The Cost of Economic Inequality
http://thedianerehmshow.org/shows/2012-05-17/cost-economic-inequality
A discussion about the role of income inequality in today's economy and its consequences for our future.
Guests
James Galbraith
economist; Lloyd M. Bentsen Jr. chair in government/business relations and professor of government, Lyndon B. Johnson School of Public Affairs, University of Texas at Austin
author of "Inequality and Instability: A Study of the World Economy Just Before the Great Crisis."
David Wessel
economics editor, The Wall Street Journal; author "In Fed We Trust"
Edward Conard
Author of "Unintended Consequences: Why Everything You've Been Told About the Economy is Wrong." Former partner at Bain Capital.
Comments
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There must be a sweetheart deal with Ed Conard's publisher.
He made an ass of himself @On Point Monday, May 14th.
Conard actually asserted that wealth is not sufficiently polarized in the USA to initiate widespread opportunity. The "Yes Men" could not have fabricated a sillier farce. And now DRShow swallows this pill of psychosis.
Why can't we examine real injustices and solutions and quit letting the crooks repeatedly have their say? I'm sure many corporate headed men will abandon their nose to tail conga line long enough to call in, seeking approval from their top dog. No one would believe DRShow used to exude sophisticated feminism, and nuanced humor.
Oh no Pancake....now you've gone and used the "n" word. That strikes fear into the hearts of conservatives. I plan on using a large black banner with the word NUANCE emblazoned on it in red at the Nato Summit when I march.
That should do it.
As usual though, you are spot on! First I hear of this dimwit Conrad was last week in the New York Times, what an uninformed doofus. You'd think that some intelligence would come with all that money....but it never logically follows. Ever.
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Here is the first paragraph from the widely quoted Oct 2011 Congressional Budget Office report. http://cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdI...
CBO finds that, between 1979 and 2007, income grew by:
275 percent for the top 1 percent of households,
65 percent for the next 19 percent,
Just under 40 percent for the next 60 percent, and
18 percent for the bottom 20 percent.
My Note: Middle Class income rose by 40 per cent!!!
My question is:
I am always concerned about the poor but if the middle class has seen income rise by 40 per cent, what is the problem there? Should the middle class be envious because a small group of entertainers like Beyonce and Streisand, sports figures like Brady and Kobe, and big biz execs like Buffet and Gates make a lot more $$ than similarly employed people did 40 years ago?
I grew up in the 60s and 70s in a middle class family and there is no doubt that today's middle class has far more than we ever had. Compare cars as just one example. Today's middle class cars not only have all the extras including satellite radio and power and automatic everything but they also include expensive safety features that we never dreamed of. Seat belts, airbags, and pollution controls are standard now but not even available then.
As for our home, we didn't even have central air when my parents bought their first new home in the mid fifties.Our family of 5 had one floor of finished living space and 1 full bathroom. It was probably 1200 square feet. We were solidly middle class but homes that small are rarely even built today.
Why are only the figures for the top 1 per cent widely quoted and why is the 40 per cent gain in middle class income ignored? Isn't this inequality obsession more hype than anything?
bernie mihm wrote: " Isn't this inequality obsession more hype than anything?"
Excellent and well crafted post bernie. You bet your life it's all hype! What were witness too is the spoiled brat generation. A generation of lazy self important defeatists who are used to having everything handed to them. As children given awards for little or no special achievement. Now coming of age the realities of life have come into focus and the response from this generation is a thrashing out of envy and contempt for the true achievers. Hard work and perseverance is not an option.
Bernie: What you stated is the exact type of home I grew up in and what I have now. We had no AC in the house, we used fans or a water cooler. Only had one television and one phone. Kinda of hard to get some privacy when wanting to ask a girl on a date, but we did fine.
Can't understand some of these cry babies that started on this topic today.
"The gap in income between the wealthiest Americans and all others has grown strikingly in recent decades, the CBO data show. In 1979, when the data begin, the average after-tax incomes of the top 1 percent of households were 7.9 times higher than those of the middle fifth of households. By 2007, top incomes were 23.9 times higher than those of the middle fifth — a more than tripling of the income gap."
http://www.cbpp.org/files/6-25-10inc.pdf
But how can we be so petty, we should all be grateful for the 40% increase that "some" of us received. We should grovel and thank the wealthy for their largess and be grateful that they didn't take it all.... true achievers my @ss. They've produced nothing but a casino.
