wealth that was millions of times greater than the wealth all the peasants in their demesne possessed combined. Within this system, human potential was wasted profligately--how many of those peasants, who had no realistic path to education or to acquiring a skillset other than farming, might have advanced knowledge if given an education and the opportunity to do different work? How many might have done something great that, unfortunately, never manifested because the economy of the period dictated such extreme inequality?

Inequality past a certain point starts to become a waste of human potential. When someone is forced to work two jobs just to make ends meet (as one example), they have little energy left over to study something, to develop a talent or a special insight or what-have-you, to contribute to knowledge and overall skill in the manner that they could if the economy were optimized to allow human flourishing. How many people today who just work all the time and come home tired as all get-out might have been able to cure cancer, prove some important theorem in computer science leading to better cybersecurity, invent some new genre of music, find ways to improve agricultural output, write literature that provides new insights into the human condition, negotiate peace treaties with warring factions, and so on? How many more would be able to at least contribute in some small way to such worthy goals? The number is clearly not zero--that's one lesson of the Medieval period. It took so long to dig out from under the rubble of the dark ages because so much human potential was wasted. Knowledge advanced at a glacial pace as a result.

(continued...)

 

[ashurbanipal]

Additionally, when reasonable work is not rewarded reasonably, people have less incentive to work. They have less incentive to do their best, and inequality becomes a kind of self-fulfilling prophecy. Is it just that someone who works full time at a job that needs doing is unable to make ends meet, while someone else who works a similar number of hours installs solid gold toilet seats because they're so bored with the amount of wealth they have? Again, when we realize that inequality is a consequence of rules that we have written, rules that are not in the fabric of the universe, why in the world would we want to perpetuate such rules when they lead to these kinds of outcomes? Again, it's probably true that getting rid of all inequality would be bad, but that does not mean going hog wild the other way--toward more inequality--is good. There is obviously some point of balance, and I (and others) would suggest that point is when full-time work always leads to affording a comfortable lifestyle.

Again, the author of the cato.org article relies on the fact that there is at least one possible world in which inequality does not imply increased poverty--and while I'm generally all for reasoning with counterfactuals (i.e. possible worlds that are not the actual world), such reasoning must be done correctly. In this world, in which resources are scarce when compared with demand, inequality does imply poverty. It also implies a number of other inefficiencies, and it certainly locks an ever greater number of people into a bind--the majority of people in the economy do not want to be, and would rather change the rules, but thanks to the marriage of politics and money, the few who do benefit the most from an economy where massive inequality exists are able to keep it that way, and the majority, who would rather change the economy, must either continue with a system they don't want to continue with, or they may turn to illegal or extra-legal means to overthrow it.

So, what about the data the cato.org article cites? In this case, it does seem that the cato.org article cites that data mostly correctly--while (importantly) ignoring parts of the paper that argue against the principles cato.org would stand for. However, the major flaw in those data is exposed, above. Just because more inequality does not lead to more poverty does not mean that the poor and middle classes have the same amount of wealth. They have less wealth, but not enough to slide into a lower scale (in the case of the middle classes--there's nowhere to go for the lower classes). Interestingly, the papers I could find in the citations of this article support exactly that conclusion. For example, the paper titled Winning the War: Poverty from the Great Society to the Great Recession by Bruce Meyer and James Sullivan has this to say:

After 1986, the situation reversed due to the Tax Reform Act of 1986. There was a large decline in after-tax money income poverty relative to money income poverty between 1986 and 1988, the first period during which the EITC was expanded (and the personal exemption and standard deduction were increased). The effect of the EITC is even more noticeable between 1990 and 1996, when after-tax money income poverty fell by 1.2 percentage points more than the rate for money income poverty. This growing gap coincides with the period of greatest expansion of the EITC under the 1990 and 1993 budget acts.20 Between 1996, when these expansions were fully phased in, and 2008, there was little change in the difference between these two measures of poverty. Between 2008 and 2009, however, pre-tax income poverty rose
noticeably more than after-tax income poverty, reflecting provisions in the American Recovery and Reinvestment Act of 2009 that expanded tax credits including the EITC, the child and additional child tax credits, and the Making Work Pay tax credit. The pattern of changes in poverty by family type reinforces the evidence on the effect of tax credits...

