US Politics - Wealth Distribution

[jfrazierjr]

Funny you should mention Monopoly. It was created to teach kids the evils of greed and rampant capitalism.

The creator REALLY did not think this thing through very well... Given that the "winner" is the one who ends with the most wealth, the game is absolutely contrary to her intentions(this includes the original game as designed, not the version popularized by Parker Brothers). Had she simply set the "winner" as the person with the median wealth (or the lowest in a two player game) then it might have actually conveyed the message. However, that is rather doubtful as then people would not have played the game more than a few times. Either way, the point is/was missed.

[metatheurgist]

Either way, the point is/was missed.

Yes, that's what I said in the last part of that post. I think the creator expected people to feel bad about crushing everyone under their thumb but the winner usually just revels in it. Seems aliasmask got it though.

[Full Bleed]

The creator REALLY did not think this thing through very well... Given that the "winner" is the one who ends with the most wealth, the game is absolutely contrary to her intentions(this includes the original game as designed, not the version popularized by Parker Brothers). Had she simply set the "winner" as the person with the median wealth (or the lowest in a two player game) then it might have actually conveyed the message. However, that is rather doubtful as then people would not have played the game more than a few times. Either way, the point is/was missed.

I don't know. Anyone that has played Monopoly more than a few times against people will have, inevitably, found themselves on the wrong side of the Monopoly. Lessons can be learned from losing as well as winning. It might not exactly preach the "evils of wealth concentrated into the hands of a few" heavy-handedly, but the lessons are still there to be learned.

People are people though, and "winning" in a game will always trump any underlying moral lesson. Take a game like Axis and Allies. There are certainly lessons to be learned from how the balance in the game starts and progresses (i.e. illustrating America's late entry into the conflict). But, at the end of the day, whether you are one of the Axis or Allies in the game, morality is cast to the wayside in favor of winning at all costs. That doesn't mean that there aren't millions of American "winners" playing the Axis powers in the game that might not elicit a twang of guilt in the process. Sometimes, getting a chance to be the bad guy in a safe role-playing environment is, in and of itself, a lesson well learned.

Heck, I remember playing a number of scorched-earth type characters in RPG games when I was much younger. The ease that came from killing and robbing innocents both had its appeal and taught a number of valuable lessons (like it's easier to be evil than good when amassing wealth and power, but it's less psychologically rewarding doing it through nefarious means).

In Monopoly there is an understanding among the players that there is likely to be one tyrannical winner in the game. Usually a cut-throat trader that gloats over the misfortunes of his fellow man. Recognizing that behavior outside the game and condemning it sounds like a lesson well learned to me.

[Jade]

So, this is an interesting discussion, but a lot of people seem to be really missing a key factor here:

There is significant income mobility in the US. How much? Well, read the report put out by the Department of the Treasury for details: http://www.treasury.gov/resource-center ... revise.pdf

Here are some important findings from the study:
*Of the top 1/100 of 1%, more than 75% of them fell out of this income group within 10 years.
*Of those in the top 1%, more than half of them were no longer in this group a decade later. On average, those who had started in this group in 1996 were making less money in 2005 (despite that bracket making more money overall).
*More than 1 in 2 Americans switched income quintiles within that 10-year period. This was true in the previous decade, as well. Significantly, those in the lowest income quintile were equally likely to have left it a decade later.
*On average, those who started out in the lower income groups saw their income increase more than those who started in the higher income groups.

This study seems to suggest (in clear, uncertain terms) that people don't stay in the same income group. Usually videos like the one posted¹ look at the overall income group, and not individuals. What it neglects to take into account is that half of the individuals in any given income group are no longer in that group a decade later. These videos simply don't take that into account. We do have significant income mobility in the US.

Bottom line: In the US, the poor are getting (on average) richer², and the rich are (also) getting (on average) richer² (though at a slower rate), except for the super-rich, which are actually (on average) getting poorer².

¹I'm in China, and so I cannot view the posted video in question, though I have seen others like it, and may have actually seen it directly when I was back in the US or UK; for those who don't know, Youtube is blocked by the Great Firewall here (for the good of the people, of course). Socialism FTW!

²In terms of income.

[aliasmask]

There was considerable income mobility of individuals in the U.S. economy during
the 1996 through 2005 period as over half of taxpayers moved to a different income
quintile over this period.

Roughly half of taxpayers who began in the bottom income quintile in 1996 moved
up to a higher income group by 2005.

This seems normal. The lowest quintile could be a person with a 30 hr/wk job at minimum wage going to either a full time job or making a dollar more after 10 years... This isn't a true sign of income mobility. Also, the whole nation had an economic boon with the computer industry during that time. These dates are very specific to the time of greatest progress until just before our economic down turn in 2006. The same things can't be said using current data.

