Senate Income Inequality in the U.S.: Causes, Effects, Solutions

I've seen the dollar figure that my husband's company puts into each employee's health care benefit, and I have a very hard time believing that a tax going towards a government health care program would be greater.

It wouldn't, unless the bargaining option is removed, as Bush did. (Part of my "Republicans can't govern" theory: If you think government can't do anything right, you can't do anything right by means of government.)

Also, if nutritious food were just as cheap and easy to prepare as crap food, then Americans would be healthier overall, thus decreasing health care costs for all of us. We need to start by ending the corn subsidies and thus ending mass production of high fructose corn syrup but that's another topic.

Well, the biggest problem with high-fructose corn syrup is that it's cheap.

I've seen commentary on the past (in general, not here) on so-called "welfare queens" who think they are somehow "above" working fast food. Not saying there aren't whiny entitled moochers in this country, but we also have to consider the fact that a minimum wage job does not pay enough to cover day care.

The actual welfare exploiters tend to be corporations. The fossil fuel industry gets massive subsidies. Biotech companies get subsidies as well, and they outsource the crops to farmers. The amount of subsidy for corn (used for high-fructose corn syrup) and soybeans (used for margarine) makes it possible for farmers to sell the product back to the company that sold the seeds to them for cheaper. And of course Congress has been trying to approve helicopters the military doesn't even want.

 

Also, if nutritious food were just as cheap and easy to prepare as crap food, then Americans would be healthier overall, thus decreasing health care costs for all of us. We need to start by ending the corn subsidies and thus ending mass production of high fructose corn syrup but that's another topic.


Well, as somebody who has to be on a strict, controlled diet myself I will be the first to say that diets are not cheap. My food bill has gone up since my stomach condition set in two years ago and now I cannot simply eat a TV dinner for meal. That would simply shred up my stomach. I have to eat a specific diet or my stomach will react to it. I couldn't eat my own birthday cake last january, because of the gluten and sugar. So yes, diets are expensive. No more fast food deals or TV dinners.

 

A better way of looking at both ideologies is this:

Conservatism, at its best, is like a tough dad, who shows his caring and respect for his kids by pushing them to go out and achieve.

Liberalism, at its best, is like a soft mom, who has blankets and hot cocoa waiting at home to give the kids a break when they need it.

Both parties often fall short of those ideals, of course, as do many parents. But here's the real question: If your mother and your father are fighting, do you want one to kill the other, or do you want them to just stop fighting?

 

Thanks for that reply Mr. 44. I'm shocked to hear that my one sentence cliff notes preview seemed like an overly broad generalization. Also, I find the more apocalyptic members of this forum (on both sides) amusing.

I apologize if this is rambling- I?ve started and stopped this post several times, changed focus and done some hacking at it. I?ve mainly focused on how education can be improved to improve equality to an extent.

Anyways, like I said, I don?t actually really care about inequality in outcome. If CEOs are making 185 times the average worker, that is what it is. It doesn?t really bother me on its own terms*. Same with Gini coeffecients. Yeah, one country may be more equal, but if they are all equally poor, who cares? Absolute levels are too frequently overlooked. Yes, I am concerned about inequality?s effects on overall economic growth, but that would make what is looking to be a long post even more sprawling. Though maybe I?ll address it later.

That said, I do worry about inequality in the United States because I do not think we have equality of opportunity. This has a lot to do with education, but also healthcare and infrastructure to an extent. I?m not hopelessly naïve; there are way too many factors that are outside society/ government?s ability or mandate to affect. Family environment- hell, your genes- are huge determinants of your future that have nothing to do with school or whatever. But I don?t think anyone can say with a straight face our education system is fine. People may disagree with why, of course.

Genes are genes, and while important I guess, pretty worthless without the other stuff. Healthcare is obviously debated in this country; I?d suggest it is in the public interest to provide healthcare to pregnant women and children (actually I?d suggest it?s the public interest to provide catastrophic health insurance to everyone, but that?s another kettle of fish). I don?t really want to get into that right this second though. The education though, I think is more easily discussed in a less partisan manner. I guess I?ll ramble a bit about that then, not that I actually have solutions.