In other words, the reason poverty declined when measured by consumption is that various redistribution schemas worked during the period in question. But obviously, had those redistribution programs not been present (as the paper elsewhere explains), consumption measures would track with income measures, and both would have increased over the same period. The same paper estimates that only .5% to 1% of the poverty rate is affected by macroeconomic conditions--that is, by conditions determined through market forces alone. The cato.org article is silent on these and other similar points in the other papers it cites, leaving the non-inquisitive reader with a very skewed view of the findings of the papers cited.

(continued...)

 

[watsup]

It would be so amusing if Trump undercut Democrats and hiked taxes on the rich to pay for tax cuts for the middle class.

Perhaps if Demcorats weren't such flaming idiots they would get back to their roots of being for the working man and actually do something useful for the middle class on taxes. Instead they'll focus all their energy on letting hairy 40 year old men into the women's bathroom and telling little Johnny he's actually Sarah.

He’s lying. Again.

 

[ashurbanipal]

Anyway, onward to "myth" number five: Inequality Distorts the Political Process. The article starts out essentially admitting that there is one obvious way in which the myth is no myth at all, which is a little weird. It goes on to focus solely on campaign contributions by the wealthy in comparison to everyone else, and the political results. It says, for instance:

Finally, as noted above, the U.S. system is highly redistributive. The wealthy pay a disproportionate share of taxes. The regulatory state and the overall size of government have grown substantially. If the wealthy are attempting to tilt the playing field in favor of the rich, they have been remarkably unsuccessful.

Eh...not so fast. The highest tax rates have been slashed nearly 70 points since the 1950s. The term "highly redistributive" is ambiguous--"highly" compared to what? The cato.org author probably thinks that practically any redistribution scheme is "highly" redistributive, since that's part of what cato.org stands for--unfettered free markets with little government involvement. As if to verify this analysis, the article says:

In the popular imagination, it is an unrestrained free market that gives rise to inequality, and a powerful government is necessary to act as a counterweight. In reality, big government is often complicit with, and frequently the cause, of inequality.

Again, not so fast. Unrestrained free markets have been tried, and they do lead to inequality. It is also true that government today has been made largely complicit in exacerbating inequality (weirdly, while conservatives keep crying out that government is far too progressive). That government today has been made complicit does not mean that it's false that unfettered market forces do not also lead to inequality. What we need is a government that is free of the influence of money, and that kind of government (probably that kind alone) is able to act as a counterbalance to the inequality-increasing forces that are inherent in a free market.

(continued...)

 

[ashurbanipal]

Moving on to how the author of the cato.org article uses the data he cites, I have to say that the same patterns present in the other "myths" are also present here. For example, he cites the paper "Does Wealth Inequality Matter for Growth?: The effect of Billionaire Wealth, Income Distribution, and Poverty" by Bagchi and Svejnar, the cato.org article cites the following quote:

When we control for the fact that some billionaires acquired wealth through political connections, the effect of politically connected wealth inequality is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant effect.

Which is from the abstract of the paper (not usually best practice, but OK). That conclusion is at least plausible. But then, how does the cato.org article make use of this quote? It claims this conclusion means that the key variable in economic freedom is not market forces, but government-dispensed favors. Bagchi and Svejnar say nothing about "economic freedom" and do not, anywhere in their paper, establish such a sharp dichotomy between government favors and market forces, as if those are the only two alternatives. Digging into the article itself, it turns out that what Bagchi and Svejnar are focused on is whether or not inequality affects economic growth--they find that it does, but when they factor out government favors, they find no effect. Again, that's quite plausible, but is an utterly different conclusion than what the cato.org article says is their conclusion.

