No, I wouldn’t. But luxury goods and the price of commodities are linked. If people weren’t flying private jets the price of gasoline would be that much cheaper because there would be less demand on the existing supply. Just like us rich white folk who go out and eat 10 different kinds of fish in Sushi dinners in Littleton Colorado far away from the oceans, deplete the ocean’s fisheries which can cause hunger in coastal regions that depend on fishing for survival. It’s all connected.
What I wonder is, does the existence of the extremely wealthy make things better or worse for the poor and middle class?
On the one hand, it is often the wealthy who are the philanthropists, whose donations help keep schools and hospitals and libraries and charitable institutions going. There are lots of things that require great concentrations of wealth to accomplish, but that the little guy benefits from—from big buildings to blockbuster movies to breakthroughs in scientific or medical research.
On the other hand, the wealthy can, and often do, hog or waste the resources that the poor and middle class want or need in order to live. Some (though not all) of the rich make their money by exploiting the poor. And (as Acid Lamp noted). being wealthy tends to insulate you from the rest of the world, so that you lose touch with what most of us know as reality.
At the moment, I’d score it pretty much a wash, though scaling towards the “worse” end of the spectrum. It’s true that the very wealthy are linked with great acts of charity; however, is that not merely commensurate with their ability? After a certain point, as I noted earlier, their standard of living really cannot get any higher. They can literally do pretty much whatever they want. The problem with this system is that if we depend upon it to balance out society’s ills, we are dangerously close to reverting to a feudalistic model. Currently, I’d say that the rich (not the extremely wealthy) as a class are interested in achieving that ultimate status rather than doing good with their money.
I was watching a TV program about a woman who sold her internet business for 23 million. She wrote about the rich . When she got done with everything .she had 10 mill in the bank. She called up her rich people for advice. One suggested she move across the river to a fancy New York area. Apartments cost 10 to 30 mill. She called another. He suggested going in on a jet. Cost about 10 mill. The very rich are so far above our comprehension that we can not relate to them. One paid 15 million for his daughters wedding.
There is a lot going on in this thread with lots of ground being covered, so I’ll do what I can to respond piece by piece.
Thudlow started hinting at an interesting point when he started describing the difference between relative poverty and absolute poverty. As I read this thread and the respondents I feel like people are confusing the two. The poorest Americans today, relative the richest Americans, do indeed look exceedingly poor and their lifestyles inadequate. But, consider that the average American “poor” family has: central heating, A/C, hot and cold water, multiple televisions, cable, VHS or DVD players, electricty, etc. Poverty in America is NOT the same as poverty everywhere else. I would argue that we are not seeing the “Because some people fly private planes while others starve to death” issue proposed by mswas. This is not a third world dictatorship we have here.
Now, when talking about the rich I feel like we really need to step back and look at the big picture. Whenever we point to rich people and say “look at there spending! That could be used to feed a poor person.” We need to keep in mind that they are SPENDING. They are filtering there wealth into the economy. They are distributing their wealth in THE most efficient way possible. Flying the jet plane employs pilots, airline workers, maintenance crews, stewardesses and all of the businesses associated with these jobs. The 15 million dollar wedding mentioned by gonzomax was spread to all of those associated with that job. Government centralization of a task already provided for through capitalism is wasteful and harmful to the system that allows such contemplations to even take place. We should also note that, even if rich people are not spending there money on luxury items (or anything else for that matter), they are still generating wealth for others through almost any interaction they have with their bank or investment broker.
Our economy is also not stagnant. Families do NOT stay poor for very long. Generations all tend to have their incomes grow as time passes. Just as rich people lose money too. The top 1% or 10% or 50% are always changing. They are not stagnant. The rich get rich while the poor get poorer is more of a myth then anything else. The rich tend to make people richer along with themselves. Capitalism is positive sum.
All of this being said government does need to play a role. A society needs a safety net to protect those who have fallen and need a hand to get back up. This does not justify blatant redistribution though, as I feel some of the posters seem to lean towards.
Damn, hell of a first post. Look forwards to responses.
That’s just silly. I don’t think you have any justification for saying they are distributing the money in the most efficient way possible regardless of how they spend it. Money spent in different ways has different effects on the economy. For example, spending 1 million dollars on fireworks does not have the same effect on the economy that investing that 1 million dollars in a business or building new infrastructure.
That doesn’t mean that the govt should make every decision, but the govt does have a role in the economy. To say otherwise is just conservative dogma, not a statement of pragmatic fact. The “law” of supply and demand gurantees that equilibrium is reached, it does not guarantee an “optimum” result in any measure: including “total wealth”.
To me, this means that she’s rich, but not THAT rich. Depending on how old she is and her lifestyle, having $10M in the bank could mean anything from a good retirement to needing to think about what she’s going to do for a job next. Assuming she lives in New Jersey or Brooklyn, cost of living + not having anything to do during the day + having to spend a lot of money to keep her occupied with her rich friends may equal anything she earns on her principal.
Income inequality, at least of the extreme kind we see in America is bad because it’s unfair, it’s bad for the economy, bad for governance, and produces social instability.
