Matthew Yglesias » The Latest on Inequality

Aug 15th, 2009 at 3:14 pm

The Latest on Inequality

Presumably the crash has changed this, but the top 0.01 percent’s share of American income reached a record high in 2007:

This trend has a variety of underlying causes, some of which are worth changing and others of which (better global communications leading to a bigger superstar effect) are basically good. Be that as it may, using the tax code to take some of this wealth and transform it into more and better public services for the broad mass of people would do a lot of good.

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Filed under: Inequality, taxes,

37 Responses to “The Latest on Inequality”

Adam Says:
August 15th, 2009 at 3:31 pm
It would seem that this rate skyrocketing is a very strong indicator of a bubble and a future crash/recession. It’s quite a striking chart. Note the stability during our broad growth in the 40s-60s.
bob mcmanus Says:
August 15th, 2009 at 3:38 pm
This trend has a variety of underlying causes

That’s what they want you to believe.

The first bump upward is 78-79, with drops in 87 and 2000. I see no interim changes due to tax policy, nor any effect of Clinton policies. It seems to track equity prices and Fed policy very closely.

Read Thomas Palley (”Financialization”) again last night, and he noted that due to a change in tax law and other factors, around 1979 corporations started to finance expansion with debt instead of equity. Now again, that strikes me as 2nd order, a Fed not promising low inflation and low longterm rates would make that impossible.

Volcker & Greenspan did it.
Peter Says:
August 15th, 2009 at 3:59 pm
My question is what is the volatility among people who enter/leave the top .01%? That is, are there alot of people with spectacularly high incomes year after year, or is there a substantial chunk that have one big year (selling a buisness built up over some decades) and then leave the top .01% the next year.
Mattyoung Says:
August 15th, 2009 at 4:26 pm
If taxing the rich leads to more and better government programs, then why isn’t Obama taxing the rich? So far none of his programs are reaching voter approval in Congress and opposition is growing.
Al Says:
August 15th, 2009 at 4:38 pm
It will be interesting if the top 0.01%’s share of income actually decreases during the Bush years. There’s a pretty good chance that happened.

George W. Bush: the best President for income equality in a long time.

(Bill Clinton: the absolutely worst President for income equality ever. The top 0.01%’s share of income more than doubled during Bill Clinton’s reign.)

(It also appears that the top 0.01%’s share of income decreased during George H.W. Bush’s reign. Bush father and son: doing their part in decreasing the top 0.01%’s share of income.)
abb1 Says:
August 15th, 2009 at 4:52 pm
Taxes? They don’t pay any taxes, you idiot; 15% the most, if even that much. Yeah, and I’m sure street robbers donate to charity, so the street robberies are good too.
eric k Says:
August 15th, 2009 at 5:25 pm
Al,

If your gonna flat out lie about stuff at least make an effort.

The chart declines from ‘98 to ‘00 and rises steadily from ‘01 to ‘07. Remind me when was W President again?

Sheesh can we at least get right wing trolls who make an effort?
rapier Says:
August 15th, 2009 at 5:35 pm
My seat of the pants guess is the income (and more important asset) distribution is at this very moment even more skewed to the top. If it isn’t then it will be if the bailout regime works because that will be its inevitable outcome. That is what it is designed to do.

If the top can’t have an ever larger share then they will blow everything up. I personally don’t think the bailout regime will work so I expect everything to blow up. Blow up against government, not the top 1%.
Max424 Says:
August 15th, 2009 at 5:49 pm
Adam

Yup. Income inequality rapidly growing-

1928. Black Monday, 1929

1986. Black Monday II, 1987

1999. Dot Com Crash, 2000

2007. Unnamed current fiasco, still underway
El Cid Says:
August 15th, 2009 at 5:57 pm
The original charts are available at the link, in MS Excel / spreadsheet format. You can change the X axis if you want to break out every year. There was an increasing concentration of share of national income for the top 0.01%.

However, the most recent peak for the top 100 wealthiest Americans (Forbes) was in 2000 (2.5%) and is now converging back on 2%.

The entire 400 wealthiest American’s share of national income has been on an upward slope, the most recent secondary peak in 2000 but since then having exceeded that peak.

So it’s been not quite as great, proportionally, for the richest 100, but the next richest 300 have been on a slightly better post-2000 path than the richest 100.
StevenAttewell Says:
August 15th, 2009 at 6:21 pm
I have a doubt that “superstar” effect is quite what’s going on here, but it is interesting how the top 10%/1%/.1% are differentiating. Gives you an understanding of the social basis behind the faux-Galters; reminds me a bit of declining aristocrats in 1788.

Needless to say, the answer is to redistributive massively.
Sycophant of the Bourgeois Says:
August 15th, 2009 at 7:11 pm
Yet to see a chart including 2008.

