How America's Top 20 Percent Perpetuates Inequality
bostonreview.net
bostonreview.net
Free (or at least affordable) university education is one of the most cost-effective investments a state can make. I've seen it work wonders in Poland in the last 25 years. And I don't mean "education to become academic scientists" - that part sucks in Poland. I mean "education to become globally competitive in high-margin areas of economy". It's cheap, it benefits economy in many ways, and it lowers the inequality. If Poland can afford it (and could afford it when it had GDP per capita under 10 000 USD) - USA can too.
Also - economy is not zero-sum. Yes, top 20% is always 20%, but if the division between incomes of top 20% and top 30% is negligible - why should we care about top 20%?
And if your country has 20% of people that can compete on global market, but other countries have 40% or 60% - you're screwed. Well, I guess you can just import them instead of teaching your own, but what to do with these non-competitives you're left with?
Many of those families live in places like New York or California where $112,000 is not much.
The families I know in New York City making around $2-300,000 live paycheck to paycheck in tiny, old rented apartments. Both parents work until 6-8 PM, they barely see their kids except in weekends. They spent the first decade or so after college paying off student debt and now they have five figure credit card debt. Their life is void of luxury. No cars, no fancy vacations, no real estate, no savings, no shares, often no pensions savings either. Everything is spent on kindergartens, nannies, schools, rent etc.
You may be upper middle class if your family makes $112,000 in Oklahoma. But it simply doesn't make sense to regard people in New York City or the Bay area with such salaries as upper middle class.
Sorry, but just what in the everliving fuck are they doing with that money? Burning it for warmth?
- Taxes
- Mortgage
- Interest on the mortgage
- Property insurance
- Our child's daycare so we can both work
- Payments on loans for every appliance that unexpectedly broke
- Saving
Half those costs would go away if we didn't buy a big house. For example, we have two air conditioning units and the heaters and both heaters died in the past year and costs $2,000+ to repair.
More money = more money tied up in assets and "good debt" = less actual discretionary money at the end of the mont
It ends up being about the same as someone who makes significantly less BUT we have equity in our property and money in our retirement funds at the end.
And I'm not going to lie. I enjoy a nice dinner ($500), a broadway play ($1,000 for good seats), or a Red Sox game ($900) once and a while.
A family I know in the East Village says they spend $12,000 per month. They live 2 parents, 2 kids in a 500 square feet rent stabilized apartment (a walkup). The 140 square feet living room has a kitchenette in the corner. I believe rent is $2,200 monthly. Last time we visited, my one year old found a syringe outside their door. Don't know what they make before tax but it can hardly be less than $200,000. I asked why they didn't just move away from Manhattan, but they would have to commute 1-2 hours more per day to find a cheaper solution. They were already aways from the kids 10-12 hours a day as it were so that was not an option.
Families in such situation is a big part of the so called upper class.
My point was that if they weren't spending so much on food/clothing/bills/etc than they would be capable of affording a perfectly nice apartment.
https://gist.github.com/harryh/970743e082bc7c9857ac9149997cc...
(I'm going to delete this gist later. Maybe silly but I don't feel 100% comfortable posting this data on the internet forever).
I live a nice life and have nothing to complain about. Last year 40% of my AGI went to taxes (fed, state, local + fica). There are plenty of good reasons to think that number should be higher.
Also, FWIW, median family income in Manhattan is somewhere around 75k. So someone making 250k is making over 3x the median. They're doing very well for themselves.
I liked much of what the author had to say, but claiming that America has a more rigid class structure than a nation with a hereditary monarchy seems like a stretch.
Why should I not I want my kids to grow up with the privileges of the top 20%? I worked the hours of 3 standard people over my lifetime to accumulate the wealth I want to pass onto my offspring to secure my genetic legacy. Aren't I just fulfilling what biology deems as life's most imperative mission?
Why should I feel hated for cashing in the chips on a successful venture that would have failed 9 out of 10 other times? Starting a business already has negative expected value, so why is it on the 1 out of 10 times that I succeed, 40% of what I win gets taken away?
Why should I want to live my life to the same degree of effort and reward as every else? What is the point of living life in such a manner, as governed by some impenetrable limiter of success and reward, it would be like being stuck for the rest of your life on tutorial island in Runescape, where you can't burn your shrimp on the campfire and you can't die to monsters, as that is where 100% of accounts begin their lives and where 80% of accounts never log back in.