Of course; they have most of the money in the country. Even undertaxed, they’ll pay a lopsided amount, because they have such a lopsided share.
No much, but it doesn’t work that way. In the real world, societies - including America - lose social mobility as the disparity in wealth increases.
Hardly; the poorest tend to be homeless. And even in homes, poor people die in heat waves or winter because they can’t afford to heat or cool their home.
Oh, garbage. This is just trickle down economics all together again. The poor and middle class are what makes the economy run. Not the rich.
Except that capitalism isn’t solving poverty; and poverty would be MUCH worse without government intervention.
Again, nonsense. Your idea that families grow wealthier over time is the myth. Social mobility barely exists in America anymore; we have more of a class ceiling now than Europe does. If you are born poor, you will almost certainly die poor. If you are born middle class, you will - at best - stay middle class.
Nobody’s trying to argue here that it doesn’t suck being poor, or that it isn’t important to improve the lot of those in poverty. But in this thread about “income inequality,” we’re pointing out that there’s a difference between poverty and inequality.
It may or may not be relevant, also, that many of those who are homeless or otherwise poor, are so for reasons, like mental illness or substance abuse, that are not really economic reasons. Not that these aren’t real problems, but I don’t think they’re at all caused by inequality of income/wealth.
I suspect your next-to-last sentence is correct but your last is incorrect; but I don’t know for sure.
Too often, we (myself included) fall into the trap of thinking of money as something real, something that has actual value, rather than as a way of storing or distributing wealth; or that money, when you spend it, ceases to exist, instead of changing hands so that it can be re-spent and re-spent by the next person along.
What bothers me about the rich is not when they obtain or spend more than their “fair share” of the money, but when they use up more than their fair share of the finite resources that the have-nots need.
Do you have a cite for this?
< google > Here’s a news story on the subject; a reprint of a Wall Street Journal article apparently.
Unemployment is up big time. The foreclosed have lost homes. Yet in Michigan college tuition goes up 12 to 20 percent a year. With loans difficult to get, we easily see where that will end. The poor and middle will be outside looking in.
First sentence, last paragraph:
“All of this being said government does need to play a role.”
Government does have a role to play. Capitalism is not perfect. It is susceptible to human fallacies.
How is spending a million dollars on fireworks not the same as “investing that 1 million dollars in a business?” How does this spending not benefit the workers of the fireworks industry? How does this not bolster the infrastructure of that business? How does this million dollar injection not affect the town the fireworks factory is located in? How is this not investment?
“I don’t think you have any justification for saying they are distributing the money in the most efficient way possible regardless of how they spend it.”
Bureau of Indian Affairs. The picture of efficiency from centralization.
Again, Capitalism is, for the most part, a positive sum game. Both parties from any given transaction benefit.
(Sigh) So…can anyone tell me how to edit posts? 
Anyway just a little something to tack on regarding the income mobility topic mentioned above.
“Again, nonsense. Your idea that families grow wealthier over time is the myth. Social mobility barely exists in America anymore; we have more of a class ceiling now than Europe does. If you are born poor, you will almost certainly die poor. If you are born middle class, you will - at best - stay middle class.”
Here’s my findings:
The key findings of this study include:
•
There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
•
Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
•
Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
•
The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
•
Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.
The degree of mobility in the overall population and movement out of the bottom
Source:
Interesting findings really. Feel free to take a look.
Summary of responses I like so far: income inequality matters when it is a symptom of an underlying problem; it is not a problem in itself.
To me the question is whether real incomes are rising, and if so, how. If the top 1% of income earners have reaped more than all the bottom 50% in recent years, we’ve got a problem. (Maybe welfare traps exist and distort the data, and welfare traps are a problem.) If the top 10% have captured 50% of the income gains in recent years, we’ve got a problem. (Productivity increases not resulting in increased nominal wages and/or consumer surplus should be pathological.)
It is true that budgets are probably never balanced. There’s no realistic way to ensure that productivity gains will be spread evenly, or even what “evenly” would mean in this case. It’s also possible, in principle, that gains really would only accrue to one segment of the population, even without underlying problems. So wealth inequality on its own is not enough to know whether or not income inequality matters, much like a sneeze may be a sign of an impending case of the flu but it may also be a sign of dust in the air. But if the economy is moving forward, no one should be getting worse off.
There are indications that we’re going backwards. (link)
We’re working a lot harder to barely consume anything more (and in non-white cases, less). Not cool. Lots of other interesting tidbits.
Another possible reason for data showing income inequality:
“The top 1 percent’s share [of national income] jumped from 9.1 percent in 1985, when the top tax rate was 50 percent, to 13.2 percent in 1988 when the top tax rate dropped to 28 percent,” Reynolds explains, but the change was not due to “a sudden two-year spurt in inequality. It was a sudden increase in the amount of high income reported on individual income tax returns rather than being concealed, deferred, or reported on corporate income tax returns.”
Reynolds notes that taxpayers are very responsive to changes in the law, so “a substantial reduction of top tax rates should be followed by a very substantial increase in the amount of income reported on tax returns. And [since 1986] that is exactly what happened.”
