In earlier posts on ataxingmatter (here and here), I reviewed Robert Reich's 2010 book, After Shock, and wrote about his suggested cures for the problems made most visible in the 2007 crash and the Great Depression that followed.

The gist of the book is summed up in the following quote:

"[L]eft to its own devices, the market concentrates wealth and income--which is
disastrous to an economy as well as to a society." at 59

Corey Robin writes in the Nation about the same problem, Reclaiming the Politics of Freedom, The Nation, Apr. 26, 2011. But he notes that harping on the distributional inequality doesn't resonate with voters. If the left wants to influence policies and capture the hearts of voters, he suggests, it needs to demonstrate that this distributional mayhem, which leaves everybody but the rich vulnerable, has even broader consequences that reach to the very fundamental creation myths of our society--the desire to be our own masters, to free ourselves from a tyrannical monarchy and colonial overlords who seemed to want to dictate how we could work, what we could drink, and where we could live. That is, to make what we are saying comprehensible at the "yeah, that's what counts for me" level, we need to connect to America's own Founding Moment. We need to "reclaim[] the politics of freedom."

And I think he is correct. Because the problem we are facing today, with corporate lobbying and campaign contributions reinforcing the elite class's wining and dining of politicians, is more than the dysfunction of the economy. Yes, there is too much money at the top where there is not enough ability to spend it. Yes, there is too little money at the bottom where there is no way to provide for basic needs. Yes, there is barely enough in the middle, resulting in stagnation in local businesses who don't have enough customers to sell to and can't afford to give credit to those who want to buy.

It is not just that banks, connected to power through their managers and shareholders, are able to speculate with other people's money (our money!) in the international derivatives casino and then push their losses off on us. It is not just that corporate bosses rake in as much in a day as many of their workers make in an entire year of hard labor. It is not just that we can no longer talk to anybody local when there is a problem with our phone or our order from a company. It is not just that ordinary people are ignored, disregarded, almost shunned, because the elite really are only comfortable in the company of other elites. It is not just that we can't get an appointment with a doctor unless we have (expensive) health insurance, or can't get that crown we need on the broken tooth because it costs as much as some of us make in half a year.

No. These things are real, they affect us every day, they make us angry every day because we recognize our powerlessness to deal with the highly impersonal Big Business world that has been fostered by the four decades of reaganomics' deregulation, privatization, tax cuts and militarization. But still, the problem goes much deeper than these things.

Our very freedom is threatened. When we are economically powerless, we are also powerless in our lives because we lose our freedom to make choices that are right for us.

• we lose our rights to bargain with our employers (look at how Wisconsin and Ohio have treated their public employees or how WalMart treats its workers and anyone who talks unions),




• we lose the power to improve ourselves by pulling ourselves up by the bootstraps through publicly funded education from grade school through university,




• we are dominated in the marketplace by powerful businesses that use automated systems to turn us off, ignore our calls and letters seeking redress for a mischarge or a poorly done job,




• we lose our jobs, are forced to accept paycuts or furloughs, when the company claims times are tought, yet we watch the same public companies to pay their CEOs millions more

Our freedom to improve ourselves, freedom to choose the kind of work we want to do, freedom to prepare for our retirement and then retire with some security about our future, freedom from worry about whether or not a catastrophic medical emergency will eat up all our savings and leave family without an adequate living--all these freedoms are being threatened today by the concentration of wealth in the hands of an elite few who thereby become emplowered to set the market terms as they choose.

The idea of the "free market" is a bill of goods sold to replace the real concepts of freedom we should be considering. Markets, of course, can only function well for the people where government constraints prevent the owners and managers from setting all the terms to suit themselves, leaving externalities of their profitmaking to be borne by the people. literally ripping them off. The sloganeers have persuaded ordinary Americans to think that the American Dream of freedom is encapsulated in that little bitty notion of a "free market" so that they will unknowingly throw away the big idea of freedom--the freedom to set one's own course in life, in a cooperative society that works to provide those tools.

The reason we need a progressive tax policy--including at the least progressive tax rates with brackets that reach much higher into the stratosphers of the ultra rich (55% for those making $1 million or more annually) ; elimination of the capital gains preference (so that all income is taxed under the same rate structure); and an estate tax with bite (meaning a graduated rate that protects a reasonable nest egg for the next generation while serving as one method of limiting the concentration of wealth)-- is to ensure the freedom of each and every one of us, from rich to poor, from newly arrived immigrant to elderly Native American.

