Will the disparity of weath distribution destroy America?

Great Debates
21

Please. Has your quiver of arguments run so low that you launch this desperate volley of “the peasants want my money candy” in response to reasonable questions about an issue of current concern? Can a question of wealth ever be calmly discussed without these thinly-veiled assaults against the Pink Menace of confiscatory taxes?

Since you were not responding to any points I made, I do not believe I’m in any position to rebut any of your views, which have nothing to do with my own. I would ask, however, for you to address one simple question: Does a healthy middle class benefit a country? (Whether economically, politically, socially, or whatever.)

22

I think it’s interesting that what was brought up as a logical fallacy is, to you, a perfect example of the way things ought to be.

This is also interesting, as I seem to remember that you come down hard against unions, who are, after all, simply trying to maximize the compensation received by workers.

The disparity between rich and “not rich” will continue to get bigger as long as money is what controls the government instead of votes, and I see no way off the ever-widening Moebius strip that is the US governmental system that wouldn’t be, um, unpleasant.

23

[QUOTE=Ravenman]
Well, just kidding. Is it really too difficult to understand the concept of fairness? I’ve seen you a lot on these boards, you’re a smart and opinionated person, not a sociopath who would fail to understand the consequences of actions or that the world doesn’t revolve around one person. If we lived in a world where the average CEO made 1,000 times what the average worker did, would you blink an eye? What if it were 10,000 times? Does that cause you any concern whatsoever?
[/QUOTE]

I know what the concept of ‘fair’ and ‘fairness’ is, but I really, truly, really really don’t know what it means in this context. What is fair? That a CEO only makes 2 times what the workers make? That he only makes 5 times? 10? 100? 500? None..that’ he’s paid exactly what the workers makes? How do you determine what is or isn’t ‘fair’? What do you base it on? How do you quantify it? Is it good in all situations, or should the number fluctuate depending on different companies? At what point does something move from being fair to being unfair, and who decides?

To me, the decider is not GW Bush…er, sorry, lost focus there. To me, the deciding factor comes back to the market. The CEO, the upper level paper pusher, the secretary, the engineer, the janitor, the night guard…they all are selling their labor, their skills, their abilities. They are going to get whatever they can for those skills and abilities…whatever the market can bear. If one of them has the skills and talent, or just the ability to kiss ass the best, they are going to command whatever top dollar they can…while the others are going to command less.

I make about 4 times what the lower level techs make. Overall, IT makes more, as a department, than the average of the other departments in my organization. This causes a lot of grief, with lots of accusations of what’s ‘fair’ or ‘unfair’. A lot of folks in other departments resent that IT, on average, makes more than they do, and while they don’t want to (and in most cases can’t) do our jobs, they want our salaries…to them, that would be ‘fair’.

It’s a good question. Part of it is that CEO’s in Japan and CEO’s in the US are compensated differently because of differences in tax and regulations between the two companies. Not all compensation is in the form of dollars, and it’s always difficult to weigh the difference between companies operating in two different countries. Part of it is probably cultural, and part of it probably gets back to the whole perception thingy…in the US, the perception seems to be that CEO’s have a larger impact on the success or failure of a given company than perhaps they do in countries like Japan.

I agree. And perhaps the CEO pay scale thing is a similar bubble.

As you might or might not know, I actually don’t follow sports much, so that analogy might well have been flawed.

-XT

24

A healthy middle class is the single most important factor in a stable and functioning democracy.

That leads to the next question: How do you get a healthy middle class?

One half of society seems to say, “take money from the rich, give it to the poor, now you’ve got more middle class.”

The other half of society seems to say, “All for upward mobility. A system that lets the rich get richer also allows the poor to get richer as well, now you’ve got more middle class.”

25

[QUOTE=Snowboarder Bo]
I think it’s interesting that what was brought up as a logical fallacy is, to you, a perfect example of the way things ought to be.
[/QUOTE]

Actually, Bo, I misunderheard what he was saying there. I thought his number 2. said When a business does poorly, the business needs to pay the CEO LESS so he will do a better job. I totally misread it, and still hadn’t seen it until you pointed this out. Thank you Bo…appreciate that old boy.

I don’t have any issues with collective bargaining for labor. I have some issues with how some unions work in practice, but none what so ever with people collectively negotiating for their labor to get a better price.

And what’s your solution to this?

-XT

26

That should read “allow for” upward mobility.