I think a constant effort/reward ratio would be something to aim for, since it keeps each individual equally motivated. This might not be optimal for the society as a whole, but it is pretty close. ([0] discusses this in terms of network usage pricing, but the math is more general.)
[0] http://www.mit.edu/people/jnt/Papers/R-04-rjsm-elastic-tr.pd...
You might deserve whatever you've worked for, but that has nothing to do with the question of whether your children deserve more or less than others. I'll let you look up John Rawls's "veil of ignorance" thought experiment for yourself.
> Why should I feel hated for cashing in the chips ... 40% of what I win gets taken away?
The system does enough to incentivize gambling already. The results are already non-linear, and if you were truly one of those lucky ones then you're still richer than the other nine even with 40% taken away. To the extent that incentives for gambling and arbitrage displace incentives for more beneficial or sustainable kinds of effort, that's bad both morally and economically. Almost nobody's suggesting that everyone should be kept absolutely level. The question is to what extent we should attenuate the accumulation of riches (especially inter-generational riches) to balance out the various "rich get richer" amplifying effects that already occur.
mind defining exactly what those skills are? seems like maybe the market does not value them as much as you do, which in any merit-based or free market system is 100% OK
True, but I don't think that's what "class" generally means. Class is about privilege - about the ability to get ahead because of who you are rather than what you do. If you're in a higher class you're more likely to get into or to stay in that top 20% than somebody of a lower class who made equivalent choices and efforts. In a classless society there would still be a top 20% but those kinds of disparities could not happen. I think it's an unachievable goal, because environment is not quite the same as class (though the two are strongly related) and also affects outcomes, but it's something generally worth striving toward.
One sentence from the article really sticks out: "The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top."
The author, a highly educated middle aged British guy who works at a think tank, needs years to figure out that the United States isn't the bastion of opportunity it purports to be? Come on! Literally the moment your plane lands at the airport you notice food is prepared by immigrants, and taxi drivers have missing teeth. The inequality is visible everywhere, and it stares you in the face. The author only barely recognizes the contradiction between his wish for equal opportunity for all and his desire to give his children a leg up.
Ultimately he concludes that hoarding opportunity by the top 20% "results in a less competitive economy as well as a less open society". In other words, he's _still_ arguing that the top 20% should be in favor of equal opportunity out of self interest, because it builds a better society for all. This is in direct contradiction with his earlier observations about the zero-sum nature of opportunity. Efforts to redistribute wealth and opportunity from the rich to the rest does not benefit the rich: it's called class conflict for a reason. Maybe in another decade or so the author will figure this out.
Only if you don't consider a benefit to ones descendants.
By hoarding wealth, the richest prevent their own wealth from growing (out of risk aversion and greed), and they end up either voluntarily transferring wealth or it's taken from them by an angry underclass. You can see why (after the fact), they would've preferred the former. Posted this yesterday but Acemoglu and Robinson's Economic Origins of Dictatorship and Democracy goes into this in depth.
http://neweconomist.blogs.com/new_economist/2006/01/book_rev...
Besides, it's really nice to be wealthy, but wealth can't protect the wealthiest from getting murdered by someone lacking mental healthcare or getting radicalized because they have no other option. Thus spreading the wealth does help everyone.
Also, you are misrepresenting what he said re Britain and the US.
I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016. There are lots of reasons I have made America my home, but one of them is the American ideal of opportunity. I always hated the walls created by social class distinctions in the United Kingdom. The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top.
The only thing he's saying is that while Britain has a society with obvious class differences, the US has those differences hidden. It's not that it took years for him to figure out cause he's a clueless dummy.
There are ways of gradually doing it that don't involve mass upheaval.
Not sure what you mean by this. Isn't the goal here to destroy a lot of wealth? Wealth is a relative term - someone with $1B is not rich because 1B is an inherently big number, they are rich because $1B is orders of magnitudes greater than what most people will make in their lifetimes. Making people all have about the same in the bank other would destroy wealth.
- Almost everyone today (in western, developed nations) has more purchasing power than almost everyone did 100 years ago. Doesn't that mean that everyone is more wealthy?
- As new technology is developed, Alice's wealth depends less on Bob's poverty, because she can rely more on automation and less on Bob's labor. This might cause tremendous problems for Bob, but that's besides the point. Bob can now (if he manages to prosper) become immeasurably wealthy without reducing Alice's wealth in the least.
- You could make millions of dollars selling farm equipment. It seems clear that, in doing this, you are accumulating wealth. But it is not clear that your success needs to be at anyone's expense. Presumably your customers are buying your wares because your product helps them build wealth too. If the market is saturated, your success might come at the expense of your competitor's, but that seems like a different phenomenon from the idea of relative wealth that you've described above.
