Why the (US) Rich Are Getting Richer | Hacker News Reader

Why the (US) Rich Are Getting Richer

foreignaffairs.com

36 pointsboredguy849 comments

This is just another in a series intellectually feeble articles on the wealth divide. Compare this recent study from Canada: http://www.policyalternatives.ca/publications/reports/rise-c...

Both of these pieces offer no in-depth analysis of the data and almost no international perspective. Without offering any justification, they quickly point the blame at the typical scapegoats of "the bankers who caused the crash", high CEO pay, and tax rates. They rely on broad and readily available statistics, and haven't done any genuinely new groundwork.

I'd like to see a better study which considers these factors:

* Choosing a meaningful dividing line (Why choose to compare the top 1%, and not some other fraction?)

* Breaking down sources of income (Investment income, regular pay, stock option grants)

* Breaking down income by industry (Medical, law, engineering professionals; public servants; finance professionals; entrepreneurs; corporate managers; entertainment figures)

* Detailed comparison of wealth divides in other countries

If anyone can point us to this sort of study, please speak up!

Yes, it's feeble. The article does not connect some of the trends it discusses to the problem of income inequity.

For example, there's no discussion of how increased taxes will fix income inequity nor is it obvious why it will. Gates, Buffet and other superrich got to where they are through long term capital appreciation. Increasing taxes will have an impact on them, but they will still be superrich.

What's also interesting is the national wealth divide is more or less a fake issue, because the economy is global. The really important divide is between wages for unskilled workers in the US and western Europe versus wages for unskilled workers in developing economies. You can't ignore the "Designed in California, Made in China" differential.

How many high paid ($1million+) CEOs are there?

I thought it was because the rest of us were just lazy freeloaders or otherwise morally undeserving!

Sarcasm? Not Sarcasm? Purposefully ambiguous?

From where I sit, it's very clearly sarcasm.

That was my initial thought, but I'm gonna have to cite Poe's Law on this one.

Oh wow... I'm flattered.

Something I've long been curious about, as an academic who is removed from the startup culture and never really gave a damn about getting rich.

Suppose that the (US) marginal tax rate on income or capital gains over $500K was raised to 75%.

How much would this affect entrepreneurs' willingness to work their asses off on their startups?

I invite you to read this article about Denmark ("The happiest place on earth") circa 2007: http://abcnews.go.com/2020/story?id=4086092&page=1 From the article: "The happiest people in the world pay some of the highest taxes in the world -- between 50 percent and 70 percent of their incomes"

I know this thread is not related to happiness, but I do think there is a correlation between poverty and happiness. It's hard to be happy when you can't put food on the table (let alone pay for an education) for your children.

To be honest, probably nothing. Rich people are pretty much pros at operating tax shelters, which explains the famous Buffet quote about how he pays a lower tax rate than his secretary.

No, it's better/worse than that. Long-term capital gains (held more than one year) are taxed at 15% for someone like Buffet. He paid a lower rate (17.7% combined short-term and long-term) on taxes than his secretary without trying to avoid taxes.

Yes. However, increasing it from the current 15% to 35% or 38% probably wouldn't affect it much.

Well, I guess a lot of people do it for the money as well as the fulfillment of building a great company.

Relocation to a different country is always an option.

It is an option, but an intentionally-difficult one. It is often easier to move products across borders than people. The nice thing about the Internet is that you don't always have to care.

Getting tired of the inequality articles.

This coming from someone who lives in a city (Milford, NJ) with a median family income of $62,167 USD that is 97% white. Ouch.

(Also, today I learned about HackerNewsers from your profile. Very cool site!)

If you're expecting to get me upset by looking up my demographics, you're wrong. I wouldn't have posted that if I cared. But it's funny how much you think you know about me and how wrong you are.

For example, I don't live in Milford, NJ. That is, in fact, my mailing address, and if you plug that into your GPS you will indeed arrive at my house, but the world is slightly more complicated than that -- as is the topic of the OP. I'll leave it to you to puzzle out how both of those might be.

Your statement about Milford being "97% white" reveals more about you than it does me, I think. It reveals that, for some reason, you believe that race is important; why else would you go looking for the racial makeup of my (purported) community? It reveals little about me, since you'll find that (assuming you're using Wikipedia's numbers) my household would make up over 3% of the town's non-white population (if I did indeed live in Milford).

I happen to fall into the largest age cohort cited. And if you knew my address, you'd also see that my property is actually smaller than the minimum zoned acreage, being grandfathered in.

