The K-shaped recovery
pomp.substack.com
pomp.substack.com
What your are basically seeing as a complete failure of all government programs and safety nets. Everything from schools to libraries to homeless housing has failed. Anyone wealthy enough to not use those services extensively is ok, everyone that needs them is f-Ed. Moreover the folks using those services were an optional luxury in many cases and simply got cut.
A day of reckoning is only wishful thinking. The Matthew effect is here to stay. https://en.wikipedia.org/wiki/Matthew_effect
*I am always perplexed by how Americans feel so much pride over this
I feel like this is dangerous thinking.
Very different approaches can be reasonably proposed to solve the same issues by people with very different perspectives on the world. People who don't support - or even directly oppose - the actions you believe should be taken don't necessarily not care about the same things that you care about.
Sure, but we have a system where individual's earning potential is pitted against the general welfare of communities. When the state needs to generate tax revenue for social programs and infrastructure corporations will fight it. As a country the US has been hollowed out by this conflict. The issue isn't _how_ these problems get solved, but _if_.
Libertarianism as an ideology is born out of this dichotomy, sold as small-government means big individual. In reality small government just means big corporations.
Higher taxes and government provided safety nets are less biased than charities. Why would I be proud of a country where people beg on Facebook for donations when their family gets cancer, and a significant portion of those go on to vote against things like universal healthcare, parental leave, minimum sick leave/vacation leave, etc.
They also incentivize problematic behavior. When there's no chance in hell that you won't get the money, you have little incentive to change your ways to become a productive member of society. Moral hazards are a thing.
Case in point: USA has a very well-developed bankruptcy system. Losing a business frequently means your business debts are absolved and you can start anew. One may think that such a system will encourage people to throw money at bad decisions: however, a bigger effect is that people are encouraged to cut the loss at a reasonable point and start a new business, because you can take calculated risks.
There are (or used to be) arcane economic systems based upon the reverse principle: if your business fails your life is ruined, so you have every incentive to stick to it until the bitter end, using up every resource, including your personal money, your family money, and your relatives' money. (South Korea used to be like that.) And guess what? It didn't bring more successful businesses, just more suffering.
They're not all positive though, they are incentivizing a part of the population to not contribute. I live around such people, and I have no doubt that they'd contribute if the alternative was going hungry and sleeping outside. But since the alternative is a 70sqm flat, a tv, xbox and smartphone, utilities paid for and food in the kitchen, they don't see a reason to contribute - it would just mean spending time doing things they don't like for more money. But as they already have their needs and most of their desires covered, that's not a good offer to them. They're perpetually relying on the safety net, and it tends to become intergenerational.
If you want to install a safety net, it's wise to address that issue.
Not all will, obviously. Some actually need the safety net (e.g. disabled people), others fall into it and then get up again. It's the ones who don't want to get up again that are the issue.
I'd rather have them return to contributing than pretending that, if we didn't have people who are lazy, we'd invent them.
Those carers are often entirely dependent on safety nets.
That is far from lazy! It's an exhausting thing to do.
Heck, for some even getting out to the shops is difficult, as how do you go out if you need to stay with your cared for person all the time.
Maybe you'd consider it solved if you count the benefits on which so many carers rely; certainly not without them.
Even then, I find it striking that benefits for carers where I live are lower than benefits for an unemployed person. As though a carer needs less to live on.
So asking for charity is bad, but forcing the government to use it's monopoly of force to take money from others for you is good?
Would you rather replace this with a system where children had to beg on gofundme for middle school tuition, where funding is implicitly decided by who has the best sob story and appeases the FB algorthim for that day.
Replace school with health care and his point is clear.
Absolutely. I will, with no hesitation, be fine with that trade.
A government, or more broadly, a society has no requirement to earn a profit and every incentive to keep its citizens healthy and happy so as to be positive members of society in order to perpetuate that society.
Remember that, in some areas of the country, fire protection is for-profit and if you didn't pay your fire company dues, your house will burn while you watch. Meanwhile, in the "socialist" areas with government-owned-and-operated fire departments, everyone's residence will receive at least some protection.
Two, if there's any body who would need to decide that, yes, the government would be a much more appropriate body than individuals - it is at least theoretically a representative of the whole population.
I don't think the entire point of society is to force people to participate in your choice program under threat of jailing
people who don't share your (presumably) anti-state views probably think this is basically what government is.
if you rephrased to something like "government action ought to be the last resort for solving the problems of a community", I could agree with you.
In my personal position, I want to "force" the government to "use it's [sic] monopoly of force" to accept a little more tax money from me in exchange for making sure that my fellow citizens, whether they're less fortunate or not, don't literally die because they don't have enough pieces of paper to pay for healthcare.