27

The ‘glory days’ of the middle class came in the aftermath of FDR’s policies, the collapse of the middle class came after movement conservatism and the Reagan revolution. So I am pretty sure I know which one works.

Nearly all the wealth created in this country goes to those who are already wealthy. Economic growth won’t create a middle class since the wealth never ‘trickles down’.

28

The problem is that “middle class” has multiple, politically motivated definitions. It’s as much a state of mind and culture as it is a statistical income distribution.

I would agree. However an extremely expensive education is required if you want to joint the ranks of the Goldman Sachs and Patterson, Belknap, Webb & Tylers of the world making over $150,000 after a few years. And even then, only a handful of those associates and analysts will make partner or MD where they can earn the really ridiculous money. And those jobs are only open to the hardest working, most talented people who aren’t someone’s nephew or son in law.

For those people who can’t afford to go to a top school, they are often left wondering why they can’t find decent jobs or have huge loans that have trouble paying off with their $40,000 a year job.

29

To be blunt: bullshit.

The middle class in America emerged because following WWII the rest of the world was either broke, bombed to shit, or both. Combine that with the GI Bill and suddenly you get a huge population that gets free secondary education. It’s easy to pay an unskilled factory worked $50k a year when you have a near global monopoly on production.

Meanwhile, all those broke and bombed out countries were forced to come up with other solutions. Instead of having everyone fend for themselves in some apocalyptic nightmare, they chose socialist policies to life everyone up equally.

I can tell you from experience was it was like growing up in Canada waiting for the economy to grow, and what it was like to constantly have high unemployment and no prospects. I seriously doubt Americans have the patience. Even the American socialists demand change instantly.

30

It’s also entirely possible that you can’t help the middle class:

31

This has always been the best and most logical explanation. FDR, JFK, LBJ just happened to be in office during this unusual combination of circumstances leading to American prosperity.

If Americans want similar prosperity today, we have to incite Russia, Japan, and China to get mad and fire their nuclear warheads at each other. That knocks out 3 of the top 10 economies and Americans can get their romantic notions of high-paying blue-collar jobs back. For extra credit, find a way to make India self-implode and a good chunk of IT jobs will re-emerge as well. If all this happens before Obama leaves office, then of course our distinguished professors will write the history books saying his domestic policies brought all this about!

32

Skimmed the comments. Several people say “this is true but it’s not a problem.” The article points out the reasons it is a problem and will become an even bigger one as time goes on and the trend continues. Why is the article wrong?

33

It sure looks like an increasing problem.

34

If Bill Gates and Warren Buffett moved to Canada the wealth disparity would improve in America and get worse in Canada. But which country would benefit? If Alex Rodriquez was traded to the Kansas City Royals their income disparities would shoot up and the Yankees disparity would go down. How would that help the average Yankee or hurt the average Royal?
If the rich are getting rich through productivity then however much they make is good for society. Why do owners of companies pay CEO so much are they stupid or do they just not like money? Some say it is because the CEOs are fooling the shareholders, but private companies pay their CEOs just as much as public companies.
If the problem is that the rich are getting rich to fast then having the rich retire would benefit society. However most of the rich are very productive, so having the most productive members of society stop producing would not benefit society. Thus the problem is not that the rich are getting richer too fast, it is that the middle class class riches are not rising fast enough.

35

I think the biggest problem of fairness here is roughly analogous to the “Congress voting for their own salaries” problem. Right now, almost all big businesses are publicly traded corporations. Obviously they want to get top talent for CEOs, so the shareholders (in the guise of the Board of Directors and via stock voting) allocate a fairly tasty salary for the CEO. However, the CEOs now have more money than anyone else, and can buy more stock. Meaning in the next round of stock voting, more of the shareholders have a vested interest in pushing up CEO salary at the expense of corporate profit, holding non-CEO wages as low as practical, and reducing dividends (since they get all of the first, the middle matters only as it affects the first, and, generally, a small proportional-to-ownership share of the last). The result is a nasty positive feedback loop where the obvious fact that the CEO should be making more (due to having more responsibility) than the line labor results in the CEO having more overall power to determine his own salary, since he has more actual dollars with which to buy voting stock.

It’s not unfair for someone to negotiate a salary rate, or demand a salary, or turn down a salary demand. It’s arguably unfair for someone to determine their own salary demand, AND have a large amount of the voting power involved in accepting that demand, AND not have the risks associated with traditional non-corporate ownership.

