Income Inequality: So What?

[thriftyandboringinohio]

A conservative scholar questions whether the US really has an inequality problem

Quartz: So let’s start really broadly. Is increasing income inequality in the United States a problem?

Winship: Maybe? There are some empirical questions in the social sciences that are very hard to answer convincingly, and this one of them. I wouldn’t make strong claims that inequality is not a problem, but I’ve spent quite a bit of time arguing that there isn’t really good evidence that it is...

Full article
https://qz.com/1334456/a-conservativ...ality-problem/

[dcarrigg]

Re: Income Inequality: So What?

A conservative scholar questions whether the US really has an inequality problem
Full article
https://qz.com/1334456/a-conservativ...ality-problem/

I was in NYC in the autumn of 2011. The police had mobile sniper units on scissor-jack bucket-platforms that popped up out of armored cars, thousands more cops rode horses or motorcycles or launched teargas. Police helicopters whirred overhead. I don't know how many marched in the streets. Maybe 100,000 or so. The city arrested about 2,500 of them and settled another $2 million or so in police brutality lawsuits.

Overall, it remained remarkably peaceful. But inequality was the cause du jour. And it has only gotten worse since 2011. The next outbreak of civil unrest will be even louder. It's all circuses, no bread. Dangerous bet for kleptocrats to assume people will pay more attention to the show than their own hunger pangs.

I think for a lot of these people, Russia is the model. This isn't some big anti-Russia spiel or intelligence theory. I just think a country run with an iron fist by billionaires with no establishment clause, no separation of church and state, extensive laws against sexual and religious and racial minorities, a flat tax, etc. etc. is the new American Dream now for the Americans who've already got it all. The only difference is in the people/culture. We'll see what kind of fight the plebs can put up.

[thriftyandboringinohio]

Re: Income Inequality: So What?

...Russia is the model....a country run with an iron fist by billionaires with no establishment clause, no separation of church and state, extensive laws against sexual and religious and racial minorities, a flat tax... is the new American Dream ... for... Americans who've...got it all... We'll see what kind of fight the plebs can put up.

I think you are correct. I posted this because it's a great insight to the best argument that can be made to advocate for the new gilded age of robber barrons.

If one carefully cherry picks the data and carefully words the questions then inequality can be shown to be really no problem at all. Any credible study that shows otherwise is dismissed because results are all over the map and there are no clear conclusions.

Scott Winship tells a beguiling story that any conservative or libertarian would really like to believe. He delivers the argument in a soft and kindly tone that makes the audience want to agree with such a learned and reasonable person.

The article helps the oligarchs convince us we should not be concerned that they are on a course to own it all and control it all.

[vt]

Re: Income Inequality: So What?

The better question: is there opportunity inequality?

Study rich people. Yes some had inheritances and/or found ways to game the system.

But a good number failed a number of times before becoming successful. A number also came from very humble beginnings, without education or even intact family.
They took risks, sometimes losing their entire net worth. But they found a way to come back.

Does opportunity still exist? I believe it does and there are ways for almost anyone to take advantage of, if the desire for very hard work at times and time commitment.

[dcarrigg]

Re: Income Inequality: So What?

The better question: is there opportunity inequality?

Study rich people. Yes some had inheritances and/or found ways to game the system.

But a good number failed a number of times before becoming successful. A number also came from very humble beginnings, without education or even intact family.
They took risks, sometimes losing their entire net worth. But they found a way to come back.

Does opportunity still exist? I believe it does and there are ways for almost anyone to take advantage of, if the desire for very hard work at times and time commitment.

