For Richer and for Poorer

Millionaires get poorer while the poor get richer. So what’s all this talk about the income gap?

The rich get richer and the poor get poorer, or so the saying goes. Thousands of people have been sleeping outside in tents for months as part of the Occupy Wall Street movement in large part because they believe this statement is both accurate and important. But while there is a nugget of truth there, this critique obscures the great news that income mobility is actually alive and well in the United States of America.

There is plenty of evidence that the richest Americans are richer than the richest Americans of the past. For instance, the top 1 percent of income earners in 1990 made 14 percent of Adjusted Gross Income (AGI), or pre-tax income, versus 23 percent in 2007—the second highest figure on record. The top 1 percent of households in 2007 made 275 percent more money adjusted for inflation than the top 1 percent in 1979, according to an October report from the Congressional Budget Office, while incomes in the bottom 20 percent increased by just 18 percent.

But ending the data in 2007 obscures the fact that the wealthiest 1 percent took a sizeable hit after the financial crisis, reducing their share of Adjusted Gross Income to 17 percent in 2009. As economist Steven Kaplan of the University of Chicago explained to George Mason University economist Russ Roberts in a recent EconTalk podcast, “Recessions are bad for the rich. If you care about inequality per se, recessions are great.” Kaplan also noted that in 2009, the rich had a smaller share of income than they did at any point during Bill Clinton’s second term, often cited as a period of significantly greater income equality.

But even if the top 1 percent were still pulling down one-fifth of national income, this doesn’t mean that the remaining 99 percent are worse off, contrary to popular belief. Rather, as Kaplan correctly observed, “Income is not a zero-sum game. Somebody else’s income does not come at your expense. It could…but in general these numbers don’t have automatic implications for the 99 percent.” These kinds of comparisons don’t tell us anything about the absolute conditions of lower income earners.

For instance, even though the lower earners have a smaller share of income today than they did in 1990, their absolute income is higher. A smaller share of a larger national pie can still mean more income than the bigger slice of a smaller pie. This is true even after you consider growth in population.  According to IRS statistics, in 1990, the bottom 50 percent of income earners reported 15 percent of real adjusted gross income, some $517 billion in pre-tax income. In 2007, they reported only 12 percent of AGI, but this percentage amounted to more absolute dollars—some $1.1 trillion in pre-tax income. 

But even these figures miss a more fundamental point. The top 1 percent in 1990 are not necessarily the same people as the top 1 percent in 2012. Data describing comparative income performance generally do not take into account the movement of individual households through time. There is no accurate assessment of the income gap without accounting for income mobility. The more the mobility, the less the significance of widening income disparities. 

So what does that mobility look like? Take the top earners in America. Using IRS data, the Tax Foundation has shown that of the 675,000 taxpayers who reported $1 million in pre-tax income at some point between 1999 and 2007, only about half remained millionaires just one year later (see figure). A tiny 6 percent, or 38,000 people, retained their millionaire status for all nine years. In other words, most top earners are likely to lose their membership in the millionaires club.

And things look rosier at the bottom of income distribution, too. The same Tax Foundation analysis showed that about 60 percent of households that were in the lowest income quintile in 1999 had moved to a higher quintile by 2007. And about one-third of those in the lowest quintile moved to the middle quintile or higher. While it may be difficult to rise literally from rags to riches, there is still plenty of opportunity for Americans to climb up the income ladder.

 So if upward mobility is so common, why are there still plenty of poor people in this country? In a recent video about income mobility hosted by the Institute for Humane Studies, economist Steven Horwitz of Saint Lawrence University explains: “Immigrants and young people entering the labor force come into that income distribution at low levels of income. They become the new poor when the old poor slowly move their way up.” Horwitz concludes that “even though a first glance at the data may make it seem as if the rich are getting richer and the poor are getting poorer, the reality of the United States in the early 21st century is that everyone is getting richer, poor and rich alike.”

 Even better news: The American Dream is still alive. Most children are living better lives than their parents did before them. A 2008 Pew Economic Mobility Project study by Brookings Institution scholars Julia Isaacs, Isabel Sawhill, and Ron Haskins showed that two-thirds of 40-year-old Americans are in households with larger incomes than their parents had at the same age. That remains true even after controlling for the rising cost of living. And if anything, this finding understates the progress we have made. Household size has declined in recent decades, meaning that incomes are now divided up between fewer family members, leaving each of them better off than the larger households of the past.