It’s interesting that the answer is always tax the rich, rather than bail them out less. Genius Democrat politics as usual.
roger Says:
August 15th, 2009 at 7:38 pm
Superstar? Oh, the guild in upper management that locks in predatory sums for subpar decisionmaking and major golf. I think we can call it the price of an inefficient labor market in upper management. What a price! Trillions for cretins. Expert programs and assists from well trained MBAs could bring down management costs at your average corporation by 90 percent – and nobody would miss the superstars.

I like the flunkism. I imagine that the flunkies of Caligula, Tiberius and Nero would have called them superstars, if that had been the roman way. They called them gods instead. So much more honest in their abject servility than Americans.
darkpool Says:
August 15th, 2009 at 7:52 pm
its a bit like when I have 2 ten dollar bills in my wallet and someone “steals” one of them. Next time they come looking I am only carrying one bill. Behavioral Economics 101 “Wealth” is fungible.
roger Says:
August 15th, 2009 at 8:26 pm
Darkpool, how odd to think behavioral economics means making up crackbrained anecdotes and drawing generalizations from them. In reality, there’s no evidence that pickpocketing is going to make anybody carry less cash around. A fake anecdote without any social context makes for infinitely fungible generalities that have nothing to do with the real world. In reality, one is held to one’s wealth by one’s lifestyle. A billionaire might be able to receive tax breaks in Dubai, but if that billionaire were forced to live in Dubai, he’d soon forego the pleasure.

Wealth is, in fact, not that fungible. You put it in derivatives, put it in stocks, put it anywhere you like – it will flow through a tax regime. And that tax regime just might decide to take a goodly chunk of it.

So, a better story is – I have a billion in my wallet and I use it to buy the number of congressmen necessary to keep my taxes low. And some to set up talk radio hosts who will tell fairy tales to rubes. Like if I, superstar creator, don’t get my tax breaks, why I might Galt off somewhere and not generate that wealth for the rest of us – cause of course, wealth is generated at the top. And horses have wings. The myths slide down easy, given a certain level of illteracy among the population, that is coddled anyway by decades of freeriding on the state – like all the inhabitants of the midwest with their farm subsidies – that they consider it in the natural order of things.
Behavioral economics 101: you can always roll the rubes.
Alan Says:
August 15th, 2009 at 8:41 pm
The Carlyle Group reflects this trend:

February 2001–$12.5 billion (MarketWatch)
January 2009–$91.5 billion (Kellogg School of Management)

For links go to:

http://stateofthedivision.blogspot.com/2009/01/bush-economy-summed-by-carlyle-groups.html
Hector Says:
August 15th, 2009 at 10:38 pm
Re: A billionaire might be able to receive tax breaks in Dubai, but if that billionaire were forced to live in Dubai, he’d soon forego the pleasure.

Though I suspect many of our idle rich are just decadent enough and p*ssified enough to enjoy life in Dubai, the Las Vegas of the Gulf. Our own Myles SG being Exhibit A.

Happy Assumption-of-the-Virgin day to you all.
Sycophant of the Bourgeois Says:
August 15th, 2009 at 11:15 pm
roger, it is interesting the wealthiest philosophers and economist in history (Marx and Keynes) supported socialist and expansionary governments.

Could it be that you have yet to realize gigantic bureaucracies may in fact help many of the rich rather than hurt them? Has TARP not made you question your age old mantra.

Caligula, Nero, and more, all bought their power on handouts to the mobs of Rome. This reminds me a lot more of Obama promising the world for a penny than the fumbling tax till it works conservatives.
Adam Says:
August 16th, 2009 at 12:53 am
Happy Assumption-of-the-Virgin day to you all.

I suppose that would be the assumption that unlike every other “virgin” girl in history that got pregnant, this one somehow saw some angels and was told she would be supernaturally impregnated. She certainly didn’t fuck some young farmhand in a stable. No, that would be completely out of the question. Nobody does that. It must have been of divine origin, unlike literally every other occurrence in human history. After all, we have books written that tell us so. And they must be believed.
Adam Says:
August 16th, 2009 at 1:00 am
Caligula, Nero, and more, all bought their power on handouts to the mobs of Rome.

The key point here is the realization that you can buy the mob’s loyalty for far less than an actual wealth distribution would entail. You throw them crumbs, make a Coliseum to entertain them, and they love you. This is far more similar to Republican strategy.

The HELP bill, on the other hand, which actually contains a 5% tax on millionaires, is very hostile to such people in power. As is the proposal to allow those provisions of the Bush tax cuts to sunset.