Additionally, especially in this section, the cato.org article cites some questionable sources. For example, a quote from one paper reads:

Constraints on government discretion are necessary to preserve free market capitalism as well as personal freedom. Although incomes are expected to be unequal within a free market economy, market inequality is desirable because it is attributable to merit and is a consequence of market competition that improves living standards. When governmental discretion is not constrained, free market capitalism is vulnerable to being compromised by unproductive entrepreneurship, resulting in crony capitalism that retards economic development and mobility, and generates undesirable structural inequality.

but then goes on to say:

The theory developed here does not offer a clear testable hypothesis concerning the qualitative relationship between economic freedom and income inequality. Rather it suggests that countries characterized by high levels of freedom will incentivize productive entrepreneurship and generate desirable market inequality. Meanwhile, countries exhibiting low levels of freedom will incentivize unproductive entrepreneurship and generate undesirable structural inequality. While the theory offers little guidance on whether market inequality will be greater or less than structural inequality

Which is pretty revealing. The paper is clearly shot through with unsupported opinion, and is not really a data-driven argument. It's not the kind of paper that I would ever cite, nor would any good scholar, philosopher, or theorist.

Anyway, there's a lot more I could say, but the above hits the high points. I don't want to give the impression that I'm totally negative on the viewpoint from the cato.org paper--I've tried to point out where I think the author has a point. I don't believe that capitalism is all bad, or for that matter, even half bad. It has some features that lead to injustice and inequality, and that can end up rewarding unvirtuous behavior, and for those reasons, it must be balanced by its opposite, socialism--which itself is equally bad if allowed to be total within an economy.

These things said, on the whole I did not find the cato.org article very impressive, for the reasons stated. Again, the article makes a few good points, but generally seems to be aiming at a conclusion and scrambling after any source that will support that conclusion.

(finis)

 

[Logophile]

An insurrectionist Obama Judge will block it.

The DP left will melt down that it's unconstitutional to raise taxes on the rich.

Lol!! So true. Perverse Joe may have left the building, but his fans do linger. They'll be furious over the tax hike, claiming it's only to hurt guys like Clooney and Soros

 

[eohrnberger]

I apologize for the late response, but I wanted to dig into this article before posting.

ItsAllRte.

Below is my response:

This article is rather voluminous for an internet article, and most people won't read it all the way through. I suspect the authors depend on Americans reading the headlines and perusing maybe a few paragraphs, rather than reading the entire thing, because they often end up criticizing their own criticisms, pulling back their points pretty substantially. For instance, they gather together a number of criticisms of Thomas Piketty's Capital in the Twenty-First Century, in which they say that his methodology is flawed because it's often unclear how he arrives at the statistics that are supposed to support his case. But then they say this:



In other words, other economists whose work hasn't attained the same fame in the public consciousness have corrected Piketty's errors and reached roughly the same conclusions that Piketty drew--inequality is wildly out of whack and it is leading to all kinds of disconnects in our society. An article that was meant to try to arrive at the truth would state the answers made to the criticisms they gather--especially the ones made with "greater satisfaction," and would focus on the best case made about inequality.

They go on to say that Piketty-like analyses don't take into account redistribution of wealth through taxation. After several paragraphs, they reveal the punchline:



While that might be a legitimate analysis, it's clear that it does not weigh in so much for your own conclusion. Income inequality grew 18% rather than 23%. OK...even if true, that's still pretty bad. They started measuring from a time where income was already not equal, in 1992, and only go to 2012. So income inequality, with taxation accounted for, rose nearly 1% per year during that period. Yeah...that's still pretty bad. It's kinda hard to fathom what point the cato.org article could be making here.

One point the above does seem to imply--and that the article avoids stating--is that redistribution of wealth through taxation does work. The article makes much of the fact that the wealthy pay a "disproportionate" share of income taxes (while later admitting that other forms of taxation tend to even things out more), as measured against their share of income. While this fact (I'll assume it's a fact for the sake of argument here) sounds good for your side of things, it's not so convincing after a few moments of thought. If you took away 99% of my wealth, or most people's wealth, it would mean I'd have to go live under a bridge. But if you took away 99% of, say, Elon Musk's wealth, he could still afford a stunningly rich lifestyle and never have to work again.