So why are people still sleeping outside in protest? Scott Winship of the Brookings Institution explained the paradox at National Review Online: “These accounts generally conflate disappointing growth in men’s earnings with growth in household income, which has been impressive. Growth in women’s earnings has also been impressive, but economic pessimists have twisted these bright spots to fit a gloomy narrative.”

The bottom line is that rising income inequality, while alarming at first glance, isn’t what it seems to be. The dynamism of the U.S. economy has been sadly underappreciated. Contrary to what most people believe, American households still experience considerable income mobility over time. That means more reasons to celebrate, and fewer reasons to pitch a tent at Occupy Wall Street.

Contributing Editor Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, writes a monthly economics column for reason.

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  • Ripped From Today's Headlines||

    Santorum Surges from Behind,"

    http://www.philly.com/philly/b.....47948.html

    "Romney Squeezes Out Santorum."

    http://www.democraticunderground.com/1002115624

  • Mo||

    According to IRS statistics, in 1990, the bottom 50 percent of income earners reported 15 percent of real adjusted gross income, some $517 billion in pre-tax income. In 2007, they reported only 12 percent of AGI, but this percentage amounted to more absolute dollars—some $1.1 trillion in pre-tax income.

    Using nominal dollar figures over 17 years? Tsk, tsk. That $1.1 trillion is only $635 billion in 1990 dollars. Which is a real wage growth of 1.1% a year for 17 years. That's about half of total GDP growth in that same time frame. You're correct in saying that they're not worse off, but they're not much better off either.

  • RedDragon6009||

    But they are better off.

  • Mo||

    After you subtract out 1% annually to account for population growth, you're left with 0.1% a year. Not exactly cashing in on the rising tide.

  • Kwanzaa Cake||

    These IRS stats cut out benefits like health insurance, 401(k) matches, and the like. So the 1.1%/year wage growth is on tope of the growth in benefit compensation. It never ceases to amaze me when this stuff gets left out.

  • anon||

    Calculating the individual "wealth" of 180 million people is a futile venture if only because of the subjective value of -everything.-

  • Kwanzaa Cake||

    And we don't even TRY to calculate wealth. Our collective head is so screwed up that we equate income with wealth. Of course, they are entirely different.

    I am thinking of a caller to Suze Orman's show I happened to catch last week. Woman in her late 50's, had an income of $45,000/year. But she had a 401(k) worth $170,000 and about $900,000 in investments. In other words, she is a millionaire. Yet the income figures alone would place her within the "middle class" 99% and, presumably, this suffering group whose incomes have allegedly stagnated.

  • Torontonian||

    A few things:
    "in 1990, the bottom 50 percent of income earners reported 15 percent of real adjusted gross income, some $517 billion in pre-tax income."

    "reported" - People with low reported incomes may also have unreported sources of income (from savings, family, cash income, etc.)

    "real" - the numbers are already adjusted for inflation.

    "pre-tax" - a more relevant metric would be income after tax. Tax rates have fallen for the lowest income earners (especially with the EITC).

  • ||

    Add in the bit about benefits, and I think that about wraps it up.

  • Mo||

    Those numbers are real in the sense that they are all in current dollars (see source below). The way to do an apples to apples comparison is to do it in constant dollars.

    "income" - People with high reported incomes typically have additional sources that are not considered income, primarily through capital gains taxes.

    "pre-tax" - taxes have fallen for everyone.

    http://www.irs.gov/taxstats/in.....79,00.html

  • Mo||

    Oops, "primarily through capital gains taxes" should be "primarily through capital gains".

  • ||

    You can't count 'savings' as unreported income, it's already been reported and taxed when it was first earned. At best you can call it unspent income.

  • wareagle||

    the rich ALWAYS get richer but with capitalism, so do the poor. Besides, teh US has bastardized "poor" to a level much of the rest of the world would laugh at. To a large extent, the plight of the poor is self-inflicted, a combination of poor choices and bad decisions. Yes, I'm sure there are the innocents in all this but most poor people are poor of their own making.

  • Nash||

    They are also "poor" because they NEED Smartphones, 60" LED Televisions, and 3 Month Trips to Bali paid for with credit cards and what's left of their savings. Then when they break their ankle rock climbing they bitch about how they can't afford healthcare because instead of saving their money they blew it on globetrotting.

  • Kwanzaa Cake||

    Curiously, spending everything and saving nothing leaves one with no net worth. Which in turn means that only those who save money have the sort of investment income that helps to propel you up the economic ladder.

  • annonymous commenter some guy||

    Breaking an ankle because you're an idiot doesn't help your income flow either...