Increasing disparity of wealth is a natural, probably inevitable consequence of a dysfunctional, unsustainable civilization wherein equal claims to natural wealth are not recognized. Those with some wealth are in better position to amass more, and to protect what they have, while those with little or no material sustenance are in a poor position to improve their condition.
This situation, and the very UN-sustainability of civilization is the result of a systemic flaw in our political and economic systems. We do not at present respect public property rights along with private property rights.
Natural resource wealth belongs to all, if it belongs to anyone.
If we remembered that part of what Thomas Hobbes, John Stuart Mill, John Locke, Adam Smith and others said about respecting private property... that it is rational and just, that it makes sense, in the context of a corresponding or balancing respect of public property... that rights of the people to the Commons must be respected... If we remember and take heed, we will start charging fees to industry when they take or degrade natural resource wealth, and we will give the fee proceeds to the people at large.
No person would live in extreme poverty. Abject poverty is an unnatural condition that reflects a neglect of basic human rights (public property rights). Fees charged to those who produce environmental impacts would provide the means whereby we could share natural resource wealth equally among all people.
http://gaiabrain.blogspot.com/2011/04/natural-law-requires-respect-of-pu...
The CBO figures dont show the effects of inflation. Sure, kick my income up 40% but then add (really subtract 4% per year compounded) and that 40% goes into the red pretty fast. U S consumers live less fulfilling lives with more offshore junk to keep them occupied.........now it takes all members of a family unit working to keep up instead of just the breadwinner. By contrast, the top 1% can have their income minus inflation and STILL have significant gains.
Have you been away from the economy for a while? Small changes over a number of years creep up on a person.
And the waelthy, greedy never get enough. Thats the disease of greed.
So, what’s the cause of the declining work ethic? One factor is a lack of focus on the task at hand and an unwillingness to sacrifice short term benefits for the long term good of society. Today’s students grow up expecting instant gratification, material possessions (oftentimes instilled by parents who want their kids to have it better than they did), and a feeling of entitlement. We have a problem with unemployment in this country that may take years to abate. Some have said the unemployed would rather collect 99 weeks of unemployment pay than work for what may be, in some cases, only a marginal amount of extra pay. What happened to the good feeling that work provides simply because we accomplish a goal, provide for our families, and become contributing members of society? All too often laziness has overtaken hard work. Albert Einstein observed that “An idle man does not know what it is to enjoy rest.”
In Democracy in America, Alexis de Tocqueville worried that free, capitalist societies might develop so great a “taste for physical gratification” that citizens would be “carried away, and lose all self-restraint.” Tocqueville believed that the genius of America in the early nineteenth century was its pursuit of “productive industry” without a descent into destructive materialism. He pointed to a common set of civic virtues that celebrated not merely hard work but also thrift, integrity, self-reliance, and modesty – virtues that grew out of a sense of morality that informed American democracy and free markets.
http://www.ethicssage.com/2010/10/declining-work-ethic.html
Quite frankly I don't think tattooed and pierced five gallon bucket bongo boy is qualified to do anything except beat on his pail, let alone suggesting tax policy!
Average yearly wage(2010) in US 41673.83/2080 = 20.04 per hour
Average car Cost 29217 = 1458 hours
Average House Cost 218200 = 10883 hours
Average Yearly Wage(1979) in US 11,479.46/2080 = 5.52 per hour
Average car Cost 6847 = 1240 hours
Average House Cost 60300 = 10923.91 hours
This information was gathered from Federal government websites, and it shows that the same amount of work hours get you the same amount of goods. What this doesn't figure is that the average household now has 2 workers making the average wage. This means people have significantly more buying power now then before and/or savings, college, food, energy, insurance...
Quit Whinning we are doing about the same as before, statistcally no difference, and we have the ability to save an entire person'sw age that didn't exist before.
Conservatives love to line up behind this "blame the victim" mentality. And they've done an excellent job of providing fertile ground for the past forty years by insuring that our public schools have become breeding grounds for that kind of philosophy.
This nonsense that unless I'm successful then it's entirely my fault has now come full bloom. And their reaction.....of course is blame the victim.
It's like blaming the victim in the case of rape...."what were you wearing, you were just asking for it".