36

Surely there’s a happy medium in there somewhere. The biggest issue of fairness seems to stem both from my post above (in that a market system with a notion of corporate ownership by way of voting shares has, by default, a potential unstable positive feedback loop for the relative share of income gained by the rich) combined with the increasing ability of globalized companies to flee taxation they find “oppressive” despite enjoying the markets provided by the stable and wealthy nation those tax rates help support.

And that’s assuming you split the debate that way as opposed to :

One half of society says “dollars are dollars, so rich and poor should each pay the same fraction of our income as dollars. That’s fair.”
One half of society says “dollars are affected by marginal utility. The rich will miss those dollars less than the poor will, so we should take relatively more dollars from the rich to equalize the pain of their respective tax burden. That’s fair.”

37

How about the third half that says “tax the rich at a more reasonable level, such as was the case in the recent past, then use that money to give the poor access to education, healthcare and supports that will let them leverage their talents to get into the middle class.” A hand up rather than a handout?

38

You don’t have to use tax policy to rein in CEO salaries - just some sort of decent multiple of the pay of the lowest pay worker would do just fine also. The money saved would either be invested back into the business or go back to the stockholders. Is that capitalist enough for you?

As for the harm it does, it seems clear that CEO entitlement means that they make money if they screw up and make money if they don’t screw up. Don’t you think enforcing responsibility would make for more effective corporations and a better economy? You also get short term thinking in that to make your numbers this quarter you might do things that are overly risky in the long term - like buy high yield mortgages that assume the housing market will never go down, for instance.
Someone getting a load of money by creating wealth is good. Someone getting a load of money despite destroying wealth is not so good, and that is what we have now in a lot of cases.

39

The article mentions three problems:

  1. Shrinking opportunity- This is not related to rising wealth. If opportunities are shrinking the answer is to grow opportunities, not make rich people poorer. Make starting business easier, cut red tape, cut regulations, cut taxes, get rid of minimum wages. The author presents no evidence that wealthy people make it harder to get opportunities.
    2.Distortions such as monopolies and tax loopholes for special interest groups- There are no more monopolies than there used to be probably less. AT&T was a monopoly, IBM was a monopoly, and the big three automakers were an oligopoly. The only way to cut the power of special interests is to cut the power of the government to grant special favors. Plus he gives no examples of special tax favors that increase wealth accumulation.
    3.Rich people will at some point stop the government from investing in infrastructure. The government is spending more than ever before, the budget deficit this year is more than the federal government spent in a year before 1996. The top 1% pays 40% of the total taxes. This is the highest percentage in modern history. The US has the most progressive tax systems in the world. If the rich have all the power in this country why are they stuck paying all of the taxes?
40

Hold on there, back the bus up, beep beep beep

Pick any sentence in that paragraph and you have the same issue:
If senators are voting themselves pay raises, vote the fuckers out. When they come around campaigning tell them the single most important issue to you is that senators should make less money. Convince all your neighbours to join with you, and push that issue. If no one cares, the senators will continue to make more money.

Secondly, if the CEO’s salary is breaking the company, or if the CEO is not providing enough value, the share holders will, can, and do vote him out. Why?

Because if the CEO’s salary is breaking the company, or if the CEO is not providing enough value, the share value will fall. The two things have to happen together. If the stock price is up, the CEO is doing a good job, if it’s down he’s doing a shitty job.

So even if the CEO owns a majority/controlling or even significant chunk of company stock, he’ll lose a shit ton of money in the process.

Let’s pull a CEO at random: Steve Jobs of Apple. As of October 2009, Jobs owned 5.426 million shares of Apple (of the 921 million share issued).

At $330 per share that’s currently worth $1.8billion.

Five years ago the stock touched $50 per share. So let’s say he does a crappy job and the stock falls 50%, you do realize that means he stands to lose $900million dollars. And if he really fucks up (like Lehmen Brothers or Sysco Systems) he stands to lose both his job AND $1.8billion dollars.

He’s (or he was) responsible for a $65.23 billion company employing almost 50,000 people. What do YOU think is fair compensation?

If you own/trade stock long enough you’ll see a pretty consistent trend of [over paid] CEOs getting the boot when the share value falls. The most recent I’ve seen is the CEO of Medtronic being pushed out before they even had a replacement for him. Company stock fell over 50% in the 2008 crash, and was a total dog the 6 years prior.

I’m growing tired of the misapplication of anger towards the perceived compensation of industry leaders.

You know who else votes themselves pay raises–unions.