Who on the Forbes 400 had parents and/or grandparents/guardians worth less than 7 figures in property? Maybe Oprah? I can't think of anyone else that even has a shot. I mean, let's see:

1. Jeff Bezos: Parents owned millions worth of ranch land--500 square miles worth in a massive operation nearly the size of my state.
2. Bill Gates: Father was partner in a huge law firm. Made millions. Grandfather was a national bank president. Mother was on the board of a major bank and the national United Way.
3. Warren Buffet: Father was a Congressman worth millions who owned an investment firm and fought against the New Deal.
4. Mark Zuckerberg: Grew up a millionaire in pricy part of New York; went to Phillips Academy then Harvard. Parents were millionaire owners of dental and psychology practices.
5. Larry Ellison: Maybe a contender. Was adopted. Adopted father was a Chicago real estate mogul, though.
6. Charles Koch: Inherited his money and company from father Fred Koch.
7. David Koch: Ditto
8. Michael Bloomberg: I believe his dad was a real estate agent who also ran development companies and owned a bunch of small apartment complexes in Boston. Millions at least.
9. Larry Page: Maybe a contender. Parents were both computer science professors who hooked him up with private schooling and cutting edge tech and software most couldn't afford.
10. Sergey Brin: Again here, might count: Folks were bigwigs in the USSR. Got permission to leave. His father was a math professor, mother was a NASA researcher.
11. Jim Walton: Daddy founded Walmart
12. Robson Walton: Ditto
13. Alice Walton: Ditto
14. Sheldon Adelson: OK. First one that clearly counts. Grew up in Dorchester, dad drove taxis, grandpa was a coal miner.
15. Steve Ballmer: Dad was Ford royalty, sent him to fancy school in Europe as a kid. Forget what mom did, something fancy there too. Millions and millions.
16. Jacqueline Mars: Heiress to the candy fortune.
17. John Mars: Ditto.
18. Phil Knight: Dad owned the Portland newspaper and a law firm, I think. Money there.
19. Michael Dell: Mom was an investment banker, dad was an orthodontist. Grew up very rich.
20. George Soros: Famously a protégé of Karl Popper, parents published books and were lawyers I believe.
21. Elon Musk: Daddy owned a colonial African emerald mine in Zambia and sent him to the finest whites only all boys private schools.
22. Paul Allen: Parents inherited big money, I believe. They were both librarians, but had a lot time off to globe-trot and got him into the ultra-elite Lakeside school with Gates.
23. Carl Ichan: Here's the second sure one. School teacher and clergy for folks. Made his money on Wall Street banking.
24. James Simmons: Father owned a big shoe factory in Massachusetts. Grew up a millionaire.
25. Laurene Powell Jobs: Interited fortune from husband. Husband was adopted too, but neighbors with Bill Hewlett (of Hewlett Packard) who mentored and financed him.

I mean, we can keep going. There's the top 25. Maybe 2 of them actually come from what I might call standard middle-class backgrounds. Maybe 4 more come from upper-middle-class backgrounds with access to people and equipment and resources that 99% of people don't have. The other 19/25 grew up millionaires or better.

The odds aren't looking good for the Horatio Alger story here.

[jk]

Re: Income Inequality: So What?

last time i read an article about it, social mobility was lower in the u.s. than in europe.

[vt]

Re: Income Inequality: So What?

Yes some had a head start, and I stated that. however a sizable number came from humble beginnings.

Your information on Soros, Bezos, and Ellison appears to be incorrect:

Here are the facts on Jeff Bezos. His real father had a failed small business and abandoned the family when Jeff was three. Jeff's stepfather was a cuban immigrant who taught himself English then went to work at Exxon.

https://www.businessinsider.com/jeff...father-2013-10

We know Steve Jobs came from a broken home.

https://www.businessinsider.com/bill...ement-house-18


This list has a few repeats from the one above but adds some different names:

https://www.cnbc.com/2017/09/11/10-b...dirt-poor.html


Yet another list with a few repeats but the rest new names:

https://www.businessinsider.com/twen...-17-billion-10


There are now more self made billionaires and less inherited ones than before:

https://www.forbes.com/sites/afontev.../#77b3d0183369

[dcarrigg]

Re: Income Inequality: So What?

