The Role of Government

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Re: The Role of Government

Postby KeithE » Tue May 20, 2014 4:49 pm

William Thornton wrote:Nice rant, Keith, but I only objected to Sandy's screwball use of the word "competitive". I understand that you don't like CEO pay and a lot of other stuff.

Like usual, a quick retort w/o attempt to understand - I was talking about how salaries were "competitive" these days. If you think a new college grad is being fought over and offered a high salary these days you are living in another time (maybe the 60's-70's). If you think it is an employee market these days, you are ill-informed. When an ad today mentions "competitive salary", that is a mockery with only 17% of new college grads having work lined up this year (although 73% have been trying to find work). Most will have to take part time non-professional jobs while their student loans rates have been increased.

Today there is competitive pressure all right but it is competitive pressure downwards for the workers in order for a company to lower production costs and add to their margins; all the while there is competitive pressure upwards for CEO/top execs salaries to stroke their egos and because they can.

Sure I threw in some other stuff about media's role, role of advertising, offshoring production, end of democracy as we have known it, demonization of unions, and the eventual endpoint of unfettered capitalism when capital is best spent investing in market speculation/hedge funds and not in new products. All of these points are important subfactors to the subject of competitive salaries - up at the top and/or down at the bottom of the pay scale.

Your blind and instant faith in uncontrolled capitalism to bring about utopia just shows how much you have been duped.

Have you read Piketty's book reviews? Do you even think it is possible you are wrong?
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Re: The Role of Government

Postby William Thornton » Tue May 20, 2014 5:15 pm

I ask forgiveness...trick question. If gummit sets the minimum' especially at such a high level it is by definition not competitive. Gummit fiat determines the wage, not competition. If a million people would take an entry level, unskilled position for $10/hr bidnesses would still pay the $15 (or eliminate the job altogether).

Get a term besides "competitive".
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Re: The Role of Government

Postby William Thornton » Tue May 20, 2014 5:17 pm

Keith, I merely too issue with the use of the term. If today's job market is competitive in the sense that many jobless grads compete for limited jobs, then that is still competition. There are occupations where the opposite is true...Obama just hasn't got around to killing those markets.
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Re: The Role of Government

Postby William Thornton » Tue May 20, 2014 5:32 pm

Hmmm, no shortage of high-tech workers, study says. The number of immigrants alone with relevant degrees is enough to fill the available jobs. No doubt such an environment depresses wages due to competition. So, are my mod/lib friends in favor of shuttng off immigration to improve the competitive situation?

http://www.breitbart.com/Big-Government/2014/05/20/Report-U-S-Has-Surplus-Not-Shortage-of-High-Tech-Workers
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Re: The Role of Government

Postby William Thornton » Tue May 20, 2014 7:04 pm

William Thornton wrote:Hmmm, no shortage of high-tech workers, study says. The number of immigrants alone with relevant degrees is enough to fill the available jobs. No doubt such an environment depresses wages due to competition. So, are my mod/lib friends in favor of shuttng off immigration to improve the competitive situation?

http://www.breitbart.com/Big-Government/2014/05/20/Report-U-S-Has-Surplus-Not-Shortage-of-High-Tech-Workers


Hmmm, autocomplete just had me cussin'...guess the forum watchdogs missed it.
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Re: Piketty's book

Postby ET » Tue May 20, 2014 10:19 pm

Well, William, before you run out and get a copy of Piketty's book, you might want to read the following article. Some interesting things are noted in this rather lengthy piece by Louis Woodhill over at Forbes.com: Thomas Piketty Gets the Numbers Wrong
It's rather long, but you should definitely read it, because I suspect Piketty's bogus numbers will be quoted for quite some time to come. There is so much good stuff in this article, I'm going to have to seriously chop it down.
Given the excitement that Thomas Piketty’s new book, Capital in the Twenty-First Century, has stirred up within the political left, the French economist probably should have titled it Fifty Shades of Inequality.

In Capital, Piketty presents a painstakingly researched case for doing what progressives ranging from Paul Krugman to Barack Obama want to do anyway, which is to raise taxes and expand the power and reach of government.
***
The point is that Piketty’s painstakingly researched numbers are worthless, because they ignore the existence of the modern welfare state. Our various welfare programs redistribute a huge percentage of national income, and, therefore, for the purposes of Piketty’s comparisons across time, they redistribute the beneficial ownership of capital.

But William, I think this is the most devastating "DATA" (that Keith will obviously ignore) that devastates Piketty's "solution":
Piketty claims that his tax system would not impact economic growth or entrepreneurial innovation. However a comparison between France and the U.S. renders this assertion laughable. For reference, France, already has a wealth tax, as well as a much higher marginal income tax rate than the U.S. (75% vs. about 43%).

Of the 100 most valuable corporations in the world, 44 are based in the U.S., and 5 are based in France. This means that the U.S., which has less than 5 times the population of France and less than 6 times the GDP, has created almost 9 times as many “Top 100” companies.
***
These comparisons are just the warm-up. The real shock comes when you look at when each country’s “Top 100” companies were started.

The last time that France created a “Top 100” company was 100 years ago: Total Petroleum, in 1924. And, Total was founded at the initiative of the French government. The most recent private French venture in today’s global “Top 100” is L’Oreal, which was founded in 1909.

In contrast, one U.S. “Top 100” company (Facebook) was founded only 10 years ago. Another, Google, which was started in 1998 by two guys in a dorm room at Stanford University, has a market cap approaching that of all 5 of France’s “Top 100” companies added together.