  • annonymous commenter some guy||

    I should say "Breaking an ankle doesn't help your income flow either. Being an idiot compounds the problem."

  • ||

    Yes, all true. Today's poor, as I observed in eight years of volunteer work with them, 2000-08, enjoy lifestyles that would have been considered luxurious by standards I saw growing up in the 1970s.

    One of the reasons I'm no longer volunteering is that it just got to be outright disgusting to go to the subsidized apartment of a "poor" family...in a secured apartment complex that included a tennis court and swimming pool, and see digital cable running on a big-screen TV, cars, Internet access, cell phones, in-unit washer/dryers and dishwashers, salon-airbrushed nails and streaked/highlighted hair, and fashionable new clothes and shoes.

    Sorry, yeah, I'm a bitch and all, but if you're getting government and charitable assistance, when I go to your apartment, I want to see NO cable, NO Internet access, NO new clothes/manicures/pedicures/weaves, NO luxury apartment complexes with security gates and swimming pools, NO cars, NO cell phones, and NO name-brand anything.

    Even if it could be claimed that today's poor are making less money in real dollars than a generation ago (which isn't true), what is true is that the prices of a comfortable lifestyle have dropped relative to incomes, and/or the government has redefined "poor" to a skewed, overentitled level such that "poor" now means, "I can't afford everything I want."

  • RedDragon6009||

    I was just in DC this past weekend and was surprised to see how large the Occupy camp still is in McPherson Square. I work in downtown Tampa and for the past month the Occupy movement at Curtis Hixon park has consisted of two homeless guys with a stack of signs. I'm pretty sure that the only reason they are there is because the city recently outlawed panhandling on the streets, but as protesters they get to hang out there 24/7 and pester people for "donations."

  • #||

    a lot of the new york people came down to DC after they cleared out up there

  • annonymous commenter some guy||

    Are they still making a mess of the place?

  • Mo||

    Also, according to the very same Scott Winship, intergenerational mobility in the US lags far behind European nations

    http://www.brookings.edu/artic.....nship.aspx

  • A Serious Man||

    Okay, but Europe is fundamentally different economically, politically, and culturally from the US. Besides, much of Europe isn't that great anyway, lots of urban decay, huge immigrant problems, and of course there is their debt crisis.

  • Mo||

    Well, all the countries highlighted in the link are the ones that are doing pretty well economically and socially (the Nordics, Germany and the UK) rather than the basket cases.

    I was merely pointing out that you can't highlight American economic mobility without noting that it's on the low end in comparison to our peers.

    You're right in saying that there are fundamental differences. However,

  • anon||

    US GDP: 15 trillion
    EU GDP: 17 trillion
    Germany GDP: 3.6 trillion
    Netherlands GDP: 850 billion

    You're attempting to compare apples to oranges when you take an economy 1/16th our size. If any comparison is warranted, it'd be the entire EU, which I think we can all see would make the US look far better.

  • anon||

    IE: Germany is not our peer.

  • A Serious Man||

    "Well, all the countries highlighted in the link are the ones that are doing pretty well economically and socially (the Nordics, Germany and the UK) rather than the basket cases."

    Yes, I suppose the rich people on the Titanic that got into the lifeboat first will last a bit longer than those treading water, but the fact remains that those treading water will swamp the lifeboats in their desperation.

  • GW||

    Something to consider here. You're talking about dividing the income groups into "fifths". That doesn't say that the top fifth in Europe is relative to the top fifth in the US. Any of the other comparisons for the corresponding income compartments are equally as valid.

    It's kind of like asking when we'll end poverty in America....and the answer is never, because we'll always view the bottom X% as being "poor" no matter how much absolute wealth they have.

    What qualifies for the bottom 40% in America, might very well equate to the middle fifth in some European country.

    So, there's likely more mobility because of more income equality across the board. if it only takes a few thousand bucks to move from the 2nd fifth to the 3rd fifth in germany, but it takes $30k to do that in the US, the graphs don't tell that story.

  • ||

    The UK is a basket case. There's more personal savings in place like Italy.

  • Nash||

    The debt is the biggest issue. Europe has nice entitlement programs. They also don't pay for them. They also don't have a gargantuan military all over the globe like the US does. You can't have a welfare state, a massive military and no debt. It's not sustainable.

  • ||

    You also can't have a welfare state and no debt. Counterexamples are welcome, but I can't think of any.

