[Martin Lewitt Dec 4, 2010 1513 MST]
[From Rick Marken (2010.12.04.0940)]
Martin Lewitt (Dec 3, 2010 0140 MST)--
Rick Marken (2010.12.03.1645)--
I don't think the increase in wealth discrepancy has resulted
from a sudden increase in competence of rich people. It's a
result of public policy.
I partially agree, public policy made a significant contribution, but some
of the increase in "discrepancy" depend on the sources of that new wealth,
some may be less labor intensive and thus naturally concentrate in fewer
people.
Wealth disparity was at its lowest and virtually constant from
1943-1980.
But wealth was also much lower then, that is hardly preferable.
During that time the top marginal tax rate was never lower
than 70%. Then came 1980 and the top marginal rate started going down
precipitously. Between 1980-2008 the rate was never higher than 50%
and was typically about 35%. That's the policy change that coincided
with the increase in wealth disparity.
What is the statistical significance of extrapolating from one datum?
You say some of this disparity
resulted from sources of new wealth. That requires believing that no
such sources of wealth were ever developed from 1943-1980. This seems
highly unlikely to me just on the face of it, but also because the
average rate of growth in wealth from 1943-1980 was 7.9%; from
1980-2008 it was 6% (and it was only that high thanks to Reagan's
second term government spending spree and the high growth rate of the
"high tax" Clinton era).
I guess you are given Clinton credit for the dot.com bubble.
RM: The top
marginal tax rate started decreasing under Ronnie Raygun and has
continued it's decline (except for a brief, minor increase under
Clinton) to the present; and that decline has been mirrored by a
corresponding increase in the national debt and the wealth of those
who had their taxes reduced (duh!). So trillions of dollars in what
should have been national wealth devoted to improving common
infrastructure so important to private production (transportation,
education, research, etc) has gone right into the pockets of assholes
like the Koch brothers, who can now buy elections and ensure that
their wealth keeps increasing and they will never have to increase
their contribution to the common good.
Such bitterness, perhaps you could try controlling for freedom as the common good, as many who lived in the shadow of the iron curtain learned the hard way.
It sounds like you are saying there should have been more spending on
infrastructure even though much spending was already being debt financed.
It might sounds like that to you. But if you try reading it again you
might see that that is not what I'm saying. What I'm saying (or trying
to say) is that when tax rates were reduced, revenue was reduced which
led to deficit (and increasing debt). Since most of the tax reduction
went to the wealthy, the loss of government revenue showed up as
increased wealth for the wealthy (the increased wealth disparity).
If the wealth was merely retained by the wealthy, then the wealth disparity already existed. But once again you are assuming a static model. There were also large increases in the rate of productivity growth in the 80s and 90s arguable made possible because more capital stayed in the private sector.
With the government unable to even pay it's existing expenses, there
was no will to invest in infrastructure improvement, which would have
just increased deficit and debt even more (though there was always
room for more military spending, which Raygun did with abandon, which
is why we had "full" unemployment toward the end of Raygun's term;the
end of the Cold War put an end to that "boom").
The increasing deficit, may actually have acted as a restraint on increases in unproductive government spending, further increasing wealth. Milton Friedman argued that government spending (competing demand) was the actual tax on the economy.
However, recall that after the Volcker recession, the US economy reached
what economists considered full employment.
Yes, a result of Raygun's huge government spending program, creating
tons of jobs in the military-industrial complex.
There were other industries growing rapidly at the time as well. If you are arguing that military-industrial spending is much more effective than Obama's shovel ready programs, it will help if you have a mechanism to account for the difference.
Which consumer demands do you
think should have been unmet so that resources could be diverted to your
centrally planned priorities?
I have no idea what you are talking about here.
Government demand competes for resources with consumer demand. Central planner's grand schemes effectively "tax" consumers even when debt financed, unless the resources were sitting idle.
ML: Beyond that, there are often many noncoercive changes or
alterations in coercive policy without increasing coercion which will
reduce the wealth disparity or alter the processes which increase it.
RM: Name one!
1) Having the federal reserve no longer consider increasing labor costs
inflationary, and remain neutral in the allocation of the returns from
productivity increases to labor or capital.
Don't see how having the Fed "remain neutral in the allocation of the
returns from productivity increases to labor or capital" would
decrease wealth disparity. But what I do know is that this suggestion
is certainly not non-coercive; it's thought control. How are you going
to have the Fed stop considering something without enforcing that.
What if the Fed doesn't want to stop considering it? Are you going to
do nothing? If so, your proposal is meaningless.
The Fed's mission was set by congress, full employment and stable prices. The fed repeatedly in the 80s and 90s interpreted rising wages as inflationary and tightened money supply and causing slow downs. This effectively allocated more of returns from rapidly increasing productivity to capital rather than labor, instead of just letting market forces determine the allocation. This is one source of the increased wealth disparity that concerns you. A change in this can be "enforced" by simple Congressional clarification of the mission, specifically mentioning neutrality and/or by appointed Fed governors which will manage the Fed in the neutral manner.
2) Requiring the federal reserve to create money directly into the hands of
the people instead purchasing US treasuries which gives the benefit of the
newly created money to relatively well-to-do bondholders and foreign central
banks.