In the 90 years since Total was founded, the U.S. created 17 of its 44 “Top 100” companies, including 1 in the 2000s, 2 in the 1990s, 4 in the 1980s, and 4 in the 1970s.

The progressives want us to believe that high taxes don’t impact growth and innovation.

There's a good bit about CEO pay in there too. However, I'm always more interested in how such kooky theories would play out in the real world, so I found the "Piketty Idiocy Lightning Round" to be particularly insightful. I've listed a few of them below, but my favorite is the last one.
  • In Piketty’s world, it would be a bad thing if someone were to develop a drug that cured Alzheimer’s. This is because that person would certainly become a multi-billionaire, and that would increase inequality.
  • Under Piketty’s tax system, it would have been impossible for Elon Musk to leverage his success with PayPal to fund Tesla Motors.
  • On page 309 of Capital, Piketty notes approvingly that the minimum wage in France has been higher than that of the U.S. since 1985. However, Piketty doesn’t mention that, since 1985, French unemployment has averaged about 9%, vs. about 6% for the U.S.
  • To Piketty, a rising ratio of wealth to national income is bad, and a falling ratio is good. Accordingly, Piketty’s bad periods have names like “la Belle Epoch” (the beautiful era), the “Roaring Twenties,” and “the Soaring Sixties.” In contrast, his good times have names like “World War I,” “World War II,” and “the Great Depression.”

The part at the end about "common utility" is also instructive. I'd love to quote that section, but I've already got a long post here. Just replace the phrase with "common good" to get the American version. In the end, all progressive schemes like Piketty's have the same footprint when it comes to addressing issues. The answer is more government seeking the "common good" or the "common utility", but just as long as those wielding the power are leftists intellectuals such as themselves. You know, William, like the ones who go to Stanford and such. ;)
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Re: The Role of Government

Postby KeithE » Tue May 20, 2014 10:54 pm

William Thornton wrote:I merely used Sandys nonsense statement about bidnesses needing gummit to force "competitive" wages. If wages are not competitive' then bidnesses will have no employees. Gummit, OTOH, will have plenty. If one wishes to use the language of the market, e.g. "competitive", then at least show an understanding of the concepts involved.

Barriers to paying competitive wages also include licensure and other often artificial devices to limit the pool of workers.

There are plenty of aspects to the relationship of labor and capital, employers and their employees.


Wrt the red sentence above, here is what Sandy said was:
Without pressure, big business will not compensate their employees at competitive rates.

He said nothing about where the pressure should come from. Just your anti-gummit, knee-jerk reaction.

Wrt the green sentence above, that is non-sense in conditions like today when job seekers are generally happy to find just one job offer and businesses are trying to increase their profit margins.

Wrt the blue sentence above, here is the data about government jobs since 1980:
Image
The public sector (government jobs) has gone down markedly under Obama while the conservative icon Reagan increased the public sector.

Wrt the orange sentence above, in the language of the market, “competitive” means best product for least price. Sandy at least clarified what he meant by saying "competitive rates” in compensation. Your call to “at least show an understanding of the concepts involved” is applicable to yourself not Sandy who explained what he meant.

You’ll have to explain the last two sentences (uncolored)

Overall that was a bad post.

William Thornton wrote:Keith, I merely too issue with the use of the term. If today's job market is competitive in the sense that many jobless grads compete for limited jobs, then that is still competition. There are occupations where the opposite is true...Obama just hasn't got around to killing those markets.


Again a misuse of what is generally termed “competitive” in market parlance. Competition for professional jobs is not what Milton Friedman meant by championing “competition” -best product for lowest price.

Employment (low paying, non-professional jobs) in the private sector is growing under Obama.

Image

Most of the jobs created are low (many non-livable) wage jobs w/o benefits (given business’s desire to keep costs low/profits high/ plenty of compensation for the top execs). This leaves millions on government dole and/or relatives mercy, and does not increase aggregate demand for products as if the wages were higher.

That modest growth is due to the modest stimulus. We need another stimulus aimed at higher paying jobs. To be most profitable to the future they should be in education, alternative energy, accountability agents, infrastructure repair/replacement and R&D in general.
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Re: The Role of Government

Postby William Thornton » Wed May 21, 2014 7:29 am

The reason you are not getting this, keith, is that you are infected with your anti-capitalist, CEO pay snit, keynesian True Believer attitudes. I merely called Sandy on his use of "competitive" as a synonym for non-competitive, arbitrary wage levels. Orwellian would be the word for it. As much as you read on economics, it's almost painful to see you stumble so badly on simple things.
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Re: The Role of Government

Postby KeithE » Wed May 21, 2014 8:20 am

William Thornton wrote:The reason you are not getting this, keith, is that you are infected with your anti-capitalist, CEO pay snit, keynesian True Believer attitudes. I merely called Sandy on his use of "competitive" as a synonym for non-competitive, arbitrary wage levels. Orwellian would be the word for it. As much as you read on economics, it's almost painful to see you stumble so badly on simple things.


I agree with your statement:
If gummit sets the minimum' especially at such a high level it is by definition not competitive

whether or not the min wage is especially high like $15/hour which is less than a livable wage in most areas of the country.

But my point is that you are the one misusing the term “competitive” as applied to market systems when you say:
If today's job market is competitive in the sense that many jobless grads compete for limited jobs, then that is still competition.


Sandy is correct when he says:
A truly competitive wage occurs when business "competes" with other business for employees by paying the highest possible wage for available labor.


Again Sandy explained what he meant by saying:
Without pressure, big business will not compensate their employees at competitive rates.
He did not specify where the pressure might come from.