I'm rattling these off from memory. Apparently it was Bezos' grandfather who had the giant Texas ranch, not his father. Still brought him up extremely wealthy. A rare gift to have a guardian with multiple square miles of land. I know the Soros and Popper story well. Times were certainly hard come the Nazi invasion. Still think his folks operated as publishers and lawyers. They put out Literary World Magazine and I believe published novels as well. I also think they were lawyers, although that's not quite as lucrative in mainland Europe as it tends to be in English-speaking countries. Point is, he wasn't growing up middle class. Think I'm right about Ellison too. His father was an accountant by trade, but made most of his money in real estate, at least enough to bring him up on the north side of Chicago and send his son off to California to find himself in a fancy new Thunderbird after he dropped out of college. Better than working class, that's for sure.

Yes, broken homes and family tragedies are common. Very wealthy people both commit more and are more often victims of violent crime, divorce, and tragedy.

But Forbes desperately stretches the definition of "self-made." For instance, that link you provide says Forbes "scores self-madeness" from 1 to 10, where 1 means you did nothing to make money, and 10 means you came from nothing and did it all yourself.

You know what 7 is? "Self-made who got a head start from wealthy parents and moneyed background: Rupert Murdoch" Rupert literally inherited News Corp (LTD) from his father, Sir Keith Murdoch. He left Oxford to come back and take over the company after his father died. This is what Forbes calls a 7 on the self-made scale.

Here's what they say about number 8: "Self-made who came from a middle- or upper-middle-class background: Mark Zuckerberg."

Zuckerberg went to Phillips for crying out loud. The Exeter campus--with over a billion dollar endowment. The school from John Knowls' A Separate Peace. Tuition is $50k per year. Alumni include Daniel Webster, Franklin Pierce, Jay Rockefeller, Joseph Coors, Gore Vidal, Tom Steyer, Michael Lynton, Ulysses Grant Jr, Robert Lincoln, John Irving, and Bradley Palmer. The other Phillips Academy campus down the road at Andover had George H.W. and George W. and Jeb Bush, Lincoln Chafee, the Olsen Twins, John Forbes, Robert Stearns, Benjamin Spock, Christopher Wray, Bill Belichick, etc. etc. This is not a middle class high school. Not even upper middle class. Things you witness at that boarding school alone are probably worth substantial sums of money.

I mean, if 1 on the list is inherited money and did nothing, 10 is supposidly self-made, and one of the 0.01% of American kids who go to the most elite boarding high school in the country are considered an 8, then what does that say about how Forbes defines "self-made?"

So what's 9, you ask? "Self-made who came from a largely working-class background; rose from little to nothing: Eddie Lampert" Eddie Lampert's father was a partner at the NYC law firm Lampert and Lampert, which did securities law. His father did die when he was 14. But he didn't die broke. He got tapped for Skull and Bones at Yale. That doesn't happen to poor kids who get into Yale. He was of course handed a job at Goldman working for Robert Rubin right out of college, and from there became partner in a hedge fund. People who grow up with fathers who are partners in Wall Street law firms then go to Yale and get tapped for Skull and Bones and a job at Goldman are not "self-made men who came largely from a working class background." Sorry. Working class does not equal daddy the law firm partner bigwig to me.

10 is Oprah. Oprah is the very rare exception in a number of ways.

But most of these people love to make themselves out to have had rougher or harder upbringings than they really did. It fits their own internal "I made this" narrative. But it just doesn't hold up to scrutiny in all but the rarest of cases.

[vt]

Re: Income Inequality: So What?

Sure there have always been kids from middle class or upper middle class that had a head start, but there are also a good number of billionaires and thousands of millionaires that came from modest beginnings and even extreme poverty. Opportunity exists for those willing to use it.

Bezos grandfather had a ranch in south Texas, but wasn't that rich when Jeff Bezos was a kid. Jeff actually increased the size of the ranch 12 fold to make it large. His grandfather did teach him some valuable lessons. His mother was only 17 when Jeff was born, and she had a low level job.

You mention Sam Walton's kids with their big inheritances. But you neglected to say that founder Sam Walton was raised in poverty and built Walmart from nothing.