As for TARP, yes, it obviously helped executives of Goldman Sachs and others. I believe the idea behind its passage was that its failure, while hurting said bankers, would cause far more pain to the middle and lower classes. The bankers positioned themselves such that they had to be paid off to prevent a depression, which while morally despicable still made the correct decision to pay them off to avoid catastrophe. The correct lesson is thus to prevent that situation from ever occurring again, not to deny them their ransom.
Al Says:
August 16th, 2009 at 1:38 am
If your gonna flat out lie about stuff at least make an effort.

The chart declines from ‘98 to ‘00 and rises steadily from ‘01 to ‘07. Remind me when was W President again?

Sheesh can we at least get right wing trolls who make an effort?

Huh? Look more closely at the chart. The previous high was in 2000.
globus Says:
August 16th, 2009 at 4:41 am
Посуточная аренда квартир в Екатеринбурге
bob h Says:
August 16th, 2009 at 7:46 am
I’m guessing that more people in that top .01% would agree with you than you think. They know that their wealth is best sustained in a healthy society where more people feel they are getting a fair shake.
Anthony Says:
August 16th, 2009 at 8:19 am
Though I suspect many of our idle rich are just decadent enough and p*ssified enough to enjoy life in Dubai, the Las Vegas of the Gulf.

Hector, how about putting the asterisk-laden misogyny on hold until such time as you actually see a naked lady.

Go back to slinging around your made-up definition of “hipster” and stop using the female anatomy as an insult. Ass.
El Cid Says:
August 16th, 2009 at 9:11 am
Figure 3 (and data table 3) from the linked information from Saez is the one dealing with share of national income of the top 0.01%. Either look at the data or open the chart in Excel, stretch it out, and redo the X-axis if you need.

Yes, there was a 2000 peak, and it dipped 2001 – 2004, but by 2005 had regained its 2000 peak and by 2007 had exceeded it.

Is anyone arguing that Bush Jr. had policies which were much harsher on the top 0.01% than Clinton during 2001 – 2004 but then in 2005 on Bush Jr. reversed those policies and then was better for them than Clinton?

To me an important lesson from that chart of wealth concentration among the top 0.01% is that it had peaked in 1920, and declined for most of the rest of the century until sometime in the early 1970s (depending on whether or not capital gains are included, 1973 if excluded and less clear if included), the concentration of the share of national income then began a steady climb upward since then, yes, reaching the 1920 peak in 2000 and then exceeding the 1920 peak by 2006.
El Cid Says:
August 16th, 2009 at 9:13 am
Pardon me, by 2006 it had exceeded the 1920/2000 peak.
Jose Padilla Says:
August 16th, 2009 at 9:26 am
The rich always do well during boom times. Everybody does well, but the rich do really well. Hence, the Nineties. The Bush years, however, were generally shitty. Probably the worst eight year period since the Thirties. So, you had the rich getting richer (at a record rate) while everybody else were getting poorer. This is a first in America.
roger Says:
August 16th, 2009 at 10:46 am
Actually, no. Caligula, Claudius and Nero did not ascend to the imperial throne by any form of wealth redistribution. They ascended because they inherited their positions. Like many a rich American family – say, the Bushes – their success was due to the collapse of the virtues and institutions that had made the republican powerful. But even in its abject state, Rome lacked the brownnosing culture so prevalent in America, with its painfully platitudinous biographies of our great CEOS and collections of their wit and wisdom – of course, written by ghostwriters.
joe from Lowell Says:
August 16th, 2009 at 12:33 pm
Huh? Look more closely at the chart. The previous high was in 2000.

And George Bush was inaugurated in 2001, so that’s his starting point.
joe from Lowell Says:
August 16th, 2009 at 12:35 pm
Al Says:
August 15th, 2009 at 4:38 pm
It will be interesting if the top 0.01%’s share of income actually decreases during the Bush years. There’s a pretty good chance that happened.

George W. Bush: the best President for income equality in a long time.

(Bill Clinton: the absolutely worst President for income equality ever. The top 0.01%’s share of income more than doubled during Bill Clinton’s reign.)

(It also appears that the top 0.01%’s share of income decreased during George H.W. Bush’s reign. Bush father and son: doing their part in decreasing the top 0.01%’s share of income.)

This is a perfect microcosm for the thought process that made the Bush presidency such a success, and which has brought the Republicans to the exalted status they enjoy today.

In the first line, Al makes up a factoid based entirely on speculation, which is politically useful to him.

By the last line, he is accepting this “fact” as reality, and using it as an assumption on which to base his understanding of the issue.

This is how you end up in such a deep minority; you believe your own bullshit, and base your political and policy efforts on that belief.
JonF Says:
August 16th, 2009 at 1:06 pm
Re: Caligula, Nero, and more, all bought their power on handouts to the mobs of Rome.

