Oh, please do. But don’t just “talk about” it. Prove it.
Asia is just the latest frontier in globalization which affects income inequality at both ends. Low skill labor is now competing with a billion former peasants in China and hundreds of millions of Indians. Service industry workers are also competing with millions of immigrants from poor countries around the world. This lowers wages because of the laws of supply and demand.
Conversely, american companies can sell around the world to new consumers. Microsoft, Google and Facebook have billions of new consumers buying their products in formerly poor countries. Bigger companies need talented executives and can afford to pay them more. Since it is tax advantageous to pay them in stock, executive compensation has grown by leaps and bounds in companies whose stock has done well.
Capital also benefits from globalization in that it can go to wherever in the world it is needed most and earn better returns than it could stuck in one countries. Bretton Woods really opened up capital to emerging markets and since then you have seen poor countries grow fast while many rich countries have stagnated relative to their previous growth.
All this worsens income inequality within countries while reducing economic inequality worldwide. 56 years ago tens of millions of Chinese were literally starving to death and now they are making shiny geegaws for Apple. That transformation is probably the swiftest increase in human well being in the history of the planet. Something to be celebrated and not bemoaned.
The point is that there are many things that factor into income distribution. Saying that a theory is or isn’t true based on the difference in income distribution between countries is only reasonable if you’ve removed everything else that feeds into that one number. Otherwise, it’s like trying to compare whether the depth of the ocean propogates faster if you add a single drop in California or Sri Lanka. The signal is too small compared to the noise.
You want me to “prove” that taking lots of money away from the rich reduces the income gap between rich and poor? :dubious:
Remember, the question isn’t “Is soaking the rich good for the economy?” It’s “Does soaking the rich reduce the income gap between rich and poor?”
Are you seriously arguing that a 90% top marginal tax rate would INCREASE the amount of income inequality in the United States? By what mechanism? How does taking lots of money away from the rich lead to the rich having more money?
The premise of this thread is laughable. The big change from 50 years ago and now isn’t feminism or Asia. It’s that we used to tax the hell out of the rich and now we don’t. Now, as a conservative you might argue that letting the rich keep more money is a good thing for the economy as a whole – that’s the whole principle of trickle-down economics after all – but I fail to see how you can argue that letting the rich keep more money is not a major factor in the rich having more money.
You are confusing effective tax rates with the statutory top tax rates. Rich people have always had the ability to move income around to pay less taxes and accept compensation in the form of non-taxable perks instead of just income. Given this and the changes to how the IRS treats perks effective tax rates were always much lower than the top marginal rate. In 2010 the White House put out an economic report that estimated top effective tax rates for those with an income equivalent to $250,000. In 1960 it was estimated at about 28% and it was estimated at about 25% in 2010. If you look at what people actually pay taxes are a very small part of the reason the rich have more money.
Which is why we need to start taxing wealth, not just income.
I suspect that it would count as double taxation in the majority of cases, which is forbidden.
By what? I don’t think there’s anything in the Constitution about it.
First, thanks for the responses! I didn’t mean to be a drive-by thread starter, but I happened to start this one just before leaving town, and then forgot all about it.
I suspect you’re right, but I don’t have the facts to back that up.
Can we show a correlation? Interesting hypothesis. If so, though, the differential income of families wouldn’t vary as much as the differential income of individuals. (If everyone was married, there’d be little differentiation – little increase in gap – if the gap was entirely due to women entering the workforce. Of course, everyone isn’t married and it’s not the only factor.)
It’s definitely not a zero-sum gain.
As productivity goes up thanks to technology, that rising tide should float all boats. It always has in the past. I admit that there may come a point (which we may have already reached) where it’s no longer true, as the labor is no longer needed to provide the productivity.
I attribute the loss of power of unions in the US to competition from overseas, which bolsters the point in my OP.
As a tech worker, I don’t feel any need for a union, and I’m glad they’re not involved.
Good point.
I agree.
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The premise of this thread is laughable. The big change from 50 years ago and now isn’t feminism or Asia. It’s that we used to tax the hell out of the rich and now we don’t.
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I’m not laughing, and your points here are less compelling than the simple fact that nearly everything we buy is made overseas. Anyway, it’s just your opinion versus mine, but I’ll be mature enough not to laugh at yours.
I wouldn’t argue that letting the rich keep more money is not a factor. I’d just guess that it’s a minor factor compared to tax rates. Great wealth isn’t accumulated by personal income, it’s accumulated by capital gains. Yes, capital gains taxes are lower now too. Still, I doubt it’s the biggest factor. Got any figures to prove your point? Nope? Neither do I, but I’d love to see any figures anyone can post.