A majority of citizens, including those who regularly give to charity, are not equipped to properly allocate their charitable contributions. I'm not talking about making sure their money goes to the right problem area, I'm talking about making sure it's not funneled into a con man's pocket. Take a look at the financials on major charities and you'll quickly realize that philanthropy doesn't work all that well.
Side note - the government collects taxes, and must continue to do so in order to exist. If you're against taxes as a concept, you're against government existing altogether. If that's the case, your political ideology is effectively anarchism.
Side note on HN etiquette, to say the parent comment displays a "total lack of understanding of the USA" is an ad-hominem overstatement, ratchet back the language and turn up the civility.
On the other hand, the grandparent did make a statement which could be considered ad hominiem:
>"The US has always been a land for the rich to oppress the poor: the system encourages this. Those who care about the less fortunate are the minority."
* There's no guarantee that those charities are providing the right sort of support for the poor. For example, the thread you're replying to is about worse schooling for the poor, so are charities directly addressing that or just providing after school classes (less good), or even just food handouts to adults after it's already past the best time to educate them (far worse but unfortunately the most likely)?
* Are they even directed at the most poor at all? For example, it's common for the rich to donate to cancer research charities, which helps the rich more than it helps poor people who can't afford healthcare at all (but is still a good cause, don't get me wrong).
I always shudder when my rich coworkers donate money to their own children's private school, get the tax deduction, and also get a corporation gift match.
>"No healthy society should rely on private charitable as safety net for the less fortunates."
Why?
Charities are held to account by a very different constituency (the donors), who are in a much more powerful position.
I'm also not sure your assertion that "people will chose to transfer their wealth to those in their own tribe, and not to those outside of it" holds much water. I think donors often give to causes which affect people very different from themselves, and anyway, your state or nation is really just a different sort of tribe. Given some convincing evidence, I might believe that state-welfare programs are more equitable than private charities, but I have not seen such evidence.
"forcibly take money" I assume refers to levying taxes. I think you'll find that governments that don't levy taxes generally produce less liveable societies than those that do.
> "But the Saudi government—a highly autocratic regime—has historically resisted taxing its citizens for a reason: Taxes empower people to demand more from their government, and they can often be a trigger for democratization. “Taxation plays a profound role in the rise of democracy,” Sven Steinmo, a political-science professor at the University of Colorado at Boulder, told me."[0]
[0]https://www.theatlantic.com/international/archive/2020/06/sa...
My belief is that forcing somebody to do anything against their will is inherently immoral. Taxation is included in that. It's not that simple of course- it's all relative, and sometimes taxation can do enough good to outweigh that morality.
The problem with this argument is that it can be used to shutdown any government service. I can easly say, I don't have kids so I won't support schools. Or I don't like police/firefighters so I won't pay for them. I don't like parks so I won't pay. I drink water so I won't pay.
Any such society wouldn't survive. Either the next generation would simply be taken over by a competent government with an educated workforce and functioning social services. At some point you have to think beyond yourself ask what is needed to keep America alive.
1) in an economic downturn, one would expect charitable givings to decrease due to economic contraction. I think the evidence from the 2008 recession is somewhat mixed on this topic. Most governments, not reliant on personal donations, do not face the same sort of budget issues (which is another debate).
2) Charities have the ability to discriminate. They can choose how to allocate donations in ways that can include or exclude certain segments. This is in some respects true as well for government spending, but once again boils down to the allocation problem.
3) economies of scale. Larger organizations are often less redundant than a group of smaller organizations, reducing overhead.
> My belief is that forcing somebody to do anything against their will is inherently immoral. Taxation is included in that. It's not that simple of course- it's all relative, and sometimes taxation can do enough good to outweigh that morality.
Since you are not fully opposed to taxation, would you accept a taxation scheme for a government program if an independent and well researched study showed that government spend outperformed private programs by 2.5x, 10x, etc.? Or is it more that any issue that could be addressed via private charitable organizations should be off-limits for the government?
Basic education, housing, medical care, and food/water are areas that are so essential that having them be government run makes sense to me. I'd still prefer them to be as-local-as-practical, since I believe that accountability of government is increased the more local government is. I don't want the United Nations running my local elementary school as an extreme example.
I think that allowing for non-profit/charitable causes to exist and to have contributions to them be tax-deductible is still beneficial to society. I don't want the government deciding which churches are worthy of existing (that's problematic on multiple levels) and neither do I want to penalize someone who believes their church provides important enough community services to be worthy of support over someone else who believes that an art museum or the opera is worthy of support (whether that was via-government or via-donations).
There is no amount of government efficiency in supporting churches that would cause me to turn that over to the government.
