Are the Poor Getting Poorer?

[spurgistan]

Actually, second world didn't really refer to an stage of development between first and third; it was used to refer to states in the Warsaw Pact (first world being developed capitalist economies, and the third world being countries both of us fought over and stole resources from). So, after that whole thing went to shit, we just classify those countries as either developed or developing. Which is also why we don't refer to them as 1st and 3rd world that much, kinda lost it's significance after 1990.

themoreyouknow.jpg

On a more ideological note,neoliberalism is new colonialism.

[BigBallinStalin]

To simplify - the "job-creating rich people" are those that create income through business operations. On the other hand the "hoarding rich people" are those that create income through investments. If BBS were dead, he'd be spinning in his grave based on that characterization (considering that the hoarders are ostensibly investing in companies that have business operations). In any event, assuming that's how we characterize those people, the "job creating rich people" are already paying more tax comparatively to the "hoarding rich people." And if you impose a more stringent tax on the "hoarding rich people" they will just hoard more.

Don't base the tax on just income... tax both income and capital.

Inb4 BBS rage.

The problem is that if you place higher taxes on capital gains, or other forms of investment, you decrease the spending on investment. By doing so, companies have less funds to invest in new/old projects. These projects tend to create/increase the demand and supply for labor and products in various amounts. So if you cut this flow, or reduce it, you're merely cutting into economic growth.

The accumulation of wealth doesn't occur when you redistribute wealth through taxation or other forms of state intervention. In fact, long-term wealth for all income brackets is destroyed with excessive taxation. However, there is a fine point where many argue that the national/local governments should serve as a strong enough authority in upholding private property rights, rule of law, etc.

So there's an optimal balance between taxing "the rich" and shoveling money to the poor and to political pockets and their vested interests. In my opinion, that optimal balance should be extremely low--lower than current US levels, and significantly lower than most of Europe's excessive income taxes.

[BigBallinStalin]

Actually, second world didn't really refer to an stage of development between first and third; it was used to refer to states in the Warsaw Pact (first world being developed capitalist economies, and the third world being countries both of us fought over and stole resources from). So, after that whole thing went to shit, we just classify those countries as either developed or developing. Which is also why we don't refer to them as 1st and 3rd world that much, kinda lost it's significance after 1990.

themoreyouknow.jpg

<opens arms, insert rainbow>

On a more ideological note,neoliberalism is new colonialism.

What'chu talking about, Spurgis?

[natty dread]

The problem is that if you place higher taxes on capital gains, or other forms of investment, you decrease the spending on investment. By doing so, companies have less funds to invest in new/old projects. These projects tend to create/increase the demand and supply for labor and products in various amounts. So if you cut this flow, or reduce it, you're merely cutting into economic growth.

But the companies would have the option to create jobs, and thus avoid the tax. All we need is to make creating jobs more profitable for them than paying the income/capital tax. That way the companies could still profit and they would help the economy instead of just hoarding money.

The accumulation of wealth doesn't occur when you redistribute wealth through taxation or other forms of state intervention. In fact, long-term wealth for all income brackets is destroyed with excessive taxation. However, there is a fine point where many argue that the national/local governments should serve as a strong enough authority in upholding private property rights, rule of law, etc.

So there's an optimal balance between taxing "the rich" and shoveling money to the poor and to political pockets and their vested interests. In my opinion, that optimal balance should be extremely low--lower than current US levels, and significantly lower than most of Europe's excessive income taxes.

Are you saying that countries that have higher income taxes, also have wider wealth gaps between rich/poor?

As far as I know that is not true, but surprise me.

[spurgistan]

Neoliberalism (the financialization and export-orientation of the global economy, referred to by morons of all political stripes as "capitalism" as if Adam Smith envisioned a world where a single man could devestate the Thai economy) has had the effect of massively widening global income inequality while severely limiting the ability of populations to control their resources. While it's nice to see China experiencing economic expansion, I question the extent to which the pie is rising for everybody and not just exporters. Development ought to be based on local needs and democratic use of resources, not the whims of the World Bank.

