I personally think that the government’s role in the economy should be to maximize prosperity. The largest amount of people should have the largest amount of gain possible.
That said, if one group, in this case the so-called 1%, are increasing their incomes much, much faster than the vast majority (who in real terms are flat in income increase) should the government seek regulations to modify the economy so that the one group that’s running away with it increases slower and everyone else increases faster?
I would assume that this question has two sides. Morally and economically.
Morally, I strongly think that reducing misery is the best aim possible. The more people you can help, the more morally successful a policy is. For this reason I support progressive income taxes and a social safety net.
Economically, I’m not educated enough to have a strong argument either way. Is the idea of flattening prosperity better for the economy than what we’re doing now? It seems to my layperson’s view that the more poor and middle-class people raise, the more demand there will be for the 1%'s goods and services.
True, what I meant was that the relative increase of prosperity would be as close as possible among the various segments of the population.
I’m not suggesting that the money should be ground up and distributed equally, I’m suggesting that as the economy grows the incomes of everyone should ideally rise by the same percentage.
My first response would be: Sure. I guess the devil is in the details. If you go about this by mandating higher wages, you probably will end up screwing everybody over as the economy tanks due to putting us in an uncompetitive position in the global economy. But if you focus on things like infrastructure and education, then that won’t necessarily guarantee equal prosperity, but it might set the stage for it better.
I think the ideal should be a meritocratic system where prosperity is distributed according to individual effort. Some people make greater efforts, either by inherent ability or increased determination, and I feel they deserve greater rewards (assuming their efforts are being directed to useful purposes).
Ideally government should strive to maximize some sort of “Quality of life” index. This to me makes a lot more sense than maximizing GDP as it gets to the heart of the issue. Money is only desired to the extent that it can be used to improve one’s quality of life. The result of such a move would be a flattening of the income divide as $1,000 will have a much larger effect on the quality of life of a poor person than it will on a millionaire. So progressive social policy will have a bigger bang for the buck.
There are problems with this of course, primarily how to measure quality of life. Also a certain level of meritocratic fairness that has to be factored in so as to maintain the motivation of an individual to be productive. But even if we work out how to quantify life quality we are no closer to determining what policies are best, any more than we currently know what policies are best to grow GDP.
I wouldn’t mind the top 1% accelerating away, as long as the lower 30% is steadily improving, and since it’s no longer feasible for a family with one blue-collar breadwinner to own a house and two cars, I daresay some tweaking is in order.
“Equal” in thie context is both too precise and too ambiguous. Put it this way: I see a guy weighs six hundred pounds, I think “He needs to lose some weight”. I don’t think “He needs to weigh 187 pounds”.
Well, that’s easy, if you just pick some arbitrary numbers. They should have made 20x the US median income. Where did I get 20x? I think that’s what the Occupiers are demanding. Maybe it was 30x. Either way, pick a number. The point being, if you buy into it, they should not make an arbitrarily large multiplier of the median income. I think that is what the OP is saying. I don’t agree with it, but it’s not like it’s something we couldn’t do if we wanted to.
I think I didn’t do a very good job of explaining this. Allow me to give still more detail:
Say the government looks at incomes for a period, 10 years for this example.
You look at income distribution across the population. I will make up the numbers for the example.
Tier 1: 10% make 10k
Tier 2: 50% make 50k
Tier 3: 39% make 100k
Tier 4: 1% make 1m
Okay, so with my made up numbers above, over a 10 year period, the Tier 4 guys increase their income by 10%, and the Tiers 1 - 3 are stagnant.
Would it make sense for the government to lower taxes on the first three tiers and raise them on the top tier to normalize income increases? If not taxes, then perhaps other economic tweakings could be done, not to manipulate the dollar increases to be the same. But to try to drive the percentage increases to the same level.
No. The government should not legislate to manage outcomes. They should ensure fair and equal opportunity, and let those with the ingenuity, brains, charisma, work ethic, and luck make as much as the market gives them…and vice versa.
But that is highly unrealistic. Who or what gets to decide “merit”? The so-called free market? The government? Luck? Profit and merit aren’t even close to the same thing.
And if that results in mass starvation or the collapse of the country, so be it?
And in the real world, ensuring “fair and equal opportunity” is if anything harder than flattening outcomes. Nor are people rewarded for things like a work ethic or brains as much as they are for being psychopathic, for lies, corruption, and connections.
I don’t think however, people would be too willing to give up whatever gain they have so that there would be no rich nor poor man in the society. That is the very reason why currencies are established in the first place.
Do you really mean that everyone’s income should rise by the same percentage, or that every group’s average income should increase by the same percentage? These are very different things, and one of these options makes class mobility impossible.
I’m confused. If, for example, I have $100 and you have $10, but tomorrow both of our incomes increase by 10%, the income gap will grow even though our incomes increased by the same percentage, as I’ll be making $110, while you make $11 (a $90 difference beforehand and a $99 difference afterwards). Are you saying this is wrong?
I’m not saying that anyone has to give up what they gain. I’m saying that tax rates (for instance) could be tailored to favor groups that are stagnating.
I’m not convinced it’s the right thing, which is why I asked in the thread. But I’m not proposing that incomes be averaged. I’m proposing that the rates of increase be managed.
If Joe the Tier 4 Guy (from the examples above) makes a million a year, he would still make a million, it’s just his taxes might creep up a few percent because the rest of the economy isn’t increasing at all.
What I’m asking about is whether it’s desirable for the rising tide to lift all the boats, and if the government should manipulate the economy to make it happen.
I was assuming that people would be broken down into groups for this purpose. Like the tiers from the example above. Of course, any actual system would be more granular (I assume).
I’m not talking about the number of absolute dollars. I’m talking about managing the rate of increase in income.
In your example, you and I have the same increase, 10%, and if you assume that those increases carry for everyone in our income ranges, then no adjustment would be made.
We don’t tax the amount you have, we tax the amount you make. That’s what I’m talking about.
Mass starvation is not a likely outcome from a system with fair rules and equal opportunity. But I’m fine with rewarding those who excel, no matter how much they make more than the average.