Matthew Yglesias » The New Economy

Sep 9th, 2009 at 3:14 pm

The New Economy

It’s basically an old story, but the CBPP has some nice new representations of the inequality explosion of recent decades:

Needed: Higher taxes and better public services with a special focus on public services likely to facilitate increased college graduation rates.

Comments
33

Filed under: Economics, Inequality,

33 Responses to “The New Economy”

Mixner Says:
September 9th, 2009 at 3:26 pm
Yawn. Same old meaningless income data you’ve posted a million times before.

Are you EVER going to write anything serious about inequality, Matthew? Read this.
ron Says:
September 9th, 2009 at 3:28 pm
Needed: Higher taxes and better public services with a special focus on public services likely to facilitate increased college graduation rates.

Always the wrong emphasis from MattY.

70% of the population won’t, can’t, will never graduate from college. At last not unless college is downgraded to high school.

And public services has to mean meaningful, well-paying jobs for that 70% or that too is inadequate.

Higher, much more progressive taxes are absolutely necessary.

What we need is for government to quit pretending that the Fed can manage the economy and for the congress to address and start to solve our deepseated problems.
Max424 Says:
September 9th, 2009 at 3:30 pm
“Hey, Republican Conservatives, look at this chart. Is this what you want? To make policies that allow the richest motherfuckers in world history vastly richer? Is this what you REALLY want?”

“Yes,” is the squeaky-rat like response from a Nut Job lurking in the corner shadows.
Davis X. Machina Says:
September 9th, 2009 at 3:37 pm
Needed: Higher taxes and better public services with a special focus on public services likely to facilitate increased college graduation rates.

…or tumbrels. Tumbrels would work, too.
Bloix Says:
September 9th, 2009 at 3:42 pm
Income inequality is a huge part of the health care problem. When doctors and hospital administrators and drug company execs have to be paid enough so that they can be part of a tiny elite, while everyone else is making a fraction of those incomes, the amount that ordinary people must pay for health care is going to be beyond their means. But if the income distribution is flatter – as it is in other industrialized countries – then ordinary people can afford to buy health care, whether they pay for it in taxes or via the purchase of insurance.
Go, Sestak! Says:
September 9th, 2009 at 3:44 pm
But they might Go Galt! Ohs noes!
Mixner: "creepy, borderline sociopathic guy" Says:
September 9th, 2009 at 3:49 pm
Yawn. Same old meaningless Cato bullshit you’ve posted a million times before.

Are you EVER going to write anything serious about inequality, Mixner?
q Says:
September 9th, 2009 at 3:52 pm
one thing your graph is missing is the difference in household size — it shrunk quite a bit between 1976 and 2007.

saez / pinky mentioned this in their paper. it barely affects the inequality story, but it does affect the comparative median increase story.
Don Williams Says:
September 9th, 2009 at 3:59 pm
The workers got decent income growth in the 1946-1976 period because the US Superrich were scared that the evil Commies were going to subvert the US population and cut the Superrich’s fucking heads off.

Plus the Rosenbergs and Cohens showed the rabble how to severely buttfuck the assholes who put us through the Great Depression.

Plus there was a great need for cannon fodder. Hence , the lip service and flag waving for “patriotism”.

After the collapse of the Commies, however, we went back to the personnel polices of the Robber Barons in the Gilded Age.
Suggest to today’s billionaire that he owes something to his fellow countrymen and watch him laugh his ass off.

As someone who worked on national military and intelligence systems during the Cold War, an interesting question to me is whether the American People would have been better off if we had LOST the Cold War.

Had to see how the Commissars could have fucked us worst than the number being done on us by our own leaders.
Noah Says:
September 9th, 2009 at 4:04 pm
I agree with Matt’s prescriptions.

But a lot of the runup in pretax income inequality may be due to A) increased global trade (which dumped a lot of labor and not much capital onto the world economy starting in the 70s, creating a labor surplus and capital shortage), and B) the giant mega-bubble in the finance industry. The latter should be corrected with regulation, while there’s really not much we can do about the former besides wait for our trading partners to catch up to us…
Ted Says:
September 9th, 2009 at 4:19 pm
@4: Cosign tumbrels.
N Says:
September 9th, 2009 at 4:23 pm
Those figures are depressing but I’m not sold on your recommendations for fixing the problem. Restoring tax levels to Clinton Administration levels I agree with – especially with the goal of restoring a balanced budget. But an expansion of the government sector I think is the wrong approach. The government at the Federal State and local level has gotten out of control with their spending and elevated salaries. Government today views the taxpayers as a resource to be strip-mined. Even with the worst recession in decades, governments across the country refuse to cut back on staff or perks.