Still wrong about Ellison:

"I'll never complain again about living in a bad neighborhood, after moving from the Lower East Side of Manhattan to a still-worse neighborhood on the South Side of Chicago," said Ellison in an interview posted on the Academy of Achievement website. "After my ninth month, I kept my mouth shut about the neighborhood."
"A 1997 Vanity Fair profile on Ellison described his childhood home as a "cramped walk-up apartment." According to the article, Ellison was raised by his great-aunt and great-uncle, who was once successful in real estate but lost everything in the Depression."

[dcarrigg]

Re: Income Inequality: So What?

That ranch was still massive. Several dozen square miles at least. Worth millions easily.

Vanity Fair profile aside, I'm pretty sure his 'dad' was into real estate and made some pretty good money, and I know I read that he drove from Chicago to California in a brand new Thunderbird after he dropped out of college. I don't know any middle class kid who has the money for a brand new car the day they drop out of college. Something about his telling of the story and the actual facts probably don't jibe that well. Like I said, a lot of people have very deep victim complexes and feel the need to embellish about how tough their upbringing was to justify their current lifestyles.

[vt]

Re: Income Inequality: So What?

Yeah, but people always demonize the rich, or even the guy down the street that worked hard and was able to have a comfortable debt free recovery.

We do see a good number of billionaires led by Buffett and Gates, who are going to give away almost all their wealth. Plus a number of these and mere millionaires are creating more good jobs to help raise the standard of living.

The charity of Buffet/Gates and their billionaire buddies will do more for the poor dollar for dollar than any other government program I know. The government doesn't create jobs, and the money in anti poverty programs is watered down before it gets to the poor.

My stint in anti poverty as a Vista Volunteer did more for the poor dollar for dollar than any high paid, high pensioned government employee today.
There are many decent people in government but many programs are flawed.

[dcarrigg]

Re: Income Inequality: So What?

Yeah, but people always demonize the rich, or even the guy down the street that worked hard and was able to have a comfortable debt free recovery.

We do see a good number of billionaires led by Buffett and Gates, who are going to give away almost all their wealth. Plus a number of these and mere millionaires are creating more good jobs to help raise the standard of living.

The charity of Buffet/Gates and their billionaire buddies will do more for the poor dollar for dollar than any other government program I know. The government doesn't create jobs, and the money in anti poverty programs is watered down before it gets to the poor.

My stint in anti poverty as a Vista Volunteer did more for the poor dollar for dollar than any high paid, high pensioned government employee today.
There are many decent people in government but many programs are flawed.

I totally disagree. And I'll admit, it's quite political. The left does tend to put more focus on the misdeeds of billionaires. But it's usually folks on the right who I hear demonize the guy down the street who works hard. Especially if that guy's a teacher or a fireman or a government employee with a pension or some kind of immigrant or God-forbid an artist or professor or anything like that. So this is really one of those silly polarized political things that probably belongs in rant and rave, so I'll try to stay more true to the topic of inequality.

Somehow the US got by fine from about 1932 to about 1978 basically without billionaires. And I suspect it will get by fine without them again. To me they're sort of a canary in the coal mine. They represent something fundamentally broken about the economy and institutions of our republic. Too little anti-trust enforcement. Too much rentiering. Too few labor protections. Too little taxes at the top end. Their very existence shows something's very out of balance with the institutional structure of the country.

So this is why median income has been essentially flat for 4 decades. It's like you have 100 guests at a wedding, and 1 gobbles up half the cake, 9 others get big, plate-busting slices, 10 others get crumbs and frosting drippings, and the other 80 get nothing. This is how we have designed the economy to share GDP growth in the modern age.

The good news is, I think, that the previous generations have gotten so greedy, that they took their highly state-subsidized college educations, and pulled the rug out from under their kids, who they saddled with huge debts. Then they took their highly subsidized suburban houses, and became nimbys who pulled the rug out from under their kids again to promote any and all policies that would raise housing prices. Then they very jealously guarded their personal health insurance and their personal universal healthcare for their age group and punished the young to the point where of the 40 million uninsured, about 70% are 18-40. They are the least likely to get overtime for their work and the most likely to be classified as "independent contractors" so they lose all labor protections since the 1938 Fair Labor Standards Act. They have been brutally punished by a changing system that purposefully soaks them to enrich a very few.