[PLAYER57832]

To simplify - the "job-creating rich people" are those that create income through business operations. On the other hand the "hoarding rich people" are those that create income through investments. If BBS were dead, he'd be spinning in his grave based on that characterization (considering that the hoarders are ostensibly investing in companies that have business operations). In any event, assuming that's how we characterize those people, the "job creating rich people" are already paying more tax comparatively to the "hoarding rich people." And if you impose a more stringent tax on the "hoarding rich people" they will just hoard more.

Don't base the tax on just income... tax both income and capital.

Inb4 BBS rage.

The problem is that if you place higher taxes on capital gains, or other forms of investment, you decrease the spending on investment. By doing so, companies have less funds to invest in new/old projects. These projects tend to create/increase the demand and supply for labor and products in various amounts. So if you cut this flow, or reduce it, you're merely cutting into economic growth.

Except a lot of what companies invest in are labor-saving devices and "efficiency". It doesn't really increase employment at all.


AND... blind support of investment leads to companies making decisions like relying even more on very limited resources rather than truly seeking out other alternatives.

Besides, most fundamental research is not really performed by private entities, or rarely is. Some inventions are conducted by private entrepreneurs, but are generally NOT funded by big investors until they are already successful. Mostly, companies tweak existing technology.

Further, why should the government be in the business of supporting ANY business unless it is for the overall welfare of the country (converting to arms during times of major war, stopping pollution of common resources, etc, etc).

The whole idea of private enterprise is that it is profitable in and of itself, without government help.

The accumulation of wealth doesn't occur when you redistribute wealth through taxation or other forms of state intervention. In fact, long-term wealth for all income brackets is destroyed with excessive taxation. However, there is a fine point where many argue that the national/local governments should serve as a strong enough authority in upholding private property rights, rule of law, etc.

The amount of taxes matters less than how the money is used, the things those taxes support. Germany has a relatively high tax rate, but also has a booming economy.

That said, there IS a limit. OUR problem here is not that taxes are too high/too low per se, it is that the money was borrowed and speant spuriously, mostly to support the cronies of the Republicans and Democrats in power. (more Repubs than dems, but that is not due to any moral superiority of the dems).

So there's an optimal balance between taxing "the rich" and shoveling money to the poor and to political pockets and their vested interests. In my opinion, that optimal balance should be extremely low--lower than current US levels, and significantly lower than most of Europe's excessive income taxes.

Its the outputs, not the outputs that need the most tweaking. Paying interest to foreign entities, because we allow them to buy our treasury bonds, is just stupidity (as an example). Its OK, even good to allow foreign governments to invest here to a point, because that gives them a vested interest in well, not attacking and destroying us. However, its gotten excessive and is hurting us now.

[BigBallinStalin]

The problem is that if you place higher taxes on capital gains, or other forms of investment, you decrease the spending on investment. By doing so, companies have less funds to invest in new/old projects. These projects tend to create/increase the demand and supply for labor and products in various amounts. So if you cut this flow, or reduce it, you're merely cutting into economic growth.

But the companies would have the option to create jobs, and thus avoid the tax. All we need is to make creating jobs more profitable for them than paying the income/capital tax. That way the companies could still profit and they would help the economy instead of just hoarding money.

And where does the money for the companies come from?

The accumulation of wealth doesn't occur when you redistribute wealth through taxation or other forms of state intervention. In fact, long-term wealth for all income brackets is destroyed with excessive taxation. However, there is a fine point where many argue that the national/local governments should serve as a strong enough authority in upholding private property rights, rule of law, etc.

So there's an optimal balance between taxing "the rich" and shoveling money to the poor and to political pockets and their vested interests. In my opinion, that optimal balance should be extremely low--lower than current US levels, and significantly lower than most of Europe's excessive income taxes.

Are you saying that countries that have higher income taxes, also have wider wealth gaps between rich/poor?

As far as I know that is not true, but surprise me.

As far as I know, those types of countries tend to have smaller wealth gaps (~60% income tax), but the costs to society are tremendous. On average, those types of countries have more poor people on average. This occurs because the government is inherently inefficient at "creating" wealth or opportunities for others to gain wealth. If they were perfect, then there should be no problem with excessive taxation, but there is...