There is no amount of private efficiency in providing for national defense that would cause me to turn the military over to private interests to run.
What about enforcing traffic laws, or forcing children to attend school?
They're both rhetorical arguments with a core truth, but if you attempt to take them out of rhetoric they're both incredibly silly.
This means the wealthier you are, the more say you have in appropriating what could be government money. If you make millions per year, you can potentially apportion more money than some citizens make in a decade. You effectively have more power in the government than many other citizens who should have the same capacity for change.
It's a form of plutocracy.
Why would my charitable giving give me power in the government?
> the more say you have in appropriating what could be government money.
Everything could be government money, my house could be a government house, my wife could be a government woman, etc.
Just because the government has the power to seize it doesn't mean they should or that it's theirs
I feel like I already outlined this, but it bears repeating. Taxation gives money to the government and the government decides how to spend it. If the government spends it poorly we can vote out those who use it improperly. You can't vote Jeff Bezos out of the country.
> Everything could be government money, my house could be a government house, my wife could be a government woman, etc.
Technically a percentage of you house is claimed by the government through property tax and your wife isn't property and I hope you know that.
Yes, that's exactly what it means, because, as you say it's "their" money. A pretty fundamental part of ownership is deciding what to do with something.
You really think government should be telling people how and where to spend their money?
Nope. And you are free to spend your money how you want. The point missed here is that when it's tax-deductible that money _would_ have been local/state/federal money.
The government already decided you need to return that money back to the community/country. If they give you the power to choose who gets it, they've given you the ability to appropriate government funds.
That isn't true, only a fraction of the money would have been taxed.
And that's exactly the point: We are incentivizing people to give 5 times as much money as taxes would have been.
If that money isn't allocated perfectly, well, there's 5 times as much of it, I think it'll be OK.
> The government ....
The government will never do a perfect job, this way we let people fill in the gaps.
> they've given you the ability to appropriate government funds.
You keep talking as if they deduct the full amount donated from taxes, this is simply not true.
Or is it that you think even the most charitable nation is not charitable enough? (hence acknowledging that charity doesn't appear to work).
[0] https://www.pewsocialtrends.org/2020/01/09/trends-in-income-...
I agree that the USA is not charitable enough, but that doesn't mean charity "doesn't appear to work". The government is also bad at achieving its stated aims, but that doesn't mean we should stop depending on it, or stop trying to improve it.
I'm not trying to belittle your point, but is there a source that goes more in-depth on this topic?
"Joe Biden and his wife donated just $70,000 to charity in the two decades leading up to 2017, per their tax returns. But when their earnings skyrocketed in 2017, so did their giving. That year they handed more than $1 million, or about 9% of their income" (including $250K to their own foundations) (still pretty low since he and his surviving children got stinking rich after the Vice Presidency and is quite old)
-Forbes
There’s nothing in contradiction with the parent’s sentiment and this giving.
More importantly, why aren't we collectively falling all over ourselves to help those people?
Consider how many tiny, regional/branch charities/NGOs they are in your city alone, and then consider all the overhead of running a small business. Now multiply the two numbers together.
Circumstances are unique in most cities, dealing with on location is usually more efficient than a one-size-fits-all approach that cannot consider local reality (or it would lose any and all efficiency).
If you contrast the effectiveness of the food stamp program, or school lunches, or medicaid to literally any charity in the US, you will find that they blows them out of the water, in terms of impact per dollar.
You are vastly underestimating the impact of economies of scale. The overhead of food stamps, for instance is 0.7%. You won't find a single small charity that operates that efficiently.
I understand the hope in UBI in that regard, it would make a lot simpler by giving people money and then praying that they'll use it wisely.
Everyone needs a roof over their heads, food, and occasional access to medical care. When they can't afford one of those things, it doesn't take long for them to end up on the street.
The highest-ROI way to deal with homelessness is to prevent it from happening in the first place. Without food stamps, section 8, unemployment benefits, and Medicaid, there would be an explosion of homelessness, regardless of local circumstances.
The homeless population wasn't born on the street. Most of it ended up there, because of a medical condition that was left untreated (Addiction is a medical condition), or because they couldn't afford making last month's rent.
You'd be far better off throwing resources behind healthcare, or SNAP, or section 8, or at-risk-youth-programs, compared to funding your local charity that has 4 employees and a director [1] that administers 9 temporary-shelter beds. [2]
[1] I wish I was kidding about this, but that's how a lot of small charities operate.
[2] That won't take you, if you have an addiction problem.