American's are only going to be successful again when they realize that they've been duped by conservative thought. That of course is asking a lot, as it appears that the money and pressure have now firmly lined up on the side of the ignorant come this fall.
My hope is, at this point that the Republicans do get a sweep come this fall, (the Democrats have been useless for the past three) so that they are left holding the bag of crap that this country has become. That way when the storms sweeping over Europe crash upon our shores that there will be no doubt as to where to lay the blame.
Inflation:The reason is straightforward: governments are consumers, not producers.
The true root problem is not any grand conspiracy but merely human nature. People tend to want something for nothing. People love those government benefits, but hate paying the full price. Government officials hate levying new taxes because people hate paying taxes and representatives want to be reelected. Borrowing currency already in circulation has limits because as government borrows more, less currency remains in circulation in the private sector. Furthermore, there is a limit to how much debt private investors want to buy and hold.
Therefore, governments use a clever scheme of borrowing through the printing press. The central bank buys that debt, thereby introducing new currency into circulation. The short story is that the central bank buys that debt with funds created out of thin air.
When currency is created privately by monetizing debt at the local level, there is no currency inflation because goods and services back that currency. However, when governments monetize debt, there is almost always inflation because additional goods and services seldom back that new currency. The reason is straightforward: governments are consumers, not producers.
When governments inflate the currency, this inflation acts as a tax because this inflation pays for government expenses. Whenever inflated currency is introduced into the market, the first users of that currency do not experience the inflationary effects. Only those people far down the line eventually feel the inflationary ripples. This tax is not directly visible, but everybody is aware of the pain caused by continually rising prices. Worse, this continual fluctuating of the exchange value of the currency causes turmoil because nobody can depend upon the future exchange value of the currency.
The thesis undergirding all the “blame the unemployed” rhetoric was summed up by conservative commentator Ben Stein, who insisted that “the people who have been laid off and cannot find work are generally people with poor work habits and poor personalities.”
The trouble, though, is that the whole narrative averts our focus from the uber-capitalist, job-killing trade, tax-cut and budget policies that are really responsible for destroying the economy. And this narrative, mind you, is not some run-of-the-mill distraction.
The rightwing myth of the lazy unemployed is what duck-and-cover exercises and backyard nuclear shelters were to a past era….an alluring palliative that manufactures false comfort in the face of unthinkable disaster.
The one good thing you can say about the continued over payment of those in the top tier is that many of those they step on and exploit to meet their endless needs actually don't mind being abused, judging by the polls. To me that means we're more the home of suckers than home of the brave. And the reason is we're economically ignorant.
Republicans on the Financial Crisis Inquiry Commission are sabotaging the commission's work, demanding that "Wall Street" and "deregulation" not appear anywhere in the report. They are absolutely refusing to participate, instead releasing a counter report blaming the government, claiming “We, the People” forced the giant banks to give home loans to the poor, and blaming the poor for receiving those loans. This is what spending by Billionaires gets your country, "blame yourselves for your plight."
They’ve closely watched Americans attention span…
People tend to think about what is put in front of them to think about. (mostly Fox News) That's why everyone goes to see a new movie on the first weekend instead of waiting until they can get good seats with no lines. Wall Street and the likes of the Chamber of Commerce understand this so they put scapegoats in front of the public to mask what they are doing. Right now there is a corporate/rightwing campaign to blame working people for the problems they caused.
And it isn’t simply Fox, news sources are run by big corporations, and they have been saying over and over…. that unions and the unemployed and the poor and the government are the cause of the problems. And, naturally, after hearing these things over and over, the folks watching television….their knee-jerk reaction is to blame the unions, the unemployed, the poor, the government.
The blame right now is directed at the unions, the poor, the unemployed and our government: “We, the People.” And we don’t stop long enough to see that this is the way the wealthy want it.
@mnemecek, you are either naive or a professional statistician who knows how to use numbers in a deceptive way. Averages mean absolutely nothing when they can be skewed by a stratospheric increase among a few at the top can skew them.
Let's see how far teenagers get demanding we up the incentives for them to clean their room and do their chores. Hey, if it's good for the goose...
Why don't these inequality cheerleaders ever talk about those falling off the lifeboat altogether?
Here's the real deal:
The U.S. is rapidly becoming a minority-majority country.
