The Rebellion of the French CEOs

[The Rabbi]

Fine by me. You can start with this: the periods of time when income inequality increased the most was also the times when economic growth was at it's best.

I'm working on it. I've read the Saez paper and it's pretty interesting. More soon.



You might read this again. What it says is that mean income of the top 1% is more volatile than the mean of all households, which is true. That doesn't say anything about the relationship of the two measures which would be a measure of inequality.

There's a good CBO report on this issued May 16, 2012 called "Trends In The Distribution Of Household Income, 1979-2007" CBO | Trends in the Distribution of Household Income Between 1979 and 2007
I don't seem to be able to copy the cool looking graph, but you can get that from the link to the report.

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.

The upshot is that over the last 28 years real income has grown faster for the top 1% than everyone else, which is why I conclude that income inequality is increasing.

You do realize that the turnover at the top is quite significant? It's not the same people who enjoyed the growth in wealth over the last 28 years. Nor it is the same people on the bottom all those years living on the edge or below the poverty line. The people who risked the most in those years are the ones who benefited the most; those who risked nothing or did nothing to increase their worth ended up with the least. In both cases, as it should be.

Excellent point! One that libs constantly flub. The bottom 20% is only a statistic. It does not represent real people, who are far more fluid.

 

[oldfart]

The people who risked the most in those years are the ones who benefited the most.

This is a rather astounding claim. How much did the bailed out Wall Street banks actually risk? And what about the risks assumed by all the people who lost their homes when they became unemployed? Maybe you should define your concept of risk. It would certainly be entertaining; I think you would end up making the Marxists' point for them.

 

[The Rabbi]

The people who risked the most in those years are the ones who benefited the most.

This is a rather astounding claim. How much did the bailed out Wall Street banks actually risk? And what about the risks assumed by all the people who lost their homes when they became unemployed? Maybe you should define your concept of risk. It would certainly be entertaining; I think you would end up making the Marxists' point for them.

Inb what sense is a bailed out wall st bank a person? Do you believe that is the only risk anyone ever took in business in this country?
Maybe you need to explain your understanding of risk as it pertains to business. It would certainlly be entertaining. I think you would end up making the psychiatrists' case for them.

 

[Wiseacre]

The people who risked the most in those years are the ones who benefited the most.

This is a rather astounding claim. How much did the bailed out Wall Street banks actually risk? And what about the risks assumed by all the people who lost their homes when they became unemployed? Maybe you should define your concept of risk. It would certainly be entertaining; I think you would end up making the Marxists' point for them.

I was talking about people, not businesses. When a business starts up or is expanded, there are investors who risk their money on such ventures. Most of us can't afford to do that, we're struggling along for the most part and can't take such risks. If the business fails, we lose nothing cuz we have nothing to lose. The rich guy loses a bundle though, or he/she makes a bundle.

 

[JoeB131]

Let's see. Fox News is reporting that French executives want lower income taxes on people who make $191,000 or more. And this is important because.........

Actually they want lower taxes AND less spending because the french economy is going down the drain thanks to the socialist policies over the past several years. Which is why it's important. Cuz under Obama we're going in the same direction. Apparently democrats are too damn stupid to learn from the mistakes of others.

Libs think we can take proven failed policies of other nations and make them work.

I think you miss the point.

The French tried exactly the kind of thing you "Supply Siders" alway recommend. they cut taxes on the rich (albeit not to the obscenely low amount they pay in this country) and they cut government programs.

And the REcession got worse for them, not better.

That's why Hollande won to start with.

 

[jtpr312]

Let's see. Fox News is reporting that French executives want lower income taxes on people who make $191,000 or more. And this is important because.........

Ignorance like this is why obama is president and why this nation sinks deeper and deeper into the toilet.

 

[oldfart]

Inb what sense is a bailed out wall st bank a person?

Did you not get memo? "Corporations are people too." Even the Supreme Court says so.

