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Do you agree with this? (updated)
Last edited Fri Feb 14, 2014, 04:31 PM - Edit history (1)
Think Progress announces that it's going to focus on three "really good" pieces written by conservatives. Here is one of the first three:
<...>
2) “Why Is Janet Yellen So Concerned And Disturbed About Income Inequality?” — Jim Pethokoukis, AEI Ideas
Switching gears from reporting to wonkery, the American Enterprise Institute’s economics blogger took a data-driven swing at our new Fed Chair Friday morning. Like President Obama and almost all progressives, Janet Yellen believes inequality is “one of the most disturbing trends facing the nation at the present time.” Pethokoukis thinks that’s rubbish, and assembles a list of studies that aim to demonstrate why.
His post is a short, easy-to-read listicle, but each bullet point neatly summarizes a more sophisticated economic argument against conclusions that most progressives take for granted. Take the first point:
The link takes you to another Pethokoukis post breaking down a study by Stanford and UChicago economists arguing that inequality is buoyed by the same forces that have massively improved the lives of the world’s poorest in the last 50 years. This sort of argument is useful not only because it forces progressives to confront potential conflicts inside their worldviews (reducing inequality and poverty may be goals at odds with each other), but also because it points out that progressives don’t have a lock on wonky academic research. What “science” says about public policy is more complicated than we sometimes like to admit, and challenges like Pethokoukis’ force us to reckon with that reality.
- more -
http://thinkprogress.org/politics/2014/02/14/3287091/conservative-posts-week/
2) “Why Is Janet Yellen So Concerned And Disturbed About Income Inequality?” — Jim Pethokoukis, AEI Ideas
Switching gears from reporting to wonkery, the American Enterprise Institute’s economics blogger took a data-driven swing at our new Fed Chair Friday morning. Like President Obama and almost all progressives, Janet Yellen believes inequality is “one of the most disturbing trends facing the nation at the present time.” Pethokoukis thinks that’s rubbish, and assembles a list of studies that aim to demonstrate why.
His post is a short, easy-to-read listicle, but each bullet point neatly summarizes a more sophisticated economic argument against conclusions that most progressives take for granted. Take the first point:
1.) If you buy the thesis that a big jump in high-end inequality has been mostly driven by technology and globalization, then the alternative is more equality, perhaps, but less innovation here and more extreme poverty abroad. Now that’s a disturbing scenario.
The link takes you to another Pethokoukis post breaking down a study by Stanford and UChicago economists arguing that inequality is buoyed by the same forces that have massively improved the lives of the world’s poorest in the last 50 years. This sort of argument is useful not only because it forces progressives to confront potential conflicts inside their worldviews (reducing inequality and poverty may be goals at odds with each other), but also because it points out that progressives don’t have a lock on wonky academic research. What “science” says about public policy is more complicated than we sometimes like to admit, and challenges like Pethokoukis’ force us to reckon with that reality.
- more -
http://thinkprogress.org/politics/2014/02/14/3287091/conservative-posts-week/
My first reaction was WTF? After reading the AEI piece at that link, I have to say: WTF?
Updated to expand on objection.
This is from the AEI piece:
“This growing inequality,” President Obama said during his recent Knox College speech, “is not just morally wrong, it’s bad economics.”
<...>
In other words, the core thesis of Obamanomics — the rich have immorally gaffed all the income gains of the past 30 years and its time to redistribute — doesn’t seem to hold up. Rather than attacking the 1% or 0.1% or 0.01%, Washington should be focusing on boosting growth and economic mobility through education reform and improving innovation-driven productivity.
<...>
In other words, the core thesis of Obamanomics — the rich have immorally gaffed all the income gains of the past 30 years and its time to redistribute — doesn’t seem to hold up. Rather than attacking the 1% or 0.1% or 0.01%, Washington should be focusing on boosting growth and economic mobility through education reform and improving innovation-driven productivity.
The author is basically using a study to justify Reaganomics. Think about life since Reagan, rising inequality. Think about this stat:
CEOs before Reagan made 78 times their minimum wage workers. Today, its almost 3500 times! Without Reagan, America might have had the same income distribution we had in the 1970s, which would mean we would be averaging $120,000 annually--not $40,000.
http://www.dailykos.com/story/2014/02/07/1275771/-Obama-v-Reagan-Fun-comparison-I-did-to-piss-off-a-wingnut-on-Reagan-s-B-day
http://www.dailykos.com/story/2014/02/07/1275771/-Obama-v-Reagan-Fun-comparison-I-did-to-piss-off-a-wingnut-on-Reagan-s-B-day
Reagan fooled people with his bullshit tax increases. Yeah, he increased revenue, but it was on the backs of low-income Americans and seniors, including taxing unemployment benefits.
The top tax rate was lowered from 50% to 28% while the bottom rate was raised from 11% to 15%. [4] Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[5] This would be the only time in the history of the U.S. income tax (which dates back to the passage of the Revenue Act of 1862) that the top rate was reduced and the bottom rate increased concomitantly. In addition, capital gains faced the same tax rate as ordinary income.
http://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
http://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
More: http://www.democraticunderground.com/10024465391#post30
OK, here are a few more statistics on growing income disparity from EPI:
- The significant income growth at the very top of the income distribution over the last few decades was largely driven by households headed by someone who was either an executive or was employed in the financial sector. Executives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005. These estimates understate the role of executive compensation and the financial sector in fueling income growth at the top because the increasing presence of working spouses who are executives or in finance is not included.