For education, I think we need to step back for a minute and think about education on a higher level for a bit. That?s not to say states and towns can?t continue to innovate. I am pretty intrigued by vouchers and charter schools- as an econ grad students, I almost reflexively lean towards options that improve competition and consumer choice. But I also struggle with education because it is really hard to model. For example, in an efficient, competitive labor market, a worker is paid his/her marginal product. That?s fine. But what the hell is a teacher?s marginal product? I?m not sure we even have a consensus in this country on how to measure a teacher?s ability. Standardized tests, sure, sort of, but I think a lot people are justifiably unhappy with that and the ?teaching to the test? mentality. You could do long term studies to determine outcomes- I think one came out last year that tried to find out the value of a kindergarten teacher (the best were worth something like 400K in present value of future earnings I think, which would mean the teacher is grossly underpaid) . However, it takes a looooong time and people are understandably impatient. And I don?t know if the present value of the marginal increase in earnings is what people want to measure. Is a good teacher one that just makes their students wealthier down the road?

I tend to see the inability to measure teacher ability as particularly acute in elementary school. To an extent you can use student evals in High School and College. In first grade? Not as much. Yet those years are important. So I do agree with the people saying we need performance pay, I?m just worried about how to measure performance. And I hope none of this is construed as an assault on teachers or whatever. I absolutely respect people who choose to do that?but I?m not going to pretend everyone in it is necessarily good at it just because they love it. Just like I love

 

With regards to two, teaching holds a strange cognitive dissonance in our country. As a profession, it polls as being fairly highly respected. When it comes to individuals though, parents can be just awful (which I mentioned; parents tend towards irrational when it comes to their children).


Your point three I didn't address (maybe tangentially) , but that is really important too for performance evaluation. Any evaluation really needs to try to measure "value added". Otherwise teachers in poor urban/rural districts are going to always look worse than teachers in middle class suburbs, regardless of their actual value added.

 

There is a difference between upward mobility of lower classes into the middle or upper middle class and the upward mobility of the rich to the super rich. I am all for #1 because it reduces the burden for everyone, but #2 is what we actually have. When banks get bailed out and the people who masterminded the biggest cluster we've seen in our lifetimes are passing out millions in bonuses for a job well done while folks who have bought homes with the intent of staying in them, paid their mortgages, but now have to walk away because the value has dropped by 50% and they lost their job, yeah people are pretty pissed. So, I am in agreement with jabbadoo, if this trajectory continues it will not end well.

 

Basically the overarching rule for maintaining economic stability and allowances for lower-class citizens comes down to taxes.

I'm actually more in favor of higher taxes (especially higher rates for higher income-earners) for the sole purpose of generating greater benefits for everyone. The public sector operates on taxes, so its power to influence diminishes as the private sector is allowed to flourish. I'm not talking solely corporations, but individual income earners. When your public sector takes a secondary role to individual prosperity and capitalism, you're encouraging the unhealthy competition which fuels the income inequity we're facing today.

I'm not sure if I'm promoting communism here, but we really need to face the reality that higher taxes are needed to be imposed on everyone for this to succeed. Everyone saw how successfully the repeal went for the Bush tax cuts, so any who think we can just impose higher taxes on only the upper 1%... don't count on it. It would have been far better if all the tax cuts were repealed, but Obama pushed for keeping the lower 99% and now we're stuck trying to figure out where the hundreds of billions in tax cuts are to come from for the rest of our lives.

 

Here's a question for you: at what point would those high taxes become immoral in your opinion?

The US already has the most progressive tax structure in the world. The top 10% pay a larger share of the total taxes in the US than in any other nation, including those with a larger income disparity (such as Italy or Poland). From the link:

Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation's income. By contrast, we prefer to have the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation's income.

My wife and I have been rewatching Justice with Michael Sandel, and in episode 8, they get into a good discussion on this point.

You are basically holding to John Rawls' views on distributive justice, that any inequalities in society should be for the benefit of the least well off. The problem with this is that it completely undermines the idea of self ownership, the idea that I own myself and my labor. Self ownership is the most basic right, and is essential in society in order to maintain individuality. After all, if I don't own myself and my labor, it raises the question of who does own me and my labor. Under a philosophy like Rawls', the answer would appear to be that society exerts at least partial ownership over me and my labor.

