Government Spending

Nick Gillespie at Reuters on Economic Inequality & Mobility


This week, Reuters is running an excellent series on income inequality and the Great Recession. Check it out here.

I've contributed a commentary piece titled, "Examine inequality's causes before prescribing solutions," which looks at the ways in which government promotes geographical inequality and stacks the deck against younger, poorer people in favor of older, wealther people. Some snippets:

Fear and loathing of income inequality is both totally understandable and ultimately misplaced.

It's understandable because everywhere around us it seems as if top income earners ? those latter-day kulaks vilified as the "1 Percent" by the Occupy crowd and populist politicians ? are gaining while the rest of us seem barely able to hang on to a lower-middle-class standard of living.

It's misplaced because it glosses over strong evidence that the ability to rise above your starting place ? the American Dream, by most accounts ? is better than it was 40 years ago….

…generational inequality…is also goosed by government policy. The Pew Research Center finds that in 1984, households headed by someone 65 years or older possessed on average10 times the wealth of a household led by someone under 35. By 2010 that gap had widened to 22 times. Part of that disparity is the result of payroll taxes that take about 12.4 percent (half from the worker, half from the employer) of every dollar of earned income up to $110,000 to pay for Social Security (for the past two years, the worker's share of Social Security taxes has been reduced by 2 percentage points, a break that will expire at year's end). Another 2.9 percent of all wages ? again split between employee and employer ? goes to Medicare.

Read more, with lotsa links, here.

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  1. Reuters just changed the headline to “News Flash: Libertarian Blames Government, Wants Money Taken from Elderly”

    1. Not minorities and de chillrunz? They’re slipping…

  2. “A June study from Pew’s Economic Mobility Project finds that 84 percent of Americans have “higher family incomes than their parents did.””

    While undoubtedly true, even assuming that we are talking in inflation adjusted terms there is still something wrong here. I know that I make more than double what my parents combined incomes were in gross pay when they were my age and that puts me about 10% ahead of them in inflation adjusted income. However when you compare the things that each of us could actually afford I cannot come close to matching the lifestyle that they had.

    While it is true that a portion of the difference comes from their being more goods and services available which are considered “necessities” today it does not come close to explaining the discrepancy.

    The fact is that cost of actual real necessities has risen faster than the overall inflation rate and therefore even having a higher inflation adjusted income does not necessarily translate to higher standard of living.

    1. However when you compare the things that each of us could actually afford I cannot come close to matching the lifestyle that they had.

      How many smartphones did they have?

      1. My parents were able to afford a lot of land a really big house. Today, I can’t afford more than a townhouse and no land. That’s the biggest difference. Our TV is nicer than theirs was and our cell phone is much smaller and does more, but our purchasing power is significantly less.

      2. None, but their landline phone plus long distance charges cost ~70% of what my 3 cell phones cost in inflation adjusted terms.

        On the flip side my parents had significant left over income for savings and vacation travel which I do not have.

        So sure I have the added convienence of a cell phone over a land line but that plus the ~$50 a month in extra cost for the cell phones in no way makes up for the rest.

      3. How many smartphones did they have?

        “THE ONLY THING THAT MATTERS IS MY GAY ELECTRONIC TOYS” — A stupid, materialistic lolbertarian who doesn’t understand the value of having enough wealth to go on vacation and take time off to spend time with his family.

  3. Just a pet peeve, but …

    those latter-day kulaks vilified as the “1 Percent” by the Occupy crowd and populist politicians

    Comparing the “1 percent” to the kulaks is a little ridiculous. The kulaks were peasant farmers who didn’t want their farms collectivized and were massacred by the Bolesheviks. They were pretty much the furthest thing from the wealthy Wall Street investment fund managers and corporate executives that comprise the top 1% of earners in America, many of whom are happy to socialize their losses and completely willing to act as the industrial policy branch of government in exchange for a few tax breaks.

  4. I can see why The Jacket chose to pay some limited amount of lip service to how “income inequality” like, totally makes some people feel really bad about themselves, and we all know feeling all the feelings is something that is relevant when examining policy. Except that it isn’t.

    The correct way to start talking about income inequality is to say that it doesn’t fucking matter. Other things, like standard of living, and how government fuckery impacts that, are worth discussing, but acknowledging income inequality as a valid concern just legitimizes TEAM ENVY’s class warfare obsession.

    1. Wait – are you saying that jealousy is not a sound basis for public policy? **clutches pearls**

    2. I don’t think income inequality “doesn’t matter”. Better to say that it is a negligible issue so long as the ability of people to change their income based on the amount they are willing to learn and skills they are willing to pick up is far more important.

      It’s fine to make $22k as a 19 year old. It sucks as a 29 year old with a household to care for. As long as people in different demographics can change their income with respect to their own cohort, there’s no inequality problem. I am concerned that this traditional flexibility is ossifying and becoming problematic in its own right.

      1. If only the government would do something, right?

  5. Discussing intergenerational transfers of wealth is a good start. You should also discuss ending the Fed and the regulatory leviathan. Any other policy prescriptions for dealing with inequality will just make people equally poor.

  6. …households headed by someone 65 years or older possessed on average 10 times the wealth of a household led by someone under 35…

    Yet every time I rip Social Security as being a Ponzi scheme, it’s defenders warn me that old people would be eating dog food and living in the streets without it. They must mean Alpo….

    I get the liberal defense of welfare (the rich being taxed to support the poor), although I disagree with the morality of it (stealing being immoral.) I don’t get how anyone defends taking money from struggling working young people to support wealthier retired old people.

  7. Our government–and Obama’s policies–have been one handout after another. Bailouts for banks and the UAW. Subsidies for the auto industry and companies that produce “green” technology. Free contraceptives for empowered wymyn. Obamaphones and Obamacare for the poor. The standard Social Security / Medicare entitlements for the elderly. Continued handouts to universities and college students. Funneling cash to the military-industrial complex, foreign nations, and Israel.

    Here’s my question: for someone who isn’t a banker, a union worker, a woman, a minority, an energy sector employee, a government pawn, a college student, a professor, an old person, a defense contractor, an Israeli, an African warlord, or a government teat-sucker, how am I supposed to get ahead?

    (Oops, sorry, I forgot that my white male privilege means that my personal hardships don’t matter compared to Sandra Fluke’s vagina.)

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