I saw that and am very interested and look forward to having time to look into it more deeply. I always thought the dogma that Piketty attacks was counterintuitive (but the truth often is). I do suspect that a natural tendency for wealth to accumulate to the wealthy is a significant factor. But it didn’t keep the US middle class from being in great shape in much of the 20th century, so there’s more to it than that, and I don’t think differences in tax rates are the primary reason.
Regarding both of the above: how do we count these?
Compare what we bought in the 60’s and 70’s with what we buy today, and where it is made. Back then, everything was made in the US. Then Japan entered and competed with radios and motorcycles, and then TVs and cars. Not long after that, South Korea and Taiwan jumped in. Today, the vast majority of what we buy is made in China.
That isn’t simply “offshoring,” that’s a complete change in the flow of goods.
If I’m correct, this should be clear from a chart of trade deficits. In the 60’s, they’d be small. Today, they’re huge.
Nobody said Asia was stealing anything.
That’s my understanding also - but if a CEO knew that a massive payout would be mostly taken in taxes, there is lot less incentive to look like a dick by being greedy. And a lot more incentive for the company to use that money for growth.
Back then the ratio of CEO pay to average worker pay was much less than today. I also don’t recall hearing about stock options back then. I’m sure they existed, but weren’t used as much as today thanks to a more stable market and capital gains taxes.
It also appears that rules requiring the publication of CEO salaries, which were supposed to limit them out of shame, actually launched a race to get more than the CEO down the block.
It is not a fixed pie, but the new pie created by capital and labor is all going to capital. If wages shrink relative to inflation, where do you think that money is going? It is going to increased profits, increase stock prices, and increased bonuses for the management. If a company increase profitability through layoffs, that is another example. And those left, whose productivity increases by definition, don’t see any benefit for the most part.
Those of us near the 10% with money in the market don’t care that much about stagnant wages, since our net worth has been booming thanks to the Obama market. Those who can’t afford investments get screwed even more.
In my experience those left after automation have more skilled jobs. There will be fewer workers, but they should be more highly paid. Is that happening? I doubt it.
This is nothing new. In the '50s televisions went from being luxury items to items anyone could afford, which is why programming fell from sophisticated dramas by Rod Serling to the Beverly Hillbillies. Plus, the rich still have plenty of nice toys out of the reach of the middle class.
That’s why I never understood the Kutzner curve.
The standard conservative/libertarian rebuttal might be that it was created by the capitalist with the capital, so … great! While I have some sympathy for this (I want capitalists to have incentive to create new wealth) I do worry about the ultimate result. Thus, unlike most conservatives, I’m not “lower taxes or death!”
That’s what happens in the short term, but then the service economy has been picking up, thanks to the available pool of inexpensive labor. That’s my guess, anyway.
This would be a typical example from among the many assertions in Thomas Piketty’s book: that the rich have the resources to grow their wealth much faster than the general economy, and in a permanently slowing economy (just how many people and continuous economic growth can this planet support?) the gap between rich and poor will continue to grow. Offshoring manufacturing is just a symptom of private wealth growing faster than the global economy, not a cause.
As Evil Captor has already noted, forbidden by what? If that were literally true then sales taxes concurrently with income taxes would be forbidden, and so would inheritance taxes, among many others.
I realize you were responding to the manufacturing argument in the OP, but I think the general thrust of the idea – Asian integration into the world economy – is still likely to be the broadly correct diagnosis, even if the specifics are a bit off.
Citing job losses in isolation is a little like saying the US federal budget deficit was 3 billion in 1970 and 1,293 billion in 2010, therefore the US must have a budget problem. A numerator without a denominator. Maybe the conclusion is right, and maybe it’s wrong, but without compensating for the size of the economy there is no way to tell. With the budget, we can look at percentages of GDP to give a better baseline. With globalization, the problem is much more difficult. It’s an entirely different class of problem.
Looking at 5 or 6 million manufacturing job losses in isolation doesn’t tell us about wage pressures in other sectors. It doesn’t indicate whether the US labor markets might have reached a new balance of more stagnant growth, based on the implicit threat of more job losses through international competition, or something more subtle, like more concentrated investment abroad compared to investment at home given the different wage costs. That is a hugely important factor, a fundamental thing we would absolutely need to know, but there is no number for it. It’s invisible. On the other end of the spectrum, looking at manufacturing job losses doesn’t tell us how the Gini coefficient might be influenced by fat gains from globalization at the top of the income distribution which would still exist even given limited measurable job losses.
It’s very possible that globalization is a primary reason for increasing income inequality in the US, as these things are measured, even given a relatively small numbers in what we can actually see. I happen to think it’s the driving force, but I’m not in a position to make a good argument for it. Because it’s hard. Long term, I think we’ll see an inverse relationship between Chinese and American wage growth, where an extremely large drop in Chinese wage growth (or more broadly, developing country wage growth) will correspond to a measurable increase in US wage growth – that is, wage growth across developed countries will converge more closely with each other. And long-long-term, I think US wage growth will be on a pleasantly higher path with China and India and so many other countries as part of the game, compared to where we would have been without them. I just can’t run the counterfactual history in a laboratory to prove this.