Making college free (or at least easily affordable) is highly redistributive and highly accretive. See also: public transportation, affordable childcare, and so.
You're not just wrong when you say that government efforts to redistribute wealth mostly destroy it. The opposite is true: funding the commons through progressive taxation makes modern society possible. Redistribution is at the absolute core of everything the government does.
> I fully support progressive taxation, free education, public transit, affordable health care
Choose one.
(Hint: all taxation is redistributive)
Healthcare transfers resources from the healthy to the sick. Government redistributes resources to children and to the elderly, because they can't provide for themselves.
We pay for roads we don't drive on. We pay for airports we don't fly through. We pay for parks and libraries we don't visit. All of this is redistribution from people who pay for the services to those who use them.
That these government services create wealth doesn't change that they are still redistributive in nature. In fact, the government has created and enforces the rules by which people can accumulate wealth in the first place. If the government makes the rules such that wealth automatically accumulates in the hands of the few, that's redistribution too!
It seems to me that you look at society as if there is a natural wealth distribution, and it's only redistribution when the government intervenes with that natural equilibrium by taking from some and giving to others. My perspective is that the government creates the very rules through which wealth can be created and accumulated (property law, IP law, incorporation, etc) and taxation is just part of this system.
Spreading the wealth helps everyone from a Rawlsian perspective. But if you're already rich you have nothing to gain from redistribution. If civil unrest starts brewing you can easily skip the country and wait for the storm to pass.
> the US has those differences hidden
Taxi drivers have missing teeth. There is nothing hidden about this. It's in plain sight. Just like the homeless in every city asking if you can spare a dollar. Just like the ostentatious displays of wealth in the "right" neighborhoods. It's impossible not to see this, unless you're a clueless dummy isolated by privilege.
Most people have to struggle just to survive. The middle class worries about living in the right neighborhood with the right schools, so their children can have a good life. Nobody can afford to get involved in their community, or with local politics.
Noam Chomsky has written a number of interesting articles about apathy and alienation. I highly recommend The Utopia of Rules by David Graeber. Not directly about apathy in society, but related.
But sentences like "This is not an accident, people are pushed towards apathy because that serves the wealthy", without much additional clarification, might help you get perceived as some kind of conspiracy theorist.
This discontent is right in front of us. We often turn them into "racial" issues, but what is an event like Ferguson but a violent reaction to power? What is the rise of populists like Trump?
Spreading the wealth helps everyone from a Rawlsian perspective. But if you're already rich you have nothing to gain from redistribution. If civil unrest starts brewing you can easily skip the country and wait for the storm to pass.
If you are driving through a bad part of town and get mugged, you don't have the option to just skip the country. You can't seamlessly avoid random acts of violence which are rooted in inequality. Similarly, you can't avoid the effects of an apathetic workforce. If you want to be safe and live in a productive society, it benefits you to think larger than "I can just flee the country if things get bad".
Taxi drivers have missing teeth. There is nothing hidden about this. It's in plain sight. Just like the homeless in every city asking if you can spare a dollar. Just like the ostentatious displays of wealth in the "right" neighborhoods. It's impossible not to see this, unless you're a clueless dummy isolated by privilege.
Immigrants will always be poor. The author got here in 2012. Presumably his taxi driver grew up in a country with poor dental work and was a new arrival, too. It doesn't say anything about class.
> If you are driving through a bad part of town and get mugged,
Rich people don't drive through bad neighborhoods. People who live in gated communities don't get hit by stray bullets from gang wars. I don't think appealing to the self-interest of rich people works here. They're already looking out for themselves, and the trendline is pretty clear.
> Immigrants will always be poor.
Look, are you're really going to argue that immigrants having bad teeth is the natural order of things, and not a consequence of the availability and affordability of dental care? (And what about the dental health of Nascar fans? Not class related either, I presume!)
The list of US' richest people nowadays consists of founders of Microsoft, founders of Google, founder of Facebook, founder of Amazon and founder of Oracle. So how many of today's richest became richest by hoarding and hoarding alone, Scrooge McDuck style?
These are not rich oligarch industrialists at all.
If your total household income, husband and wife together, is $112k, you're middle class in most of the country. In some areas like the Bay and Manhattan, you're lower middle class. You generally don't have access to subsidized rent and you don't get subsidies for health care.
