A rising tide doesn’t lift
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This document discusses rising income inequality in the United States and possible policy solutions. It notes that most economists believe the current income distribution should be more equal and that redistribution is a legitimate role of government. Possible solutions proposed include massively increasing higher education spending through grants and loans to advance skills, restructuring the tax code to be more progressive by increasing taxes on capital gains and dividends, and reducing corporate welfare. The document closes by stating the author believes the U.S. is headed in the wrong direction on income inequality but it's not too late to change course.
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A rising tide doesn’t lift
- 1. A Rising Tide Doesn’t Lift All Boats GDP, Fiscal Policy & Income Inequality Jeff Bowman April 26, 2011
- 2. Fortune 100
- 5. Economic Driver: Innovation and Tech
- 6. Income and Social Class
- 8. “Hey Gini, where are we?”
- 9. Where are our friends?
- 14. Survey Says A study by the Southern Economic Journal found that "71 percent of American economists believe the distribution of income in the US should be more equal, and 81 percent feel that the redistribution of income is a legitimate role for government.“ In a 2004 poll of 1,000 economists (from the AEA), a majority of polled economists favored “redistribution".
- 15. Possible Solutions Massive increase in Higher Education Spending on a Federal and State Level via grants, scholarships, boost tax credits and highly subsidized loans for low to middle income earners to advance skills. Restructure tax code to become much more progressive. Especially focus on increasing taxes on capital gains and dividends. Reduce corporate welfare and corporate tax loopholes.
- 16. Closing Thoughts I do not wish to live in a banana republic. Although, the retailer makes a good pair of pants. What is the ideal distribution of income in society? I couldn't tell you, but I strongly believe we are headed in the wrong direction but it is never too late to change course.
- 17. Footnotes Heyne, Paul T., Peter J. Boettke, and David L. Prychitko. "10th." Study guide, The economic way of thinking, tenth edition . 2003. Reprint. Upper Saddle River: Prentice Hall, 2003. 352. Print. http://www.bls.gov/lpc/prodybar.htm http://www.olivermunday.com/NEW/ Thompson, William, and Joseph V. Hickey. Society in Focus: An Introduction to Sociology.. 6th ed. Boston, Mass.: Allyn & Bacon, 2008. Print. http://www.creditwritedowns.com/ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html "Klein, G. P. (November 15, 2006). Why Intellectuals Still Support Socialism. Ludwig Von Mises Institute.". Retrieved 2007-08-21. "Klein, D. B. & Stern, C. (December 6, 2004) Economists' policy views and voting. Public Choice Journal.". "Income Inequality in the United States, 1913-1998" with Thomas Piketty, Quarterly Journal of Economics, 118(1), 2003, 1-39 (Longer updated version published in A.B. Atkinson and T. Piketty eds., Oxford University Press, 2007) (TABLES AND FIGURES UPDATED TO 2008 in Excel format, July 2010) http://www.people.hbs.edu/dmoss/Bank%20Failures,%20Regulation,%20and%20Inequality%20-%20Chart%20with%20Comments%20(David%20Moss,%20August%202010).pdf
Editor's Notes
- A very brief overview. Indebted to hundreds of people that are multitudes smarter and more wise than myself. See footnotes. IMAGE:146 ROBERT DEYBER, A Rising Tide Lifts All Boats III, acrylic on canvas, image size: 30 × 40 inches.
- Discuss America’s greatest and most innovative companies.
- One of the most careful definitions is in The Economic Way of Thinking, 10th edition, by Paul Heyne, Peter Boettke, and David Prychitko. They write: "The gross domestic product is the market value of all the final goods produced in the entire country in the course of a year.“ Discuss strong economic growth because of innovation, superior technology, ultra-high productivity of labor force.Footnote 1.