This is inaccurate. Both Caligula and Nero succeeded to their position in an orderly way; their predecessors (Tiberius and Claudius respectively) had arranged it beforehand. Neither had to buy off the Roman citizenry. And in fact the Roman grain dole dates back well over a century before either of them. And while both were fairly pyscho, their tyranny fell not on the ordinary people of Rome, but mainly on the Roman upper classes, excepting Nero’s scapegoating of a certain small, new and foreign cult for the Great Fire of 64 AD. In both cases it was mainly the Roman elite who saw to their deposition.

Re: But even in its abject state, Rome lacked the brownnosing culture so prevalent in America

The Roman client-patron system was pretty much the epitome of brown-nosing. The patron gave sometimes substantial monetary gifts to his clients and in return the clients supported the patron’s political career.
Hector Says:
August 16th, 2009 at 3:26 pm
Adam,

No, that would be the assumption (Lat. “being taken up”) by which the Mother of God was corporeally assumed into heaven without dying. As a special privilege befitting her status as the purest and highest of all ordinary human beings, God allowed the Mother of God to enter heaven without dying (as with Enoch and Melchisedech before her). The Assumption is attested to by many early writers, it is backed up by the lack of any testimony of the Virgin’s death and the absence of any one claiming to possess her relics (as we have for all the Apostles), it was believed by authoritative church sources from very early times, and it is backed up by St. John the Divine’s vision of the woman clothed like the sun, as well as the words spoken to Queen Esther (as a prophetic figure of Mary), “You shall not die, for this law was made not for thee but for all others”.

Of course, never put it beyond the hipster yahoos to jeer at what they are too dumb to understand.
Campesino Says:
August 16th, 2009 at 7:38 pm
Alan Says:
August 15th, 2009 at 8:41 pm
The Carlyle Group reflects this trend:

February 2001–$12.5 billion (MarketWatch)
January 2009–$91.5 billion (Kellogg School of Management)

For links go to:

http://stateofthedivision.blogspot.com/2009/01/bush-economy-summed-by-carlyle-groups.html
===========================================================

What this really says is that more people and institutions have invested with Carlyle and increased their investment pool, it’s not a profit figure. If you look on their website you’ll see Carlyle’s share of the pool is $3.6 B.

Also ironic is that the link the 2001 figure comes from is a story about a huge investment that CALPERS made in Carlyle. You know the evil CALPERS – the outfit that manages the the retirement funds of California public employees. They’re all part of the .01% I guess
Campesino Says:
August 16th, 2009 at 8:11 pm
joe from Lowell Says:
August 16th, 2009 at 12:35 pm
Al Says:
August 15th, 2009 at 4:38 pm
It will be interesting if the top 0.01%’s share of income actually decreases during the Bush years. There’s a pretty good chance that happened.

George W. Bush: the best President for income equality in a long time.

(Bill Clinton: the absolutely worst President for income equality ever. The top 0.01%’s share of income more than doubled during Bill Clinton’s reign.)

(It also appears that the top 0.01%’s share of income decreased during George H.W. Bush’s reign. Bush father and son: doing their part in decreasing the top 0.01%’s share of income.)

This is a perfect microcosm for the thought process that made the Bush presidency such a success, and which has brought the Republicans to the exalted status they enjoy today.

In the first line, Al makes up a factoid based entirely on speculation, which is politically useful to him.

By the last line, he is accepting this “fact” as reality, and using it as an assumption on which to base his understanding of the issue.

This is how you end up in such a deep minority; you believe your own bullshit, and base your political and policy efforts on that belief.
=========================================================

Actually you should look at the numbers. The rate of increase during the Clinton years was much higher than during the Bush administration – 219% to 163%. During Clinton their average share of income was 3.3% and during Bush 4.4%
U.S. Income Earned By The Top 1/10th of A Percent (1913 to 2007) » Sociological Images Says:
August 18th, 2009 at 11:57 am
[...] borrowed from economist Emmanuel Saez, via Matthew Yglesias. Leave a Comment Tags: class, history Public Service Announcements Vs. [...]
Wonk Room » As The Rich Got Richer, The Poor Got Poorer Says:
August 18th, 2009 at 4:20 pm
[...] of this wealth and transform it into more and better public services for the broad mass of people would do a lot of good.” Indeed, those vigorously opposing implementing a surtax on the richest Americans in order [...]
Matthew Yglesias » By Golly, a Two-Tier System! Says:
August 20th, 2009 at 4:44 pm
[...] question is why, with income inequality reaching unprecedented levels, we shouldn’t act to redress that inequity in our health care system? Dworkin appears to [...]

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The Latest on Inequality

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