Robert Waldmann

Steve Benen made a graph out of a table from a column by Bruce Bartlett. Bruce Bartlett is an interesting figure -- a heterodox conservative who praises Reagan and criticizes Bush Jr. The figure sure fits Bartlett's line. It shows the effective tax rate on families with median income. Sad to say, Steve Benen's web page is a *.mht ??? and I don't know how to steal the figure [see UPDATE below] so just click.

Bartlett identified the "effective federal income tax rate -- taxes paid as a share of income -- for a family with the median income. The median is the exact middle of the income distribution -- half of families are above and half are below. It's as close as we can get, statistically, to the typical American family."

[UPDATE: I do know how to steal graphics, but you should read the Benen piece as well. Graphic above by Steve Benen, from data presented by Bruce Bartlett. -klh]

It shows an increase up until the election of saint Ronnie, then a decrease, a sharp decrease in 1986, more decline when the GOP took control of Congress, a down tick when Bush was elected and Bartlett still supported him, then a gradual increase as Bartlett became a critic.

Oh how convenient. I describe how he is cheating after the jump.



As anyone who has ever filled out a 1040EZ must know, this is nonsense. Effective tax rates do not depend only on income. The table would be meaningful if Bartlett had calculated the average effective tax rate of families with the median income, but that's not what he said. I suspect that he used a "tax family" with median income and characteristics such that the graph looked the way he wanted.

Of course, Bartlett is talking about the income tax only. The increase in FICA under Reagan doesn't appear. That is par for the course for a Republican.

Less importantly for the median family, he doesn't consider the capital gains tax. However, the average family with median income pays positive capital gains tax (the average of a non negative variable must be positive).

I'm guessing that Bartlett's "median family" has 2 earners and 2 children. I see a big drop when the marriage penalty was reduced.

The average family with median income has less than 2 earners and less than 2 children. The family which pays the median effective tax rate ... I have no idea.

I will now check my guess (starting 5:59 EDT) by clicking a link.

6:00 AM EDT. Yep he lied. The table which appears when I click his link is Entitled "Average and Marginal Income Tax Rates for Four Person Families ..."

That is not "as close as we can get statistically to the typical family."
The Bureau of the Census projected in 1996 that that in 2005 the average number of persons per family would be 3.09 which is rather less than 4.

It does seem that I was wrong about the number of earners. They assume one earner not two. Median income is for four person families.


Now part of what is going on here is that the "Tax Policy Center" is trying to make Reagan look good. However, that isn't all that's going on. They care about what they consider to be normal families. Single adults without children and single mothers with children don't count. Women are assumed to be housewives. The only people that matter are those in families which consist of one working dad, mom and two children. For families with median income single mothers with three children slip into the sampel (lucky duckies). For half median income they don't as it is assumed that there are 2 children in the family for the purposes of the EITC.

I think their prejudices about what is normal is even stronger than their Hackitude as Bush Jr would look better if one considered the marriage penalty.

The only possible response to this post is here.

By divorced one like Bush

Via C & L via CR comes the NYT asking when will the recession be over. They have 11different responses. Roubini is there suggesting we could see an L curve.

We now face a 1 in 3 chance that, if appropriate policies are not put in place, this ugly U-shaped recession may turn into a more virulent L-shaped near-depression or stag-deflation (a deadly combination of economic stagnation and price deflation) like the one Japan experienced in the 1990s after its real estate and equity bubbles burst.

Of course there is one response titled: Stop the Bailouts. Can you guess the ideology? (Hint.)

Calculated Risk highlighted STEPHEN S.ROACH (Chairman of Morgan Stanley Asia), A. MICHAEL SPENCE (Stanford Professor, Nobel prize, economics) and GEORGE COOPER (author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy”). All three came up with 2010/2011. Although, they all noted "if's" as to government action, including the world's governments and maybe lingering effects.

I'll go with the following.

Niall Ferguson is a professor at Harvard and the author of “The Ascent of Money: A Financial History of the World.”

This is a crisis of excessive debt, the end of the Age of Leverage. It will take longer than a few more months to resolve bank and household insolvency, especially with asset prices continuing to fall so rapidly. Even with zero interest rates and huge deficits, Japan suffered a “lost decade” in the 1990s — and that was when the rest of the world was doing well. This recession is taking place as the rest of the world is doing even worse than the United States. The collapse of trade as measured by East Asian export data is petrifying...At the moment, I find it quite easy to imagine two consecutive years of contraction. And I don’t rule out two more lean years after that.