We humans can only eat so much per day. We only need so much room to live. We can only travel so far in a day or a week or whatever. We only need so many changes of clothes and so much medicine, and etc. We can only watch so many movies, play so many video games, enjoy so many potted flowers, learn to play so many musical instruments or read so many books at a time.

The crux of matter is who determines 'what is enough' and who is given the power to confiscate anything above that.

Inequality has been the reality since the very beginning. Seeking to impose 'equality' (in quotes on purpose as it never is) by force is the tyrants dream, one we see playing out in nations such as Cuba and North Korea, which isn't 'equality' even in the most generous sense of the definition - there are always other who are 'more equal' than the rest.

It is this 'equality' which the political left is selling to those on the lower end of the economic scale, and do so not for the economic impact, not for the betterment of those on lower end of the economic scale, they are selling it strictly for the level of power and control over others that it would give them, i.e. dictating winners and losers at their whim. Once the left has this, the single party state is next, as they'd go and confiscate all the resources for their political opposition and run unopposed.

Scratch a liberal, or a progressive, find a tyrant.

(continued...)

 

[eohrnberger]

(continued from above...)

Capitalism, or any form of market economics, decentralizes the decision making about how wealth is distributed, privileging local knowledge over trans-local knowledge. Socialism does just the reverse.

This centralization of the economic decision making is what I described in the previous post.

Proponents of a mixed economy realize that both local and trans-local knowledge have value and should be respected and reflected in an economic system. The above fact about how much wealth an individual human can actually use is a trans-local fact--the same thing is true everywhere, in all times and places, even if the exact value of wealth that can be used changes based on the conditions within a society.

Adam Smith would have had no use for the internet, for a smart phone, for a computer, for an automobile, etc. We, on the other hand, need access to the internet to find and apply for jobs, to schedule social events, to get news, etc. We need relatively fast transportation to sustain life, living (as most of us do) in cities that span many miles in any direction.

Pulling in the technology question is only muddying the economic question.

But the point is that purely decentralized decision making is blind in many respects, and results in inequality pretty rapidly, thanks primarily to luck more than anything else. Which brings me to the second myth this article supposedly busts--that the wealthy do not earn their wealth. I have to say that I've known a great many wealthy people, and in my experience, this is largely true. My old boss, before I went off and started my own company, used to blow into the office around 10 AM, bark out a bunch of orders to people for a couple hours, and then leave about noon and we'd sometimes hear from him as he was sitting on his boat, drinking beer and fishing. It was something of a joke among the five of us that actually ran the company--if we actually did what he said, the company would have run into the ground; we got really good at representing that we'd followed his orders when in fact we had done what good common sense dictated.

I met a great many wealthy folks just like that.

Your personal anecdote points out that had not your wealthy boss started that company, hired good people to run it, even though sometimes against his order, would soon fall out of his economic strata. From my view, the wealthy not only earn their way to that economic strata, they have to keep earning their place to remain there, even if its just having the foresight of investing large stakes of their money and living off of the earned interest and dividends (those investments enabling others to not only build their paths to wealthy, but also to give opportunities to large swaths of others in the form of employment - mutually agreed swap of skills and knowledge for compensation).

In the system we have, they are free to do so. In the proposed opposite system, they are not free to do so.

 

[eohrnberger]

I also did meet a fair few who worked pretty hard and had a good head on their shoulders. But here's the thing: while they did indeed work hard, putting in anywhere from 50-90 hours per week, so did a lot of other folks without nearly the same success. Hard work may be a necessary condition for wealth in at least some cases; it is far from a sufficient condition, though. I was quite wealthy at one time, and I did work very hard, but I am under no illusions that my success was also due to considerable luck. I knew, and know, any number of people who work just as hard as I did, and do, who attained nowhere near the wealth I had accumulated at one time.

Haven't you heard that life's unfair? Life, and reality for that matter, there will always be disparent outcomes. It is unavoidable and inevitable, yet the opposite approach tries to dictate outcomes, independent of, and in spite of, these realities, as well as people's good or bad decisions along the way.

In short, trying to swim up stream against all the currents.