I’m proud to be "infected with your anti-capitalist, CEO pay snit, keynesian True Believer attitudes.” But I take some issue at being labelled anti-capitalist. I’m for capitalism if it is controlled for factors like extreme inequality and opportunity inequality and allowing externalities and environmental degradation. IOW, I’m anti-unfettered-capitalism.
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Re: The Role of Government

Postby William Thornton » Wed May 21, 2014 8:26 am

Pride is one of the deadly sins, no? :wink:

Neither you nor Sandy get this. But have a nice day anyhow.
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Re: Piketty's book

Postby KeithE » Wed May 21, 2014 8:45 am

ET wrote:Well, William, before you run out and get a copy of Piketty's book, you might want to read the following article. Some interesting things are noted in this rather lengthy piece by Louis Woodhill over at Forbes.com: Thomas Piketty Gets the Numbers Wrong
It's rather long, but you should definitely read it, because I suspect Piketty's bogus numbers will be quoted for quite some time to come. There is so much good stuff in this article, I'm going to have to seriously chop it down.
Given the excitement that Thomas Piketty’s new book, Capital in the Twenty-First Century, has stirred up within the political left, the French economist probably should have titled it Fifty Shades of Inequality.

In Capital, Piketty presents a painstakingly researched case for doing what progressives ranging from Paul Krugman to Barack Obama want to do anyway, which is to raise taxes and expand the power and reach of government.
***
The point is that Piketty’s painstakingly researched numbers are worthless, because they ignore the existence of the modern welfare state. Our various welfare programs redistribute a huge percentage of national income, and, therefore, for the purposes of Piketty’s comparisons across time, they redistribute the beneficial ownership of capital.

But William, I think this is the most devastating "DATA" (that Keith will obviously ignore) that devastates Piketty's "solution":
Piketty claims that his tax system would not impact economic growth or entrepreneurial innovation. However a comparison between France and the U.S. renders this assertion laughable. For reference, France, already has a wealth tax, as well as a much higher marginal income tax rate than the U.S. (75% vs. about 43%).

Of the 100 most valuable corporations in the world, 44 are based in the U.S., and 5 are based in France. This means that the U.S., which has less than 5 times the population of France and less than 6 times the GDP, has created almost 9 times as many “Top 100” companies.
***
These comparisons are just the warm-up. The real shock comes when you look at when each country’s “Top 100” companies were started.

The last time that France created a “Top 100” company was 100 years ago: Total Petroleum, in 1924. And, Total was founded at the initiative of the French government. The most recent private French venture in today’s global “Top 100” is L’Oreal, which was founded in 1909.

In contrast, one U.S. “Top 100” company (Facebook) was founded only 10 years ago. Another, Google, which was started in 1998 by two guys in a dorm room at Stanford University, has a market cap approaching that of all 5 of France’s “Top 100” companies added together.

In the 90 years since Total was founded, the U.S. created 17 of its 44 “Top 100” companies, including 1 in the 2000s, 2 in the 1990s, 4 in the 1980s, and 4 in the 1970s.

The progressives want us to believe that high taxes don’t impact growth and innovation.

There's a good bit about CEO pay in there too. However, I'm always more interested in how such kooky theories would play out in the real world, so I found the "Piketty Idiocy Lightning Round" to be particularly insightful. I've listed a few of them below, but my favorite is the last one.
  • In Piketty’s world, it would be a bad thing if someone were to develop a drug that cured Alzheimer’s. This is because that person would certainly become a multi-billionaire, and that would increase inequality.
  • Under Piketty’s tax system, it would have been impossible for Elon Musk to leverage his success with PayPal to fund Tesla Motors.
  • On page 309 of Capital, Piketty notes approvingly that the minimum wage in France has been higher than that of the U.S. since 1985. However, Piketty doesn’t mention that, since 1985, French unemployment has averaged about 9%, vs. about 6% for the U.S.
  • To Piketty, a rising ratio of wealth to national income is bad, and a falling ratio is good. Accordingly, Piketty’s bad periods have names like “la Belle Epoch” (the beautiful era), the “Roaring Twenties,” and “the Soaring Sixties.” In contrast, his good times have names like “World War I,” “World War II,” and “the Great Depression.”

The part at the end about "common utility" is also instructive. I'd love to quote that section, but I've already got a long post here. Just replace the phrase with "common good" to get the American version. In the end, all progressive schemes like Piketty's have the same footprint when it comes to addressing issues. The answer is more government seeking the "common good" or the "common utility", but just as long as those wielding the power are leftists intellectuals such as themselves. You know, William, like the ones who go to Stanford and such. ;)

You referring to Thomas Sowell?

As for the Forbes.com article, it is quite predictable. Contrary to that article, Piketty does treat Social Security in Chapter 13 of a 16 chapter book. For “developed countries” he recommends a unified retirement system (not a mixture of SS, pensions, FERS, etc.) adequate to prevent poverty in one’s golden years coupled with private savings (if one wants a more affluent retirement). He does not treat health care or Medicare that I have found.

France’s innovation is just a little less than the US from what I can quickly gather.

Image

France’s wealth tax is progressive 0-1.8%. That reduction in available capital for innovation should not influence “innovation” much at all. More innovation comes from smart people with gumption, independent of their wealth.

You mentioned Elon Musk’s Tesla. Just watched the 60 Minutes story on him last night. He had lost all his Paypal fortune (via $1.8B sell to eBay) by 2008 before he took control of Tesla in 2008. His successes (SpaceX, tentatively Tesla) have come from his visionary ideas, quality engineering (not his capital) which caught the attention of venture capitalists which knows no international borders. I also know SpaceX can make space launch vehicles at a tenth of what Lockheed-Martin or United Space Alliance (L-M + Boeing collusion) does. Big bucks does not equate with innovation.