Making people at this level earn less so everyone will be more equal just means more fall into poverty.
A better solution is to focus on returning skilled high pay jobs to the US in order to get more people into higher brackets.
> Income growth has not been uniform within the top fifth, of course: a third of the income rise went to the top 1 percent alone. But that still left $2.7 trillion for the 19 percent just beneath them.
2.7e12/326.e6*.19 = $1574 increase each on average. For the income range discussed, this is just barely keeping up with the rate of inflation.
That being said, you also are likely to pay more taxes both nominally and proportionally if you are benefiting from a 529 deduction - so when you take the revenue side of the equation into account the proposition looks a lot less lopsided...
The AHCA had a provision to eliminate a 2% additional tax on dividend income (IIRC) for people earning over $200k. Removing that is, as far as I can tell, only a benefit to "the rich" (by some definition, maybe not yours).
Special provision for higher tax on dividend income after a certain threshold (a) complicates the tax code (b) increases the cost of tax preparation, therefore removing disposable income that would be spent elsewhere from those sectors of the economy and (c) encourages companies to favor stock buybacks over dividend payments, which introduces its own distortions into the economy.
And oh, by the way, it's completely avoidable if you suspect your income will exceed $200k and are willing to spend 10 minutes to rebalance your taxable accounts in favor of growth stocks, real estate and municipal bonds.
Other than that it's an excellent provision in the tax code.
Is this true if you count in the ~13% regressive employment tax? While income tax is progressive, we should consider taxes as a whole and there are some taxes that are regressive in nature that make it hard to make such broad claims without further work.
Its not a simple matter of "tax deductions benefit only the wealthy" as some like to pretend.
But the real problem is still the 1% (or the 0.1%). It just hasn't caught up with the top 20% yet. Unless the arc of US politics changes radically, and I've seen no indication that it will, over the next 30 years, these people are going to be proletarianized the way the rest of us have been over the last 30. You can see it already in the decline of private medical practices as doctors become employees of hospitals and chain clinics. In the decline of tenured faculty at universities. The zottas are not going to tolerate that share of their wealth going to their high-skilled servants for any longer than they have to.
Ironically, I just visited Gothenburg in "socialist Sweden", and it was the most racially/poverty segregated city I have ever been to in the modern world.
No, it's much simpler than that: blacks, gays, guns, abortion.
Attempting to reduce all the of the great Conservative/Libertarian arguments for not wanting top-down tyrannical centralized high-tax government that takes away liberty to instead being single-mindedly rooted in racism, homophobia, etc. may make you feel better that your opponents are irrational emotionally-driven zealots -- but you've so missed the mark on comprehending the people who oppose you that you're only helping to further the enormous divide of understanding that we have in politics today.
If gays/guns/racism and abortion were not hot political buttons in the United States the Republicans would likely never win an election.
Libertarians have to all practical intents and purposes no representation in congress that is able to move the needle so can be safely ignored. It's just the rich making themselves richer, one group going about that slightly more nuanced than the other.
And if the libertarians would be represented in congress in numbers that could move the needle the rich would be making themselves richer even quicker.
I normally find that people outside of the US are not so nearly informed as they think they are about the driving dynamics of US politics, especially when it comes to things like "why do people vote the way they do".
For the most part, people outside of the US start with their non-American cultural biases which makes them extraordinarily susceptible to what are also the loudest voices: Hollywood, the news media, and the most outrageous politicians - while being almost completely ignorant of the undercurrents that actually drive dinner table conversations.
Although libertarians aren't very represented, if you don't see the heavy strain of libertarianism in modern Conservatism - I'd say that's another indicator that you don't know much about the politics of the people you're overly simplifying.
I'd be more than happy to bet that they are typically a lot better informed than you'd guess and that the reverse (Americans being informed about the dynamics of politics in other countries) would be dramatic.
Keep in mind that whatever the US does the world is affected so American presidential and mid-term elections are followed the world over by people who have absolutely no way to influence (well, that's the theory at least) but who will very much be on the receiving side of whatever the outcome is.
I'd be more than happy to bet that they are typically a lot better informed than you'd guess
And yet every person I've talked to who has an outside-looking-in view of US politics was positively stunned that Trump won the election. Their left-leaning news sources and celebrities absolutely convinced them that there was no way that America would elect Trump. Once again, they didn't understand American politics as well as they thought they did. Rather than admitting their ignorance, they tend to rationalize.
>Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires.
Regardless of who said it, it captures the American attitude held by some "You may some day be flush, why would you vote against your future self and raise taxes on him?"