  • Montani Semper Liberi||

    I don't see any mention of dollar amounts in there. What is the bottom, second, middle, fourth, or top fifth in terms of earnings in Europe and the US? If there is less room between the groups in Europe than the US, one could conceivably have a bigger increase in income in the US but only more up one group while a person with a smaller increase in income in Europe would move up two or three groups. Now which is more important, having more money or being able to say that you moved from the bottom fifth to the middle fifth?

  • anon||

    The entire argument seems to be a non-sequitur. In 1990, it would have been impossible to build the computer I use today to play video games. Not just expensive, impossible

  • GW||

    Yes...these figures don't account for how cheap some goods have gotten... especially "luxury" goods like electronics.

  • RedDragon6009||

    At least you'll have something fun to do if lose your job.

  • anon||

    Good luck with that. Even if I do shut my business down, I know for a fact I can find a job doing -something- within a day.

  • annonymous commenter some guy||

    McDonald's is always hiring. Always.

  • Rev. Blue Moon ||

    Seriously - and they are usually hiring full-time supervisor and/or management positions. 30+K per yer and benefits with a high school diploma.

  • ||

    McDonald's is phenomenal. I know someone on my brother-in-laws side of the family who was considered "slow" and McDonald's hire him. They trained him and he eventually was offered a job in management and keeps growing within their organization.

  • ||

    That is to say, there are many stories like that one with McDonald's. When I was growing up, it as considered a big thing to have McDo on your CV.

  • annonymous commenter some guy||

    Not to mention that your computer gives you a great deal more opportunity than all of 1990's information resources combined.

  • SprERK||

    The issue isn't so much the U.S. Today vs 20 years ago, but the U.S. today versus many European countries today. Income in much more equal in those, and provide much more assistance in health care, unemployment insurance, and antipoverty programs. Things have gotten better, but not at a very promising rate. The fact that male wages have stagnated means that, if we sucessfuly create a gender-neutral work force, there will cease to be any further improvement.

  • GW||

    Generally, the level of lifestyle the "average" European lives isn't nearly that of the average American, either....even if you only count the Americans that are living within their means, not asshole deep in debt.

    Just compare dwelling sizes for an idea. In the UK, a family of 4 doesn't live a 2000 square foot single family home. In America, those are everywhere.

    That "equality" forced on them by the government gives no incentive to make extra money and pursue a higher standard of living.

  • ||

    Exactly. And staggering percentage of Europeans live with their parents well into their 30s, especially in Spain and Italy. Living with your parents at 35 is not what I describe as a high standard of living.

  • GW||

    Yep. Look at GDP per capita. The story is all there.

  • anon||

    I'd have already committed suicide if I were forced to live with that creature some refer to as my mother my entire life until this point.

  • ||

    Suicide? Or homicide?

  • EDG reppin' LBC||

    Matricide, technically. See Orestes.

  • T||

    I can't imagine being okay with living with your parents until 35.

    But then, I get along better with my family the farther away from them I am.

  • annonymous commenter some guy||

    Yeah. In those countries you don't buy a house when you grow up, you inherit it.

  • ||

    Not only that, in the post-war era, not only did American cash go to Europe to help build it but PRIVATE money too. For example, as a purely anecdotal story, my father sent money to his brother to build a house for his family after he lost his eyesight and hearing in a mining accident.

    This gave my cousins a shelter. Eventually they found their way to Milan and Paris to open restaurants and a transportation company. Let's just say they turned, say, 75k into millions.

    I wonder how many stories like this took place across Europe in the mid to latr 20th century that basically helped their economies. I wonder by how much though.

  • Montani Semper Liberi||

    My wife mentioned this the other day. She did a study abroad in Spain while she was in school. Her impression is that the average Spaniard lives like a Section 8 person in the US.

  • ||

    The only reason the wealth gap would be less in Europe(something may or may not be true) is because it's far harder in those countries to gain wealth, hence the greater financial mobility in the U.S.

  • ||

    Deregulating, dramatically shrinking government's scope and spending, and generally moving towards a free market economy would almost certainly result in massive economic growth. I think that, more than anything, would solve the problem. We'll still have spectacularly rich, but the middle class will grow and do much better in such a situation.

    Naturally, we'll do no such thing, as that reduces the power of some to force many to do their bidding.

  • anon||

    Deregulating isn't even necessary. De-taxing would suffice.

  • A Serious Man||

    Yeah, but unfortunately we have a major political party that thinks that if the rich are getting too rich it's a bad thing for everyone. Plus they have a vested interest in keeping the poor dependent on the goodness of government charity and patronage.

  • ||

    Which is why we need a fundamental rollback of government, to make it largely irrelevant how much some political party wants socialism.