Carmen M. Reinhart is a professor of economics at the University of Maryland.

Counting the months of decline, however, is a narrow gauge of distress. A better metric is the length of time it takes the economy to recover to the level of per capita income at its prior peak.

After the most severe banking crises around the world in the postwar period, the economy has taken an average of four years to return to its previous peak in personal income. After the Depression, it took the United States 10 years.

Wow? Someone basing the issue of the recession and it's conclusion on how much income people have.

Do you think we can get her to consider the split of that income? After all, in that 10 year depression recovery the top 1% share declined from 22.35% to 16.68%. But (big but) in 1936 it popped up to 19.29%, then we had 1937. By 1939 (10 yrs) it was back to 16.18% and never saw anything close to it until 1986's 15.92% (from 12.67the year before). We hit 22% in 2005!

by divorced one like Bush

Let's talk jazz: Still cashing the income inequality
berries, clams, dough, heavy sugar, jack, kale, mazuma, rubes, simoelan, voot. It's all money.

I started this series to develop a simple model of income inequality so that I wouldn't sound like I was chewing gum and people wouldn't get all balled up on the heavy sugar.

The first one presented the model. 100 people, $1000 of total income. 1976: 8.7% of the dough to the One, all the rest of the jack to the Many. 2005: 23% of the sugar to the One, the rest of the voot to the Many. Basically, it showed why income inequality ain't allowing the Many to by orchids. Also, maybe it'll help you know one's onions.

The second post addressed the concerns that the model was to simple. The sugar was heavier, the times were percolating I'm told. Except that the only real issue for my model was that the population would have to increase against the 1000 clams for the model to reflect the coffee made. There was less mazuma for everyone. Oh, and the total dollars to be made up with a tax cut to duplicate the take of 1976 is $1.4 trillion dollars.

In the end, none of this bodes well for the concern about multiplier effects and money velocity. Yet here we are all these plans being put into action to get people spending 'cause that's the problem and the issue still gets no respect. We want to get more kale into the hands of the many, but we aren't taking about anything related to increasing the share of income to the many (which would include the trade issue as Stormy has been hammering it).

HELLO! The reason people have no money is not because their taxes are too high, their health care is too high, their interest rates are too high; THEY NEVER HAD IT TO BEGIN WITH!

So, let's see how much the 99 people of the Many would need in 2005 to have stayed even with their position in 1976.

First here is what the $1000 should be in 2005:
$3,429.93 using the Consumer Price Index
$2,811.66 using the GDP deflator
$3,891.74 using the value of consumer bundle
$3,296.90 using the unskilled wage
$5,013.86 using the nominal GDP per capita
$6,805.40 using the relative share of GDP
My model using actual income data came up with $6940 total, but based on per capita, it was only $5130.

Each of the 99 people had $9.22. In 2005 they would need the following:
$31.62 using the Consumer Price Index
$25.92 using the GDP deflator
$35.88 using the value of consumer bundle
$30.40 using the unskilled wage
$46.23 using the nominal GDP per capita
$62.75 using the relative share of GDP
My model, using per capita income resulted in $39.90.

Interesting No? The total personal income in the model comes out to be pretty close to the GDP per capita and relative share. So, the percolating of the economy did result in the same economic coffee in 2005 as in 1976. Unfortunately for the Many, the semoelan handled is less than the per capita and relative share of GDP. Can you say SCREWED?

My model also resulted in the number of $47.31 for each of the 99. That is the number to make up for the share of income lost to the One. It is essentially the number calculated based on nominal GDP per capita. Or, the unscewed number.

But, these numbers just show that using the percentage split, the One stayed even with the percolating economy and the Many dropped down to something less. It does not show the loss of purchasing. For that, we need to reverse calculate.
For the Many, they have $39.90 each in 2005. In 1976 it looks like this:
$11.63 using the Consumer Price Index
$14.19 using the GDP deflator
$10.25 using the value of consumer bundle
$12.10 using the unskilled wage
$7.96 using the nominal GDP per capita
$5.86 using the relative share of GDP

I think what we are seeing here by looking forward and then backward, is that the Many are earning more for their labor (wage went up), but they are not earning wages comparable to the contribution made to the rising GDP by their laboring. Who knew, Slave Wages is a real wage!

by Divorced one like Bush

So, I'm listening to Saturday Night Fish Fry as I'm composing. It's the blues, though the station is a jazz and folk station. Public broadcasting at it's best! Maybe if the economy sinks enough, we'll return to the big bands and swing. No more solo acts of Rockband. And, maybe I'll be supplementing my income playing rent parties.