So, look at the poorest of the US, and yeah, they're much poorer than everyone else; however, look at the costs incurred by the other 4 groups in other countries who attempt to fix this problem--presumably through much higher taxes than the US. On average, their people are poorer. That's a huge cost to society, and I wouldn't want to burden anyone with that because a loud minority screams "unfairness" (for one particular group) while ignoring the unseen costs on everyone else.

The Economic Freedom Index covers the general correlation between prosperity and economic freedom, which it defines extensively. Generally, with higher taxes comes lesser prosperity/standard of living/quality of life, etc., but it's difficult to tease one variable out; however, the report is illuminating.

[BigBallinStalin]

Neoliberalism (the financialization and export-orientation of the global economy, referred to by morons of all political stripes as "capitalism" as if Adam Smith envisioned a world where a single man could devestate the Thai economy) has had the effect of massively widening global income inequality while severely limiting the ability of populations to control their resources. While it's nice to see China experiencing economic expansion, I question the extent to which the pie is rising for everybody and not just exporters. Development ought to be based on local needs and democratic use of resources, not the whims of the World Bank.

Yeah, life under the Great Chairman was so great.

[BigBallinStalin]

To simplify - the "job-creating rich people" are those that create income through business operations. On the other hand the "hoarding rich people" are those that create income through investments. If BBS were dead, he'd be spinning in his grave based on that characterization (considering that the hoarders are ostensibly investing in companies that have business operations). In any event, assuming that's how we characterize those people, the "job creating rich people" are already paying more tax comparatively to the "hoarding rich people." And if you impose a more stringent tax on the "hoarding rich people" they will just hoard more.

Don't base the tax on just income... tax both income and capital.

Inb4 BBS rage.

The problem is that if you place higher taxes on capital gains, or other forms of investment, you decrease the spending on investment. By doing so, companies have less funds to invest in new/old projects. These projects tend to create/increase the demand and supply for labor and products in various amounts. So if you cut this flow, or reduce it, you're merely cutting into economic growth.

Except a lot of what companies invest in are labor-saving devices and "efficiency". It doesn't really increase employment at all.

Seriously, think about that statement.

Consider its long-term implications.

Concentrate...

Ok, if what you said is true, then employment over the past 100 years would never have increased. The population would have kept growing, and employment would not have increased... so we should be experiencing unemployment of about... 80% today...

The accumulation of wealth doesn't occur when you redistribute wealth through taxation or other forms of state intervention. In fact, long-term wealth for all income brackets is destroyed with excessive taxation. However, there is a fine point where many argue that the national/local governments should serve as a strong enough authority in upholding private property rights, rule of law, etc.

The amount of taxes matters less than how the money is used, the things those taxes support. Germany has a relatively high tax rate, but also has a booming economy.

That said, there IS a limit. OUR problem here is not that taxes are too high/too low per se, it is that the money was borrowed and speant spuriously, mostly to support the cronies of the Republicans and Democrats in power. (more Repubs than dems, but that is not due to any moral superiority of the dems).

That is the nature of the status quo. It will always remain this way until the US Economic Empire collapses and a new order emerges. The rules of the game are too rigid to change.

The example of Germany is nice, but is it replicable? It's extremely difficult, if not impossible, given the cultural differences between the US and Germany.

So there's an optimal balance between taxing "the rich" and shoveling money to the poor and to political pockets and their vested interests. In my opinion, that optimal balance should be extremely low--lower than current US levels, and significantly lower than most of Europe's excessive income taxes.

Its the outputs, not the outputs that need the most tweaking. Paying interest to foreign entities, because we allow them to buy our treasury bonds, is just stupidity (as an example). Its OK, even good to allow foreign governments to invest here to a point, because that gives them a vested interest in well, not attacking and destroying us. However, its gotten excessive and is hurting us now.

Player, it's not stupid to borrow money; it's stupid to constantly borrow when one doesn't have the revenue to continue borrowing. But if you want "universal" healthcare, then that's one of the costs. If people keep demanding the government to "create jobs," then the government has to borrow money to do so.

I'm not sure how your statement relates to finding an optimal tax rate...

[AndyDufresne]

I came across this article on Scientific American about 'Last Place Aversion,' and how it relates to wealth redistribution, general giving, an some perhaps inherent fears and phobias.

The 'Last Place Aversion' Paradox: The surprising psychology of the Occupy Wall Street protests

Could be worth a quick read if you have the time.


