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Inequality - not simply Poverty - harms society
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tophatcat



Joined: 09 Aug 2006
Location: under the hat

PostPosted: Mon Jun 12, 2017 7:15 am    Post subject: Reply with quote

Cheese is good!

The world needs more cheeses.

The moon is made of cheese; so said my great-grandmother.

!
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Fox



Joined: 04 Mar 2009

PostPosted: Thu Sep 21, 2017 4:19 pm    Post subject: Reply with quote

Insanely Concentrated Wealth Is Strangling Our Prosperity.

Quote:
Remember Smaug the dragon, in The Hobbit? He hoarded up a vast pile of wealth, and then he just hung out in his cave, sitting on it (with occasional forays to further pillage and immolate the local populace).

That’s what you should think of when you consider the mind-boggling hoards of wealth that the very rich have amassed in America over the last forty years. The picture at right only shows the very tippy-top of the scale. In 1976 the richest people had $35 million each (in 2014 dollars). In 2014 they had $420 million each — a twelvefold increase. You can be sure it’s gotten even more extreme since then.

These people could spend $20 million every year and they’d still just keep getting richer, forever, even if they did absolutely nothing except choose some index funds, watch their balances grow, and shop for a new yacht for their eight-year-old.

If you’re thinking that they “deserve” all that wealth, and all that income just for owning stuff, because they’re “makers,” think again: between 50% and 70% of U.S. household wealth is “earned” the old-fashioned way (cue John Houseman voice): it’s inherited.

The bottom 90% of Americans aren’t even visible on this chart — and it’s a very tall chart. The scale of wealth inequality in America today makes our crazy levels of income inequality (which have also expanded vastly) look like a Marxist utopia.

American households’ total wealth is about $95 trillion. That’s more than three-quarters of a million dollars for every American household. But roughly 50% of households have zero or negative wealth.

Now of course you don’t expect 20-year-olds to have much or any wealth; there will always be households with none. But still, the environment for young households trying to build a comfortable and secure nest egg — the American dream? — has gotten wildly competitive and hostile over recent decades. (If we had a sovereign wealth fund, everyone would have a wealth share from birth.)

But here’s what’s even more egregious: that concentrated wealth is strangling our economy, our economic growth, our national prosperity. Wealth concentration drives a vicious, downward cycle, throttling the very engine of wealth creation itself.

Because: people with lots of money don’t spend it. They just sit on it, like Smaug in his cave. The more money you have, the less of it you spend every year. If you have $10,000, you might spend it this year. If you have $10 million, you’re not gonna. If you have $1,000, you’re at least somewhat likely to spend it this month.

Now go back to those top-.01% households. They have about $5 trillion between them. Imagine that they had half that much instead (the suffering), and the rest was spread out among all American households — about $20,000 each.

Assume that all those lower-quintile households spend about 40% of their wealth every year. They each get to spend an extra $8,000, and enjoy the results. Sounds nice. And it’s spending that simply won’t happen with concentrated wealth. The money will just sit there.

Now obviously just transferring $2.5 trillion dollars, one time, is not going to achieve this imagined nirvana. Nor is it bloody well likely to happen. That example is just to illustrate the arithmetic. Absent some serious changes in our wildly skewed income distribution (plus capital gains, the overwhelmingly dominant mechanism of wealth accumulation, which don’t count as “income”), that wealth would just get sucked back up to the very rich, like it has, increasingly, for the past forty years — and really, the past several thousand years.

If wealth is consistently more widely dispersed — like it was after WW II — the extra spending that results causes more production. (Why, exactly, do you think producers produce things?) And production produces a surplus — value in, more value out. It’s the ultimate engine of wealth creation. In this little example, we’re talking a trillion dollars a year in additional spending and production. GDP would be 5.5% higher.

If you want to claim that the extra spending would just raise prices, consider the last 20 years. Or the last three decades, in Japan. And if you think concentrated wealth causes better investment and greater wealth accumulation, ask yourself: what economic theory says that $95 trillion in concentrated wealth will result in more or better investment than $95 trillion in broadly dispersed wealth? Our financial system is supposed to intermediate all that, right?

...

The last time economic growth broke 5% was in 1984. And the decline continues.

So how do we get there, given that we’ve mostly failed to do so for millennia? Start with a tax system that actually is progressive, like we had, briefly, during the postwar heyday of rampant and widespread American growth and prosperity. And greatly expand the social platform and springboard that gives tens of millions more Americans a place to stand, where they can move the world.

...