The uber wealthy depend on others working hard within a system that shunts most of the wealth that results from their labor up the economic chain to those uber wealthy. That's more or less definitional of capitalism--the owners of the means of production buy a person's labor and pay them less than that labor is worth, appropriating the excess as profit to themselves. Some of us--a comparative few of us--are born into families that can subsidize such ownership or that already have such ownership, and some of us--comparatively many more of us--are not. Such is obviously a matter of fortune and nothing else.

The article tries to blunt the force of this point by trying to show that many of the wealthy did not inherit their wealth. That is, they did not receive a huge sum of cash or property upon the death of their parents. But that's hardly an adequate response to the issue--indeed, most of the wealthy have figured out that if you will your estate to your heirs, they have to pay an estate tax, and there are ways to ensure they end up with it entirely outside that system. There are, in addition, other considerations and examples. Consider the case of Bill Gates. He did not inherit much from his parents, but his parents did lend him $250k and ensured that he received some lucrative contracts straight out of the gate by virtue of their strong political connections. His father was president of the Washington State Bar Association, and through that position, he hooked Bill Gates up with various local and state legislators.

How many of us are born into families that can afford to loan us $250k? How many of us are born into families with political connections?

(continued...)

You are criticizing the capitalism form of economics, you'd also need to take into consideration the following:

That seems kinda accurate.

But almost 1/2 the world does rely on other things besides the free market.

...

World poverty rate for 2022 was 44.90%, a 0.8% decline from 2021.​

• World poverty rate for 2021 was 45.70%, a 1.5% decline from 2020.
• World poverty rate for 2020 was 47.20%, a 0.9% increase from 2019.
• World poverty rate for 2019 was 46.30%, a 1.1% decline from 2018.

World Poverty Rate 1981-2025 | MacroTrends

Poverty headcount ratio at $5.50 a day is the percentage of the population living on less than $5.50 a day at 2011 international prices. As a result of revisions in PPP exchange rates, poverty rates for individual countries cannot be compared with poverty rates reported in earlier editions.

www.macrotrends.net

Free Market Capitalism has elevated large parts of the globe's population's standard of living from abject poverty to middle class, and here you are apparently purporting that we should discard it, and impose a government run confiscatory wealth redistribution - centralized economic planning - which has shown itself a failure throughout history?

 

[eohrnberger]

(continued from above...)

You can look at the biographies of Warren Buffet, Donald Trump, Jeff Bezos, etc. and see similar factors at work. They did not inherit much (well, Donald did), they received a start from their families while they were still alive. Donald received a "small" loan of one million dollars from his dad (and, according to some reporting on the subject, he may have received a great deal more). Again, how many of us are born into families whose dads can loan us a million dollars (roughly five million in today's money) and provide guidance in an elite business environment?

For this reason, this point in the article is massively misleading. It simply does not address the point at all, while trying to convince sympathetic readers that it does address the point. I have a hard time fathoming why someone would find the article convincing on this point.

The next "myth" the article takes on is about economic mobility. It starts by throwing up a bunch of statistics about the wealthy not maintaining their wealth...which to my mind just shows what I've said about the wealthy in the past: they get their wealth mainly through luck, most of them are incompetent weirdos who are unable to think clearly, and of course, many of them lose their fortunes for exactly this reason.

But then it goes on to the heart of the matter: economic mobility among the poor and middle classes. On this point, the article doesn't spend a great deal of time, relying on published studies on the topic. The first such study it cites is, apparently, no longer available. It was on the US Treasury website; the link to that study now goes to a photo of a very serious looking Secretary Bessent, so it's not possible to evaluate it. The second study it cites, however, is quite telling. Here's what the cato.org article says that study finds:

The previously cited statistics about elevating the globe's abject poverty applicable here.

Here's what the paper cato.org cites has to say, however:



Another way to state the above is as follows: nearly 80% of men in the working classes have income that is within the same quintile or at a lower quintile in two years. Pretty hard to figure out how the cato.org article gets its interpretation; it may be that the cato.org author combines the percentage of folks who experienced lower income with those that experienced higher income...but that's clearly not correct.

