The Dow Jones Industrial Average

[dcarrigg]

Re: The Dow Jones Industrial Average

DC, after the savings and loan crisis over 1,000 were convicted.

After the 2008 crash one loan person went to prison. Why not many more?

Why were the banksters bailed out? The money was supposed to go to infrastructure to provide middle class jobs. The infrastructure is continuing to collapse around us.

If we don't replace these two corrupt parties and their radical wings conditions will get worse. There is not public service anymore, just feeding off the public trough by the corrupt plotiticians (yes plot) and their donors.

I largely agree that the wealthy have become increasingly untouchable and above the law over the past few decades. No argument there.

The question still remains, though: If tax cuts are so great for the middle class, then how did it come to pass that after decades of successive tax cuts precisely zero wealth or income has trickled down to them?

And if the last dozen or so experiments with tax cuts did nothing to improve the lot of the middle class, then why would you expect the 13th round to go any differently?

I honestly don't understand it. It's an experiment we have run again and again, always with the same results, and people still believe that this time will be different.

I suppose people tried to turn lead into gold for centuries to no avail, so maybe this is no different?

[vt]

Re: The Dow Jones Industrial Average

The Kennedy tax cuts worked, but then we wrongly got into the Vietnam quagmire.

The Reagan tax cuts worked but that was followed by the rise of the financial industry that still strangles us. We need to put out the FIRE.

Demographics are largely responsible for the middle class not making progress but that will reverse in a couple of years so there is great hope for the next couple of decades.

We need to innovate in a number of areas. Here is a good article of how to improve education:

http://www.mauldineconomics.com/fron...king-education

[dcarrigg]

Re: The Dow Jones Industrial Average

The Kennedy tax cuts worked, but then we wrongly got into the Vietnam quagmire.

The Reagan tax cuts worked but that was followed by the rise of the financial industry that still strangles us. We need to put out the FIRE.

Demographics are largely responsible for the middle class not making progress but that will reverse in a couple of years so there is great hope for the next couple of decades.

We need to innovate in a number of areas. Here is a good article of how to improve education:

http://www.mauldineconomics.com/fron...king-education

Actually, this helps me quite a bit to understand your thinking. It sounds like to me that your hypothesis is that all the tax cuts of the past few generations created massive wealth for the middle class, but the middle class never got to get their hands on any of that wealth, because it was somehow immediately diverted away to fund war efforts and the financial industry before they could touch it.

It's an interesting hypothesis. But it does lead me to ask you one more question:

Why do you expect this Administration's tax cuts to turn out any differently when the Treasury Secretary comes from Goldman Sachs and the Chief of the Council of Economic Advisors is the former President of Goldman Sachs?

[thriftyandboringinohio]

Re: The Dow Jones Industrial Average

Great discussion folks.
VT, I think you make an excellent summary of one central idea when you say this:

"... you are not going to help most of the poor until they develop better habits, make better health decisions, begin to value education more, and emulate working and middle class families that are successful. .."

I hold that there is no real hope of changing these people, based on my experience with friends and family who fit that description.
It will never happen.
A substantial fraction of human beings are

- dull witted
- undisiplined
- unhealthy
- lazy
- prone to addiction

If you will grant my premise, then we face a question. What will we do with your cousin who has always been stupid, foolish, and lazy?
I prefer we pass out a bit of food and housing and healthcare, enough for a meager existence.
Further, I prefer to take the cost of that from the winners of the economic contest that is our economy, the top 10% of earners, which includes me.

In the U.S. now we allow entire industries to thrive that focus on selling poor folks terrible products that no sensible person would ever purchase. Payday loans at 600% APR. Junk medical insurance plans that will never pay for anything. Horrible deals on gas and electric power utilities. Subprime credit of various sorts. Buy-here-pay-here car lots. Cigarette shops selling roll-em-here to avoid tobacco tax.
Over my lifetime I've seen a host of regulations stripped away that once protected idiots from these predatory practices, each regulation taken away in the name of jobs and competition.
We created a minefield of temptations and pitfalls for the desperate and foolish to fall into, which makes the whole situation worse.