How is this non-coercive? How do you "require" the Fed to do this
without backing up the requirement with the threat of coercive force.
The may have started out as a private trust, but now it is just a part of the federal government, expected to be managed more independently of the political process. Part of the implementation would not be a "requirement" at all, but would give the Fed the new alternative tool for creating money rather than the purchase of government bonds or the stimulation of a pyramid of debt. "Requiring" the fed to use the new mechanism exclusively or preferentially and transparently would merely be a reform of a government agency.
3) Reducing the double taxation of dividends and capital gains so that
investing the savings of the middle class in the stock markets are less
speculative, less leveraged and more stable. If you object to this as a
reduction in coercion, it can be made revenue neutral by double taxing
interest on debt instead, I would recommend limiting the deductability of
interest to $1,000,000.
Again, how is this non-coercive? What are you going to do about the
people who want to tax both dividends and capital gains? How are you
going to collect the double taxed interest on debt non-coercively?
The people who want to tax both dividends and capital gains can stay free, there is no reason to do anything with these people despite their coercive and economically illiterate nature. Eliminating the double taxation of dividends and capital gains would be reducing coercion. Double taxing interest would be coercive, would not represent a net increase in coercion at the macro-economic level if done concurrently with the decrease in coercion. It would be a political compromise and admittedly change the distribution of coercion. The first two were non-coercive, and this one doesn't increase the level of coercion which is the other standard I mentioned.
4) Opening up Anwar and offshore oil reserves to development. This would
reduce "leakage" to the oil exporting countries, and add to the number of
higher paying middle class jobs.
How are you going to do that non-coercively? How are you going to get
drilling crews in there if there are a bunch of people waiting to
prevent them from getting in?
Keep in mind that coercion is not the use of force, just the initiation of the use or threat of force. Those acting to prevent would be the initiators and thus the coercers.
5) Healthcare tort reform, which would lower costs to the health insured and
doctors, while reducing the misallocation of wealth to relatively
unproductive attorneys.
How are you going to do this without a fight from the attorneys?
You'll have to coerce the attorneys into playing by these new rules.
The attorneys are officers of the court, the rules will just have changed. Certain mechanisms the attorneys used will just no longer exist or will have to meet reformed standards.
6) Reducing the barriers to entry to the medical professions, reducing
costs to consumers while providing more employment opportunities at less
educational expense.
Again, how are you going to enforce this?
You don't have to enforce it, you just have to stop enforcing the old more restrictive barriers.
7) Legalizing recreational drugs, bringing them into regular economy where
they pay taxes or where consumers can pay lower prices or grow their own,
retaining more of their wealth.
The legalizing drugs part sounds great but how are you going to
collect the taxes without the threat of penalty for not paying (ie.,
without coercion)?
Taxing the drugs would be coercive, but perhaps less than the confiscation which is currently occurring. Of course, those growing their own would probably only be taxed on the first batch of seeds.
8) Partial privatization of Social Security, allowing recipients to
participate in the greater returns in the now reformed stock market, and so
that die before receiving significant social security benefits have something
to leave to their children and other beneficiaries.
How are you going to non-coercively get people who like the current
system to change?
Certain treasury bonds could be available as investment vehicles which would offer the same low rates of return that the current system is based upon. The change could be voluntary, by the provision of options that might have higher rates of return. Increasing options would not be coercion. Other needed reforms to the system might be coercive, but they would be needed even without the privatisation. At least privatisation offers the opportunity to decrease the wealth disparity.
9) Reforming corporate governance so that executive compensation packages
are disclosed, and poison pills which serve entrenched interests at the
expense of stockholders are not allowed.
How are you going to non-coercively get executives to disclose this stuff?
It would probably only apply to publicly traded companies that already have voluntarily submitted to the standards of the stock exchanges and are further regulated by the Securities and Exchange commission. There will be strong pressure from their stockholders to continue to be traded on the exchanges. Reforms such as this are usually implemented with significant input from the regulated corporations, when the needs are recognized and usually benefit the corporations by restoring public trust. But this may be argued to be coercion, agreed to in order to gain the benefit of artificial limited-liability status.
Just a sampling.
Besides the fact that I don't see how any off these proposals would
reduce wealth disparity by much -- if at all -- all of them are
coercive. You said you had all these non-coercive ways to reduce
wealth disparity. So far I have seen no proposals that are
non-coercive, let alone that have any chance of reducing wealth
disparity. Feel free to try again.
Not all are coercive. Apparently you can only see reducing the wealth of the wealthy as reducing disparity. More of the returns from the increases in productivity will go the workers with item one.
Item two is directly redistributive. The benefits of new money creation would go to the poor instead of the banks and those who would benefit from increased bond prices, including bondholders. The current method of money creation directly benefits the wealthy at the expense of the general public.
Item 3, puts the economy on a less leveraged basis, meaning fewer layoffs in economic downturns and shallower recessions. it also makes investment is stocks a safer alternative for middle class savers relative to the low returns from deposit accounts.
Note, the pattern is one of benefitting the lower end of the wealth disparity generally without coercive and ultimately economically self destructive parasitization of the wealthy. Reducing the non-market based privileges and windfalls of the wealthy is not coercion.
regards,
Martin L
···
On 12/4/2010 10:39 AM, Richard Marken wrote:
Best
Rick