Continuing with an evaluation of the cato.org article's sources, we find that another link leads to a 404 error. The last one--the Pew Charitable Trusts survey, does indeed find (as the cato.org article says) that adult children in 2012 had a higher average income than did their parents at the same age, but then also has this to say (which the cato.org article ignores):



As if to hedge their bets against someone (like me) who will actually follow up sources and investigate further, the Mr. Tanner (the cato.org author) has this to say:



Indeed, if we take the claim that "the rich will stay rich and the poor will stay poor" in some absolute sense, to mean that literally not a single person who is poor will become rich and vice versa, that claim is false. But that's hardly what the claim itself means--it means that the lived reality experienced by most of the poor is that they will remain poor, or, at best and for a minority of them, rise into the middle class. Again, I'm not sure how someone can take the cato.org article seriously.

(continued...)

 

[eohrnberger]

(continued from above...)

The next "myth" is that more inequality means more poverty. Tanner does not start off auspiciously, repeating the same fallacy-riddled talking point that I see many times on these boards:



That the economy can grow, or that, had we made different decisions, it might have been that we produced a little more wealth in some past interval of time than we did, is a red herring. The fact of the matter is that, in any given interval (say, in one calendar year), our economy, and any economy, produces a finite amount of wealth. That wealth is distributed among the population such that some receive more, and others less. Giving some more to one person does indeed mean taking it away from someone else, for the simple reason that wealth must first have been produced (past-tense, even if immediately past tense), and wealth produced in the past is finite. The fact that, in some alternate universe, we could have done something different and thereby perhaps produced more wealth than we actually did does nothing to affect conditions in the actual universe--nor does the fact that we can produce more next year have anything to do with how much we produced last year.

I don't agree with this zero sum gain view of the economy.
Do please tell me how Warren Buffet, Donald Trump, Jeff Bezos, etc., hwo their wealth has prevented you from earning more, should you have chosen to do so?
Oh right. It hasn't.

The reality is that wealth, investments, building companies such as Amazon, Tesla, SpaceX, The Boring Company, etc. has enabled others opportunities to increase their incomes than had they not made those investments or built those companies. Even in a more passive role, investing in stocks or mutuals, makes capital available for other to build or growth companies which do the same thing, provide others with opportunities to elevate themselves.

Wealth possessed is wealth distributed (by whatever means--whether through earning, by freely entered contract, central planning, or anything else, but again, also past-tense, even if immediately so). That is, the wealth that someone possesses at this very moment was produced and distributed prior to them getting it, so by necessity, when we are talking about human wealth, we are talking about wealth produced in a finite period of time, which means, in turn, that we are talking about a finite amount of wealth. So, indeed, giving more to someone means someone else gets less. Now, by itself, that does not mean that the ones who get less are poor, though the fact that resources are scarce in conjunction with the fact that finite resources are produced in any given interval does imply that inequality has a good chance of increasing poverty.

Which brings me to another point about the way this "myth" is phrased: let's suppose I credit the findings of the studies the cato.org article cites--that is, suppose I agree with everything they say (see below--I have some things to say about this). Must I abandon the point I just made, above, if I am to remain reasonable? The answer is no. In fact, I can agree that greater inequality does not affect the number of people who are in poverty, and consistently believe that the giving someone more part of inequality directly implies that others will have less.

Again, I don't agree with the zero sum gain view of economics.

 

[eohrnberger]

Suppose there are only two people in an economy, but wealth is very unevenly distributed among them. One person gets 90% of the wealth they both generate, the other person gets 10%. Now, we define poverty (in this hypothetical example) as having less than, say, $20,000 per year. The economy in question generates $150,000 per year, so the person who gets 10% gets $15,000 per year, the other $135,000 going to the wealthy person, so the poor guy really is poor by our definition. Now let's suppose we change up the percentages a little bit, and make it so that the rich guy gets $140,000 per year, while the poor guy now gets only $10,000 per year. The poor guy, perforce, gets less, since the rich guy gets more, and the economy always generates a finite amount of wealth. But did that greater inequality lead to greater rates of poverty? No, obviously not--it just meant that the poor guy was made even poorer. The lesson here is that measures like the bottom quintile of income or the federal poverty level or what-have-you still has a range to it; and if we give the rich more, it likely does mean that the poor get even less, but at the same time, poverty will not have increased in terms of the proportion of poor people in the economy. So the way the "myth" is stated is pretty weird and simply doesn't address the real issue...which I could say about all five of the supposed myths. Again, they are all rather slick straw men; there's no attempt made here to understand what the authors opponents are really saying before launching forward with counter-arguments.