  • ||

    The only way to combat the power of those politicians and their cronies is to

    1) Publish more studies like this that strip away the misleading data used by the big-government crowd to state their case

    2) Expose the behind-the-scenes actions of Washington bigwigs (how rich they are, how cozy they are with special interests, their campaign donations from moneyed groups)

    3) Explain that all the abuses of the free market trumpeted by the liberals are the result of crony capitalism, which would go away if the government wouldn't constantly tilt the playing field towards corporations and special interests that lobby them the most

    The one person I could see being able to do all that who is exceedingly difficult to smear in an election is Gary Johnson.

  • Blacksmithing||

    Nice, but I don't see any of this happening until the US economy crashes.

    We can crow about the benefits of deregulation and free markets, but I think there are too many people out there either 1) ignorant of the benefits or 2) philisophically opposed to such policies. I'll call the latter "Tonies." And then there are the crony capitalists that are perfectly happy running things into the ground as long as it feathers their nests.

  • Tony||

    Empty speculation.

  • roystgnr||

    The definition of "millionaire" is not "someone who earns a million dollars in a year". The definition of "wealthiest" is not "currently earning the highest income(s)".

    This article also misses the most interesting factoid I've seen about income inequality, the distinction between household income inequality (slowly rising over the past couple decades) versus individual income inequality (slowly falling): http://politicalcalculations.b.....ncome.html

    I don't expect this to become common knowledge any time soon. It's probably harder to work up a good class war over "thanks for paying us more, but why don't you want to marry us too?"

  • ||

    The definition of "millionaire" is not "someone who earns a million dollars in a year".

    It used to be, you know.

  • Mo||

    No it didn't. It was always based on net worth. The old timey millionaires didn't make a million a year for the simple fact that making a million dollars back when the phrase came about was the equivqalent of making tens of million today.

    This article also misses the most interesting factoid I've seen about income inequality, the distinction between household income inequality (slowly rising over the past couple decades) versus individual income inequality (slowly falling)

    That is super interesting.

  • ||

    I agree. I only know this,again to cite my father, because of dealing with his accountant and lawyer. He never "earned" a million dollars a year but he amassed millions in properties. For that, he's considered a "millionaire."

    And in a place like wanna-be Little Scandinavia socialist Quebec, he's also probably viewed as a capitalist pig for having the audacity to come from nothing to make some coin.

  • ||

    Thank you. I rarely have any issue with Ms. De Rugy's consistently excellent articles, but I just about stopped reading when I saw her use that definition. Grr.

  • Rev. Blue Moon ||

    Sorry, but I don't take anyone who betrays the Founders seriously.

  • ||

    I agree. When they do studies they should measure standard of living and the total net worth of individuals, not just what they reported as "income", and they should examine it over time. They should also examine the effects of lifestyle choices on people's standard of living (I am convinced that a huge cause of generational poverty is people having kids when they're 17 and dropping out of school).

  • ||

    The article's illustration outstrips its text in epiphany- to restore full employment , al DC need do is render servant's wages deductible from their master's taxes in a fully graduated way, sparing the the unseemly spectacle of millionaires without gardeners driving their own cars, and billionaires going about in limos without footmen running behind

    Restoring the nation to the level of service prevailing before the Great War, when 2% of the population were full time servants would add millions of jobs.

  • barfman||

    seitz@physics.harvard.edu

    *barf*

  • Blacksmithing||

    Or Big Gov could pay 1/2 of us to dig holes and the other 1/2 to fill them. Full employment!

  • Ugh||

    Professional servants are routinely paid six figures in the United States.

    But I suppose Russell also finds it offensive and demeaning that servers bring him food when he joins his peers at Chilis.

    Anything short of a Roddenberry utopia is an irritant to people like this.

  • A Serious Man||

    While we are on the subject, here is Mr Yglesias at Slate blogging about income inequality and Mitt Romney's claim that OWS obsession with it is about envy.

    http://www.slate.com/blogs/mon.....redirect=0

    Needless to say, he is quite enamored of mathematical models that seem to support his assertions while ignoring the reality of deflationary widgets such as technology that improve standard of living.

  • Kwanzaa Cake||

    Simple issue, really. Would the average lower-middle class or poor American trade places with Charlemange? Perhaps so, if willing to forego indoor plumbing, heat and air conditioning, penicillin, automobile transportation, telephones, washing machines . . .

  • A Serious Man||

    But you see, to the average left-winger those things are rights that every person is entitled to. It doesn't matter how they were innovated in the first place which is what really annoys me about this whole debate on wanting to stick it to the rich and corporations.