But who decides that society has claim to me or my labor, or how much claim over me it has? Under Rawls, it would be society itself. At that point, it essentially means that society actually owns me completely, because I am only allowed to have what society permits me to have. Once you take that step (from me owning myself and my labor to me only owning what society allows me to have), you have basically converted everyone from being free individuals into slaves of society, and if you continue down that path, you destroy the inherent self-worth of individuals.

Kimball Kinnison

 

That's a fair point, Kimball, but remember how little we tax the top 10% today compared to how much we used to. Under Eisenhower, the top tax bracket was 90% ? compared to 35% today ? and not only were the rich still rich, but the middle class was booming as well. Those were days when one working parent could provide for a whole family, as opposed to today, when two working parents can barely pay the bills.

Whatever happened to those days?

 

I'm very curious to know what your understanding of Rawls is, KK, because that critique doesn't seem justified. Are you basing this on a detailed study of A Theory of Justice and Political Liberalism (e.g., courses explicitly looking at Rawls' political philosophy) or your own extra-curricular exploration? Rawls himself is a deontologist, which as a philosophy is *very* concerned with respect for the individual (and explicitly states that individuals cannot be sacrificed for collective gain). In light of Rawls explicit concern for the maximization and maintenance of individual liberty (the maximin part of the Liberty Principle is established before the Difference Principle), I'm very curious to see why you believe Rawls is essentially arguing against himself.

 

Interesting chart, but I think its flawed. For one, it only includes federal income tax, which is our most progressive tax. It doesn't include regressive sales or excise taxes, or the more neutral/regressive property and state income taxes. It'd be far more interesting to look at overall tax burden.

Also, its numbers for incomes strike me as suspect, as they are a lot lower than most other estimates I've seen pegging the top deciles income share at around 45%. I'm trying to understand the methodology of the OECD, but it seems that they may not have quite caught non-wage, non-divided income (ie, capital gains) very well. It also relied on self reporting, whereas other estimates I've seen (such as Emmanuel Saez's) use data computed from tax returns.

 

Individual labor has little or no value without the society that serves as its foundation and creates the stable environment in which it can thrive. Would you want to open a Starbucks in Mogadishu? What about the value of the labor of a Japanese earthquake refugee. A person with a business in northeast Japan depends on the society to rebuild an infrastructure so that conducting business will again be profitable one day. The more a person earns, the more they have at stake in ensuring that the infrastructure continues to function and society runs in an orderly fashion.

If there were less income inequality, the rich would likely end up paying a smaller overall share of total tax revenue, even as the marginal tax rates they paid on their income rose.

Distributive justice helps everyone feel invested in paying for the upkeep of an environment in which the rich can make lots of money. Distributive justice ends up helping the rich more than it helps anyone else, but it makes everyone else feel better about it. That is what social cohesion is all about.

 

Let's cut the bull****. You are not talking about any form of "justice" at all, and I reject the notion that any justice is involved. What we're really talking about here is the redistribution of wealth, in which a certain minority (the richest 1% or 5%) is targeted because it is believed they are not paying their fair share. It would be one thing if those programs actually accomplished their stated mission, but they aren't.

Except the richest 1% of the people are already paying 40% of the personal income taxes, a greater share than paid by the bottom 95%. They already pay more than most of the middle and lower classes. How much more should they be asked to pay, especially when the results promised have not been produced?

And now, with news of a plan to take down JP Morgan Chase, its going to get uglier. I'm sure that what amounts to nothing more than an extortion plot being carried out across state lines is clearly illegal, and well within the purview of the Justice Department. IF this attempt is for real and IF it is allowed to go forward, a lot of Red America will be questioning whether the social contract is still in force. If the cops are unable or unwilling to protect you, what else could that mean? At that point, they will decide that if the government cannot or will not look out or protect their interests, they will have to do it themselves.

 

A more equitable distribution of income will fix the problem of the rich paying "too high" a total share of tax revenue. Individually, if they pay a top marginal rate of 50-60%, and we achieve a distribution of income more comparable to other leading industrial nations, then as a whole the rich will no longer be burdened with paying so much tax revenue. The solution to your problem is more social services and better educational opportunities for the poorest Americans and a series of higher marginal tax rates and capital gains taxes for the top percentiles of earners. Bringing everyone closer to the median will help spread the tax burden more evenly.