You have all heard about the IRS release of the top 400 income earners (pdf) stats? Yup, $105.2 billion combined taxable income.

In the first posting, I showed that, all things being equal, as income share goes down for 99% of the population, there is overall less greenbacks (great tune)in the hands of the Many. The astute AB readers said: What about the fact that there is more water in the pool over time? Yes there is. But is it not six to one, half dozen to the other? Did not every numerical factor that acted to raise the pool of greenbacks in the income pool also act on everything else? Well, of course it would be foolish to think the force of economic nature rains equally on all species of greenbacks.

Just a little aside with the band (stepping aside, laying down the Les Paul, black with a maple finger board for those interested), we (Angry Bear) recently discussed velocity as a factor in giving the thumbs up or down to the stimulus package. I forgot about this money concept. It is part of what I'm trying to relay in my model to the average voter. Being that velocity has to do with how many hands a greenback moves through in a given unit of time or over time, I thought with showing that less greenbacks in the hands of the Many over time, the effect would become evident. I mean, how is it we can be talking about the effectiveness of a stimulus package in terms of it's multiplier effect which jams with velocity and miss that the chance of increasing how fast money moves and/or how much money will move and/or how many times it moves increases when you have more people moving more money than when you have more people moving less money? Why are we talking about giving tax cuts to the greatest number of people instead of the fewest this time as part of the stimulus? Why did we give everyone $600 last year?

Ok, the LP is slung and the Ampeg is cranked.

All things being equal is not so much. From 1976 (the low point of the top 1% share of income) to 2005 the disposable income increased by a factor of 6.94. The $1000 in the model is $6940 in 2005. Unfortunately the per capita income (how much for each person) only increased by a factor of 5.13. So people, we just plain have less to begin with. Thus, the $1000 to be true to my model of a never increasing population of 100 is now $5130 in 2005. What do you think this does for velocity? I bet it explains the “historically” low inflation thus “historically low” interest rates.

Let me keep playing. In 2005 using a constant income, the One gets $230, (23%) the 99 get $7.77 each. It is a ratio of 29.6 to 1. But income increased. I'm going to use the increase that mattered, per capita. Per capita income in 2005 is $5130. The One has $1179.90. The Many get to share $3950.10 for a per capita of $39.90. 99people get to have $39.90 each. 5.13 times more than my constant income model. A ratio of 29.6 to 1. How about that! The only thing not equal in my constant income model is the population.

The drums are pounding a driving blues now. If the income share percentages had remained constant to what they were in 1976 the One would have $446.31 (2.6 X less) and the Many would share $4683.69 for an amount of $47.31 each (1.2 X more).

What do you think works better as a jam for velocity and multiplier effects, 99 people sharing $3950.10 or $4683.69?

Solo time.
From the Center for Housing Policy 2006 report (pdf) I learned that 62.9% of income for all families based on 28 metropolitan areas is spent on housing, transportation, food and medical. Now what would help velocity more, 62.9% of $3950.10 leaving $1465.55 for everything else or $2199.14 for everything else because the 99 had more income? (The $2199.14 is assuming people did not just spend more on housing, transportation, food and medical because they had more.) Or hold the expenditure percentage constant to the income increase, you still have more extra greenbacks to riff with. $272.14 to be exact. In the same report, those earning $20,000 to $50,000 are spending 80.1% of their income on housing, transportation, food and medical. Your turn to solo with the numbers.

Ending riff of tax cut squeals.
Using actual, nominal numbers, the dollar amount that would need to be made up to play a tune as in 1976 by a tax cut to the 99 in 2005 is: $1,493,418,800,000. (1.2 of the nominal 2005 99% income – 2005 99% nominal) One trillion, four hundred ninety three billion, four hundred eighteen million, eight hundred thousand dollars. All in one year (not many are into the long 1/2 hour jams any more). Still thinking the stimulus is just right or too big or not enough tax cuts?
Who played that sour tax cut note? Get them out of the band!

Next time, we'll play some jazz and see what various inflation factors do to the Many.

by Divorced one like Bush
(Updated to correct my decimal point. I'm bad.)

When I talk to others about why we're in the mess we're in from a position of income inequality using numbers like $1,025,000,000,000 per year from the 99% to the 1% does impress them, but as I posted a while ago it is hard to really comprehend such a large scale. I had to come up with a KISS model. This model had to also correct a problem many had when I would tell them that the share of income to the top 1% has increased to around 23%. Often they would equate the increase to the over all increase in the economy. That is, the 1% got 23% more because the economy was 23% bigger.