Massively progressive taxes are not about taking money from the rich and directly redistributing it, not really. Rather, they're about reducing the incentive to seize wealth for yourself in the moment at the expense of the health of the broader system by reducing the marginal utility of such seizures ever closer to zero; about putting the wealthy in a position where it makes more sense for them to pay their workers more and invest more in their company rather than reaping profits personally. If you can plunder a company for money in the short term, it's no surprise people will adopt that model. By contrast, if plundering that company results in nearly 100% of that plundered cash vanishing into taxation, then the rationale for plunder vanishes and the only remaining incentives are in favor of acting to preserve long-term stability. At the federal level, that ought to be the actual purpose of the tax code: preserving and enhancing stability.
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bucheon bum



Joined: 16 Jan 2003

PostPosted: Fri Sep 22, 2017 5:26 pm    Post subject: Reply with quote

Fox wrote:
Insanely Concentrated Wealth Is Strangling Our Prosperity.

Quote:
Remember Smaug the dragon, in The Hobbit? He hoarded up a vast pile of wealth, and then he just hung out in his cave, sitting on it (with occasional forays to further pillage and immolate the local populace).

That’s what you should think of when you consider the mind-boggling hoards of wealth that the very rich have amassed in America over the last forty years. The picture at right only shows the very tippy-top of the scale. In 1976 the richest people had $35 million each (in 2014 dollars). In 2014 they had $420 million each — a twelvefold increase. You can be sure it’s gotten even more extreme since then.

These people could spend $20 million every year and they’d still just keep getting richer, forever, even if they did absolutely nothing except choose some index funds, watch their balances grow, and shop for a new yacht for their eight-year-old.

If you’re thinking that they “deserve” all that wealth, and all that income just for owning stuff, because they’re “makers,” think again: between 50% and 70% of U.S. household wealth is “earned” the old-fashioned way (cue John Houseman voice): it’s inherited.

The bottom 90% of Americans aren’t even visible on this chart — and it’s a very tall chart. The scale of wealth inequality in America today makes our crazy levels of income inequality (which have also expanded vastly) look like a Marxist utopia.

American households’ total wealth is about $95 trillion. That’s more than three-quarters of a million dollars for every American household. But roughly 50% of households have zero or negative wealth.

Now of course you don’t expect 20-year-olds to have much or any wealth; there will always be households with none. But still, the environment for young households trying to build a comfortable and secure nest egg — the American dream? — has gotten wildly competitive and hostile over recent decades. (If we had a sovereign wealth fund, everyone would have a wealth share from birth.)

But here’s what’s even more egregious: that concentrated wealth is strangling our economy, our economic growth, our national prosperity. Wealth concentration drives a vicious, downward cycle, throttling the very engine of wealth creation itself.

Because: people with lots of money don’t spend it. They just sit on it, like Smaug in his cave. The more money you have, the less of it you spend every year. If you have $10,000, you might spend it this year. If you have $10 million, you’re not gonna. If you have $1,000, you’re at least somewhat likely to spend it this month.

Now go back to those top-.01% households. They have about $5 trillion between them. Imagine that they had half that much instead (the suffering), and the rest was spread out among all American households — about $20,000 each.

Assume that all those lower-quintile households spend about 40% of their wealth every year. They each get to spend an extra $8,000, and enjoy the results. Sounds nice. And it’s spending that simply won’t happen with concentrated wealth. The money will just sit there.

Now obviously just transferring $2.5 trillion dollars, one time, is not going to achieve this imagined nirvana. Nor is it bloody well likely to happen. That example is just to illustrate the arithmetic. Absent some serious changes in our wildly skewed income distribution (plus capital gains, the overwhelmingly dominant mechanism of wealth accumulation, which don’t count as “income”), that wealth would just get sucked back up to the very rich, like it has, increasingly, for the past forty years — and really, the past several thousand years.

If wealth is consistently more widely dispersed — like it was after WW II — the extra spending that results causes more production. (Why, exactly, do you think producers produce things?) And production produces a surplus — value in, more value out. It’s the ultimate engine of wealth creation. In this little example, we’re talking a trillion dollars a year in additional spending and production. GDP would be 5.5% higher.

If you want to claim that the extra spending would just raise prices, consider the last 20 years. Or the last three decades, in Japan. And if you think concentrated wealth causes better investment and greater wealth accumulation, ask yourself: what economic theory says that $95 trillion in concentrated wealth will result in more or better investment than $95 trillion in broadly dispersed wealth? Our financial system is supposed to intermediate all that, right?

...

The last time economic growth broke 5% was in 1984. And the decline continues.

So how do we get there, given that we’ve mostly failed to do so for millennia? Start with a tax system that actually is progressive, like we had, briefly, during the postwar heyday of rampant and widespread American growth and prosperity. And greatly expand the social platform and springboard that gives tens of millions more Americans a place to stand, where they can move the world.