  • Kwanzaa Cake||

    Also that (as pointed out above) if we define poverty by reference to current rich, we will never eradicate poverty. Whihc is the point for the leftists -- they need to convince 51% of the populationthat they're poor and getting screwed b/c it is their lever to political power.

  • ||

    I wish they'd just buy into the idea of a larger pie being great for all of us, while continuing to buy votes with the lower end of the economy. Which lower end would have flying cars and vacation homes on the Moon, unlike the wealthy, who would have portals to homes on Arrakis.

  • Kwanzaa Cake||

    And you'd be willing to put up with that kind of inequality? You're worse than Hitler.

  • ||

    Yes, that's about where the debate lives right now. Unreal.

  • ||

    Hey, how about a link to the video she mentions. Anyone?

  • ||

    Surprise! The DOJ has ruled that Obama's non-recess recess appointments are constitutional.

    "We conclude that while Congress can prevent the president from making any recess appointments by remaining continuously in session and available to receive and act on nominations, it cannot do so by conducting pro forma sessions during a recess," the opinion said.

    The White House has previously argued that the Senate began its holiday break on December 17 and will not be back until January 23, thus enabling Obama to make the recess appointments.

    "The Senate as a body does not uniformly appear to consider its recess broken by pre-set pro forma sessions," the 23-page opinion said, authored by Virginia Seitz, assistant attorney general for the Office of Legal Counsel.
  • ||

    Total nonsense.

  • A Serious Man||

    Correct me if I am wrong, but didn't Congress pass the payroll tax extension during one of these pro forma sessions? If so, then Congress was in session since it can only pass legislation while in session per the rules in Constitution.

  • BO-DOJ||

    But your argument does not take into account the fact that FUCK YOU.

  • ||

    The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.

    And if we want to get really literal about things, this vacancy happened at a time that everyone agrees the Senate was definitely in session. So it shouldn't fall under this clause to begin with.

  • ||

    There's so much bullshit in the administration's action and justification that I don't know where to begin. Yes, the Senate pulled a fast one, but it did so within its rights. The administration, on the other hand, is acting unconstitutionally. Then again, what else is new?

  • Rev. Blue Moon ||

    Hey, so can the Senate just end the pro-forma session, start another one in the morning, and then Cordray's commission will have expired?

  • Rev. Blue Moon ||

    The other thing with Tulpa's point is that the Constitution says he can fill vacancies that "may happen", not ones that "are created".

  • cynical||

    I kinda wish Congress would respond by completely defunding DOJ. Fuck em, useless cartel-owned child-burning assholes.

  • rho||

    The problem of income inequality is not about RICH BAD.

    It's about how being rich gives you access to a powerful tool in government to make yourself even richer.

    Free societies can survive the odd super-rich or super-poor, but never will survive a stagnant or falling middle class.

  • Kwanzaa Cake||

    Then let's make government a shitload less powerful. Problem solved.

  • Tony||

    That makes absolutely no sense.

  • Kwanzaa Cake||

    To you, it wouldn't. Here in reality, rich people spend money trying to influence politicians when those politicians have authority over every fucking thing imaginable. If they had a lot less authority, then the opportunities for influence peddling and graft would be a lot less.

  • Tony||

    If they had less authority the rich wouldn't need to bother bribing them so much, they'd just take the authority for themselves. We need stronger government, i.e., more separation from the wealthy and political influence.

  • Kwanzaa Cake||

    In other words you want more government despite its complete failure to deliver the results you think government should generate. This is a fantasy world you're living in. If there is a strong government with lots of power the wealthy will influence it.

  • Tony||

    That's like saying the planet Earth hasn't produced the best possible society, so we should just blow it up. Government will always be there. You reduce the role of the legitimate one, illegitimate sources of power will fill the vacuum. When in the history of the human species have large populations been able to just leave each other alone, or be left alone?

    If you want to pretend that everything is peachy without government in some magical realm where people don't compete for control and don't need rules and regulations to get along, then knock yourself out. What has it got to do with anything?

  • Ugh||

    The rich would force expensive barriers to entrance on startups? How would they do that without the fiat and threat of violence that government provides?

    Did you give even a moment's thought to your post before you hit submit?

  • Tony||

    Well the purpose of government is to be the repository of legitimate force. Without that aspect, you have what's called a failed state. Do you know of any failed states where you'd like to live?

    That power can be wielded in many ways, but you can't get rid of that power without illegitimate sources of force cropping up. You seriously think society can exist entirely by lots of asking nicely?