One of my local congress members, Representative Pat Tiberi, just announced he will resign to become the CEO of the Ohio Business Round Table.
Its a policy group comprised of Ohio CEOs pushing for business friendly laws.
The retiring CEO received $815,737 annual compensation to run this tax-exempt lobbying group last year.

If Mr. Tiberi pays half his new salary in taxes and must somehow make ends meet with just $400K of take home pay each year I'm OK with that.
It's not vilifying the rich. It's realizing that enough is enough.

[vt]

Re: The Dow Jones Industrial Average

If they go after corruption there is a chance to begin the shift.

I'm very disappointed in the direction of weakening an already watered down fiduciary rule. All financial advisors should be a fiduciary for all assets. There seems little hoe for putting out the FIRE.

[DSpencer]

Re: The Dow Jones Industrial Average

Great discussion folks.
VT, I think you make an excellent summary of one central idea when you say this:

"... you are not going to help most of the poor until they develop better habits, make better health decisions, begin to value education more, and emulate working and middle class families that are successful. .."

I hold that there is no real hope of changing these people, based on my experience with friends and family who fit that description.
It will never happen.
A substantial fraction of human beings are

- dull witted
- undisiplined
- unhealthy
- lazy
- prone to addiction

If you will grant my premise, then we face a question. What will we do with your cousin who has always been stupid, foolish, and lazy?
I prefer we pass out a bit of food and housing and healthcare, enough for a meager existence.
Further, I prefer to take the cost of that from the winners of the economic contest that is our economy, the top 10% of earners, which includes me.

We already do provide enough for a meager existence. I assume you've seen Idiocracy? What happens when that cousin has 5 kids that face an uphill battle to not end up like their parents? How many become productive members of society?

Despite many differences of opinion, I sympathize with many of dcarrigg's views on the middle class and growing inequality. However, my fear is that to simply tax the rich and give to the middle class will end up destroying the middle class and enlarging the class of people who rely on subsidies to survive. A real middle class shouldn't require supplemental income in order to survive. People doing middle class jobs should feel like they are contributing members of society, not dependents of the rich and government handouts.

I don't think there is an easy solution. A big problem seems to be that there is simply not enough demand for the supply of workers who can do middle class jobs. That in turns pushes down wages. How do we fix that?

[dcarrigg]

Re: The Dow Jones Industrial Average

Despite many differences of opinion, I sympathize with many of dcarrigg's views on the middle class and growing inequality. However, my fear is that to simply tax the rich and give to the middle class will end up destroying the middle class and enlarging the class of people who rely on subsidies to survive.

I actually think this is a productive road to walk down for a moment.

So if it's not too presumptuous for me to hop in again here, I'd like to.

A real middle class shouldn't require supplemental income in order to survive. People doing middle class jobs should feel like they are contributing members of society, not dependents of the rich and government handouts.

Believe it or not, dspencer, this is another area in which we largely agree. It's an affront to basic republican principals--be it Polybius or Paine, Plunket or Petit. I feel that same visceral distaste for dependence you do.

I don't think there is an easy solution. A big problem seems to be that there is simply not enough demand for the supply of workers who can do middle class jobs. That in turns pushes down wages. How do we fix that?

Let's try a thought experiment out for just a minute.

Take everything you know about economics. Now pretend you don't know it. Just for a moment.

In that moment, pretend that supply and demand do not meet equilibrium. Pretend that they do not exist in nature as you normally would believe they do. Pretend they are just a theoretical construct that doesn't actually reflect reality that well and are not as important as you otherwise would think. Let them wash away. Only for a moment.

Now, briefly, pretend labor is not a commodity like oil or corn or pig bellies. Pretend labor is instead simply the manner in which most people spend their waking days. Pretend this manner is prescribed by a series of laws and institutions and people with power. We'll call the laborers Proles and the people with power who prescribe the manner in which the Proles must spend their lives Patricians in this thought experiment, just to make it easy.