(continued...)

This is just a long winded support of the zero sum game view.

 

[eohrnberger]

In that spirit, I will say that the cato.org article does make one good point, which is this: suppose we continue with the above hypothetical example, but suddenly, the economy grows to where it is producing $1bn per year. The guy getting 10% of that economy suddenly gets $100m, lifting him immediately out of poverty. Inequality remains the same in such a case, but it's suddenly not so bad for the poor guy. Generally speaking, a rising tide does lift all boats--or, well, most of them, and so, this way of reading what the cato.org article says (which is a talking point trotted out many times in discussions like these by conservatives) is correct. We do not necessarily need to reduce inequality to reduce poverty (that is, there is at least one possible world in which poverty is reduced, but inequality is not).

Well some more common ground on this point, that growing the economy is a raising tide and lifts all boats.

How good a point is this? For it to have any kind of force, the possible worlds in question would need to be sufficiently like the actual world such that the actual world has a good chance of manifesting just those possibilities. It's not realistic that we could increase our economic output by many thousand percentage points next year; we're lucky these days to get around 2-3%, and with inflation thrown into the mix, those gains are basically wiped out at the lower and even the middle rungs of the economic ladder.

Here we have some common ground in that inflation is a tax which impacts the lower end of the economic scale far more than the higher levels. I understand that it's to the federal government's advantage to deflate the value of the currency so that debt can be paid with currency having a lower value, but this is at the cost of lower end of the economic scale. Frankly, the goal for the federal government should be to operate without any debt, or at least minimal debt.

But let me address the central point the author makes as to this "myth":



Again, I don't know that this quite captures the issue. The problem, as I and many others see it, is that an economy is set up according to certain rules we adopt. It's not like gravity or the collapse of the wave function or what-have-you--whatever relationships hold of our economy, they're ones that we can change. Given that fact, can we say that we actually want an economy that leads to the levels of inequality we are starting to see? It seems to me that some inequality is probably inevitable, and it may well help to motivate people to give their best, but that too much inequality becomes inherently bad, because it means that even people who work full time, and who really do give their best, are rewarded rather less than they should be. People lose their motivation to try for anything more, and as a society we lose the incentive to find people of talent and help them develop that talent--most of those folks won't do it, because it does not benefit them.

Yes, we can change the relationships in which we hold of our economy. But again, it seems your are purporting manipulating that relationship to address inequality which, from my view, is one of the fundamental characteristics of the human condition and which has been with humans from the onset, and one which will remain. You seem to think that there's a way to 'give' everyone one all they want, without taking it from someone else, and that flawed humans be in charge of that, leading to only more inequality, but only ones you agree with, again, it is the power and control over others, which is what is really sought.

 

[eohrnberger]

But even that is not the really bad part. One of the reasons that the Medieval period tends to be thought of as not a great time to be alive is that the vast majority of people were peasants. Roughly 90% of the populations of every European nation had to be devoted to production of food, leaving only 10% to take care of every other function. Inequality was probably the highest it had been in at least 4,000 years during that time; the highest ranking members of the various aristocracies often had wealth that was millions of times greater than the wealth all the peasants in their demesne possessed combined. Within this system, human potential was wasted profligately--how many of those peasants, who had no realistic path to education or to acquiring a skillset other than farming, might have advanced knowledge if given an education and the opportunity to do different work? How many might have done something great that, unfortunately, never manifested because the economy of the period dictated such extreme inequality?