What the heck does any of this have to do with (a) equality of Americans; or (b) the fact that we've seen so darned many of these articles recently on HN?

Sorry, my intent was not to belittle or enrage. I was merely pointing out the fact that, based upon provided data, you, as a developer, are quite far removed from the lower end of the income spectrum. Your comment seemed to give a vibe of "I don't care about this because it doesn't affect me and the fact that I am even hearing about it is pissing me off." My apologies if that is not the case.

(Disclaimer: I am not from the USA.) White people make up the majority of the population in the northeastern USA. Minorities tend to be poorer. That's a statistical fact. A developer in a white town is probably doing better than most people around him.

It's an important issue. I hope there are more articles about this topic. They're more interesting than articles about del.iciou.us being killed by Yahoo.

> Sorry, my intent was not to belittle or enrage. I was merely pointing out the fact that, based upon provided data, you, as a developer, are quite far removed from the lower end of the income spectrum.

Bite me.

You don't know anything about where he comes from or how he got where he is now. Heck - you don't even know that he's not one of the saintly 3%.

You're just looking to claim some high ground so you can start a pissing contest.

> (Disclaimer: I am not from the USA.)

Perhaps you should refrain from comments that depend on knowledge that you don't have.

Do I really need to have been born in the USA to be able to read published statistical data about the population? That seems to be an odd dependency.

As I said, my intent was not to belittle, nor is it to "win" any kind of contest. The desire to be part of a winning team has turned the tide from reason and logic to emotion in modern discourse (and especially politics). I don't care if I don't "win" as long as I'm forced, at a minimum, to reevaluate my position and beliefs.

Also, what do you mean by "saintly"?

> Do I really need to have been born in the USA to be able to read published statistical data about the population?

I'm not disputing your ability to read. I'm pointing out that your conclusions were faulty. Was I wrong to assume that more knowledge might have helped you avoid the error?

> As I said, my intent was not to belittle, nor is it to "win" any kind of contest.

Then you should work on ensuring that your intent is reflected in what you write.

> The desire to be part of a winning team has turned the tide from reason and logic to emotion in modern discourse (and especially politics).

Projection....

i don't care. neither do all the people who voted up the original post. there's a lot of stuff on the front page - funny how you just couldn't avoid spending time in this article.

Author's reasons for phenomenon in brief: (1) tax system not progressive enough; (2) govt hard on unions.

| Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan. It breeds political polarization, mistrust, and resentment between the haves and the have-nots and tends to distort the workings of a democratic political system in which money increasingly confers political voice and power.

Queue the libertarian rhetoric to rationalize this with another meritocracy (blame the poor) argument.

Your statement makes a nice, pandering story, but it's really a very complex issue.

There's some truth in the idea that the rich get richer, faster than the rest of us. But today, in a practical sense, what does it mean for someone to have much more money than I do?

And what causes it? It's certainly not that some plutocracy is holding our heads below water, as much some people like to paint that picture.

I'd encourage you to read this article, which has a pretty insightful analysis of where this inequality originates, and why: http://www.the-american-interest.com/article-bd.cfm?piece=90...

Actually the Foreign Affairs article makes it pretty much as simple as that. We were going pretty good in the 1960s and the moneyed plutocracy, angry that they were losing power, financed and fomented a conservative counterrevolution to undermine all the progress that had been made. They got obscenely wealthy, while we got the shaft. Pretty cut and dry.

I agree that's what the FA article says. Anybody who really thinks that's the start and finish of the topic is standing there with their fingers in their ears singing "la-la-la I can't hear you".

The real world is a complex place. It's rarely possible to point to a single cause of anything.

How about the Paul Graham argument that income inequality is not a problem if it means that everyone's standard of living is raised?

http://www.paulgraham.com/gap.html

Clearly everyone's standard of living is not going up when approximately 10% of the nation are unemployed.

Clearly we can distinguish a general trend (a rising tide lifting all boats over a period of decades) from a short term blip (a bubble bursting and causing a recession).

If you put it that way: the average salary for most Americans, when inflation adjusted, has been largely unchanged for the past 40 years. We know this.

Bubble or no, most people are not seeing a general trend of more personal wealth.

No, the average salary has been largely unchanged when adjusted for chained CPI. Chained CPI != inflation since the basket of goods changes with time. To measure inflation, you need to measure the cost of the 1970's basket of goods in 2010 dollars. Modern medicine, cell phones, computers, HDTVs, etc must all be excluded. CPI doesn't do this.