Now, pretend further that there is nothing natural about this arrangement. Pretend that the whole activity of labor itself, as we know it today in its modern form that we call "having a job," is an invention from around the time the Pligrims hit Plymouth Rock or something. The exactitudes of time aren't important. Just know that it's not so ancient as to be certainly a natural 'human' way of existence, but old enough that it might feel that way to most Proles.

Now, pretend that this unnatural and invented manner that institutions and powerful Patricians prescribe that the Proles should spend their day also entails a bit of brainwashing. Say these Patricians want to train the Proles to obey them and not to think for themselves. So say decide to set up the manner in which they spend must spend their waking-day like an authoritarian dictatorship. Totally top-down, pyramidal organizational structures. Each Prole has a boss, who then has a boss, reaching up eventually to a Patrician who directs their activity. And if they do not show up in good health and on time for these activities, they may lose their right to food, shelter, or even end up locked in a cage.

Now, imagine, for a moment, that the Patricians were so good at making the Proles forget that they are totally dependent on the Patricians for a paycheck, that they convince the Proles that they are actually equal participants in a contract for their labor. That is, they convince the Proles that they are independent agents, totally free. In fact, they let the proles apply to different Patricians and even allow them to beg for more money for the labor they do. But the key is to convince them that they earned that money naturally. Imagine the Patricians want the Proles to believe they are not totally and 100% dependent on the Patricians in this scenario for everything from their food to their shelter to their very freedom itself.

In that thought experiment, is there any mystery why there is always unemployment? Is there any mystery why the Proles will never be paid enough for any substantial proportion of them to live independently of the Patricians for any substantial amount of time? Is the first division of goods in society equitable and fair? Or is a major (not exclusive) function of the institution of labor itself just an invention to force the Proles to be subservient and pliable agents of the Patricians?

And if you think one last imaginary thought as you come back to reality and remember all you know about supply and demand, think about this: There are great and simple answers from an institutional perspective. Even if there is no good answer from a market perspective.

[thriftyandboringinohio]

Re: The Dow Jones Industrial Average

We already do provide enough for a meager existence. I assume you've seen Idiocracy? What happens when that cousin has 5 kids that face an uphill battle to not end up like their parents? How many become productive members of society?

Despite many differences of opinion, I sympathize with many of dcarrigg's views on the middle class and growing inequality. However, my fear is that to simply tax the rich and give to the middle class will end up destroying the middle class and enlarging the class of people who rely on subsidies to survive. A real middle class shouldn't require supplemental income in order to survive. People doing middle class jobs should feel like they are contributing members of society, not dependents of the rich and government handouts.

I don't think there is an easy solution. A big problem seems to be that there is simply not enough demand for the supply of workers who can do middle class jobs. That in turns pushes down wages. How do we fix that?

Thanks DSpencer.
I appreciate your comments and agree with most of them.
Especially your observation that we may not need all the billions of working age people at a steady job each day, and probably don't have enough meaningful work that all of them can earn a good middle class wage at a job, in the traditional sense.

[jk]

Re: The Dow Jones Industrial Average

although i share everyone's distaste for dependency, i can't help but wonder why we are so focused on that and relatively avoidant of the myriad of institutionalized benefits which flow to the wealthy. when warren buffet pays tax at a lower rate than his secretary why do we prefer to worry about the possibility we may be supporting the undeserving poor? which of these is really the bigger problem? which is visible and spotlighted, and which is hidden from our view? [hint: we have not, and will never, see donald trump's tax returns.]

[DSpencer]

Re: The Dow Jones Industrial Average

although i share everyone's distaste for dependency, i can't help but wonder why we are so focused on that and relatively avoidant of the myriad of institutionalized benefits which flow to the wealthy. when warren buffet pays tax at a lower rate than his secretary why do we prefer to worry about the possibility we may be supporting the undeserving poor? which of these is really the bigger problem? which is visible and spotlighted, and which is hidden from our view? [hint: we have not, and will never, see donald trump's tax returns.]

Is there any proof that buffet's claim is even true?