- Productivity has long been a major part of America’s economic success. From 1960 to 2008, gross domestic product grew at an average annual rate of 3.3%. About half of that was due to an expanding labor force, as baby boomers started punching the clock and as more women went to work. The other half came from productivity growth — workers making more, and better, goods per hour. Discuss worker productivity because of education, technology/innovation and management processes.Footnote 2.
- Technology has many benefits, one of which is to make us more efficient workers. And throughout the 20th and 21st centuries, productivity has increased as technology has made it easier for us to work faster and connect with our fellow workers. This is a look at the United States’s labor force’s productivity. Discuss technology and our global lead as a key driver of economic prosperity and growth of middle class. Footnote 3.
- Basic breakdown of Social/Economic Class Structure in the U.S. Footnote 4.
- Here's a great graph of US income tax rates back to when personal income taxes were started from Visualizing Economics. You can see the marginal rate for personal income has come way down from its 1945 peak.He says the original premise of the income tax law was based on 18th and 19th century classical economics and the price theory of economic rent. First and foremost, Hudson says that meant to the economists of the late 19th century and early 20th century that America would get rich through productivity gains that came from the work of highly paid labor. Footnote 5.
- This index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest. The index is the ratio of (a) the area between a country's Lorenz curve and the 45 degree helping line to (b) the entire triangular area under the 45 degree line. The more nearly equal a country's income distribution, the closer its Lorenz curve to the 45 degree line and the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the farther its Lorenz curve from the 45 degree line and the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality, the Lorenz curve would coincide with the 45 degree line and the index would be zero; if income were distributed with perfect inequality, the Lorenz curve would coincide with the horizontal axis and the right vertical axis and the index would be 100. Footnote 6
- Footnote 6
- During the 20th century, the United States experienced two major trends in income distribution. The first, termed the "Great Compression" by economists Claudia Goldin of Harvard and Robert Margo of Boston University, was egalitarian. From 1940 to 1973, incomes became more equal. The share taken by the very richest Americans (i.e., the top 1 percent and the top 0.1 percent) shrank. The second trend, termed the "Great Divergence" by economist Paul Krugman of Princeton (and the NYT op-ed page), was inegalitarian. From 1979 to the present, incomes have become less equal. The share taken by the very richest Americans increased.Footnote 9
- Thomas Piketty of the Ecoled'Economie de Paris and Emmanuel Saez of Berkeley turned to income data from the Internal Revenue Service.What Piketty and Saez found was that much of the Great Divergence was driven by a stunning rise in income for the top 1 percent (above $368,000 AGI). This group's share of national income more than doubled, from 8 percent in 1973 to 18 percent in 2008. Meanwhile, the bottom 99 percent's share of income, which stood at 92 percent in 1973, dwindled to 82 percent in 2008.The top 1 percent's share of income accelerated at a particularly fast rate starting in the mid-1990s, even as the education-based income gap leveled off. During the Great Divergence, Part 2, having a college or graduate degree was no protection against falling behind relative to the top 1 percent.Footnote 9
- It seems obvious to me that a decades-long trend toward income inequality is destructive to any nation, and particularly to one founded on democratic ideals. Discuss major changes in bank services, regulation and its impact on economic equality. Keeping up with Jones idea.Footnote 10. NOTE Slide is a direct copy of presentation.
- Footnote 10. NOTE Slide is a direct copy of presentation.
- The American Economic Association, or AEA, is a learned society in the field of economics, based in Nashville, Tennessee. It publishes one of the most prestigious academic journals in economics: theAmerican Economic Review.The Association as such will take no partisan attitude, nor will it commit its members to any position on practical economic questions. Its current president is Robert E. Hall of Stanford University.[4]Today the membership is ca. 18,000, over half of whom are academics. About 15% are employed in business and industry, and the remainder largely by federal, state, and local government or other not-for-profit organizations.Footnote 7 & 8
- Just some quick ideas to rebalance and ensure a just/prosperous society.
- Have to close with a bit of humor and hope after all the terrible data.
- Reference Page. Final Slide