--Andy

[Lootifer]

Hehe, we have higher taxes and more economic freedom that the US, nah nah na-nah naaaaah!

[thegreekdog]

I came across this article on Scientific American about 'Last Place Aversion,' and how it relates to wealth redistribution, general giving, an some perhaps inherent fears and phobias.

The 'Last Place Aversion' Paradox: The surprising psychology of the Occupy Wall Street protests

Could be worth a quick read if you have the time.


--Andy

Good article!

If the studies bear out in the real world, does this mean the OWS people aren't actually the working class? The studies seem to indicate that the working class don't want wealth distribution; only the very poor or the rich consider wealth redistribution to be a positve.

To the extent that it comes to light that the vast majority of OWS people aren't the working class, but are instead the rich, it wouldn't surprise me (especially since I think that anyway).

Related aside - I'm meeting up with one of my friends this weekend. He works on Wall Street. I will be sure to get information from him. He works 80 to 100 hours a week regularly, so he may have some interesting tidbits with respect to the protestors.

[Lootifer]

As far as I know, those types of countries tend to have smaller wealth gaps (~60% income tax), but the costs to society are tremendous. On average, those types of countries have more poor people on average. This occurs because the government is inherently inefficient at "creating" wealth or opportunities for others to gain wealth. If they were perfect, then there should be no problem with excessive taxation, but there is...

The costs are what they are, sometimes huge, sometimes smaller, depending on the situation.

Sure from the data it looks like government tends to be less efficicent, but there's easy examples and hypotheticals which counteract this "rule".

For example something I work quite close to (but far enough away to not have to deal with the regulation ) is electricity distribution. That is, the people tasked with getting power from the generation plants to the consumer. This is a natural monopoly, most often, which when left to the free market to resolve will almost always result in higher costs to the consumer than if an efficiently run government agency did the job. Just one example of the many out there (usually in the infrastucture sector, but not exclusive to that sector).

While Mr Smith was pretty much bang on, there are also areas with market failures that result in the free market solution being no better or sometimes worse than state control.

So, look at the poorest of the US, and yeah, they're much poorer than everyone else; however, look at the costs incurred by the other 4 groups in other countries who attempt to fix this problem--presumably through much higher taxes than the US. On average, their people are poorer. That's a huge cost to society, and I wouldn't want to burden anyone with that because a loud minority screams "unfairness" (for one particular group) while ignoring the unseen costs on everyone else.

That's quite the amazing picture, you could literally draw a whole bunch of different conclusions from it, and hence I don't like to comment. Things like that need more clarity around what exactly they are showing (for example does the earning part of the y-axis on the left chart: does that include interest as a result of investing with inheritance? )

The Economic Freedom Index covers the general correlation between prosperity and economic freedom, which it defines extensively. Generally, with higher taxes comes lesser prosperity/standard of living/quality of life, etc., but it's difficult to tease one variable out; however, the report is illuminating.

Like you say it's very difficult to tease out conclusions based on something so broard and dependant on so many different factors.

I would rephrase and say: Generally, with higher taxes comes lesser economic growth.

However I firmly believe that economic growth shouldn't be used as such a powerful lever as it currently is used for in society. Economic growth is good, but it should play second fiddle to basic human rights and opportunity for the entire population (imo). Freedom is also something I put below the basic human rights driver.

[BigBallinStalin]

As far as I know, those types of countries tend to have smaller wealth gaps (~60% income tax), but the costs to society are tremendous. On average, those types of countries have more poor people on average. This occurs because the government is inherently inefficient at "creating" wealth or opportunities for others to gain wealth. If they were perfect, then there should be no problem with excessive taxation, but there is...

The costs are what they are, sometimes huge, sometimes smaller, depending on the situation.

Sure from the data it looks like government tends to be less efficicent, but there's easy examples and hypotheticals which counteract this "rule".

For example something I work quite close to (but far enough away to not have to deal with the regulation ) is electricity distribution. That is, the people tasked with getting power from the generation plants to the consumer. This is a natural monopoly, most often, which when left to the free market to resolve will almost always result in higher costs to the consumer than if an efficiently run government agency did the job. Just one example of the many out there (usually in the infrastucture sector, but not exclusive to that sector).