The solution: Scale it down. I used pennies! (Let's not worry about the cost of a penny to mint being more than a penny is worth.)

100 pennies of income generated. 100 people.

In 1976, the share of income to the top 1% was 8.7% rounding up. You can see where I'm going with this? 1 person got 8.7 pennies and 99 received 0.92 pennies. Well, nobody gets a 0.X penny returned to them when they buy something at the store. Consequently, this just confused the issue some more.

1000 dollars of income generated. 100 people.

In 1976 1 person pocketed $87.00 and 99 people each pocketed $9.22. Cumulatively, the nation sees 1 group (the One) having $87.00 worth of purchasing power and the other (the Many) group having $913.00 of purchasing power. At this point some might say, so what, there is still a total of 1000 dollars of purchasing power. Yes, BUT... The One group may or may not spend it all, the Many will spend something in any given year. No matter what the percentage is of income spent, the Many still move more money into the demand side of the economic engine. For my gear head friends, more air flow. More dollars moving through the throttle body.

Ok Sherman, set the WABAC machine for 2005.

1000 dollars. 100 people

In 2005 the share of income to the One is 23%. (For those wanting a push against Obama I have noted that the fastest rise in income inequality was during the Clinton years. Obama has Clinton years people on staff.)

One pockets 230 dollars. Many pocket 7.77 dollars each. Are you feeling the kiss? The One has 230 dollars of purchasing power. The Many has 770 dollars of purchasing power. Being that we know Many will move more of it's dollars into the demand side of the economy, with this change we have choked the air flow and flooded the fuel. The engine will not rev as high, will not produce as much power, and just like high altitudes where the air is thinner, it will not have the reserve to get you over the mountain. At the same time, the engine is pushing raw fuel out the exhaust. I'm confident the gear heads can explain the analogy.

I'll use this web site to play with the numbers next.

I spent most of the evening reading Underbelly posts, so this link is probably due to Buce:

On Oct. 22, 1986, President Reagan signed into law the Tax Reform Act of 1986, one of the most far-reaching reforms of the United States tax system since the adoption of the income tax. The top tax rate on individual income was lowered from 50% to 28%, the lowest it had been since 1916.

About thirteen years from 1916 to 1929. About thirteen years (plus the Clinton Administration) from 1986 to 2008.

by divorced one like Bush

I should title this: Yeah, it is just like 1929 you freak'n see, hear and speak no inequality monkeys.

I have this pile of income data sorted out from Saez's work (the GDP is BEA). My thoughts regarding our economy is that income inequality (or equality) matters. It matters so much, that it is the all defining focus of government in a democracy. Every policy made should be judged against this goal of ever greater equality as we use the tool called “economy” for the betterment of our lives.

For most (even the tippy-top earners), the biggest share of income is not earned from money, but from labor, whether physical or cognitive. Because of this, there must be effort as reflected in our policy toward regulation and initiatives that continually work to equalize the share of income. I am confident, that just as Cactus showed there is a low and high to top marginal rates correlating with GDP growth rates, the same is true for share of income. That's my thoughts.

I sorted out the share of income in dollars and percentages in the past and have posted them. This time I look at per capita income and compare them to GDP.

Starting at the low point for both groups in 1933, we see $6142/person (16.46% of the total personal income) for the top 1% and $315/person for the rest. The following chart shows the years of income and GDP doubling along with the top's percentage share. I took the starting income and kept doubling it to find the year closest. A + or – means the actual income is before or after the year (between 2 years).
For the top, the number of years to double are as follows: 9,19, 12, 7, 5, 11, 9
For the bottom 99 the number of years to double are: 8, 7, 17, 9, 7, 15,
For GDP the number of years to double are: 8, 5, 11, 11, 8, 7, 12, 13
The bold number is the last doubling before 1976.

If we look at 2005 incomes, it is clear the trend for years to income doubling was increasing for the 99%. For this group, 9 years past the last doubling, there has only been a 34.5% increase where as the top has doubled. It appears that the best income percentage for both the top and the rest is around 10 to 12%. Based on my prior posting, I will say with confidence that once the 1%'ers increase their share to 16% of the income we are screwed. That is because, it was as the 1%'ers passed through the 16% mark as their share declined (the income low point in 1933) that the post 1929 economy started its turn upward. On the other end of this time span, it was 1996 that the 1%'ers passed through the 16% point as their share increased. 1996is the year that the 99%ers income fell below the personal consumption line and has stayed there since. Can you say deficit spending? Another funny thing about the 30's, the second recession, the top 1% hit 19.26% of the income in 1936. The WW2 turn around? The top 1%'ers share finally went below 16% in 1941 and never turned back.