Once these facts are considered, Reynolds concludes, “There is no clear evidence of a significant and sustained increase in the inequality of U.S. incomes, wages, consumption, or wealth since the late 1980s.”
“http://www.cato.org/pub_display.php?pub_id=6880” Links on the page. Study published by Alan Reynolds.
It’s not obvious to me that this is true. What specifically do you propose as the causal mechanism?
Not enough rungs in the ladder. If there are myriad graduated levels of income in a society, it’s not hard for a striver to go from one to the other, gradually working his way up as far as his ability and ambition will take him. There are lots of others along the way who’re able to give a hand up for a rung or two.
The way things are now, there’s a vast underclass with a very few uber-rich sitting on the top. Those rich people are totally insulated from hoi polloi by gated communities, members only clubs, a social circle that’s impenetrable to anyone new, basically the Vanderbilts speak only to the Astors, and the Astors speak only to God (did I get that right?) We can mill around in the underclass all we like, but practically speaking the avenues to get up to the level of “rich” are few and far between and since a lot of getting ahead involves networking and who you know, the peasants don’t get to know the reigning class.
I think a lot of our financial woes can be attributed to an ever smaller pool of “acceptable, our kind of people” shuffling around an ever smaller group of corporations, trading off being the CEO’s of the big companies. It’s freaking incestuous, first you fuck over Lehman Brothers to then crap up Merrill Lynch to go to Goldman Sachs to then go scrape a huge bonus off of Bear Stearns–round and round and round. There’s no new, fresh, smart, able, hungry people fighting their way to the top in order to change things up, because there’s a firmly fitted, tightly sealed glass ceiling in place that doesn’t allow us peons to get up there–we’re just not “the right type of people.” You know, “rich.”
I don’t think that Guests can edit posts ? Unless they changed that. At any rate, there’s a 5 minute edit limit; until then, there will be an Edit Post button on the bottom of your post, assuming that Guests can edit at all.
Besides what SmartAleq said, the simple lack of wealth uncontrolled by the wealthy. It’s a lot harder to make money by selling things to the common people when the common people have less and less money to spend every year.
DubsyUin: But, consider that the average American “poor” family has: central heating, A/C, hot and cold water, multiple televisions, cable, VHS or DVD players, electricty, etc. Poverty in America is NOT the same as poverty everywhere else.
Families do NOT stay poor for very long. Generations all tend to have their incomes grow as time passes.
DubsyUin, welcome to the SDMB! I hope that you enjoy yourself here.
I’m not sure what you mean by “the average American ‘poor’ family.” I wouldn’t put quotation marks around the word poor. That makes the word a little suspect. Consider the meaning of the word wife in these two sentences:
1. I saw the District Attorney leaving the hotel with his wife.
2. I saw the District Attorney leaving the hotel with his "wife."
I’m sure you see the difference that those quotation marks can make in the implication of the word they surround.
Back to your post. I will assume then that you didn’t really mean to imply that there are no truly poor people in the United States.
I taught in a classroom that overlooked “the projects” as government housing here in the urban South is called. These units did not have central heating and air. Neither did their classrooms at school. A few of the housing units had window air conditioners, but windows were more likely to have bars on them. Sometimes older people would die from the heat in the summers and there would always be a call out for people to donate fans.
When I first started teaching, not all of my students had hot and cold water. Ten houses shared an outhouse on one street. But things got better in the 1970s and when people could pay their bills, they had running water. Sometimes it was hot. I know of at least one family that stored their coal in their bathtub though. I think that most of them had a TV, but not multiple ones. (I didn’t have two myself until someone gave me a small B&W as a birthday present. Two on a teacher’s salary would have been a little much.) They had electricity…er…off and on. I don’t know about cable, VHS or DVD players. I wouldn’t think the elderly poor had them.
I think those people were maybe just the average poor.
The poorest county in the United States is in South Dakota. On Pine Ridge Reservation in 2007, 61% of the people lived below the poverty level. In fact, one out of every four people lived below 50% of the poverty level! Can you imagine? The median value of their homes and condos in 2007 was $17,500. Many of the houses have no electricity and there is no heat except what is donated. Think of how cold it gets on the plains in the winter.
I do think the 15 million dollar wedding was a wee bit wasteful and silly. Frankly, it sounds nouveau riche.
We’ve had an eight year test of this hypothesis, and, as erislover’s figures show, it has failed miserably. Maybe this great wealth was buying mortgages, and maybe it was enriching the Chinese, but it certainly didn’t go to the bottom 90% of the population. Over eight years, and from the reduced taxes from the already reduced taxes of the Clinton years, I don’t think you can explain it by the taxation of hidden assets. As if someone avoiding 50% taxes legally would stop avoiding 39% taxes.
Improving the income of the lowest will automatically reduce the gap because it is so much easier for them to improve on a percentage basis. I don’t think people would mind the rich as much if they got a piece of the pie too. But it seems CEOs get 40% raises while moaning that a rise in the minimum wage would kill their profits.
That part of the richest 1% who think they’re entitled to it must have thought that giving money to the Republicans would assure their tax cuts forever. An increase back to the Clinton years isn’t going to make anyone stop working. They should be happy that the masses won - too much inequality and it will up against the wall.