[Jade]

This seems normal. The lowest quintile could be a person with a 30 hr/wk job at minimum wage going to either a full time job or making a dollar more after 10 years... This isn't a true sign of income mobility. Also, the whole nation had an economic boon with the computer industry during that time. These dates are very specific to the time of greatest progress until just before our economic down turn in 2006. The same things can't be said using current data.

Actually, if you would read the study, you would notice that the trends they observed for 1996 to 2006 were consistent with trends previously observed in similar studies. These findings are specifically not limited to the period in question. As to whether or not the same things could be said using current data, we have no way of knowing until a study using current data is released¹. We may (perhaps incorrectly) assume things to prop up our own biases, but the only hard evidence we have right now at all (apart from anecdote) to base such assumptions on is historical evidence, and while that historical evidence might not be relevant today, it emphatically does not support your assertions.

But if, as you claim, a significant increase (or, as often in the case of the groups with higher income, a significant decrease) in real income is not a true sign of income mobility, what is? (Without providing a contrary definition, you would appear to be begging the question² here...)

¹Though, to be honest, it's unlikely that any kind of new data would actually change our opinions anyways; people generally don't change their perspectives when faced with contrary evidence (as, for example, explained in http://youarenotsosmart.com/2011/06/10/ ... re-effect/ )

²(Per the formal definition, not the casual usage.)

[aliasmask]

It's true about changing opinions, but I like to think that people know that they don't know everything. So, given something that makes sense to them and doesn't conflict with their other "facts" that they would consider the new information to revise an opinion.

This pretty much sums up the video you didn't see:

Wealth Inequality in America

It's about wealth inequity, not income mobility. But, if we had "significant" income mobility as a whole, more people would be richer, not rich people more rich.

[Jade]

It's about wealth inequity, not income mobility. But, if we had "significant" income mobility as a whole, more people would be richer, not rich people more rich.

Two people with identical incomes can ultimately end up with vastly different amounts of accumulated wealth. Do you see this as a problem if their incomes are identical?

And, as a whole, more people are richer (in terms of income, which is what is relevant to income mobility) than they were in the past. The richest 1% are less rich (in terms of income) than they were in the past. The Treasury study demonstrates all this.

So, how exactly does the US lack income mobility?

(Note that I don't disagree with your statement that accumulated wealth is not evenly distributed in the US. There's no question about that. But how is wealth accumulated if not as income?)

[wolph42]

It's about wealth inequity, not income mobility. But, if we had "significant" income mobility as a whole, more people would be richer, not rich people more rich.

Two people with identical incomes can ultimately end up with vastly different amounts of accumulated wealth. Do you see this as a problem if their incomes are identical?

And, as a whole, more people are richer (in terms of income, which is what is relevant to income mobility) than they were in the past. The richest 1% are less rich (in terms of income) than they were in the past. The Treasury study demonstrates all this.

So, how exactly does the US lack income mobility?

(Note that I don't disagree with your statement that accumulated wealth is not evenly distributed in the US. There's no question about that. But how is wealth accumulated if not as income?)

I wasn't planning on commenting on any of your (with 'your' I mean anyone who replied) reactions, although I am reading it with great interest. Still with this line of discussion I felt I had something to add:
If you check the vid in the OP then around 5 minutes the narrator tells about the mobility of the wealth distribution (true, not exactly the same as income mobility) and he clearly states that the top 1% *relative* income vs the rest of the population TRIPLED over the last 30 years. So there might be income mobility over individuals but overall there is a strong shift towards a greater and greater rift between wealthy and the rest of the US.

[Jade]

So there might be income mobility over individuals but overall there is a strong shift towards a greater and greater rift between wealthy and the rest of the US.

Certainly. But it's really important to note that the new "über-rich" wealthy (in terms of income) are not the same as the rich wealthy 10 years ago. And that's what income mobility means.

If you feel that no-one should be rich, that's a very different argument than arguing that there isn't income mobility. Relatively poor sods can (later) achieve massive incomes in the US—evidently richer than the rich who were rich when these newly rich folks were poorer.

But let's be clear: The best data we have demonstrates that there is income mobility. This doesn't mean that everyone has the same income. So, all you folks who believe everyone should have the same (or similar) incomes, regardless of the nature, quantity, or quality of the work they do, feel free to put forth those arguments.

Here's a fairly simple starting point: Should it be legal for people to gain a massive income from leveraged arbitrage? Why or why not? (Currently, it is legal in most places, in case that wasn't obvious.)