...


Massively progressive taxes are not about taking money from the rich and directly redistributing it, not really. Rather, they're about reducing the incentive to seize wealth for yourself in the moment at the expense of the health of the broader system by reducing the marginal utility of such seizures ever closer to zero; about putting the wealthy in a position where it makes more sense for them to pay their workers more and invest more in their company rather than reaping profits personally. If you can plunder a company for money in the short term, it's no surprise people will adopt that model. By contrast, if plundering that company results in nearly 100% of that plundered cash vanishing into taxation, then the rationale for plunder vanishes and the only remaining incentives are in favor of acting to preserve long-term stability. At the federal level, that ought to be the actual purpose of the tax code: preserving and enhancing stability.


Recently I read an article saying basically the same thing. One anecdote it provided was George Romney, when he was the CEO of AMC. He dismissed the idea of getting a raise. While his explanation was altruistic, the (likely) reality was the top tax rate at the time was 91%. Not much point in getting a raise when nearly all of it would go to the IRS.
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Kuros



Joined: 27 Apr 2004

PostPosted: Mon Nov 20, 2017 7:26 pm    Post subject: Reply with quote

Three people own half of the wealth of the United States

Quote:
Bezos and the next two wealthiest Americans, Bill Gates and Warren Buffett, together now own more wealth than the entire bottom half of the American population combined.


[/url]
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Fox



Joined: 04 Mar 2009

PostPosted: Wed Feb 07, 2018 4:24 pm    Post subject: Reply with quote

I'm going to put this here, because it deals with one of the ways in which concentrated wealth is maintained on a systematic level: student debt.

Quote:
A new study out of Bard will no doubt produce a hissy fit among orthodox economists…assuming they don’t succeed in ignoring it instead

In The Macroeconomic Effects of Student Debt Cancellation, Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum present a detailed examination of the costs of cancelling all student debt, public and private. Their main findings:

A program to cancel student debt executed in 2017 results in an increase in real GDP, a decrease in the average unemployment rate, and little to no inflationary pressure over the 10-year horizon of our simulations, while interest rates increase only modestly. Our results show that the positive feedback effects of student debt cancellation could add on average between $86 billion and $108 billion per year to the economy. Associated with this new economic activity, job creation rises and the unemployment rate declines….

It is important to note that the macroeconomic models used in this report cannot capture all of the positive socioeconomic effects associated with cancelling student loan debt. New research from academics and experts has demonstrated the relationships between student debt and business formation, college completion, household formation, and credit scores. These correlations suggest that student debt cancellation could generate substantial stimulus effects in addition to those that emerge from our simulations, while improving the financial positions of households.

...

Some may point out that while cancelling student debt will free up past borrowers, it leaves unsolved the problem of out of control higher educational cost inflation. That has resulted in large measure from access to borrowing allowing students to mortgage future income, which in fact may fall short of what debt-pushing college administrators cheerily said they ought to be able to earn. Even borrowers who do land good jobs can miss payments as a result of illness, job loss, or reductions in pay that then result in them being hit with penalty interest rates. And that’s before you factor in that some borrowers, particularly borrowers from private lenders, may not finish their course of study and thus are saddled with debt, yet don’t get earnings-enhancing credentials.

The evidence is overwhelming that the rapid rise in higher education costs hasn’t produced better schooling. Even in public university systems, schools have been found to spend as little as 10% on teaching. Higher expenditures have gone substantially into adminisphere bloat (both numbers and pay levels) and building programs.

...

I hope you’ll circulate this report widely. We’ve embedded it at the end of the post. From its executive summary:

• The policy of debt cancellation could boost real GDP by an average of $86 billion to $108 billion per year. Over the 10-year forecast, the policy generates between $861 billion and $1,083 billion in real GDP (2016 dollars).

• Eliminating student debt reduces the average unemployment rate by 0.22 to 0.36 percentage points over the 10-year forecast.

• Peak job creation in the rst few years following the elimina- tion of student loan debt adds roughly 1.2 million to 1.5 million new jobs per year.

• The inflationary effects of cancelling the debt are macro-economically insigni cant. In the Fair model simulations, additional inflation peaks at about 0.3 percentage points and turns negative in later years. In the Moody’s model, the effect is even smaller, with the pickup in inflation peaking at a trivial 0.09 percentage points.

• Nominal interest rates rise modestly. In the early years, the Federal Reserve raises target rates 0.3 to 0.5 percentage points; in later years, the increase falls to just 0.2 percentage points. The effect on nominal longer-term interest rates peaks at 0.25 to 0.5 percentage points and declines thereafter, settling at 0.21 to 0.35 percentage points.