So now there's a generation coming up with the lowest homeownership rates since the Hoover Administration, the highest debt levels the world has ever seen for education, largely without healthcare, largely without the labor rights and retirement plans their parents enjoyed, and largely recognizing that the economic system is purposefully rigged against them, because they got beat down so bad it's just obvious and right in their faces. And you can keep telling them the system is great and it works well and everything's fine and they shouldn't try to tear it down and start over. But it's a lie. And they know it. It doesn't fit the data. It's like a guy with a football sized tumor in his neck telling himself nothing's wrong. If you can't admit there's a problem, then soon enough, you yourself become part of the problem.

The thing is, you can keep wagging your finger at the young'uns, but the bleeding edge of this group is 40 now. They'll be in charge of the world and the country soon enough. The question is only whether the republic will survive more or less in tact with enough resources for them to lash back. If it does, watch out. I'm liable to look center-right by comparison. If it doesn't, watch out. This is the way republics die. Either way, we have had lots of opportunities for a much softer landing/transition here. But they were all refused in order to satiate that one guy's insatiable appetite for cake.

A time to get, and a time to lose;
A time to keep, and a time to cast away;
A time to rend, and a time to sew.

[vt]

Re: Income Inequality: So What?

I understand your points DC and respect your opinion.

The high earners already pay most of the taxes in this country so there is fairness of a progressive system, maybe not as much as you want.

I also think government has become to intrusive. We need regulation but not that which handicaps the ability to compete. You worry about antitrust? Just unleash the ability of new techniques of innovation, new technologies. Read Schumpter on creative destruction.

https://www.forbes.com/sites/terryho.../#6b1b127117aa

We need growth to accomplish this and we have not seen that until recently. The more growth we get the higher the standard of living of all Americans.

By the way you can't blame the insane cost of higher education on free markets. Education has been controlled by the left for a long time. Free markets and creative destruction will reduce costs and make for better education for all.

In addition I'm not against pensions. The problem is that the current ones are mathematically unsustainable. New York, California, Illinois are seeing taxpayers flee. There will have to be reform.

As bad as this sounds, growth and a large new generation will create the impetus to pull us out of this slow period towards long term growth of 3% to 4% over the next two decades.

[lakedaemonian]

Re: Income Inequality: So What?

Is the study of extreme wealth outliers the best dataset to use?

Or would the study of lower order wealth(circa $10 million NTA) be more relevant?

Thomas Stanley’s published works in the 90’s had a big impact on me.

The Millionaire Mind

The Millionaire Next Door

I remember his data set included quite significant proportions of both 1st generation wealth creation and 1st generation immigrant wealth creation.

His data set included 1st gen wealth, sector success, and country of origin as I recall.

‘Is this a “Moneyball” Problem? Focusing on celebrity home run kings, when we should focus on journeymen/women winning the entrepreneurial game?

While I do believe there are aligned interests( quite seperate to deep state conspiracies) amongst the extreme outlier wealthy to both protect and enhance their power, I tend to look towards new arrival immigrant entrepreneurs for their perspective.

The 1st generation immigrants I know in the US tend to look at the US as still a country of opportunity, warts and all.

i have a “fixer” of mine from Afghanistan who managed to get a visa due to the work he did and he is killing it in the brutally low margin medical supply sector.

He couldn’t be happier working 18 hours a day to build a business for his family picking up pennies in front of a steamroller, and no longer having to deal with the extreme corruption and extreme violence he helped me negotiate in his country of birth.

Perspective?

Hunger?

Resilience?

[dcarrigg]

Re: Income Inequality: So What?