While Mr Smith was pretty much bang on, there are also areas with market failures that result in the free market solution being no better or sometimes worse than state control.

So, look at the poorest of the US, and yeah, they're much poorer than everyone else; however, look at the costs incurred by the other 4 groups in other countries who attempt to fix this problem--presumably through much higher taxes than the US. On average, their people are poorer. That's a huge cost to society, and I wouldn't want to burden anyone with that because a loud minority screams "unfairness" (for one particular group) while ignoring the unseen costs on everyone else.

That's quite the amazing picture, you could literally draw a whole bunch of different conclusions from it, and hence I don't like to comment. Things like that need more clarity around what exactly they are showing (for example does the earning part of the y-axis on the left chart: does that include interest as a result of investing with inheritance? )

The Economic Freedom Index covers the general correlation between prosperity and economic freedom, which it defines extensively. Generally, with higher taxes comes lesser prosperity/standard of living/quality of life, etc., but it's difficult to tease one variable out; however, the report is illuminating.

Like you say it's very difficult to tease out conclusions based on something so broard and dependant on so many different factors.

I would rephrase and say: Generally, with higher taxes comes lesser economic growth.

However I firmly believe that economic growth shouldn't be used as such a powerful lever as it currently is used for in society. Economic growth is good, but it should play second fiddle to basic human rights and opportunity for the entire population (imo). Freedom is also something I put below the basic human rights driver.

I'm not really focusing on the one of the left. I'm using the right graph to explain how certain economic policies which focus on "bringing up" the poor come at a significant cost to everyone else (as seen by everyone else's reduced incomes relative to the US's). That unseen cost is what I'm talking about, and it's important for people to realize the missed alternatives when their moral sentiments for helping the poorest of poor are implemented into policy.

[Baron Von PWN]

Interesting graph. One thing that stands out to me is that the US has the most people making above 40k$ (three whole percentile groups, Canada and the UK come 2nd with 2. ) and fewer people making bellow 20k$(3 percentile groups, only one country beats them, Norway with only two percentile groups) than the OECD average. Another thing were the countries which tie the US for fewest people under 20k$; Denmark, Britain, Canada, Norway.

None of those are particularly low tax countries. Which is interesting as it suggests Taxes cause a depressing effect on the higher end of earnings.

Just out of curiosity does PPP usually take into account what might be government provided services in some countries? For isntance would they include the cost of a doctors visit in the UK to the cost of a doctors visit in the US?

As many of the countries on the lower scale such as France or Germany have many government provided services and would hardly be thought of as poor.

[Baron Von PWN]

I'm not really focusing on the one of the left. I'm using the right graph to explain how certain economic policies which focus on "bringing up" the poor come at a significant cost to everyone else (as seen by everyone else's reduced incomes relative to the US's). That unseen cost is what I'm talking about, and it's important for people to realize the missed alternatives when their moral sentiments for helping the poorest of poor are implemented into policy.

Flip that around and you see there is also a cost of not doing that. The US has its top 30% make more money, its bottom 30% makes less. the 40% in the middle do about the same as everyone else give or take a couple thousand a year.

[Phatscotty]

I think it should be recognized from another perspective how much charity wealth creation makes possible.

I like the government and rich people helping out, and I prefer charity because the money is given freely rather than taken from you. That is all the difference. donated time and money goes miles further than government programs.

[natty dread]

So, look at the poorest of the US, and yeah, they're much poorer than everyone else; however, look at the costs incurred by the other 4 groups in other countries who attempt to fix this problem--presumably through much higher taxes than the US. On average, their people are poorer. That's a huge cost to society, and I wouldn't want to burden anyone with that because a loud minority screams "unfairness" (for one particular group) while ignoring the unseen costs on everyone else.

Yeah... I don't think it's really that simple.

US may have a larger amount of overall capital at the moment... but then US is the largest country on that list. And there are tons of other factors that should be taken in account.

[danfrank]

To occupy wallstreet . At first i didn`t agree but when i realized this... Gov`t forced banks by law to lend to less qualified individuals , this inturn spurred artificial inflation of home values based on the gov`t enrichment program. with the majority of these loans being subprime , interest only . who made out in the end ? As you can see it was a tag team operation to remove cash from the population , mainly the middle class .