 

This is a pretty meaningless statistic without including what percentage of the income those 1% are making.

 

I haven't actually read A Theory of Justice in some time, and never in a classroom setting. (Pretty much all of my study in that field has been extracurricular.) I'm currently trying to work my way through a lot of that again (rereading Locke, Mill, Kant, and Rawls, among others).

My biggest problem with Rawls is that he really does argue against himself (at least from what I've read). You ultimately cannot have respect for the individual, and then argue the Difference Principle. In fact, I think that Rawls' entire argument from a veil of ignorance is flawed, and betrays his own biases because he ignores basic principles of human nature. For example, he argues that if you don't know whether you will be in the majority or minority, you will support increased rights for the minority. This is flawed because it doesn't take into account that people are, by nature, gamblers. It might work for a majority/minority split like 55/45%, but at the extremes, like a 90/10 or 95/5 split, people would be more willing to bet that they will be in the majority. How many people would take a bet where they have a 1:20 chance of winning? Compare that with how many people would take a bet where they have a 19:20 chance of winning. You will get a lot of takers for the latter that you wouldn't get for the former.

In general, I tend to find it suspicious any time someone starts using the word "justice" with any sort of modifier. "Social justice", "distributive justice", "transformative justice", etc all tend to focus more on the modifier and less on the actual justice side of their argument.

Ultimately, I believe that the Difference Principle is flawed because you cannot maintain respect for individual liberty and bias society's inequalities in favor of the least advantaged. In practice, the latter always winds up infringing on the former. Whenever society starts deciding whether one person has "too much" and needs to be singled out for special treatment because of it, you have thrown individual liberty under the bus.

Kimball Kinnison

 

Boohoo. Boohoo. Let's all have a big old cry for the rich in this country. Instead of buying a yacht that can hold two-thousand people they'll only be able to get one that hold a thousand. Boohoo. Boohoo. Or their thousand acre house that can only be fiver hundred acres. Boohoo I'll cry a river for those greedy bastardos when they have to live like a lot of people in this country: paycheck to paycheck and knee deep in debt. Until then they're just money grubbing eh-holes who need a swift kick to the crotch.

 

Quick response, as I have a lecture to give shortly.

Rawls actually does take the gambling nature of humanity into consideration (both the gambling nature as well as our natural tendency to favor our own position). He argues that the veil of ignorance is necessary to counteract both of these tendencies, and when all self-referential knowledge is stripped, we are left with pure rationality. This pure rationality exploits these tendencies by making us hedge our bets - as such, we don't screw ourselves over regardless of where we end up in society. Consequently, the Difference Principle is *explicitly* about rational self-interest - while we have a tendency to gamble, we also know it makes more sense to spread our bets out over multiple horses.

 

This is the kind of response I think makes the most sense. Yes you've got the richest 1% accounting for 40% of taxes or so, yet this minority makes so much in comparison that we're reverting back to the era of JP Morgan, Rockefeller, and Carnagee. What brought about the emergence of the middle class was significantly due to steep progressive taxes for ultra millionaires and breaks for the impoverished. Even if you were making along the lines of a million dollars a year(today's money), progressive tax increases of 90% beyond such annual salaries aren't exactly going to kill capitalism... it would simply discourage people from taking outrageous sums of money out of the economy. If there is a million dollars to be earned, ten people could benefit more greatly individually than one taking it all.

And this isn't unfair at all. If you're able to earn a million dollars a year, you'd be taxed normally for your first ~$250k like everyone else. Then you'd start seeing the extremely steep tax rates of 90% or so. Anyone who climbs the social ladder would be expected to pay the same tax rates as well... this isn't biased at all. If I make a billion a year, I'd pay steep taxes. If Bill Gates decided to become a wage-earner and get $100k a year, he'd pay the same tax rates as my brother-in-law.

Clearly if the gap between the upper 1% and the lower 99% is growing ever wider, then clearly this trend is going in the wrong direction. Also I know I haven't covered corporations and the role of CEO's... they don't go by the same system as wage earners, so that makes it difficult to keep such financial giants in check.