However, here is the meat. Using 1976 as the center point of the range because it is the low point of the share of income for the top 1%, there are 5 times that GDP doubled for an average of 8.6 years per doubling. This during the time that income share was becoming more equal. As income became less equal over the next 32 years, there are only 3 doublings of GDP or once every 10.6 years. Also, the time between doubling is increasing to more than during the prior 43 years.

Now, for the class war aspect. In the first 43 years, the top 1% saw their income double only 3 times (1 every 14.3 yrs) compared to the bottom 99% seeing theirs double 4 times (1 every 10.75 yrs). During the next 32 years, the top 1% has experienced 4 doublings, one every 8 years compared to the 99% experiencing this only twice, one every 11 years.

Here is the graph that illustrates the relationship of shifting income share and GDP growth. Following Spencer's past suggestion, the graph is a logarithmic scale.

Basically, increasing of income was more equal and the economy grew more as the top was losing share. The post 1976 economic policy we have been following has quite frankly been killing our economy. Yeah, it sure benefited the top 1%, they got their's. But, it could not last because, you can not have one group taking more out of the economic growth faster than it can grow. That, boy's and girls is the lesson of the first 43 year compared to the last 32 years. For the first 43 years, GDP doubling was always ahead of the income. For the next 32 years, GDP growth was always behind the income which was do to the top 1%'s share. Their's is the only income that increased faster than the economy. In chart form it looks like this:
First 43 years doubling: GDP 8.6 yrs, 99%'ers 10.75 yrs, 1%'ers 14.3 yrs.
Next 32 years doubling: GDP 10.6 yrs, 99%'ers 11 yrs, 1%'ers 8 yrs.

You know what else this is? It is the difference between reducing debt or increasing debt: Saving or spending tomorrow's money. Unified budget (illegal) or general budget.

So, what should economic policy in a democracy strive to do? Promote more equality in the nation's income which everyone helps to produce thus giving everybody a more equitable rise in their standard of living or promote the top 1%'s growth and the hell with all the rest? The rest being 99% of the population, the overall economic growth, the deficit, quality of life (retirement, health care, free time, better life for future generations) and just plain happier people who don't find a need to fight with everyone else on the planet.

Personally, between this info and my post titled “It's the big one honey, I know it...”,I think it's rather clear exactly what needs to be promoted with policy. In case it's not clear, there is this post “In the Beginning there was Income”.

Such policy if implemented will also act as the stop gap for this current downward trend better than anything proposed so far because it will be returning to the true purpose of an economy in a democracy like ours. Or, we can keep talking in quintiles hiding the truth and pretending that it's just a housing bubble, and people spending to much, and a credit freeze and bad regulation and oil and lack of stimulus spending and it is not really like 1929 and...

by divorced one like Bush

I should title this: Yeah, it is just like 1929 you freak'n see, hear and speak no inequality monkeys.

I have this pile of income data sorted out from Saez's work (the GDP is BEA). My thoughts regarding our economy is that income inequality (or equality) matters. It matters so much, that it is the all defining focus of government in a democracy. Every policy made should be judged against this goal of ever greater equality as we use the tool called “economy” for the betterment of our lives.

For most (even the tippy-top earners), the biggest share of income is not earned from money, but from labor, whether physical or cognitive. Because of this, there must be effort as reflected in our policy toward regulation and initiatives that continually work to equalize the share of income. I am confident, that just as Cactus showed there is a low and high to top marginal rates correlating with GDP growth rates, the same is true for share of income. That's my thoughts.

I sorted out the share of income in dollars and percentages in the past and have posted them. This time I look at per capita income and compare them to GDP.

Starting at the low point for both groups in 1933, we see $6142/person (16.46% of the total personal income) for the top 1% and $315/person for the rest. The following chart shows the years of income and GDP doubling along with the top's percentage share. I took the starting income and kept doubling it to find the year closest. A + or – means the actual income is before or after the year (between 2 years).
For the top, the number of years to double are as follows: 9,19, 12, 7, 5, 11, 9
For the bottom 99 the number of years to double are: 8, 7, 17, 9, 7, 15,
For GDP the number of years to double are: 8, 5, 11, 11, 8, 7, 12, 13
The bold number is the last doubling before 1976.