Do you believe that is the only risk anyone ever took in business in this country? Maybe you need to explain your understanding of risk as it pertains to business. It would certainlly be entertaining. I think you would end up making the psychiatrists' case for them.

Cute, but not even close. Economic risk is possibility of an economic entity suffering an economic loss as the result of decisions it makes. It is the mirror image of "reward". In a broader sense, it can include the effects of actions the economic entity has no control over but that result from the decisions of others.

 

[oldfart]

I was talking about people, not businesses. When a business starts up or is expanded, there are investors who risk their money on such ventures. Most of us can't afford to do that, we're struggling along for the most part and can't take such risks. If the business fails, we lose nothing cuz we have nothing to lose. The rich guy loses a bundle though, or he/she makes a bundle.

I think this line of reasoning misses two important points. First there are financial intermediaries such as mutual funds and life insurance companies that take invest thousands of dollars each from millions of investors, adding up to significant money. When those who invest this money take losses, the losses are the small investors, not the management companies (which get their fees regardless of the success or failure of their management). So when the stock market tanked, millions of the small guys got hurt. "When Wall Street catches a cold, investors catch pneumonia."

Second, everyone bears some risk as a result of decisions made by large economic players. People get laid off. Pension funds get unfunded. Health insurance plans get dropped. Mortgage standards tighten. Mercury standards in coal emissions are eased back. None of these things is necessarily bad, but many of the costs of business decisions are borne by other parties.

 

[Wiseacre]

I was talking about people, not businesses. When a business starts up or is expanded, there are investors who risk their money on such ventures. Most of us can't afford to do that, we're struggling along for the most part and can't take such risks. If the business fails, we lose nothing cuz we have nothing to lose. The rich guy loses a bundle though, or he/she makes a bundle.

I think this line of reasoning misses two important points. First there are financial intermediaries such as mutual funds and life insurance companies that take invest thousands of dollars each from millions of investors, adding up to significant money. When those who invest this money take losses, the losses are the small investors, not the management companies (which get their fees regardless of the success or failure of their management). So when the stock market tanked, millions of the small guys got hurt. "When Wall Street catches a cold, investors catch pneumonia."

Second, everyone bears some risk as a result of decisions made by large economic players. People get laid off. Pension funds get unfunded. Health insurance plans get dropped. Mortgage standards tighten. Mercury standards in coal emissions are eased back. None of these things is necessarily bad, but many of the costs of business decisions are borne by other parties.

Seems like we're wandering a little from the discussion over income inequality. We might be getting lost in the weeds a bit, and we've sorta left the original concept in the OP in the dust. But anyway,

In a given year, a small investor may have several thousand or even tens of thousands of dollars in a mutual fund or 401k. Their investment is small compared to the rich person who puts up hundreds of thousands or even millions. If the investment pays off at say 20% for the year, we both get that % of our investment, why is that a bad thing? In that year, income inequality went up big, didn't it? The next year when the economy tanks, we both lose 20% and don't think that doesn't hurt bro. But the rich guy lost a lot more money than I did, so income inequality went down, no? Why is it okay when he/she takes the big hit but not okay when he/she makes hay?

As far as the negatives associated with economic downturns, it's true that the people on the bottom suffer the most cuz they don't have the cushion to fall back on. So we have programs like UE and foodstamps to cover 'em for awhile. Which BTW don't get counted in a lot of the income inequality studies that come out.

 

[oldfart]

Seems like we're wandering a little from the discussion over income inequality. We might be getting lost in the weeds a bit, and we've sorta left the original concept in the OP in the dust.

You are correct and I will try to steer back onto topic.

In a given year, a small investor may have several thousand or even tens of thousands of dollars in a mutual fund or 401k. Their investment is small compared to the rich person who puts up hundreds of thousands or even millions. If the investment pays off at say 20% for the year, we both get that % of our investment, why is that a bad thing? In that year, income inequality went up big, didn't it? The next year when the economy tanks, we both lose 20% and don't think that doesn't hurt bro. But the rich guy lost a lot more money than I did, so income inequality went down, no? Why is it okay when he/she takes the big hit but not okay when he/she makes hay?