I’ll comment further later in the week. In the meantime you may want to review other more credible reviewers of Piketty’s book.
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Re: The Role of Government

Postby William Thornton » Wed May 21, 2014 9:29 am

Keith: France’s wealth tax is progressive 0-1.8%. That reduction in available capital for innovation should not influence “innovation” much at all. More innovation comes from smart people independent of their wealth.

Hate to intrude on your and ET's discussion here but would the above be why France is an example of so much innovation and newly created companies and attendant wealth? I believe ET made some points on that.
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Re: The Role of Government

Postby KeithE » Wed May 21, 2014 7:31 pm

William Thornton wrote:Keith: France’s wealth tax is progressive 0-1.8%. That reduction in available capital for innovation should not influence “innovation” much at all. More innovation comes from smart people independent of their wealth.

Hate to intrude on your and ET's discussion here but would the above be why France is an example of so much innovation and newly created companies and attendant wealth? I believe ET made some points on that.


Don’t think having Top 100 companies in terms of employment/sales/profits (or whatever) correlates much with “innovation”. Of the top 10 innovative countries plotted above all except South Korea have higher top end tax rates than the US. Besides small companies are usually more innovative (and employee-friendly). That is why we have Small Business Innovation Research (SBIRs) Programs.

Large companies make it through out maneuvering, out advertising, out lobbying, being more efficient, exploiting workers, or any number of other factors good and bad socially, but seldom through out innovating. Capital no doubt helps some; but venture capitalists are available for all good ideas.

ET makes it sound like France is far worse than the US at innovation due to the wealth tax and top rate income tax.

I googled up information about innovation by country. Not saying it is unassailable, but I don’t think ET has made his case that a small 0-1.8% wealth tax is a bad thing for business development through innovation.

Btw, Piketty is not an apologist for French economic policy; that is clear from what I have read so far. He does favor a wealth tax and hefty estate taxes.
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Re: The Role of Government

Postby Sandy » Wed May 21, 2014 10:06 pm

William Thornton wrote:Pride is one of the deadly sins, no? :wink:

Neither you nor Sandy get this. But have a nice day anyhow.


A "competitive wage" requires competition. In today's corporate atmosphere, that does not exist. Wages go to the bottom of the scale, because the market is manipulated by business, using its resources to artificially repress them in order to cut costs and devalue skills, training and experience. In a genuinely free market, competition for skilled and experienced labor drives wages up, not down. The failed "trickle down" economic policy of Ronald Reagan ended free market competition in labor and wages and caused a deep recession that artificially suppressed the labor market. Clinton almost had the balance back, then we got more failed economic policy with Dubya and another artificial suppression of the labor market. Each time, a large number of skilled labor jobs were exported, making recovery more difficult than previously.

So we do not have a competitive labor market in America today. Therefore, wages are artificially suppressed, and not competitive.
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Re: The Role of Government

Postby KeithE » Wed May 21, 2014 11:27 pm

Sandy wrote:
William Thornton wrote:Pride is one of the deadly sins, no? :wink:

Neither you nor Sandy get this. But have a nice day anyhow.


A "competitive wage" requires competition. In today's corporate atmosphere, that does not exist. Wages go to the bottom of the scale, because the market is manipulated by business, using its resources to artificially repress them in order to cut costs and devalue skills, training and experience. In a genuinely free market, competition for skilled and experienced labor drives wages up, not down. The failed "trickle down" economic policy of Ronald Reagan ended free market competition in labor and wages and caused a deep recession that artificially suppressed the labor market. Clinton almost had the balance back, then we got more failed economic policy with Dubya and another artificial suppression of the labor market. Each time, a large number of skilled labor jobs were exported, making recovery more difficult than previously.

So we do not have a competitive labor market in America today. Therefore, wages are artificially suppressed, and not competitive.

Amen! The myths of the right wing die hard in their minds.
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Re: The Role of Government

Postby William Thornton » Thu May 22, 2014 6:44 am

Sandy, your mistake is in presuming that "competition" is expressed only among employers for workers with the desired skills. Many labor markets exhibit the opposite, many workers competing for few jobs which depress wages.

...But I know that you and Keith require corporate demons to enable you to get through each day.
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Re: The Role of Government

Postby KeithE » Thu May 22, 2014 7:52 am

William Thornton wrote:Sandy, your mistake is in presuming that "competition" is expressed only among employers for workers with the desired skills. Many labor markets exhibit the opposite, many workers competing for few jobs which depress wages.

...But I know that you and Keith require corporate demons to enable you to get through each day.


---But I know that you and ET require socialist demons to enable you to get through each day. :roll:

The trouble William is that Sandy pointed out just what he meant by “competitive rates", and you came down on him when you said:
If one wishes to use the language of the market, e.g. "competitive", then at least show an understanding of the concepts involved.

Like you have declared that the word “competitive” is the sole province of free marketeerism and have harped on his supposed misuse it ever since. And even this latest harp (Sandy’s “mistake” above) misunderstands how Sandy used the term “competitive rates” which he clarified on first use and he fully described here.

Get on with the real debate - the legitimate role of government to shape the economy and the country into one that provides for:
a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,...


