img src="http://b-i.forbesimg.com/louiswoodhill/files/2013/03/Income-Inequality-Chart-032713.jpg" height=200 width=300
Posted on 03/29/2013 5:40:33 AM PDT by SeekAndFind
In a March 18 post on his “Economics One” blog, John B. Taylor published the very illuminating chart reproduced below.
The chart, which is based upon IRS data complied by economist Emmanuel Saez, shows that (at least in absolute terms) rising inequality hasn’t even benefited the so-called rich. They, like the rest of America, would be better off today if the government policy errors that led to the increasing income disparity had not occurred.
From 20 feet away, anyone can see that something bad happened to the U.S. economy in 1968. Prior to that, America experienced rapid income growth that was widely shared. The incomes of both “the ten percent” and “the ninety percent” increased by 80% in just 20 years. We had prosperity, without rising income inequality.
This 21-year “golden age” then gave way to 14 years of income stagnation, which was also widely shared. Incomes didn’t rise, but neither did income inequality.
Then something good (but not great) happened around 1983 that got incomes growing again, but not nearly as fast as during 1948 – 1968, and at the cost of rapidly widening income inequality.
After that, something bad happened circa 2000, leading to another 12 years of income stagnation for both “the ten percent” and “the ninety percent”. This brings us to the present.
Note that even though, as of 2011, the income gains of “the ten percent” since 1948 have far outpaced those of “the ninety percent” (205% vs. 72%), “the ten percent” would have been much better off in absolute terms if the 1948 – 1968 trend had continued. In such case, the incomes of both groups would have risen to about 270% above their 1948 levels. America’s real GDP (RGDP) would have been 84% (more than $13 trillion) higher in 2012.
(Excerpt) Read more at forbes.com ...
We will never go back to a gold standard because Obama’s low brain cell voters will never be able to afford buying it nor will they ever want to have to work again when they can stay on the dole for generations.
If you have not read Economic Facts and Fallacies, I highly recommend it.If we can kick the Piketty and Saez legs out from under the progressive narrative, it will collapse. The more I see, the more I realize that almost all the "facts" the progressives use are based on these clowns and their BS studies. They crap it out, then Krugman and Reich put their spin on it, then the NYT picks it up, then it is "common knowledge".
It drives me crazy.
You are missing the entire point of the article. The guys you mention didn't write it and the conclusions reached by the author certainly aren't "from the left."
Inflation is the cause of income inequality in this country. To deny that it exists is to stick your head in the sand. But, unlike the left's assertions, it is not caused by capitalism, but by the very government they wish to entrust more power to.
You are missing the point of my objection. An article that is based on faulty statistics is, itself, faulty.
There is still a good bit of hand-wringing over "income in-equality" in this article. First of all, income in-equality is NOT a bad thing. It is a very good thing. It means that people within our society are producing a great amount of wealth that is shared through incomes and amenities for all. Don't forget to factor in income mobility when you look at these statistics.
Secondly, the "gap" that is so worrisome to the left and - according to this article - this guy, too, is heavily exaggerated by the BS statistics of Saez. Using better methods, the "gap" shrinks considerably for the 95% and the top 5% is explained (largely) by income source and reporting changes.
Finally, this guy ties all the ups and downs to the indexed dollar (or lack there of). I'm not sure that is the sole contributor. Lefties try this same tactic with tax rates e.g. "The tax rates were higher under Clinton and the economy did better, therefore we should raise taxes." Neither argument is fully correct.
I have not fully wrapped my head around the pros and cons of an indexed dollar versus a floating dollar, but I am fairly sure the decimation of Europe post-war was as much a factor in that period's growth as was the gold standard, that out of control social policy Johnson through Carter was as much a part of the decline he attributes to Nixion taking us off the gold standard, the pro-growth policies and internet expansion was a strong driver in Reagan through Clinton and 9/11 and the housing bubble (among many other things) was a large part of post 2000 problems. To pin so much of it to monetery policy seems too narrow.
Sounds good, am adding it to reading list for my own interest; not expecting any liberals to care about what I read there...
Any and all Sowell books are on my recommendation list, but that is a great one to start with. If you are interested, there is a Sowell ping list run by jazusamo. Ping him if you want on.
One thing to understand here is that income equality is a Marxist ideal. It's stupid. What happens in a free market is that usually employers have to pay more for valuable labor than they do for labor that's worth less. That's a good thing. Only a Marxist would demand that labor that's worth less be purchased at the same prices as high value labor. The other thing is that leftist or not, this article draws its Marxist conclusions using stupid reasoning.
Inflation is the cause of income inequality in this country...
Look, inflation means wages rise for the oppressed proletariat the same amount as they do for the elite ruling class that exploits them. Of course we're a long way from agreeing that making everyone's income the same is a good thing just like we don't agree that America's been hit with run away hyperinflation with money having no value.