Republicans have a lot of flaws but their (rhetorical at least) skepticism – if not outright hostility towards government is justified and prudent.
rapier Says:
September 9th, 2009 at 4:57 pm
There is no fix for this because nothing is broken. The post WWII period was an anomaly. The punishingly high tax rates on the top 1% was the only way to prevent the perfectly natural tendency of asset and income distribution to skew strongly to the top. There is no way for a political system to maintain such a tax structure long term.

The top always partners with government to favor the top. That’s why it used to be called the political economy. Until the vast power of the elites to define reality took hold and we entered the glorious post 70’s period of “free markets”. Which is absolutely correct as long as it is understood that free means that the elites are allowed their natural power to direct assets and income and money creation itself towards themselves through law, regulation, and corruption.
scarpy Says:
September 9th, 2009 at 4:59 pm
Looking at the original data and charts, it seems pretty clear that the country switched in the early 1970s from a trend toward more equality and broader sharing of income & wealth to our current path.

Anyone out there know what made the difference? Did it have to do with the oil crisis, stagflation, the end of Bretton Woods? Is that when manufacturing began dying?

Or am I wrong to look at the 1970s turning point as significant?
joe from lowell: "evil psychopathic moron" Says:
September 9th, 2009 at 5:20 pm
joe from lowell is an evil psychopathic moron
Njorl Says:
September 9th, 2009 at 6:15 pm
N,
The US Government spends less as a percentage of GDP than the vast majority of nations in the world, and much less than all developed nations. Considering how much of that is military spending, we could double all other government spending, and still be spending less as a percentage of GDP than all other developed countries except Japan.

The idea that we have “big government” is a myth.
bob mcmanus Says:
September 9th, 2009 at 6:20 pm
14:Yes. And of course the tax and regulatory changes of the Reagan administration, but the equity markets started to skyrocket a little before Reagan, so I think it has partly to do with inflation expectations. In the country between the early 50s and early 80s, inflation was always a threat, so the best bet was to build a factory. After Volcker, you could trust FIRE to make you money. But this is an idiosyncratic view.

Economists are still working on it,
jmo Says:
September 9th, 2009 at 6:25 pm
The idea that we have “big government” is a myth.

Or, rather, it’s a “myth” when you want it to be (health care, education) but not when you don’t (military, prisons).

Libturds have never been terribly consistent.
Mike K Says:
September 9th, 2009 at 6:32 pm
Those rich people you scream about are also paying one-third of the taxes to run the government. How much more progressive can you be? Second, like Maryland and California are seeing, raise the rates to conficatory levels and “the rich”, aka the productive, decamp to where they are welcome.

The stupidity presented here is infantile, puerile and largely untutored in reality.
Bernie Says:
September 9th, 2009 at 6:42 pm
Even though the report is biased toward a policy agenda it had an interesting tidbit of info. Everyone is getting richer. All income groups showed inflation adjusted gains. The rich were higher, but the poor are better each year than the last. I would prefer a world where the rich get a 90% raise and I get a 3% raise over a world where the rich get a 5% raise and I take a 5 percent cut even though the income inequality wouldn’t be as great.

The data provided at the link is meaningless. Even the footnotes explained the picked data groups that have a very wide swing in final outcome. They picked adjusted gross income as the “income” which is biased to get the results they wanted. Our policies rightly shield a much higher percentage of my income from taxes than the rich. The standard deduction is a significant portion of my income, it the top 1% it doesn’t register much. We limit the amount the rich can put in tax shielded retirement savings plans. This forces the rich to put more money in riskier investments (to overcome the tax losses) that have the possibility of making larger gains during good times and larger losses in bad. I’ll bet the income inequality hit new lows after the stock market crash.
James Cody Says:
September 9th, 2009 at 7:00 pm
Wait a minute. You can’t just point to this data, which certainly is disturbing, and then make a conclusory assertion that we need higher taxes and more public services, as if the data proves your conclusion. That’s like saying, “I got into a car accident and the other driving was making a cell phone call at the time and so it was his fault.” Yes, unless you happen to be texting at the time of the accident.