Regardless, anecdotes aside, what is the point? Is the belief that poor and middle class people are paying the majority of taxes? Is there evidence that this is true?

https://taxfoundation.org/summary-la...a-2016-update/

• The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
• In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
• The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
• The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

You can still believe it's not progressive enough, but it's misleading to pretend that rich people are somehow paying less than the poor and middle class.

[DSpencer]

Re: The Dow Jones Industrial Average

And if you think one last imaginary thought as you come back to reality and remember all you know about supply and demand, think about this: There are great and simple answers from an institutional perspective. Even if there is no good answer from a market perspective.

Such as?

[thriftyandboringinohio]

Re: The Dow Jones Industrial Average

...You can still believe it's not progressive enough, but it's misleading to pretend that rich people are somehow paying less than the poor and middle class....

Quite right.
A related question might be asked - "even though the rich pay more, are they paying enough?"
Arithmetic tells us that as disparity of income and wealth increases, disparity of tax payments must also increase.
As the 1% gets closer and closer to owning nearly everything, they must get closer and closer to paying for nearly everything.

The minimum cost of living is fixed. As a percentage of total income it fades away for the 1%
The poorest 50% of Americans are close to that subsistence level, where they have no money left to pay more income taxes after they purchase food, shelter, clothing, car, and medicine.
Any plans for the bottom half pay more probably won't work, because you can't get blood from a stone.
Unless we get meaningful real adjusted wage growth for the bottom 90%
The famous discussions about the "lucky duckies" in the "non-taxpaying class" seem to overlook that.
Claims that the richest 5% of Americans suffer unfairly are hard to accept because those folks are very comfortable.

Also it can be misleading to look only at income taxes without FICA taxes, sales taxes, state and local taxes.
The graph above makes that mistake. It implies that the bottom 50% of earners pay just 3.5% of their income in taxes.
In reality they spend another 7% on FICA, bringing their burden to 10.5% of income. Then they spend a large fraction of their remaining take home pay on things subject to sales tax at 7% or so.
I don't have the data. Perhaps someone here can find us a graph similar to the one above that shows all taxes as a percentage of income across the income distribution.

[jk]

Re: The Dow Jones Industrial Average

Is there any proof that buffet's claim is even true?

Regardless, anecdotes aside, what is the point? Is the belief that poor and middle class people are paying the majority of taxes? Is there evidence that this is true?



You can still believe it's not progressive enough, but it's misleading to pretend that rich people are somehow paying less than the poor and middle class.

try adding in fica, etc.

[dcarrigg]

Re: The Dow Jones Industrial Average

Such as?

Let your imagination run wild. End overtime exemptions. Change overtime to 35 hours from 40. Change collective bargaining rules. Repeal the Taft-Hartley Act of 1947. Ban non-compete agreements and other restrictive covenants on employment. Change minimum wages, maybe even stagger them by age. Change tax rates. Increase trade adjustment assistance. Expand the WARN Act of 1988. Loosen the labor management reporting and disclosure act of 1959. Strengthen the protections of ERISA. Repeal the Small Business Jobs Protection Act of 1996. Enforce the Sherman and Clayton Anti-Trust Acts more vigorously. Spend half as much effort on international labor agreements as we do on international climate and trade agreements...And that's just playing with existing laws. Never-mind inventing new ones. The 5-day, 40-hour workweek only seems normal because it was set forth in law in 1938. There's nothing natural, and there's even nothing market-based about it. It's a law. Created by man. Amendable by man. Even if you insist on thinking of things in terms of a market perspective, generally what's being supplied and demanded are FTEs, not individuals. It's fairly trivial to alter the nature of the FTE to reshape supply and demand of the suckers, even if you insist on thinking in that direction.

[Thailandnotes]

Re: The Dow Jones Industrial Average

I don't have the data. Perhaps someone here can find us a graph similar to the one above that shows all taxes as a percentage of income across the income distribution.

Total taxes as a percentage of income. I would like to see 50 state-by-state graphs similar to this one.