If we look at 2005 incomes, it is clear the trend for years to income doubling was increasing for the 99%. For this group, 9 years past the last doubling, there has only been a 34.5% increase where as the top has doubled. It appears that the best income percentage for both the top and the rest is around 10 to 12%. Based on my prior posting, I will say with confidence that once the 1%'ers increase their share to 16% of the income we are screwed. That is because, it was as the 1%'ers passed through the 16% mark as their share declined (the income low point in 1933) that the post 1929 economy started its turn upward. On the other end of this time span, it was 1996 that the 1%'ers passed through the 16% point as their share increased. 1996is the year that the 99%ers income fell below the personal consumption line and has stayed there since. Can you say deficit spending? Another funny thing about the 30's, the second recession, the top 1% hit 19.26% of the income in 1936. The WW2 turn around? The top 1%'ers share finally went below 16% in 1941 and never turned back.

However, here is the meat. Using 1976 as the center point of the range because it is the low point of the share of income for the top 1%, there are 5 times that GDP doubled for an average of 8.6 years per doubling. This during the time that income share was becoming more equal. As income became less equal over the next 32 years, there are only 3 doublings of GDP or once every 10.6 years. Also, the time between doubling is increasing to more than during the prior 43 years.

Now, for the class war aspect. In the first 43 years, the top 1% saw their income double only 3 times (1 every 14.3 yrs) compared to the bottom 99% seeing theirs double 4 times (1 every 10.75 yrs). During the next 32 years, the top 1% has experienced 4 doublings, one every 8 years compared to the 99% experiencing this only twice, one every 16 years.

Here is the graph that illustrates the relationship of shifting income share and GDP growth. Following Spencer's past suggestion, the graph is a logarithmic scale.

Basically, increasing of income was more equal and the economy grew more as the top was losing share. The post 1976 economic policy we have been following has quite frankly been killing our economy. Yeah, it sure benefited the top 1%, they got their's. But, it could not last because, you can not have one group taking more out of the economic growth faster than it can grow. That, boy's and girls is the lesson of the first 43 year compared to the last 32 years. For the first 43 years, GDP doubling was always ahead of the income. For the next 32 years, GDP growth was always behind the income which was do to the top 1%'s share. Their's is the only income that increased faster than the economy. In chart form it looks like this:
First 43 years doubling: GDP 8.6 yrs, 99%'ers 10.75 yrs, 1%'ers 14.3 yrs.
Next 32 years doubling: GDP 10.6 yrs, 99%'ers 16 yrs, 1%'ers 8 yrs.

You know what else this is? It is the difference between reducing debt or increasing debt: Saving or spending tomorrow's money. Unified budget (illegal) or general budget.

So, what should economic policy in a democracy strive to do? Promote more equality in the nation's income which everyone helps to produce thus giving everybody a more equitable rise in their standard of living or promote the top 1%'s growth and the hell with all the rest? The rest being 99% of the population, the overall economic growth, the deficit, quality of life (retirement, health care, free time, better life for future generations) and just plain happier people who don't find a need to fight with everyone else on the planet.

Personally, between this info and my post titled “It's the big one honey, I know it...”,I think it's rather clear exactly what needs to be promoted with policy. In case it's not clear, there is this post “In the Beginning there was Income”.

Such policy if implemented will also act as the stop gap for this current downward trend better than anything proposed so far because it will be returning to the true purpose of an economy in a democracy like ours. Or, we can keep talking in quintiles hiding the truth and pretending that it's just a housing bubble, and people spending to much, and a credit freeze and bad regulation and oil and lack of stimulus spending and it is not really like 1929 and...

More Christmas cheer by Bruce Webb (cross posted at dKos)
This is in response to some comments on Kos's Track Santa post (about NORAD 'tracking' Santa and putting it up on their website).

Well, the guy dresses in all red (24+ / 0-)
and gives away the products of his factory's labor to those depending on their needs.

Of course NORAD was going to track him. I'm surprised they didn't lob the occasional Nike missile at him back in the day.

Effin' Commie.

by Robobagpiper on Wed Dec 24, 2008 at 08:45:02 AM PST
[ Reply to This |Recommend ]
Spreadin' the wealth around. (14+ / 0-)
Why does Santa hate the real America?

DEPENDING ON THEIR NEEDS? Not in this country. Rant below the fold.
In my experience children in lower-income households figure out the Santa thing somewhat earlier than kids from more affluent families. Otherwise they would go crazy asking the question that titles this diary.