Point is, conservatives would point to other causes, e.g., increased globalization and manufacturing jobs moving overseas as the third world developed and the United States focused on higher income, services jobs. (Of course, conservatives would also have to argue that Bretton Woods II was simply a natural development of a global free market rather than a consciously chosen policy.) And conservatives would argue that higher social spending, with the requisite higher taxes, would make things worst, not better.

Mind you, I agree with you, or at least intuitively I do. But I see nothing in your post that articulates why my intuition is right and how I can make arguments that the other side is wrong. All that would happen if I made your argument to a conservative by citing this data is that he would respond, “No, it’s about globalization and manufacturing jobs rightly moving overseas.”

Make an argument. Explain (and preferably with data and/or cites to publications) why lower taxes and less social spending are the primary cause.
Glaivester Says:
September 9th, 2009 at 7:05 pm
This chart also does not take into account immigration.

A lot of our low-paid workers probably have had increases in income commensurate (proportionally) with those of the top 1 percent, but because that increase was linked to them coming here, and because we don’t count them until they make it to the U.S., that does not get reflected in the charts.
fostert Says:
September 9th, 2009 at 7:07 pm
“How much more progressive can you be?”

Well, for starters, Warren Buffet could be required to pay more than 17%. Once you get over $300K a year, your effective tax rate actually goes down. Which is why Warren Buffet’s effective tax rate is much lower than his secretary’s. We have a combined progressive/ regressive tax system that peaks at the upper middle class. How about a flat tax? You don’t hear about it much anymore because the super rich realize that their taxes would go up under a revenue neutral flat tax.
The Lorax Says:
September 9th, 2009 at 8:03 pm
@ron

No, it’s not always the wrong emphasis from Matt. I don’t know where all this dickish behavior comes from.

Universities now backfill skills that were taught in high school 30 years ago.
The Lorax Says:
September 9th, 2009 at 8:06 pm
@N Where are there inflated public salaries in any sort of scale? Where?
The Lorax Says:
September 9th, 2009 at 8:12 pm
The rich are NOT fleeing California:

http://www.sacbee.com/static/weblogs/capitolalertlatest/023782.html?mi_rss=Capitol%20Alert

This is a total canard. And they’re not fleeing NY, either. California is 15th or so overall in taxes due to low property taxes.
The Lorax Says:
September 9th, 2009 at 8:15 pm
@James Cody

And the conservatives would be mostly wrong. The rest of the developed world has managed globalization without turning into Argentina.
Mike K, tutored in reality Says:
September 9th, 2009 at 8:22 pm
I enjoy tongue bathing the rich. It makes me feel productive.
Njorl Says:
September 9th, 2009 at 9:12 pm
The idea that we have “big government” is a myth.
Or, rather, it’s a “myth” when you want it to be (health care, education) but not when you don’t (military, prisons).

Libturds have never been terribly consistent

No, JMO, we do not argue against big government when we argue against military or prison spending. Instead, we argue against military or prison spending. Unlike you, most liberals have the intellectual capacity to argue for or against specific programs, rather than resorting to broad arguments about the size of government, which are not even accurate.
marc sobel Says:
September 9th, 2009 at 10:16 pm
Krugman in the Robbins Lectures this year pointed out that much of the growth in inequality was the increase in pay in the finance sector and mainly a few thousand people people at the top.

Obviously although it has regrettable moral implications, we cannot afford be squeamish when we have such massive long term fiscal issues, but have to take the fiscally sound solution and take the top 1000 bankers out and shoot them.

(no bankers were injured in the posting of this comment)
Stone Says:
September 10th, 2009 at 12:29 am
Wow. What about a graph showing the top 0.1% vs the bottom 99.9%? Or how about only the top 10 people vs the bottom?
More evidence that the rich can afford higher taxes | Increase Our Taxes Says:
September 10th, 2009 at 10:31 pm
[...] 1 Percent of Americans Reaped Two-Thirds of Income Gains in Last Economic Expansion.” (H/t to Matt Yglesias for pointing it [...]
Matthew Yglesias » Housing and Inequality Says:
September 11th, 2009 at 9:15 am
[...] curious consequence of runaway income inequality in the United States is that it’s produced a bumper crop of research (not sure I’m [...]

Matt Yglesias

The New Economy

33 Responses to “The New Economy”

Blogroll