    The question is how to prevent private interests from gaining control of that power. If you're the owner of a gun, you don't prevent a robber from getting hold of it by shooting yourself in the head.

  • ||

    Top. Men.

  • cynical||

    "they'd just take the authority for themselves"

    By that logic, the rich would have already captured whatever authority government didn't have. Obama wouldn't have asked Congress to let him detain people indefinitely, he'd have just paid Walmart to hire out their kidnapping teams.

  • Hooker||

    Things are rarely what they seem to be. One thing if for sure, people are tired of leaving their futures in the hands of employers and traditional jobs. There are more entrepreneurs now than ever before, and that is a good thing.

  • ToSeek||

    The claim is that households are doing better, but why are households doing better? When I was growing up, one parent could work 40 hours and make enough money to support a family. Today, it's two parents, both probably working more than 40 hours. That doesn't sound like progres to me.

  • ||

    Citation please.

  • Tony||

    So things were moved in the right direction thanks to the recession, though it's hard to weep for the millionaire considering all of the other victims of the recession whose support net you guys advocate removing, along with what chance there is for upward mobility. Remember, celebrating the American economy for its freedom also entails celebrating it for its socialist aspects. There's a reason the elderly weathered the recession OK--rather than have their savings tied to the stock market, they had Social Security.

    Coinciding with this is the fact that the poor have not done very well since Clinton and Gingrich decimated their safety net--guess the motivation cutting them off was supposed to inspire never materialized.

    Whatever cherry-picked data points you use to justify the wealth and income distribution status quo, the fact is that for the last 30 years a hugely disproportionate share of economic growth has gone to a very small number of people. Libertarians love to fudge the issue by pretending that the wealthy can be lumped together--all people making a $1 million or more, for example, but you have to go to like the top 0.1% to see where all the real growth has happened.

    Are you guys like I used to be when I was younger? Watch something like Downton Abbey and think, it's just not fair that I can't afford a staff of 40 in my home. Why can't we live like that anymore? Well, now we do, except the obvious truth confronts us: only a tiny, tiny number of people can afford to live like that, everyone else would be lucky to scrub their toilets. There is no correct distribution, but it's certain that too much concentrated wealth distorts democracy.

  • Kwanzaa Cake||

    Whatever cherry-picked data points you use to justify the wealth and income distribution status quo, the fact is that for the last 30 years a hugely disproportionate share of economic growth has gone to a very small number of people.

    ______________________

    Assume that is true. Over that 30 years the government has gorwn dramatically, especially with regard to the very sort of redistribution you advocate as a means for reducing inequality. Time to admit that your plan just does not work? Fuck no, time to double down. Again. And of course let's just ignore the fact that poverty has a massive cultural component. Otherwise you might have to take some responsibility for all those ghetto, trailer parks, and unwed teen moms your "safety net" has created.

  • Tony||

    Why would I admit something that is plain false? As I said, the safety net was eroded under Clinton and has been under constant assault from Republicans for the last 30 years. When it was most robust, prior to that, were people relatively poorer? Furthermore, the evidence cited elsewhere that there is more mobility in Europe--which has a stronger safety net--also belies your general claim that a safety net somehow makes people worse off by providing perverse incentives. Every bit of evidence suggests a safety net increases mobility.

  • ||

    Every bit of evidence suggests a safety net increases mobility.

    Mobility in which direction?

  • ||

    No it doesn't.

  • Tncm||

    Why would I admit something that is plain false? As I said, the safety net was eroded under Clinton and has been under constant assault from Republicans for the last 30 years.

    Except for the fact that Medicare as a percentage of GDP is growing at a massive trajectory and welfare spending as a whole only plateaued under the supposedly Draconian cuts of the Clinton administration only to experience a massive upswing but a few years later.

    Furthermore, the evidence cited elsewhere that there is more mobility in Europe--which has a stronger safety net--also belies your general claim that a safety net somehow makes people worse off by providing perverse incentives. Every bit of evidence suggests a safety net increases mobility.

    This is flatly contradicted by the work of Berkley economist Emmanuel Saez who found that, "“long-term mobility has increased significantly over the last five decades." By-the-by, ever heard of the term "Eurosclerosis"? In essence, Europe's suffocating labor regulations and incredibly generous welfare programs result in unemployment that remains high even in times of economic expansion and high real GDP growth, whereas in more liberalized economies such as the United States, Hong Kong, Canada, et al economic growth is accompanied by lower unemployment. The explanation is so simple that it's almost pretentious of me to bring it up; the marginal utility of sitting on your ass and collecting wonderful benefits for nothing exceeds the marginal disutility of labor and the potential for higher income. This is basic Econ 101 stuff, and many economists (even Keynesians!) recognize that there is a tradeoff between cushy doles and a dynamic labor force. In fact, I think my old economics textbook actually used France and Sweden as cut-and-dry examples of this phenomenon.