Because when you get back to school after Christmas vacation the first question you ask is "What did Santa bring you?" And the rich kids, the ones that already have everything anyway are always the ones who get the most and the coolest stuff. I don't know that anyone is trying to deliver this message conciously or even that kids consciously understand it. But it serves to socialize class differences in a Social Darwinist kind of way. After all if God didn't want rich people to be rich why are they rich? Obviously they must deserve it because of their higher level of education and skill or something and that extends to their children. Now I think even the youngest poor kid understands that the rich kid gets better birthday presents, you have to be pretty dim not to understand the difference between your parents struggling to make rent and pay bills and the kid who lives in the big house on the hill. But why the hell does Santa have to pile on?

Robobagpipers comment was funny but in reality is painfully off the mark. Far from being a socialist devoted to the concept of 'From each according to his ability, to each depending on their needs' instead Santa ends up as the patron saint of Income Inequality.

My family was kind of lower middle-class but we always had nice Christmas's. Lots of good food and nice gift exchanges on Christmas Eve plus some bonus presents from Santa on Christmas morning. Whereupon we got in the car and visited my Grandmother who lived sixty miles away with her daughters and their children plus an infant great-grandson in pretty dire poverty. I learned pretty early on not to discuss what Santa brought me with my cousin Joe because Santa didn't bring him jack.

I am not suggesting ruining Christmas and the belief in Santa for the really small kids. But you need to think about the message you are sending after your kid reaches school age, particularly if you live in a town or city with a fairly wide range of income inequality. Because whether your kid comes home and asks 'Why does Santa like me and hate Billy? Was he naughty?' or worse 'Why does Santa like Billy and hate me? Was I naughty?' you might be left stammering. At least if you believe in social and economic justice the other 364 days a year.

More Christmas cheer by Bruce Webb (cross posted at dKos)
This is in response to some comments on Kos's Track Santa post (about NORAD 'tracking' Santa and putting it up on their website).

Well, the guy dresses in all red (24+ / 0-)
and gives away the products of his factory's labor to those depending on their needs.

Of course NORAD was going to track him. I'm surprised they didn't lob the occasional Nike missile at him back in the day.

Effin' Commie.

by Robobagpiper on Wed Dec 24, 2008 at 08:45:02 AM PST
[ Reply to This |Recommend ]
Spreadin' the wealth around. (14+ / 0-)
Why does Santa hate the real America?

DEPENDING ON THEIR NEEDS? Not in this country. Rant below the fold.
In my experience children in lower-income households figure out the Santa thing somewhat earlier than kids from more affluent families. Otherwise they would go crazy asking the question that titles this diary.

Because when you get back to school after Christmas vacation the first question you ask is "What did Santa bring you?" And the rich kids, the ones that already have everything anyway are always the ones who get the most and the coolest stuff. I don't know that anyone is trying to deliver this message conciously or even that kids consciously understand it. But it serves to socialize class differences in a Social Darwinist kind of way. After all if God didn't want rich people to be rich why are they rich? Obviously they must deserve it because of their higher level of education and skill or something and that extends to their children. Now I think even the youngest poor kid understands that the rich kid gets better birthday presents, you have to be pretty dim not to understand the difference between your parents struggling to make rent and pay bills and the kid who lives in the big house on the hill. But why the hell does Santa have to pile on?

Robobagpipers comment was funny but in reality is painfully off the mark. Far from being a socialist devoted to the concept of 'From each according to his ability, to each depending on their needs' instead Santa ends up as the patron saint of Income Inequality.

My family was kind of lower middle-class but we always had nice Christmas's. Lots of good food and nice gift exchanges on Christmas Eve plus some bonus presents from Santa on Christmas morning. Whereupon we got in the car and visited my Grandmother who lived sixty miles away with her daughters and their children plus an infant great-grandson in pretty dire poverty. I learned pretty early on not to discuss what Santa brought me with my cousin Joe because Santa didn't bring him jack.

I am not suggesting ruining Christmas and the belief in Santa for the really small kids. But you need to think about the message you are sending after your kid reaches school age, particularly if you live in a town or city with a fairly wide range of income inequality. Because whether your kid comes home and asks 'Why does Santa like me and hate Billy? Was he naughty?' or worse 'Why does Santa like Billy and hate me? Was I naughty?' you might be left stammering. At least if you believe in social and economic justice the other 364 days a year.