[Phatscotty]

So, look at the poorest of the US, and yeah, they're much poorer than everyone else; however, look at the costs incurred by the other 4 groups in other countries who attempt to fix this problem--presumably through much higher taxes than the US. On average, their people are poorer. That's a huge cost to society, and I wouldn't want to burden anyone with that because a loud minority screams "unfairness" (for one particular group) while ignoring the unseen costs on everyone else.

Yeah... I don't think it's really that simple.

US may have a larger amount of overall capital at the moment... but then US is the largest country on that list. And there are tons of other factors that should be taken in account.

What do we do about the scammers, and the severely stupid, those who lost a decent job because they got fired and it was their fault, those who purposefully blew off "education" or those content in their "poverty"/Don't need much, or those who are poor because they are disabled, or those who purposefully try to keep their salary under that magic earning mark so they can still qualify for tens of thousands in benefits, or those who are severely lazy? Can we separate these poor from the poor who were dealt a bad hand in life, or poor due bad luck, or complete lack of opportunity, or a recession, or because they got put out of business or due to injury.

Can we make a distinction between 2 general types of poor people, basically... (there may be 3 or 4 or 5 types feel free to add anything I missed.)

1# Poor due to their own mistakes/shortcomings
2# Poor due to not fault of their own

[Phatscotty]

To occupy wallstreet . At first i didn`t agree but when i realized this... Gov`t forced banks by law to lend to less qualified individuals , this inturn spurred artificial inflation of home values based on the gov`t enrichment program. with the majority of these loans being subprime , interest only . who made out in the end ? As you can see it was a tag team operation to remove cash from the population , mainly the middle class .

The great wealth extraction.

If you want the cherry on top of that sucker, you might even wonder if the government had it in mind to end up with all the papers in the end? (fannie may n freddie mac have over 97% of all mortgages in USA) (like the way JP Morgan bought up all the farmland in the early part of the great depression)

[Phatscotty]

The society that puts equality before freedom, well end up with neither.
The society that puts freedom before equality will end up with a great deal of both.

[natty dread]

Can we make a distinction between 2 general types of poor people, basically... (there may be 3 or 4 or 5 types feel free to add anything I missed.)

1# Poor due to their own mistakes/shortcomings
2# Poor due to not fault of their own

Why should we make a distinction between them?

Is it somehow more "noble" to be poor if it was due to conditions you couldn't help? And furthermore: who gets to decide whose poorness is his "own fault" and whose isn't? What qualifies as "not your own fault"?

[Phatscotty]

Can we make a distinction between 2 general types of poor people, basically... (there may be 3 or 4 or 5 types feel free to add anything I missed.)

1# Poor due to their own mistakes/shortcomings
2# Poor due to not fault of their own

Why should we make a distinction between them?

Is it somehow more "noble" to be poor if it was due to conditions you couldn't help? And furthermore: who gets to decide whose poorness is his "own fault" and whose isn't? What qualifies as "not your own fault"?

for the very same reason to edited this.....out of my post in your response.

What do we do about the scammers, and the severely stupid, those who lost a decent job because they got fired and it was their fault, those who purposefully blew off "education" or those content in their "poverty"/Don't need much, or those who are poor because they are disabled, or those who purposefully try to keep their salary under that magic earning mark so they can still qualify for tens of thousands in benefits, or those who are severely lazy? Can we separate these poor from the poor who were dealt a bad hand in life, or poor due bad luck, or complete lack of opportunity, or a recession, or because they got put out of business or due to injury.

And i didn't ask if we should, I wondered if we can. The portion you edited out of my posts deals with your questions....to my post....

I think it is fair to look at the reasons why someone is poor. Don't you?

[thegreekdog]

To occupy wallstreet . At first i didn`t agree but when i realized this... Gov`t forced banks by law to lend to less qualified individuals , this inturn spurred artificial inflation of home values based on the gov`t enrichment program. with the majority of these loans being subprime , interest only . who made out in the end ? As you can see it was a tag team operation to remove cash from the population , mainly the middle class .

That's about right. I don't think that's what Occupy Wall Street is about, but you have the situation down.