What are the unintended consequences of this slightly higher tax bill? Does this writer not know of the Laffer Curve? The top 20% already pay the vast majority of income taxes in the United States And now he suggests they should pay more? Why not instead reprioritize spending, including cuts to programs that are proven not to work?
The "War on Poverty" has not resulted in any significant change to US poverty rates yet money is still spent on those programs. Farm subsidies, social security and Medicare and Medicaid fraud and abuse and the defense department's propensity to bleed money-- there are many areas that can and should be addressed before simply raising taxes.
And what about college cost inflation? College expenses have risen more dramatically than health costs. Could the influx of easy public money and loans have something to do with it? Look at the cartel's controlling textbooks and scientific journals! We lose our collective minds over Uber surge pricing but say nothing about $200 textbooks that were often written by professors working for public institutions. In universities you have countless Provosts and vice Provosts who pretty much add no value. You have administrators who simply administer other administrators. It's a racket of which the mafia could be proud. Adjunct professors barely scrape by while the "Director of Residental Student Diverisity Affairs" makes six figures. Many on the left like to complain about CEO pay yet let academia have a free pass to hand out titles and six figure non-teaching jobs out like candy -- all on the backs of students and indirectly, the taxpayer. If we want to expand educational access then the universities ought to start with themselves: cut the waste, lower the price. But they won't do that; the "liberals" in charge of universities actually perpetuate the educational inequality they purport to oppose. It certainly isn't conservatives in the Ivy League that maintain legacy based admissions or $80,000 per year price tags.
The problem isn't that taxes are too low, it's that government does a bad job when it comes to budgeting and fiscal policy.
I am not opposed to "left wing" proposals as much as I am opposed to "raising taxes and redistributing wealth" as the only means presented as the way to accomplish those proposals.
Zero-based budgeting would be a good start. Then every year the government can better allocate money rather than just continually adding to whatever the previous year's expenditures happen to have been.
Where's your data showing what the slope of it is for the current US tax regime? Oh, you don't have one? Why not? Afraid it might undermine the rhetoric?
The fraud in Social Security and Medicare and Medicaid isn't that high. If you want to bitch about those programs, bitch that they don't pay market rates for the services they mandate, hiding a tax in the payments other people make for medical services.
I suppose that 'almost' is there to exclude population numbers, what with whites projected to become a minority by 2050 (in the US - the white population is pretty small on a global scale, at ~8%).
More to the point: https://www.nytimes.com/2015/06/11/opinion/the-myth-of-a-whi...
> Please understand that I do not claim that the concept of race is totally meaningless. People in certain parts of the world do bear physical similarities to one another and racial terms are sometimes useful as labels for those similarities, provided that we do not pretend that these terms have well-defined meanings. Ashley Montagu [1] and others have pointed out that most popular racial concepts are, in fact, myths. What is truly nonsensical is to turn the fuzzy concept of race around and try to classify all individuals as being members of some particular race.
...
Then they came for me—and there was no one left to speak for me."
Now replace the socialist, trade unionist, and Jews from this famous quote and insert your income percentile to see what's going on here.
I said this during the occupy movement. It's not the 1%, not the 2%, not the 10%, not even the 20% that need to be worried. For they will not satisfy those who have not achieved what they desire.
What people who promote class warfare desire is financial results without work or risk because that's how they perceive those with money attained it.
Expect to see articles about the top 25% and 30% next.
Which also happens to be the truth.
Sure, hard work and risk were involved, but generally not on the part of the people who ended up with the money.
And this college fund implies there are kids involved. So a household with $112k/year and kids should be taxed heavily as possible because they didn't earn it? If they live in a high cost area or have any debt/medical problems they'll be in even more trouble.
It sounds to me like you want to tax and burden families such as that to move them back down into the income strata where there is uncertainty for housing/medicine/food/education/transportation. Why don't you like the idea of people working and earning an income in order to remove those uncertainties? That's all I want to do with my life. Is that such a terrible desire that when I finally get there I should have it taken away? By the way, I'm a recent medical graduate with 250k in debt from a lower-middle class family. If all goes well I'll be one of those evil 20% people after residency.
My income is comfortably in the region where I have to pay the marginal tax rate in my country (56%), and I pay it happily because I know it pays for valuable services and welfare for everyone.
"There’s been class warfare for the last 20 years, and my class has won"
Warren Buffett
You're talking about billionaire promoters of class warfare like Thomas Friedman or Jared Kushner right?