I think you have some confusion here. If everyone had their income increase or decrease proportionally, there would be no change in income distribution. It's the fact that different types of income grow disproportionately that creates the problem that the CBO study talks about. Also the latest figures show that in the last three years or so corporate profits have hit an all time high while wages are decreasing in real terms.

As far as the negatives associated with economic downturns, it's true that the people on the bottom suffer the most cuz they don't have the cushion to fall back on. So we have programs like UE and foodstamps to cover 'em for awhile. Which BTW don't get counted in a lot of the income inequality studies that come out.

I think you are mistaken here. The starting point on income statistics from SOI is tax return data. Unemployment compensation is now fully taxable, so every bit of it is in AGI and taxable income figures. I believe there is an adjustment that accounts for non-cash means-tested aid such as food stamps and CHIP, etc.

To get more back on point, my main argument is that there is a long literature in developmental economics that shows strong correlation between too little inequality or too much with systemic inefficiency and lower growth. There is also quite a bit of literature on growth theory with respect to factors that account for economic growth. Third and finally, there is good work done on the incentive or disincentive effects of taxation on both investment and labor. The short answer is that the United States today would have stronger economic growth if there was less income inequality, more attention to programs that aid long term growth, and there is no indication of disincentive effects on work at any tax levels being contemplated. The question of the effect of taxes on investment is much more disputed. Pick one or pick all!

Jamie

 

[The Rabbi]

Inb what sense is a bailed out wall st bank a person?

Did you not get memo? "Corporations are people too." Even the Supreme Court says so.

Do you believe that is the only risk anyone ever took in business in this country? Maybe you need to explain your understanding of risk as it pertains to business. It would certainlly be entertaining. I think you would end up making the psychiatrists' case for them.

Cute, but not even close. Economic risk is possibility of an economic entity suffering an economic loss as the result of decisions it makes. It is the mirror image of "reward". In a broader sense, it can include the effects of actions the economic entity has no control over but that result from the decisions of others.

OK, so you're punting on this answer.
The answer is that entrepreneurs take risk every day starting, running, and expanding businesses. That is not limited to nor defined by Wall St banks. If you eliminate or minimize the possible reward, through higher taxes etc, you eliminate or minimize the incentive to take risk. And if you increase the risk beyond normal business risk by imposing mandates and regulations you get the economy we have now under Barack Insane Obama.

 

[oldfart]

OK, so you're punting on this answer.
The answer is that entrepreneurs take risk every day starting, running, and expanding businesses. That is not limited to nor defined by Wall St banks. If you eliminate or minimize the possible reward, through higher taxes etc, you eliminate or minimize the incentive to take risk. And if you increase the risk beyond normal business risk by imposing mandates and regulations you get the economy we have now under Barack Insane Obama.

Other posters in CDZ may want to be aware of your character. I can see why you have a problem in the business world with regulations.

Hi, you have received -471 reputation points from The Rabbi.
Reputation was given for this post.

Comment:
dunce

Regards,
The Rabbi

 

[The Rabbi]

OK, so you're punting on this answer.
The answer is that entrepreneurs take risk every day starting, running, and expanding businesses. That is not limited to nor defined by Wall St banks. If you eliminate or minimize the possible reward, through higher taxes etc, you eliminate or minimize the incentive to take risk. And if you increase the risk beyond normal business risk by imposing mandates and regulations you get the economy we have now under Barack Insane Obama.

Other posters in CDZ may want to be aware of your character. I can see why you have a problem in the business world with regulations.

Hi, you have received -471 reputation points from The Rabbi.
Reputation was given for this post.

Comment:
dunce

Regards,
The Rabbi

Translation: You're right and I've been pwned.
Thanks for playing.