Further, even taking chained CPI as a measure of inflation, it's known to overestimate inflation by about 1.3% at least until 1996 (http://en.wikipedia.org/wiki/Boskin_Commission). Taking Boskin-corrected CPI as a measure of inflation, wages have increased 40% over 40 years.

See the other thread about wealth where people's standard of living is measured mainly by how much richer they are then their friends.

It is pretty easy to make the argument that someone 5,000 years ago who was at the top of his tribe is happier than someone today at the bottom, even though the guy at the bottom today has far more comforts than the 5,000 year old.

You (and Paul Graham) need to look into the studies that very clearly show people's happiness is a relative measure, not an absolute one.

Who said anything about happiness? Are you implying that income is proportional to happiness?

That would be nice if it were true. But it's not.

I like PG but that doesn't mean he's infallible. Income inequality to a degree isn't a problem when and if the tide does float all boats, so to speak, but the problem is the tide doesn't seem to be raising all boats and that the middle class has all but vanished in America and what's left are the upwardly mobile upper-middle class and the working poor. Kudos to them they can now DVR a show and have broadband internet available at an affordable rate, but when you're essentially a wage slave, it means very little. When the top 20% have 85% of the wealth in America, the other 80% are left to fight over the crumbs. That is a terrible foundation for a supposedly democratic nation.

"but the problem is that the middle class has all but vanished in America and what's left are the upwardly mobile upper-middle class and the working poor. When the top 20% have 85% of the wealth in America, the other 80% are left to fight over the crumbs."

Can you link to some evidence showing a slowdown in mobility? Also, I would assume a key metric to showing whether income inequality increase is a problem is to see whether the speed of improvement of standard of living is slowing or not. I'd like to see figures on this as well.

The startup world demonstrates there's nothing systemically restricting people from being upwardly mobile. The formula for wealth in America is simple; create a product that people want.

The fact that creating something people want is difficult is a universal truth, not an indictment of our democracy.

What you're missing is that nowadays to make it you have to corner a market - thats how internets works.

Not many mom and pops type business opportunities on the net.

I disagree that the only type of business on the internet is a google or a facebook. However, assuming they are, they were still started as the brain child of a few people who were not rich when they started.

Also, both google and facebook cornered markets that didn't exist 20 years ago. Where did that market come from? No one else got wealthy because of search or social networking?

I just implied that to really make it (in context of this thread mind you), to get into top 5% of income you have to corner a market (existing or new).

That means risk. East German swimmer or Chinese gymnast kind of risk. For each billionaire there are such and such number of people who "got to grow as people".

In my humble opinion the swing towards egalitarianism was an anomaly in human history. Can we make this anomaly into a new status quo? Recent developments show that very unlikely.

Income inequality can be ignored (by politicians) until a large segment of the population cannot find jobs and can't afford food/gas/healthcare. Oh wait, we're there.

Census estimates suggest 1 in 6 Americans live in poverty

http://www.latimes.com/news/nationworld/nation/wire/sns-ap-u...

1 in 7 Americans rely on food stamps

http://money.cnn.com/2010/12/21/news/economy/food_stamps/ind...

Labor Force Participation Rate Drops To Fresh 25 Year Low, Adjusted Unemployment Rate At 11.7%

http://www.zerohedge.com/article/labor-force-participation-r...

> Census estimates suggest 1 in 6 Americans live in poverty

Which definition of poverty are we using?

I have two. According to one, 90% of Americans live in poverty. According to the other, less than 1% do. Which one is correct?

Note that the 1% is based on world-standards for poverty....

> 1 in 7 Americans rely on food stamps

And taxing rich people more is going to change that how?

Govt aid is basically a no-work/low-pay job. How is reducing the amount of money in the private sector going to put more people to work?

Note that reducing the amount of money in the private sector doesn't necessarily increase the amount of money in the public sector. The US govt has never managed to collect more than 20% of GDP in taxes, so if your plan assumes that we can, you get to explain why this time will be different.

But income inequality has fallen during the recession. We've all become poorer, the rich in particular. Tax revenues took a big hit because the rich lost a lot, and the rich pay the lions share of taxes.

http://www.census.gov/compendia/statab/2009/tables/09s0673.p...

http://www.census.gov/compendia/statab/2011/tables/11s0695.p...

(Preliminary figures have suggested inequality is on the rise, now that we are recovering.)

And income equality can mean that we're all poor. Is that really preferable?

As long as people's basic needs are fullfilled I think it really is the relative wealth that decides their happiness.

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