Obama’s simplistic view of income inequality

[The Rabbi]

Uh, no.
Restricting the ability to conduct transactions costs everyone money.

I understand what your ideology tells you. I'm reporting what the facts of history tell me. The U.S. economy grew more than twice as fast in terms of per capita GDP during the 40 years when income gaps were relatively narrow (1940-1980) than in the 40 years prior to that or in the 31 years since. Also, if you compare nations in terms of income equality/inequality and also in terms of per capita GDP/PPP, you find that the richest countries in the world almost all have narrow income gaps and low levels of inequality.

That's what demand-side economics would predict, because narrower income gaps mean higher consumer demand which drives investment into production of goods and services and so pushes up GDP growth. As such, it's a real-world empirical test of demand-side versus supply-side economics. Demand-side wins.

That't total bollocks.
The period 1940-1980 was marked by the US emergence from WW2 as the only industrial power with an intact and up to date industrial base. Plus pent up demand from rationing and the baby boom all dictated rapid growth and prosperity. Income disparity had nothing to do with it. Of course 15 year olds don't make much money so that woudl go a long way towards reducing disparity.
Rich nations did not start out being equal. As countries' economies grow there are large disparities as some people make more money than others. Afterwards taxes rise and those who have made money are secure. The opportunity goes away for anyone else.

 

[Dragon]

The period 1940-1980 was marked by the US emergence from WW2 as the only industrial power with an intact and up to date industrial base.

False. Every industrialized nation involved in World War II, with the exception of the two main losers and (maybe) the Soviet Union, emerged from the war with MORE industrial capacity than it had going in. That includes Great Britain, despite the Blitz. It includes France, the Netherlands, Norway, and Denmark, despite the Nazi occupation. And that's saying nothing of countries like Switzerland, Sweden, and Spain, who weren't even in the war at all and were completely untouched.

Even Germany and Japan, which actually did have a damaged industrial base (consequence of losing the war), were fully repaired and up above pre-war capacity by the mid 1950s. There is no way for this to account for four decades of unprecedented prosperity that has also never been duplicated since.

Plus pent up demand from rationing and the baby boom all dictated rapid growth and prosperity.

Pent up demand from rationing (which, by the way, would have amounted to nothing without the full employment that accompanied it) did account for the immediate aftermath of the war, and why the U.S. economy didn't slip back into depression as some feared at the time. It cannot however account for the fact that this prosperity lasted so long. As for the baby boom, that was a consequence of prosperity not a cause of it; in any case, I've been careful to use per capita GDP growth as a measure of prosperity, not aggregate growth. Aggregate growth is skewed by population growth, but per capita growth corrects for this.

Rich nations did not start out being equal. As countries' economies grow there are large disparities as some people make more money than others. Afterwards taxes rise and those who have made money are secure. The opportunity goes away for anyone else.

Hard to tell what you're saying here. Are you suggesting that rich countries have more egalitarian incomes because they're rich, rather than vice-versa? That could be true to some degree. For example, a nation usually develops a strong labor movement only after it is well along on the path to industrialization. Also, prosperity increases tax revenues with minimal pain and consequent willingness to pay for social welfare programs. However, if the argument made here were correct, we should see prosperity decline as this came true -- if it were really so that "Afterwards taxes rise and those who have made money are secure. The opportunity goes away for anyone else."

That hasn't happened. The richest countries in the world, with very few exceptions, are STILL those with the most equal distributions of wealth. In fact, here is a list of all countries with a GINI coefficient of 30 or less, as tracked by the World Bank, followed by their per capita GDP/PPP again as tracked by the World Bank:

Japan (25) (33,994)
Denmark (25) (39,558)
Sweden (25) (38,947)
Czech Republic (26) (25,299) *
Norway (26) (56,894)
Slovakia (26) (23,897) *
Finland (27) (36,660)
Belarus (27) (14,178) *
Germany (28) (37,591)
Serbia (28) (11,488) *
Ukraine (28) (6,658) *
Afghanistan (29) (955) **
Austria (29) (39,698)
Ethiopia (30) (1,033) **
Montenegro (30) (12,676) *

* - former Communist country ** - extremely poor country

I've marked those * and ** countries because they represent sources of low inequality other than prosperity; i.e. holdovers from Marxist ideology or such extreme poverty that there aren't many rich people.