• The net budgetary effect for the federal government is modest, with a likely increase in the deficit-to-GDP ratio of 0.65 to 0.75 percentage points per year. Depending on the federal government’s budget position overall, the deficit ratio could rise more modestly, ranging between 0.59 and 0.61 percentage points. However, given that the costs of funding the Department of Education’s student loans have already been incurred (discussed in detail in Section 2), the more relevant estimates for the impacts on the government’s budget position relative to current levels are an annual increase in the deficit ratio of between 0.29 and 0.37 percentage points. (This is explained in further detail in Appendix B.)

• State budget deficits as a percentage of GDP improve by about 0.11 percentage points during the entire simulation period.

• Research suggests many other positive spillover effects that are not accounted for in these simulations, including increases in small business formation, degree attainment, and household formation, as well as improved access to credit and reduced household vulnerability to business cycle downturns. Thus, our results provide a conservative estimate of the macro effects of student debt liberation.


The article is correct, this isn't a discussion even the Democratic Party (to say nothing of the Republican Party) seems to want to have; even Mr. Sanders' substantially less bold policy suggestions on the matter, were derided, if not outright dismissed by the leaders of the Democratic Party. Yet our student loan system reinforces wealth-concentration, both by transferring wealth away from the less affluent (typical university students) and to the more affluent (both in the finance sector and university administrators), and also by potentially making a university education more expensive for those who are less able to afford it in the first place due to interests and penalties. On an individual scale which considers only the student-loan debtors themselves, this situation is objectionable enough, but this paper implies -- and while we should be hesitant to accept any individual study as gospel, I'd guess this paper is at least directionally correct, even if its particular numbers might be off -- that the systematic effects of this process cause Americans collectively suffer from negative externalities.

The notion of handling university tuition differently is not "magic abs": we have real-world examples, both from America's own past and from third party countries in the modern world, which prove it's both possible and effective to do better in this regard. Not doing better is a choice, and that choice seems to have been made in order to enrich the already affluent at the expense of young citizens pursuing education which purports to benefit our country at large.
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tophatcat



Joined: 09 Aug 2006
Location: under the hat

PostPosted: Wed Feb 07, 2018 4:47 pm    Post subject: Reply with quote

I have a great idea. Let the people who take out loans pay the loans.
.
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Kuros



Joined: 27 Apr 2004

PostPosted: Mon Feb 12, 2018 9:00 pm    Post subject: Reply with quote

Fox wrote:
student debt.
Quote:

I hope you’ll circulate this report widely. We’ve embedded it at the end of the post. From its executive summary:

• The policy of debt cancellation could boost real GDP by an average of $86 billion to $108 billion per year. Over the 10-year forecast, the policy generates between $861 billion and $1,083 billion in real GDP (2016 dollars).

• Eliminating student debt reduces the average unemployment rate by 0.22 to 0.36 percentage points over the 10-year forecast.

• Peak job creation in the first few years following the elimina- tion of student loan debt adds roughly 1.2 million to 1.5 million new jobs per year.

• The inflationary effects of cancelling the debt are macro-economically insigni cant. In the Fair model simulations, additional inflation peaks at about 0.3 percentage points and turns negative in later years. In the Moody’s model, the effect is even smaller, with the pickup in inflation peaking at a trivial 0.09 percentage points.

• Nominal interest rates rise modestly. In the early years, the Federal Reserve raises target rates 0.3 to 0.5 percentage points; in later years, the increase falls to just 0.2 percentage points. The effect on nominal longer-term interest rates peaks at 0.25 to 0.5 percentage points and declines thereafter, settling at 0.21 to 0.35 percentage points.

• The net budgetary effect for the federal government is modest, with a likely increase in the deficit-to-GDP ratio of 0.65 to 0.75 percentage points per year. Depending on the federal government’s budget position overall, the deficit ratio could rise more modestly, ranging between 0.59 and 0.61 percentage points. However, given that the costs of funding the Department of Education’s student loans have already been incurred (discussed in detail in Section 2), the more relevant estimates for the impacts on the government’s budget position relative to current levels are an annual increase in the deficit ratio of between 0.29 and 0.37 percentage points. (This is explained in further detail in Appendix B.)

• State budget deficits as a percentage of GDP improve by about 0.11 percentage points during the entire simulation period.

• Research suggests many other positive spillover effects that are not accounted for in these simulations, including increases in small business formation, degree attainment, and household formation, as well as improved access to credit and reduced household vulnerability to business cycle downturns. Thus, our results provide a conservative estimate of the macro effects of student debt liberation.


Wait, a million jobs per year? And this would also reduce student debt?

We could finance this with a wealth tax.
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