Conservatives stand on “Liberty” (understood to be inviolate) even if doing so allows some of the wealthy/corporate forces to effectivity reduce the general welfare (rising inequality and unequal opportunity issues), make a mockery out of justice (unequal legal representation and punishment issues), and materially harm the habitat of our Posterity (global warming issue). At some point Liberty of the wealthy/corporate forces become not a Blessing to all but a curse to many. We have reached that “imperfect” union in these days.
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Re: The Role of Government

Postby ET » Thu May 22, 2014 10:44 pm

More on Piketty. It just keeps rolling in.....there's even a chart at the end of this article, so that should make Keith happy.
Piketty Problems: Top 1% Shares of Income and Wealth Are Nothing Like 1917- 28, Alan Reynolds, CATO Institute, 5/202014
First of all, the Piketty and Saez estimates do not show top 1 percent income shares nearly as high as those of 1916 or 1928 once we use the same measure of total income for both prewar and postwar data.

Second, contrary to [former Treas Sec] Summers, there is no data from Piketty, Saez or anyone else showing that the top 1 percent’s share of wealth “has risen sharply [if at all] over the last generation” – much less exhibited a “return to a pattern that prevailed before World War I.”
***
Dealing first with income, it is interesting that the first graph in Piketty’s book is about the top 10 percent – not the top 1 percent. Saez likewise writes that “the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.” That is why President Obama said, “The top 10 percent no longer takes in one-third of our [sic] income – it now takes half.” A two-earner New York City family of six with a pretax income of only $110,000 would be in this top 10 percent, and they are certainly not taking “our” income.

Does Keith or anybody else consider a two-income couple making an average of $55,000 each to be part of this evil subset of immorally rich Americans benefitting at the expense of the rest? No, technically we're not talking about folks making 110 grand a year, but if we're going to soak it to the "top 10%", you're going to stick it to folks in the middle class as well.

Moving on:
Regardless whether we examine the Top 10 percent or Top 1 percent, however, it is absolutely dishonest to compare the postwar estimates with prewar estimates.

The Piketty and Saez prewar estimates express top incomes as a share of Personal Income, after subtracting 20% to account for tax avoidance. Postwar estimates, by contrast, express top incomes as a share of only that fraction of income that happens to be reported on individual income tax returns – rather than being unreported, in tax-free savings or assets, or sheltered as retained corporate earnings.

Transfer payments are not counted as income in either series (as though federal cash and benefits were worthless); this distinction is inconsequential for the prewar figures but increasingly important lately. “Total income” as Piketty and Saez define it accounted for just 61.8 percent of personal income in 2012, down from 67 percent in 2000.
***
What about Wealth – the defining topic of Piketty’s book? Summers conflates wealth and income – claiming Piketty and Saez have shown “absolutely conclusively, that the share of income and wealth [emphasis added] going to those at the very top … has risen sharply over the last generation.” On the contrary, a 2004 paper by Saez and Wojciech Kopczuk found the top one percent’s share of wealth was 38.1% in 1916, 40.29% in 1930, 25.25% in 1960 and 20.79% in 2000.

As they explained, “Top wealth shares … are much lower today than in the pre–Great Depression era…
***
Those who claim the top one percent’s share of total income is now as high as it was in 1916 or 1928 have been deceived by the fact that Piketty and Saez patched together two time series based on different measures of total income. Those who claim the top 1 percent’s share of wealth is now as high as it was in 1916 or 1928 are seriously misinformed or lying.

And another article taking issue with Piketty:
Piketty's Numbers Don't Add Up, Martin Feldstein, WSJ, 5/14/2014
Thomas Piketty has recently attracted widespread attention for his claim that capitalism will now lead inexorably to an increasing inequality of income and wealth unless there are radical changes in taxation. Although his book, "Capital in the Twenty-First Century," has been praised by those who advocate income redistribution, his thesis rests on a false theory of how wealth evolves in a market economy, a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.
***
His conclusion about ever-increasing inequality could be correct if people lived forever. But they don't. Individuals save during their working years and spend most of their accumulated assets during retirement. They pass on some of their wealth to the next generation. But the cumulative effect of such bequests is diluted by the combination of existing estate taxes and the number of children and grandchildren who share the bequests.
***
Finally, Mr. Piketty's use of estate-tax data to explore what he sees as the increasing inequality of wealth is problematic. In part, this is because of changes in estate and gift-tax rules, but more fundamentally because bequeathable assets are only a small part of the wealth that most individuals have for their retirement years. That wealth includes the present actuarial value of Social Security and retiree health benefits, and the income that will flow from employer-provided pensions. If this wealth were taken into account, the measured concentration of wealth would be much less than Mr. Piketty's numbers imply.

And since we're deep into this stuff, here's another article from CNBC: Debunking the top three myths about income inequality

Here's my favorite. This is a basic premise of Keith, Sandy & Co when we have these economic discussions:
MYTH 3—The rich are a permanent club choking off opportunity for the rest. Of those who made $1 million or more, half were millionaire earners for only one year between 1999 and 2007. Only 6 percent were millionaire earners for the whole period.
Among the top 400 earners in America, 73 percent made the 400 list for only one year between 1992 and 2009.

Only 15 percent made it more than two years.


As the IRS said in a June 2012 analysis of the dynamics of high earners, "The data reveal a mostly changing group of taxpayers over time."