Minorities historically and purposely have been kept at the bottom of the economic structure.
The numbers are on the side of the minorities, and yet the economy is not.
Solution: The powers that be in the U.S. have to either come to terms with an investment in minorities and their rise or watch the U.S. go down the toilet due to myopia and the maintenance of racial supremacy or maintain the system but see that those with the numbers will look different than the North Atlantic Europeans historically privileged.
Kathleen Rand Reed
There is one verifiable graph after another that shows that the US income gap has grown directly in line with the demise of unions, job exportation and massive increase in corporate executives exorbitant pay and benefits. How can anyone possibly argue with the facts on the ground.
Mr. Galbraith would the 1% be wise to pay their fair share in taxes for selfish reasons? Clearly they did not choose to do that because it is the patriotic and morally right thing to do. But would they be wise to move that way because the peasants are rising up?
mancuroc wrote:
@mnemecek, you are either naive or a professional statistician who knows how to use numbers in a deceptive way. Averages mean absolutely nothing when they can be skewed by a stratospheric increase among a few at the top can skew them.
Actually, I am a Computer programmer and as such am squarely in the middle class, my wife is also similarly(albeit slightly higher) compensated. These number are very close to what I find to be the case, in our own lives. You see we went to college and choose professions that actually have value in our society. Neither one of us choose to study ghost stories or other silly junk. We also pay our bills on time meaning we don't waste money on fees. If we cannot afford something we go without, if we really want it we save for it. Is this concept so difficult to understand? I've had money troubles at various times in my life but I was taught sleep in the bed I made, so I clawed my way back out of them. No social welfare programs just hardwork a willingness to accept personal austerity and a believe that if I enter a contract I fulfill it. Are these not the very characteristics you would want your children to embody? Or would you rather your offspring be constantly fighting "the man" to be given things they have not worked and sacrificed for?
To Kathleen Rand Reed
That's definitely part of it, but I would emphasize that the tail is wagging the dog here in terms of class, too; there's no reason the wealthy should be able to shape the economy to their benefit alone, except that we're mostly economic victims and dullards.
Edward Conard pretends to know economics, while ignoring everything about economics.
http://blog.nexcerpt.com/2012/05/06/conard_line/
"If Conard wishes to be truly businesslike and efficient, and use wealth responsibly, his best strategy would be to distribute his hundreds of millions to a few dozen people, in $20M chunks."
The World Economic Forum in Davos, Switzerland formerly described income inequality as a "major concern". How can Mr. Canard, who'd fit right in at Davos, be so willfully ignorant of the concerns those forums have laid out.
I guess if he's willing to use the lottery as an example of a compelling risk-reward model, he's willfully ignorant of a fair amount of economic thinking.
The one guest misspells his name-- it should be Mr. CANARD....
Would Mr. Galbraith and your other guest talk about the head sets of the Mr. Fords, Mr. Pattersons the job creators of the past who were more than willing to go along with or even cultivate environments and pay scales that assured a much more mentally and economically healthy work force? What happenned to this sense of responsibility that those with the ideas and the good fortune or effort to follow through with their ideas had towards the working force in the US? My WWII and teamster father and all of his elderly union buddies feel that American workers in the US were "sold down the pike" long ago all based on greed. That corporations rule the world which as they say is in "greedlock"
Right now I'm reminded of a Bloom County Bablyon strip back in the 80's, where out of Michael Binkley's anxiety closet comes two economists and started talking about the economy. There was much panic on Binkley's face. The same thing here.
Income inequality is a normal and acceptable outcome of a free market economy and democratic government. When markets and governments lose transparency, I believe it drives the gap wider benefiting those in power and weakens the health of society generally. To continue the blood pressure analogy, if you went to your Dr. with high blood pressure, but didn't tell them you were smoking two packs a day, their ability to keep you healthy is diminished.
Only a stooge of the democrat party could buy into the "fairness" argument. It's just plain dumb to assume the rich want it all and have no consideration or respect for a thriving middle class that in essence made them rich and will keep them rich.
What roles have globalization of markets and labor had on lower wages and larger markets? It seems that business success is amplified by internet and other global markets. It also seems that low wages in other countries have attracted outsourcing and depressed US wages.
The rate of high school drop-outs, lower educated immigrants, and reduced quality of public education also contribute.