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In my experience those left after automation have more skilled jobs. There will be fewer workers, but they should be more highly paid. Is that happening? I doubt it.
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Why should they?
I’m not getting it. You admit that products and services previously affordable to only a few are now pretty widely available to just about everyone (well, who lives in the US, Europe, Japan, Canada, etc etc), but then say that some toys are only available to the truly rich. Well…yeah. That’s so.
But what’s the point? That they ‘should’ be available to everyone? Why? That presumably the middle and lower classes aren’t rising as fast as the rich? Why ‘should’ they (automatically) be doing so?
Well, I’ll agree that the bulk of it is, yes. But…why shouldn’t it be? The productivity increases and such that are allowing capital investments to increase so rapidly are coming from, well, capital investments in things like automation, expert systems and process efficiencies, not from labor, in general…so, seems to me that this is where the bulk of the money would go towards. I’m certain you and many others in this thread would disagree, but to me that makes logical sense.
Uhuh…that’s where it’s going all right, by and large. I don’t think it’s as black and white as you make it, as you’d need to look at the details of individual job sectors where things will vary depending on the sector, but in general? Yup. Again…why shouldn’t it be doing this? Or, I guess, why should labor, across the board (and presumably in the US or other western nations) get an automatic, across the board and seemingly perpetual increase? What value does it add over and above what it’s getting? I understand that you and others THINK or FEEL that people just deserve increase because they need it, but what does labor bring in the US that necessitates an increase at this time? How does it couple to the increases in productivity and new products and services that’s driving the increases in (some) capital growth and profits, ‘increased stock prices’ and such?
Oh gosh, the thought of a shrinking economy is chilling. I hadn’t even thought of that. Clearly, the population growth will flatten out (or drop catastrophically, but let’s not go there.) Does that mean the economy doesn’t keep growing? My gut says no: wealth can keep increasing. But I don’t trust my gut. If it does shrink, does it hurt the rich less? Again, gut reaction: of course! Hard times always hit the poorest the hardest.
Just yesterday I heard about insurance companies complaining about being forced to cover losses due to government inaction on climate change. The upshot, according to an interviewee, was that governments routinely protect themselves from this kind of thing, and as a result, insurance companies will write new policies excluding damage from climate change. Oh boy! I looked at my wife and we both rolled our eyes. Once again, The Man benefits, The Government turns a blind eye, and The Little Guy gets the hard end of the stick. (It’s thoughts like this that keep my Fox News-watching parents from regarding me me as a conservative …)
Can you elaborate? But first, let me fix an error in my OP, that several have replied to and I missed the cause being lack of clarity in my own post.
When I mentioned manufacturing jobs moving overseas, I didn’t mean simply job relocation, but the bigger trend that we don’t buy stuff made by Americans: it’s mostly made in China and other Asian countries. A lot of it designed by Americans (or Swedes, thanks to Ikea! 
)
I admit the specifics might be more than a bit off.
Good point. Economies are chaotic. Another reason to mistrust my gut. But still, I look around the room and every freaking thing was made in Asia, except my old guitars and my pianos (one acoustic, one vintage electromechanical.) OK, a keyboard stand from Germany (probably manufactured in Asia!) old electronics from Japan, laptop designed here in North Carolina but not made here, … yeah. Still driving a 2000 Chrysler though. Some of it made in the US! And the house I sit in, made in the USA because I live here, all but the hardware and maybe the wood and who knows what (built 1997).
True.
Yeah, damn the lack of laboratories where we can elect a different president and see what happens, etc. Someone should work on that.
I think what you’re saying above is that as China’s economy grows and its labor costs increase (especially if they let the Renmimbi float, which they haven’t done), US labor would be more competitive, right? This all gets hopelessly complicated, especially considering China’s investment in US securities. But I agree wholeheartedly that every country should be “part of the game.”
No idea. I could have sworn that I had been taught that there was a restriction on taxing the same transaction more than once by the same source, but I can’t even find conspiracy theorists touting this, so I have no idea where my brain got it from.
I take back my statement.
So having read your post … do you think the lives of human beings matter, XT?
Sorry, I wasn’t clear. Those left in the factory. When I worked for AT&T I spend time in the Denver Works where PBXs were manufactured. The line was quite automated - it had to be because of the component size - but the people working the line had the power to shut it down if they saw a quality problem. That is the kind of people you want left. (They were union and probably pretty well paid.) Or you have the people repairing the machines. I wasn’t considering those kicked into the service economy.