Reviewing 6 or 7 years of economic discussion here, it is axiomatic that Keith, Sandy & Co talk of "the rich" as if they were some monolithic oligarchy out to destroy democracy in America, yet as the article below will show, "the rich" are anything but monolithic in their political views and they do not all support small government, low taxes and conservative/libertarian policies.
Do the rich rule America? Not Really, CNBC, 4/22/2014
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Re: The Role of Government

Postby KeithE » Fri May 23, 2014 8:58 am

ET wrote:More on Piketty. It just keeps rolling in.....there's even a chart at the end of this article, so that should make Keith happy.
Piketty Problems: Top 1% Shares of Income and Wealth Are Nothing Like 1917- 28, Alan Reynolds, CATO Institute, 5/202014
First of all, the Piketty and Saez estimates do not show top 1 percent income shares nearly as high as those of 1916 or 1928 once we use the same measure of total income for both prewar and postwar data.

Second, contrary to [former Treas Sec] Summers, there is no data from Piketty, Saez or anyone else showing that the top 1 percent’s share of wealth “has risen sharply [if at all] over the last generation” – much less exhibited a “return to a pattern that prevailed before World War I.”
***
Dealing first with income, it is interesting that the first graph in Piketty’s book is about the top 10 percent – not the top 1 percent. Saez likewise writes that “the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.” That is why President Obama said, “The top 10 percent no longer takes in one-third of our [sic] income – it now takes half.” A two-earner New York City family of six with a pretax income of only $110,000 would be in this top 10 percent, and they are certainly not taking “our” income.

Does Keith or anybody else consider a two-income couple making an average of $55,000 each to be part of this evil subset of immorally rich Americans benefitting at the expense of the rest? No, technically we're not talking about folks making 110 grand a year, but if we're going to soak it to the "top 10%", you're going to stick it to folks in the middle class as well.


The reaction to Piketty’s book does keep rolling in this time from the CATO Institute.

It is true that the first graph in Piketty book is comparison of income for the Top 10% in the Introduction; but he treats Top 1%, and Top 0.1% in Chapter 9. For the US the Top 0.1% shows much more increase since 1987 than other countries on the plot (UK, Canada, Australia).

As far as a $110K couple with 6 children in NYC, Piketty did not declare them or anyone in the Top 10% "part of this evil subset of immorally rich Americans benefitting at the expense of the rest” or any moral judgment at all. He does call out those that pay themselves $1M salaries while doing little to earn it. And I have never called Top 10%ers "evil" either; heck would be calling myself evil. I suspect that NYC family is just getting by in that expensive city where typical 3 bedroom apartment rents are $3000/month=$36K/year. If you remember, I consistently thought those CEOs/etc. who make more than 100 times that of the lowest paid people in their companies are giving themselves too much money. With a min wage of $7.25/hour = $15,080/year (2080 work hours in year), the line I would draw is $1.5M/year if that CEO insists on paying his lowest paid min wage - he can always pay himself more if he “lifts all boats, not just his yacht". Thus I have no problem with the $110K/year family or even those making 10 times that. If you have to exaggerate greatly to put others down, you have a real truth issue.

Now for the “chart" that you mentioned at the bottom of the CATO Institute article. Here it is:
Image

The 20% “adjustment" made by the CATO data manipulator (even if accurate, which it isn’t) does not change Piketty’s main conclusion that the top 1% income earners are taking a larger share of total national income since 1981 (approximately twice as much). For the top 0.1% they are taking about 3.9 times as much (Fig 9.5 page 319 in Piketty’s book). The Top 0.1% corresponds with $1.6M/year (coincidentally about 100x min wage).

The explanation for the 20% “adjustment" is given in these paragraphs:
The Piketty and Saez prewar estimates express top incomes as a share of Personal Income, after subtracting 20% to account for tax avoidance. Postwar estimates, by contrast, express top incomes as a share of only that fraction of income that happens to be reported on individual income tax returns – rather than being unreported, in tax-free savings or assets, or sheltered as retained corporate earnings.

The line in my graph shows the top 1 percent’s share of income as reported by Piketty and Saez. The bars below the line restate top 1 percent shares on a the same consistent basis for all years since 1929 (the earliest available) as a share of what we’ll call “modified personal income” (MPI) – PI minus 20%. Measured on such a comparable basis, the Top 1% share was still 18.2% in 1929 but only 13.2% in 2011.


is lacking in coherence and truth telling.

It is lacking in “coherence” in that if one were to report income pre tax avoidance, the bars in the plot above would be 20% higher in “prewar” times and other adjustments upward made for postwar times tax avoidance (CATO writer did not specify how much only that the Piketty income data for the top 1% was off of their tax returns). The artificial tilting of the degree of inequality (1929 to that of today) would have to assume 0 tax avoidance today compared to 20% in the Gilded Age (or as he plots it 0% tax avoidance in 1929 and minus 20% tax avoidance {i.e. extra taxes being paid} today).

Assuming 20% less tax avoidance today compared to that in 1929 lacks credibility as well as coherence given:
Swiss banking giant Credit Suisse has pleaded guilty to helping thousands of US clients evade paying taxes to the US government and agreed to pay a $2.6B fine
BTW, no one is doing a jail time, the $2.6B is likely less than they benefitted (their stock has soared since the ruling), and the thousands of cheating US clients will not be charged with crimes or even asked to make up the taxes evaded. What a whitewash.

I say it is lacking in “truth telling” because he cherry picks a high number (18.2%) for 1929 by choosing where to start his graph (Piketty Top 1% inequality plot Figure 9.2 on page 316 starts in 1910 not 1929 with values ranging from 18.2% in 1929 down to 16% in 1920 and up again to 18% in 1910). And he adds the years 2011-12 to Piketty plot last date is 2010 (source unreferenced) and picks a low number 13.2% in 2011 to compare to his high 1929 number (why not the 15% in 2012 I might ask - I think I know why). And this of course is after his “modified personal income” which took off 20% in 2012 (gradually less down to 0% taken off in 1929). IOW he fudges to say we are not as bad in income inequality as we were in the Gilded Age.