I was essentially apolitical when my adulthood began, and my formal education consisted of math, engineering subjects, the pure sciences and a couple of foreign languages. The only economics related training dealt with engineering economics. But my self-education continued uninterrupted to this day, with the possible exception of politics; I was too busy working, supporting my family and raising three children, successfully. If the measure of succes is total independence, and education which allowed them to choose their individual lifestyle, and continuous good employment.
But there were a few unplanned lessons along the voyage to old age. I commuted for several years with a real communist (not one with just a mouth and picket signs.) He lived his beliefs and I recall early on getting an education about the Federal Reserve which, at that time was rarely mentioned among normal folk. My real involvement in politics and its handmaiden, economics, occured decades later when retirement was on the near horizon. Free Republic has been an important part of that education, since 1998. A relative newcomer. But it all falls into place once we step back and look at everything.
The chart is informative and useful, from the standpoint of econmists, where, like the man with a hammer, everything he sees is a nail
Useful as this artcle is, it is a discussion of economics divorced from everything else which happened since 1948, which is just as important, perhaps more so, in the social arena and politics. I was not aware of their importance at the time (few of us 'youngsters' were) but in retrospect those events can't be examined in isolation, either. Among them :
The Marshal Plan
The Korean War.
The construction of the interstate highway system
The Space Program.
The start of the totally unexpected nuclear destruction of the "War on Poverty."
The nascent mass transformation from a manufacturing to a service society.
The Vietnam War.
The birth of the gigantic computer revolution.
The birth of and unjustified accumulation of power by the unproductive "enviromental" movement.
The explosion of expropriation of American assets and investments worldwide.
The restructuring of the vital power attached to the worldwide sources of energy.
The wholesale exportation of heavy industry and manufacturing jobs "overseas."
The birth and rapid spread of the internet followed by the World Wide Web.
The rise and accumulation of raw, naked political power by undisguised and unproductive Socialism. The Black Swan of the economic collapse of 2007-2008.
The tranformation of "Power of the People, by the People for the People" into its direct opposite.
The discovery, suddenly, that the Constitution has become a useless outdated dusty document created by "dead white men," and ignored with impunity by the three branches of the Constitutional, Representative Republic.
All those events can be tracked on the same graph, and their influence, vis a vis economics is certainly open to debate. Certainly a subject deserving tens of thousands of words and much gnashing of teeth, to say nothing of unrealized prison time for many of the perps.
You would be Furious... Exactly.
about 1984 the government wonks realized that they could earn a lot more and have more bennies by giving away the store and sticking the bill to the tax payers. some animals are more equal than others.
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img src="http://b-i.forbesimg.com/louiswoodhill/files/2013/03/Income-Inequality-Chart-032713.jpg" height=200 width=300
Fair enough. I meant to refer to widening income disparities [if you'll accept that distinction].
What happens in a free market is that usually employers have to pay more for valuable labor than they do for labor that's worth less. That's a good thing.
Yes. Absolutely. What I see, though, is explosive growth in the financial sector since the eighties. During that time period, we also see an incredible increase in the pay of financial sector participants.
The financial sector of the American economy has grown all out of proportion to the rest. That is a direct result of the Fed's half-century long policy of inflating the dollar. That has made playing games with money more profitable [in the shorter term] than producing tangible goods for consumption.
Since the bankers get the newly-printed money the Fed cranks out before the rest of us, they are able to invest it at its current level of purchasing power. By the time those dollars "trickle down" to the rest of us -- as they eventually do -- they are worth much less.
It's the Cantillon Effect. Inflating the money supply affects people and prices differently at different times. I have come to believe strongly that whatever "income inequality" exists in the U.S. is not due to nasty capitalism, but to the very government policies that control our money.
There is no income inequality.
There is only human inequality
But we’d still only have the same $3,000,000 wampum in circulation. Wampum would be 4 times as scarce as they were 100 years ago. The total wampum would only be about 3% of total national net worth.
It would be much more difficult to get one’s hands on actual wampum (not wampum “on account”, but wampum) after all that wealth accumulation, even though the average person still had the same net worth.
That's a very good example of a hypothetical society on which to base an economic discussion. Some use Robinson Crusoe -- I tend to use a tribe of primitives in my examples [white primitives, of course, wouldn't want to offend anyone].
But if the net worth of the society [or even just the spending] increases while the money supply remains constant, then prices for goods will drop. It is exactly what happened in the late 19th century when the U.S. participated in the international gold standard.
The output of an economy will adjust to the supply of money. Prices will vary accordingly. The supply of money under the gold standard was constrained by the supply of gold reserves and prices dropped by approximately 1% a year for several decades.
And output rose and the standard of living increased and wealth skyrocketed. A limited supply of money is no constraint on growth -- it's just a constraint on prices. They're not the same.
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