VT, you didn't fall off the turnip truck yesterday. You know that almost nobody under 40 has a pension, or a house, or a chance to get either. You know that zero growth in the past 40+ years has gone to the bottom 80%, and it never will again so long as the game is rigged to prevent it. You also know I am no socialist, you've seen me write it 100 times. But I also fear that "free markets" is just a euphemism for the worst impulses of oligarchy at this point. People claim "free markets" are why Amazon and Facebook and Google should not be broken up, despite the fact each company has bought up hundreds of others in the past 5 years. The whole meaning of the term "market" is now religious more than factual. The Sherman Act Sec. 2 has not been exercised since 2003. For 100 years, it happened at least twice per decade. Worse still? 300 million Americans suffer every day for it and have now for two generations. The day of reckoning will come. That much is always assured. It's too late now. Corporate tax cuts just gave over a trillion dollars to the wealthiest people in the world. But you want to still tell broke students they have to pay even more for tuition? Good luck with that. Qu'ils mangent de la brioche.

As a republican, there's nothing I would like more than a new deal that let the majority of Americans enjoy the fruits of economic growth along with their economic superiors. But the laws are set up such that it will never, ever happen unless we have serious reform. And since we're not getting serious reform, those inequality numbers that started this thread will only get worse. You can insist they won't until you run out of breath and your bones turn to dust, and it won't change the fact it will keep getting worse and worse and worse for each successive generation. The only solution is massive institutional change. And we'll either get there, or the union will die. There is no third option. I am a patriot. And so I will ever opt for the choice that benefits the United States. But it is not, and has not been for a long time, the same choice that benefits Peter Thiel. There will come a time, and neither of us may live to see it, when one must choose between billionaire and country. Already Citizens United and McCutcheon have been deep blows to the fabric of our republic. We will have to choose between fighting for free enterprise and fighting for the rights of feudal inheritors to rule over us as princes. History teaches us, we cannot have both. If you are lucky enough to draw air that day, you will have to choose your side. May your choice be a wise one.

This country could not survive both Abraham Lincoln and Jefferson Davis. And I fear it can no more survive both 1,000 billionaires and the constitution. We can have a democratic republic. Or we can have Lords. But not both. We must choose.

So to be fair, let me give you a sense of how I see the shape of things to come. We now, for the first time since 100 years ago, have people openly calling themselves socialists winning public office. Capitalists could have settled for the goose who laid the golden egg--it would have been fine to keep the pre-Citizens United order and have corporate donations be the largest block, but not an unlimitedly large block of money. Now there are candidates all over the country who refuse all and any business donations. It would have been possible to leave the post WWII labor standards alone, but now millions of workers are subject to their employers' religious views on which treatments and medications they can get, thanks to Hobby Lobby. Do you think that's not an army of angry people waiting for revenge? What about the millions more who can't get a regular schedule or overtime or minimum wage or even unemployment insurance because their multi-billion dollar overlords decide they don't deserve it and they won't follow the law? You think that's not an army waiting for revenge?

Things might have worked out fine, without much rocking of the boat, had we had no billionaires. But billionaires either changed, litigated, or simply avoided all the laws that prevented that type of domination and abuse from happening. Worse still? Do you remember any big bubbles during the years without billionaires? I don't. Because they didn't exist. Billionaires bring the bubbles. Their very existence fuels over capitalization and a shift from labor's share to capital. Soon there's more money than good ideas, at least at the large scale they play at. And that means bubbles. Facebook just lost $125 billion the other day. More money than all the work of all the 2.5 million people for New Hampshire and Rhode Island combined in a year, just blinked out of existence. And you know what's really funny? Facebook employs zero people in New Hampshire or Rhode Island. Neither state would notice at all if it just stopped existing tomorrow, other than a slight inconvenience. The same cannot be said of GM or GE.

We are heading into uncharted waters, my friend. And as much as we disagree now, soon we may find ourselves on the same side against waves of extremists from every direction. I'd rather head off the bandits before they unleash the storm. But I concede now, it's probably too late. We will pay for their hubris. If we're lucky, only with our wallets. Our children will pay even more dearly. The devil gets his due. The wages of greed will be paid. The question is only what the currency will be.