    This if off-topic Tony, but you might be interested in a report by the European Central Bank which shows that countries in the Eurozone that have undergone austerity programs have experienced higher real GDP growth as a result. It's almost as if easing up on government spending ends the crowding out of scarce resources from the private sector (aka the engine of growth in any economy)...

  • Tony||

    Medicare spending has gone up because more people are going on the program as the population ages. (That's called being a successful program, when society keeps more old people alive.) Healthcare spending is also way up, but the causes are all in the private sector.

    You'd expect the pattern you described in welfare spending if cutting the program caused more poverty. Again, have the benefits on any of these programs gotten more generous? No, then it can't be runaway government dogooderism that is raising the costs, it's more people going on the programs. When the economy was nearly destroyed, it pushed even more people into these programs. How is that the fault of the safety net itself? Given these patterns, it only makes sense to strengthen them.

    Which brings us to Europe--yes more generous social spending causes more unemployment. But that's ok because those unemployed people won't be put on the streets and/or made truly dependent!

    I'd like to see that report because I couldn't find it via google, but in general austerity is not producing growth and it's not even designed to. It's designed to appease sovereign bond investors.

    A safety net encourages labor mobility as well--if you know you won't starve you'll be more encouraged to look for another job. Doesn't that increase efficiency?

    The underlying problem solved is keeping vulnerable people from going over the edge into conditions modern societies shouldn't accept. This has the effect of making those people more free to participate in the economy rather than leech from it via less efficient means such as delaying healthcare until you go to the ER. It's certainly true that too-generous benefits can create bad incentives, but are we really just talking about the margins or do you want to cut people off altogether?

  • ||

    You do realize that eventually you run out of people to tax? Right?

  • ||

    I hope the NY Times readers don't visit reason.com and see my factual inaccurate column from this week. I argued the opposite of Veronique's column without citing any facts. They will realize that I am a total sham.

  • Tony||

    Here's the report.

    The basic point is that family background affects people's success or failure in America more than in other advanced economies.

  • Mr. FIFY||

    Two stupid shits posting in a row. We just need Max to make it a trifecta.

  • ||

    People don't choose to be rich or poor, as nobody has free will. People don't choose their genes or where they grow up. Both of those factors determine everything about the condition of a person's brain. People aren't responsible for their actions, since people didn't choose their parents or the childhood environment that shaped their neuroanatomy. Whether someone becomes a criminal or a hero is determined by the condition of their brain's frontal lobe. Sam Harris and David Eagleman are two neuroscientists who convincingly argue against the unscientific notion of free will.

  • Tony||

    It's no use, these people freely reject science they don't feel like believing in.

  • ||

    That is, quite possibly, the stupidest shit I have ever read in my entire life.

  • ||

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  • Kyle Brown||

    Okay, no doubt that income mobility is relevant to inequality, but the conclusions derived by de Rugy and Horwitz don't stand up to scrutiny.

    Taking the Tax Foundation study covering 1999-2007, we can just as easily state that only 2.7% of the lowest quintile move to the top 10% over the time period (and 2.4% of the second-lowest quintile, and 4.4% of the middle quintile respectively). Said another way, 90.4% of the top 10% in 2007 were already in the top quintile in 1999.

    85.6% of the top two quintiles in 2007 were in the top two in 1999. 67.6% of the bottom two quintiles in 2007 were in the bottom two in 1999.

    So much for upward mobility. The glass is half-empty, not half-full.

    As for Horwitz's argument in his video, he's citing an old Cox and Alm study that has been thoroughly debunked. The bias in their study is obvious: average income of the bottom quintile is some $1,263. So years later when the average of that same sample is $29,008, Horwitz concludes only 5% of the people poor at the beginning of the study are still poor at the end.

    The problem was that they were tracking individual income, not family income. So the bottom quintile at the beginning of the study was 16-year olds in upper-class families and zero-income homemaking housewives.

    The Tax Foundation study used family incomes, not individual incomes, so its actually worth the paper its printed on. But again, the way the statistics are quoted makes all the difference.

  • Julian||

    Hey! You guys have an audio version! Awesome! I hope more articles get these!

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