Among countries that are neither ex-Communist nor extremely poor, however, those with low G-coefficients tend also to be rich countries and vice-versa. Now, it's arguable (and partly true) that this is a result of prosperity rather than a cause of it; however, recognize that in all of these places social democracy has been in place for decades and in some of them for as long as a century. If it really were as destructive of prosperity as the right likes to claim, these would no longer be among the world's richest nations.

On the other hand, the most visible anomaly in this pattern is the United States, with a G-coefficient of 41 and a per capita GDP of $47,184. That puts us no. 7 in the World Bank's ranking by per capita GDP/PPP. But 30-40 years ago, our inequality was much lower than it is today.

And when that was so, we were number 1.

 

[Listening]

Here's the real fallacy of the piece in the OP:

He wanted to move money from rich to poor without “leaking” so much economic growth that the whole process became self-defeating.

Decreasing income gaps and increasing income equality INCREASES economic growth. It doesn't "leak" growth.

You posted this crap before and you exited when it was decided that a simple one-variable model probably does not represent our economy.

And here you are again. I see that you are still holding to the fairy tale.

 

[francoHFW]

Greece is corrupt (pay bribes, not taxes) and its bankers took advice from Lehman Bros. on how to hide debt.

 

[bripat9643]

Indeed. Look at Germany...if not for their social safety net, Germany could have been in much worse shape than they were...and would not have recovered as quickly.

How did the "social safety net" help Germany recover? If anything, it retarded its recovery.

 

[bripat9643]

Decreasing income gaps and increasing income equality INCREASES economic growth. It doesn't "leak" growth.

Horseshit. Taking money from people who actually produce stuff people want and giving it to useless parasites does not increase economic growth. There's no conceivable way that multiplying the number of parasites would have a positive effect on economic growth.

 

[The Rabbi]

Decreasing income gaps and increasing income equality INCREASES economic growth. It doesn't "leak" growth.

Horseshit. Taking money from people who actually produce stuff people want and giving it to useless parasites does not increase economic growth. There's no conceivable way that multiplying the number of parasites would have a positive effect on economic growth.

It's amazing how they can cook the facts to fit their preconceived notions.

 

[Rozman]

The Right is OK with some people making much more money than other people, as long as everyone is making more than they used to.
The Left wants everyone to be poor and miserable. That is their equality.

The Left wants everyone to be poor and miserable. That is their equality.

And dependent on government for their very existence...

 

[bripat9643]

Uh, no.
Restricting the ability to conduct transactions costs everyone money.

I understand what your ideology tells you. I'm reporting what the facts of history tell me. The U.S. economy grew more than twice as fast in terms of per capita GDP during the 40 years when income gaps were relatively narrow (1940-1980) than in the 40 years prior to that or in the 31 years since.

First, if you ask 5 different people what the facts of history tell them, you're likely to get 5 different answers. You can't prove economic theories using historical data.

The previous 40 years included a massive depression that lasted for 12 years, so that's no accomplishment. Also, those steep progressive income taxes you favor were at their peek in the middle of that period.

Also, the economy didn't grew twice as fast from 1940 to 1980 as it did from 1981 to 2011. That would be an astounding rate of growth for mature economy.

Also, if you compare nations in terms of income equality/inequality and also in terms of per capita GDP/PPP, you find that the richest countries in the world almost all have narrow income gaps and low levels of inequality.

Actually, no, you don't find that. Also, you have the cause/effect relationship reversed. countries with high rates of growth tend to have less income inequality. That's because most income inequality in the world is the result of socialism and crony capitalism. Such countries have lower growth rates.

That's what demand-side economics would predict, because narrower income gaps mean higher consumer demand which drives investment into production of goods and services and so pushes up GDP growth. As such, it's a real-world empirical test of demand-side versus supply-side economics. Demand-side wins.

"Demand side economics" is nothing more than a sleazy excuse for looting the productive members of society and dispensing the resulting swag to a host of parasites.