[wolph42]

If you feel that no-one should be rich, that's a very different argument than arguing that there isn't income mobility. Relatively poor sods can (later) achieve massive incomes in the US—evidently richer than the rich who were rich when these newly rich folks were poorer.

I didn't intend to imply that 'no one should be rich' actually I'm an enabler for innovative start-up companies and we recently had a successful exit of one of these companies of 100mln Euro's. As the founders had diluted very little they are now (at least for Dutch Standards) very rich. And I applaud to that. In the country I live in there is a general tendency to criticize success and promote mediocrity, which IMO is fatal for an economy. Fortunately it remains with 'critics' and not actually policy so there is room to excel. Also there is more and more talk from both our University as policy makers about stimulating excellence.
In the states (at least thats my impression) you have this much much further developed and are really great in pushing for excellence AND not only accepting it as a public but applaud as well.

Where things (again IMO) go wrong, is the distribution. I have to say that Aliasmask made a very compelling argument using the metaphor of the Monopoly game: you need to change the rules to get a more fair play. You should certainly not level everything as that again would take out any incentive to excel (also make a very boring game), so as a government you should make the rules such that things are get more in balance without killing the drive for excellence.
Here we do that with 'tax disks' (bit of a rough translation) where you pay an increasing amount of tax over levels of income. I don't know the numbers so a fictitious example: lets say you earn 10k a month. Then over the first 1000 you pay 30%, the next 4000 you pay 40% and everything above 5000 you pay 50%. This makes sure that low income are taxed relatively low, while high income pay the same tax for the same income as the low income, but increasingly as they earn more without resorting to something idiotic as paying 70% tax. But thats just an example.

[Xaelvaen]

@Jade - More interesting things learned (had no idea China blocked youtube, in example). I played FFXI for a long time with several Chinese friends, who I greatly miss. So I keep interested in these things, heh.

@General - The issue isn't how rich you can get, but how you can get rich. There are those silly enough to try and preserve morality in a time of every-man-for-himself, and a lot of times, in a capitalistic environment, there's no place for morals. Recent example - the Government was shut down for... who cares, it plastered the news annoyingly enough already. The morality comment comes in that the Congress GYM remained open, while the national headstart program did not... While this doesn't directly relate to income :: morality, its a great example of how morals mean little to capitalism. Quite frankly I'm surprised religious institutions are still tax-exempt.

So, I don't particularly care if an actor makes 20 million dollars per movie, since the corporation behind it spends 200+ million to make it, and brings in a helluva lot more from its profits - there's a percentage in question. What I -do- care about, however, is a fat Corporate-do-nothing making 800k+ a year off the backs of his minimum wage workers, with less than 1% dividend return or profit sharing to said workers. Its absolutely revolting.

[Jade]

Here we do that with 'tax disks' (bit of a rough translation) where you pay an increasing amount of tax over levels of income. I don't know the numbers so a fictitious example: lets say you earn 10k a month. Then over the first 1000 you pay 30%, the next 4000 you pay 40% and everything above 5000 you pay 50%. This makes sure that low income are taxed relatively low, while high income pay the same tax for the same income as the low income, but increasingly as they earn more without resorting to something idiotic as paying 70% tax. But thats just an example.

That is called "progressive taxation", and virtually every developed country in the world uses it. The US is no exception. Our income taxes are relatively low by European standards (though in California and a couple of other states they can near 50%), but the high end of our nominal corporate taxes are among the highest in the world, and higher than any EU member nation, even before you add the state corporate taxes.

Also, unlike (literally) every other country in the world, the US still taxes its citizens who are (permanently) living abroad.

[Jade]

The issue isn't how rich you can get, but how you can get rich. There are those silly enough to try and preserve morality in a time of every-man-for-himself, and a lot of times, in a capitalistic environment, there's no place for morals. Recent example - the Government was shut down for... who cares, it plastered the news annoyingly enough already. The morality comment comes in that the Congress GYM remained open, while the national headstart program did not... While this doesn't directly relate to income :: morality, its a great example of how morals mean little to capitalism. Quite frankly I'm surprised religious institutions are still tax-exempt.

As a point of order, there's nothing Capitalist at all to the way the US government runs. And US politics is definitely not a free market. (That should be obvious just by the fact that 25% of US Citizens are neither Republican nor Democrat, and yet not one of the 500+ Representatives in the House is Independent/Third Party.)

[Full Bleed]

Our income taxes are relatively low by European standards (though in California and a couple of other states they can near 50%), but the high end of our nominal corporate taxes are among the highest in the world, and higher than any EU member nation, even before you add the state corporate taxes.

Corporate taxation in the US is complicated. But don't believe the hype that we're higher here:

http://mediamatters.org/research/2012/0 ... e-r/184586