Inequality past a certain point starts to become a waste of human potential. When someone is forced to work two jobs just to make ends meet (as one example), they have little energy left over to study something, to develop a talent or a special insight or what-have-you, to contribute to knowledge and overall skill in the manner that they could if the economy were optimized to allow human flourishing. How many people today who just work all the time and come home tired as all get-out might have been able to cure cancer, prove some important theorem in computer science leading to better cybersecurity, invent some new genre of music, find ways to improve agricultural output, write literature that provides new insights into the human condition, negotiate peace treaties with warring factions, and so on? How many more would be able to at least contribute in some small way to such worthy goals? The number is clearly not zero--that's one lesson of the Medieval period. It took so long to dig out from under the rubble of the dark ages because so much human potential was wasted. Knowledge advanced at a glacial pace as a result.

Again, dressing up power and control in the guise of addressing inequality, and tossing in inefficiency.

Take Universal Basic Income.
If you give UBI to people, they are going to figure out how to live on just that, and they won't 'study something, to develop a talent or a special insight or what-have-you, to contribute to knowledge and overall skill'. A long record of human nature has established this.

(continued...)

 

[eohrnberger]

Additionally, when reasonable work is not rewarded reasonably, people have less incentive to work. They have less incentive to do their best, and inequality becomes a kind of self-fulfilling prophecy. Is it just that someone who works full time at a job that needs doing is unable to make ends meet, while someone else who works a similar number of hours installs solid gold toilet seats because they're so bored with the amount of wealth they have? Again, when we realize that inequality is a consequence of rules that we have written, rules that are not in the fabric of the universe, why in the world would we want to perpetuate such rules when they lead to these kinds of outcomes? Again, it's probably true that getting rid of all inequality would be bad, but that does not mean going hog wild the other way--toward more inequality--is good. There is obviously some point of balance, and I (and others) would suggest that point is when full-time work always leads to affording a comfortable lifestyle.

This 'less incentive to work' is manifest when you give people UBI.

If 'when reasonable work is not rewarded reasonably', people in the free market system chose to change something, be it jobs, or responsibilities in their present role to gain that reasonable reward. Dictating from on high what is reasonable reward for reasonable work isn't the solution to anything except motivating people to game that system, this too well established in rate of government benefits fraud.

Again, the author of the cato.org article relies on the fact that there is at least one possible world in which inequality does not imply increased poverty--and while I'm generally all for reasoning with counterfactuals (i.e. possible worlds that are not the actual world), such reasoning must be done correctly. In this world, in which resources are scarce when compared with demand, inequality does imply poverty. It also implies a number of other inefficiencies, and it certainly locks an ever greater number of people into a bind--the majority of people in the economy do not want to be, and would rather change the rules, but thanks to the marriage of politics and money, the few who do benefit the most from an economy where massive inequality exists are able to keep it that way, and the majority, who would rather change the economy, must either continue with a system they don't want to continue with, or they may turn to illegal or extra-legal means to overthrow it.

So, what about the data the cato.org article cites? In this case, it does seem that the cato.org article cites that data mostly correctly--while (importantly) ignoring parts of the paper that argue against the principles cato.org would stand for. However, the major flaw in those data is exposed, above. Just because more inequality does not lead to more poverty does not mean that the poor and middle classes have the same amount of wealth. They have less wealth, but not enough to slide into a lower scale (in the case of the middle classes--there's nowhere to go for the lower classes). Interestingly, the papers I could find in the citations of this article support exactly that conclusion. For example, the paper titled Winning the War: Poverty from the Great Society to the Great Recession by Bruce Meyer and James Sullivan has this to say:



In other words, the reason poverty declined when measured by consumption is that various redistribution schemas worked during the period in question. But obviously, had those redistribution programs not been present (as the paper elsewhere explains), consumption measures would track with income measures, and both would have increased over the same period. The same paper estimates that only .5% to 1% of the poverty rate is affected by macroeconomic conditions--that is, by conditions determined through market forces alone. The cato.org article is silent on these and other similar points in the other papers it cites, leaving the non-inquisitive reader with a very skewed view of the findings of the papers cited.

(continued...)