It is also lacking in “truth” as far as I can tell since I have searched through Piketty looking for this supposed 20% subtracted for pre war data for reasons of “tax avoidance”. I’ve looked at his sources at http://piketty.pse.ens.fr/en/capital21c2 and find no mention of a 20% taken off for “prewar” tax avoidance or any other time.

But one does no expect much truthful economic analysis from the CATO Institute. I don't disagree with all CATO's positions (e.g. it's relatively isolationist stance), but it's economic stances are "business friendly" to say the least.

The true picture is that income inequality has returned to that of the Gilded Age (if not surpassed it if we were able to quantify and add the tax avoidance/evasion evident today). The Gilded Age were not good days for the majority of Americans and it is not good days for the upper-middle / middle / lower classes today. I can't call all the Top 1% "evil" (some are talented athletes/entertainers who are just offered a lot by promoters; I'd take the money if I could shot 65 at golf); but the CEOs/CFOs are self paying themselves too much - don't like the term "evil" so I'll just say "greedy".

ET’s other stuff in his post above is pure RW ideological “hoped for” propaganda sans pertinent supporting facts. But I will agree with his last point:
"the rich" are anything but monolithic in their political views and they do not all support small government, low taxes and conservative/libertarian policies.

The corporate heads at least want high taxes so that they can lobby for more subsidies/bailouts. Besides many of the wealthy have deals going with Credit Suisse or other Swiss Banks or like Romney call all their income “capital gains”, so that they do not have to pay much. Talk about government “transfers”.
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Re: The Role of Government...20 percenters

Postby ET » Sat May 24, 2014 11:01 am

KeithE wrote:As far as a $110k couple with 6 children in NYC, I have never called them "part of this evil subset of immorally rich Americans benefiting at the expense of the rest”. Sounds like they are just getting by in that expensive city. If you will remember I consistently thought those CEOs/etc. who make more than 100 times that of the lowest paid people in their companies are giving themselves too much money. With a min wage of $7.25/hour = $15,080/year (2080 work hours in year), the line I would draw is $1.5M/year if that CEO insists on paying his lowest paid min wage - he can always pay himself more if he “lifts all boats, not just his yacht". And I never have called those who make over $110K/year an "evil subset of immorally rich Americans”. If you have to exaggerate greatly to put others down, you have a real truth issue.

I don't exaggerate, Keith. I simply state what is so often said outright or implied in these discussions outside the confines of this message board. In a long line of discussions here, but more importantly on news stories and other sources such as your commondreams folks, they ramble on about the "top 10%", sometimes narrowing it to the "1%" or less, depending on the percentage that will be most useful for their argument. Yes, you tend to make distinctions, but in the sound bites thrown around on TV and in the stories about "the rich" from the great majority of news outlets, I don't recall ever hearing someone mention that a household making $110,000 AGI would be part of the "top 10%". Divide that into a two-income couple and you've got a whole bunch of rather middle-class folks being used as pawns in a game of class warfare. "Bracketology" rhetoric in these discussions is rampant and it offers a convenient way to detach the talk from the reality of who would actually be affected.

I take you back to the original article and this statement:
Instead, they seem more a way of showering tax benefits on the already well off, with 80 percent of the tax breaks for 401(k)s and IRAs going to the richest 20 percent of Americans, and only 7 percent going to the bottom 60 percent.

In quoting this statement, previously, I stated that the wife and I, after working consistently all of our adults lives, are within striking distance of that top 20%. We benefit from a 401(k) at my work. My wife is self-employed. I am a non-management, engineer worker-bee in my company. We are, based on AGI, in the top 25% of earners (determine your placement here or here). I am due to move up a notch on the pay scale here within the next six months. That will in all likelihood move the wife and I into the top 20%.

So in "bracketology rhetoric", next year by this time we will become inhabitants of some faceless group of folks known to the Atlantic as the "top 20%" who are showered with tax benefits, even though we will most likely be using the same benefits (401(k) being one of them, mortgage interest deduction, home-office deduction, college tuition deduction) as are available to every other American if they CHOOSE to use them or participate. The write of the article basically uses some distorting numbers in order to make the case that because people don't save for retirement themselves, we've all got to have our wages plundered to pay for those who didn't "study the ant", as the Proverb admonishes.

Unless folks are nerdy enough to look into it, I'd bet that no more than a single-digit percentage of them even know where they fall on the income scale. I'd bet close to 95% or more of the dual-income $55k salary makers even know they are in the top 20% of earners and think people making a lot more than them constitute that group. And I'd even go so far to say that if I ask these folks making $110-115k a year in household income what they thought about putting a surtax on the top 20% of people to pay for "infrastructure, social security and education" I could get some huge polling numbers from them in the affirmative and just as high a number in the negative if I ask them if they think they'd be paying that surtax.

All because of "bracketology rhetoric" and it's detachment from reality and real people. What did we do to get here? Go to school. Get a job(s). Work 25 or 30 years. Now we're tagged as some moochers taking advantage of others because we've accumulated wealth, a higher yearly income and work experience.
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Re: The Role of Government

Postby KeithE » Sat May 24, 2014 12:29 pm

ET, you are exaggerating when you claim I disparaged people earning $110K/year at all. I make well over that myself. But that you claim I believe those like the NYC $110K family are "part of this evil subset of immorally rich Americans benefitting at the expense of the rest”, you most certainly are exaggerating greatly.