- From 1978 to 2011, CEO compensation increased more than 725 percent, a rise substantially greater than stock market growth and the painfully slow 5.7 percent growth in worker compensation over the same period.
- Using a measure of CEO compensation that includes the value of stock options granted to an executive, the CEO-to-worker compensation ratio was 18.3-to-1 in 1965, peaked at 411.3-to-1 in 2000, and sits at 209.4-to-1 in 2011.
- Using an alternative measure of CEO compensation that includes the value of stock options exercised in a given year, CEOs earned 20.1 times more than typical workers in 1965, 383.4 times more in 2000, and 231.0 times more in 2011.
Now, on to the larger point, which the TP author highlights and apparently agrees with.
1.) If you buy the thesis that a big jump in high-end inequality has been mostly driven by technology and globalization, then the alternative is more equality, perhaps, but less innovation here and more extreme poverty abroad. Now that’s a disturbing scenario
This is particularly lame. That's like saying that if you address poverty, more people are likely to become poor. It simply doesn't follow.
TP:
...This sort of argument is useful not only because it forces progressives to confront potential conflicts inside their worldviews (reducing inequality and poverty may be goals at odds with each other), but also because it points out that progressives don’t have a lock on wonky academic research.
(emphasis added, WTF?)
This reminds me of recent RW claims that you should be happy being a poor American because you'd be rich if you lived in Somalia.
Where on earth, within any given society, has income disparity and inequality helped to allieviate poverty? Where has poverty been reduced simply by making the rich richer in any country?
I posted this piece a few years back, noting that the best place to start was raising the minimum wage.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x584336
Income Redistribution: The Key to Economic Growth?
By MARK THOMA, The Fiscal Times
<...>
There is an equivalent of a Laffer curve for inequality, but the variable of interest is economic growth rather than tax revenue. We know that a society with perfect equality does not grow at the fastest possible rate. When everyone gets an equal share of income, people lose the incentive to try and get ahead of others. We also know that a society where one person has almost everything while everyone else struggles to survive – the most unequal distribution of income imaginable – will not grow at the fastest possible rate either. Thus, the growth-maximizing level of inequality must lie somewhere between these two extremes.
We may be near or even past the level of inequality where growth begins falling. The evidence on this is highly uncertain, so it’s difficult to say. But a few more decades like the last few could make the difference, so why take a chance? I’d prefer to see policies implemented to reduce inequality – given the present, elevated level of inequality, a reduction is unlikely to have much of an impact on incentives. But at a minimum we should resist further increases. This will reduce the chance of crossing over the point where growth starts to diminish rapidly, and it also reduces the chance that we will surpass the point where inequality causes cracks in the social structure.
I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field so that everyone has an equal chance. If we can do that – an ideal we are far from presently – then we should accept the outcome as fair. Furthermore, under this approach, people are rewarded according to their contributions, and economic growth is likely to be highest.
But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems. Redistribution of income appears to be the only answer.
The rest of the world has a huge supply of excess labor, and it is developing rapidly. So long as developing countries can continue to draw upon excess labor to expand economic activity, there will be little pressure for wages to rise and workers in the U.S. will continue to struggle. Until the rest of the world is more developed, or stops growing in a way that substantially alters the global pattern of production, a time that looks to be far, far away, unskilled workers in the U.S. will not get their share of economic growth.
http://www.thefiscaltimes.com/Columns/2011/01/04/Redistribute-Income-to-Grow-Economy
By MARK THOMA, The Fiscal Times
<...>
There is an equivalent of a Laffer curve for inequality, but the variable of interest is economic growth rather than tax revenue. We know that a society with perfect equality does not grow at the fastest possible rate. When everyone gets an equal share of income, people lose the incentive to try and get ahead of others. We also know that a society where one person has almost everything while everyone else struggles to survive – the most unequal distribution of income imaginable – will not grow at the fastest possible rate either. Thus, the growth-maximizing level of inequality must lie somewhere between these two extremes.
We may be near or even past the level of inequality where growth begins falling. The evidence on this is highly uncertain, so it’s difficult to say. But a few more decades like the last few could make the difference, so why take a chance? I’d prefer to see policies implemented to reduce inequality – given the present, elevated level of inequality, a reduction is unlikely to have much of an impact on incentives. But at a minimum we should resist further increases. This will reduce the chance of crossing over the point where growth starts to diminish rapidly, and it also reduces the chance that we will surpass the point where inequality causes cracks in the social structure.
I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field so that everyone has an equal chance. If we can do that – an ideal we are far from presently – then we should accept the outcome as fair. Furthermore, under this approach, people are rewarded according to their contributions, and economic growth is likely to be highest.
But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems. Redistribution of income appears to be the only answer.
The rest of the world has a huge supply of excess labor, and it is developing rapidly. So long as developing countries can continue to draw upon excess labor to expand economic activity, there will be little pressure for wages to rise and workers in the U.S. will continue to struggle. Until the rest of the world is more developed, or stops growing in a way that substantially alters the global pattern of production, a time that looks to be far, far away, unskilled workers in the U.S. will not get their share of economic growth.
http://www.thefiscaltimes.com/Columns/2011/01/04/Redistribute-Income-to-Grow-Economy
The point about the "extremes" is key. The right likes to distort progressive goals to address income inequality by equating them with attempts to destroy the free market, redistribute wealth or worse in their eyes, Communism.
They get away with using this BS to cloud a debate about equity and fairness vs. greed and oppression. The United States is not going to cease to exist if employers pay their workers a living wage, even if it means the top CEOs have to earn less than 100 times the average worker. The world isn't going to be worse off if Americans don't live in poverty.
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