My specific suggestion to limit top pay has always been aimed at those who pay themselves more than 100:1 times as much as their lowest level worker. If they pay some min wage ($7.25/hr = $15,000/year), my suggestion is that they should not pay themselves more than $1.5M/year (Note: that is over 10 times the $110K/year). By your income placement calculators (btw thanks for that), this corresponds to Top 0.5% or Top 1% depending on which calculator you use. I confine my disparaging remarks to those that pay themselves that much, recognizing that in these days some are just offered that much as acceptability of large salaries has grown. To those that are offered that much, I would recommend that they contributed liberally and if in a position to do so, raise the level of pay of the lowered paid worker-bees by reducing their own pay (really restructure the entire pay scale).

BTW there is quite a bit of difference between your two calculators. Take the NYC $110K family, they are 83% (top 17%) is the WSJ calculator and barely cracked the “Top 10%” is the Kiplinger calculator.

And I’m not against government enforcing some manner of max wage (like the Ryan-Murray Budget Deal which set the max US reimbursable contractor wage at $487,000/year; the President’s pay is $400,000/year).

I know, ET and William, you philosophically object to that. I don’t because 1) it has gotten out of hand in the last 30 years and 2) it would make our country a “more perfect union” and “promote the general welfare” and imo help to “establish justice”. Thus compensation control is a legitimate “role of government”. In fact, imo, government must step in when economic practices run amok on a destructive path for a majority of Americans - the “invisible hand” is not a “magic wand”.
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Re: The Role of Government

Postby Sandy » Mon May 26, 2014 8:37 am

One of the really nice things about the internet, and consumer activism, is the availability of information which helps you find businesses that pay fair, competitive wages, so that if it is possible, you can do business with them to support their policies. I shop at a fully unionized grocery store chain that provides employees with benefits, and amazingly contrary to conservative economic opinion, saves me money and has a lot better customer service than Wal-Mart. I've found an auto insurance company that does the same, and provides comprehensive coverage at a premium rate that's well below the "standard market" in our area. And their customer service is great. It can be done, if business owners aren't greedy. Unfortunately, too many of them are, and that requires government, unions, and consumer action to restore a competitive playing field.
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Re: The Role of Government

Postby ET » Sat May 31, 2014 4:15 pm

That's fine, Sandy. Got no problem with that other than your assertion that because other companies may not operate in the way you like that they are therefore "greedy".

Unions can be just as greedy as any CEO in trying to lock out competition, particularly from those that might work cheaper.
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Re: The Role of Government

Postby Hal Eaton » Sat May 31, 2014 11:15 pm

I've just been trying to read the lengthy posts of Dave and ET on this subject. They seem to disagree, at least in part, as to the "role of Government." The same disagreement is endemic in all of our TV news sources, largely because of either the ignorance or the bi-partisan role of many of the commentators.

I have listened to the critics of the Veterans Affairs fiasco (Faux News used the word "scandal" four times in about three minutes). My problem with the coverage is that nobody, so far, has appeared to have any knowledge of the limits placed on the processes of giving veterans health care. The commentators have wept long and loud about what we owe to all our patriotic veterans for their service to our country. The VA is not now, nor has it ever, offered free health care to the literally millions of veterans in the USA.

One of the major limits on the governments largesse toward veterans is that such health care is indeed classifiable as a charity. It is offered to any veteran who cannot afford to pay for his own health care. In the requirements for a successful application for care, the veteran must show inabilty to cover such costs based on stated amounts he/she is allowed to earn before the appeal for care is approved. (I believe the cut-off for care is pegged at $35,000 annual earnings for a single person, with about $6,000 added for each dependent. I am unsure of the exact amounts, but they can be acquired on the internet.)

My own experience occurred in 1947. I had been released from my enlistment a few months earlier, having been plagued by throat problems during my 20 months of service. Upon my application for a tonsilectomy, I was asked if I could afford the cost. I had been married three months before, was back in school on the GI Bill, and reported my (and my wife's) current income. I entered a VA hospital and the operation was performed. I met only the doctor who performed the surgery. He put a blindfold over my eyes, sat me in a chair, asked me to hold a tray with his instruments on it, and proceded to do his job, ending with a curt, "Cough 'em up."
I drove myself home (40 miles) the next day or so. I had no objections to the procedure or its conclusion. It was free, because of (1) my prior service, and (2) I was unable to pay the cost.

Medicare and Tricare cover nearly all of my health care costs now. Medicare covers most of the cost; I've been a recipient for 22 years. Tricare (or a previous program under another name) covered the total cost for 21 years; and the remainder of Medicare's costs for 22 years, based on my 26 years of Naval service.

I would not attempt to add up the total costs of such care. Part was in payment for military service, part was due to the acts of Congress which are applicable to all 65-and-over folks. Even "illegals"--a rather disgusting term--can utilize emergency rooms, with all their drawbacks, for health care. And the Affordable Care Act, if allowed to proceed, will spread the availability to most, if not all.

About the cost of my care: I've had a quad by-pass, two hospitalizations for placement of stents, 22 years of diabetic supplies, a colonoscopy and later removal of one-third of my colon, three operations to remove kidney stones, a knee replaced (and the other needs it), occasional visits to the emergency room for low blood sugar occurences, care for a transient ischemic attack which left me lost miles out in the country; and the newest complaint: a failing memory (where are my glasses, hearing aids, car keys, the hammer, the screwdriver, and my wife? I lost my truck the other day . . .)

Frankly, I wouldn't mind paying more in taxes if my personal kind of health care could be offered to all -- including those who read this folderol.
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