This is all only an issue because technology is exploding right now and our government is not designed for the rapid changes in legislation necessary to keep up. Improved communication tools have enabled outsourcing and automation that now allows 1 person to do what was formerly 400 peoples' jobs. Data privacy has become a very sudden public concern when 4 years ago it was revealed people could use that data to swing an election. Professional media outlets are now suddenly competing with average-joes-angry-blog for views and most have needed to switch to low quality/high outrage just to survive.
You end up in a situation where the same system that would have worked 50 years ago suddenly doesn't work now. But the current wealth disparity is not irreversible.
On the contrary, you can vote to change your government, but the corporations get to do what they want with 0 accountability. If they have a pseudo-monopoly (like several large tech companies do today), you can "choose" to use them or miss out on basic life services.
The fact that these monopolies can exist is a failure of the government.
Some, like telecom companies, exist because they have ownership over a scarce resource (spectrum). I might argue that because of that scarcity, internet should be a function provided by the government and not private companies at all.
Others, like smartphone OS's (iOS vs Android), exist because they are years ahead of any competition, and then entrench themselves by using custom parts and protocols. In an ideal world, there would be an OS-agnostic language for developing mobile apps, just as web pages are (mostly) browser-agnostic. Likewise, as manufacturing parts gets cheaper hopefully it becomes easier for tech enthusiasts to build their own phones with an open source OS. The government should have a role to facilitate this outcome.
But yes, monopolies leave us helpless
Wholeheartedly agree with this! But I think it's not just the US. Any states that emphasizes and pushes capitalism and it's values are going the same way. Seems like the only states where inequality isn't spiraling out of control are countries that are not strictly aiming for one system, but taking the best out of many, a balanced diet of systems.
Many developed countries by your definition are 'socialist', yet fare far better than the US.
I was making fun of the people that claim any attempt at fixing the system is socialism.
Whatever the measurement, I find it just as interesting that there was such a large increase over pre-covid for the high income zipcodes. My assumption would have been a decrease in the low-income zipcodes (due to access to technology resources for e-learning, more friction in adjusting to staying at home, economic woes effecting low income families more, etc), but the high-income zipcodes to stay roughly the same. It looks like (for math at least) that e-learning is working out great when you have access to the technology, much better than regular in-person school (assuming what they're measuring as 'progress' is actually meaningful to begin with).
My anecdote working with a lot of engineers who are all currently remote is that they're spending much more time with their kids overall. All throughout the day and not just after work hours. It makes a lot of sense that high income households have math literate parents and those parents now have more time to help their kids become math literate.
The participation rates for Zearn is, at best, a proxy. And when they say "student progress", I believe it means "students solving puzzles and progressing through the lessons" (whether that's with parental supervision or self-supervised).
[1] https://www.nytimes.com/2020/03/15/nyregion/nyc-schools-clos...
Not to get overly political, but I think this was the goal, at least for one of the US's political parties.
For instance, libraries are funded by both federal and local sources. There is only one party that consistently wants to remove that funding (hint @which one: https://www.publishersweekly.com/pw/by-topic/industry-news/l...)
How much additionally is spent is locally determined, yes, and here you see that disparity as well. In Georgia, a heavily GOP state where I have family, the online catalog is pretty meager, even for major cities. While they have PINES for the less populous counties, a state-wide interlibrary loan program, it only is for physical books. Access to electronic resources is anemic. In California, a heavily Dem state where I live, the online resources tend to be excellent (especially if you're in larger counties/cities), not only having an extensive online catalog, but a lot of extras (Kanopy, Hoopla, language learning stuff, etc).
But even all that aside, the -effectiveness- is curtailed by federal effects. Online resource access, extremely relevant under COVID, requires stable internet access. But unfortunately, that's not always available. Attempts to treat internet as a utility, to financially fund broadband rollout nationwide, have failed, due to one particular party preferring it staying privatized and purely for profit. Programs to create financial incentives to offset the cost even where it is rolled out have been created, but only under one party, and the other seems inclined to defund or cancel them. Attempts to allow municipalities to roll out their own broadband to be able to offer faster speeds without data caps at lower prices have been fought tooth and nail, again, by one particular party, on behalf of preventing governmental 'competition' with the private sector.
Etc. In short, while you're right that localities are run by both major political parties, both the explicit statement you make that funding is local (only), and the implicit belief you're relying on that you can distance local effect from federal decisions, are wrong.
Only 8% of public school budgets comes from the Federal government: https://theconversation.com/federal-spending-covers-only-8-o...
The impact of Federal spending cuts on these programs is overrated, and one good-faith reason for cutting that spending is to federalize (I.e. decentralize) the administration of those services.
I suspect that the percentage is a bit higher when you look at low-income areas (either within states or even at the state level).
Okay but how many standard deviations higher? In every single State and school district, Federal funding is a tiny minority of the total budget.
If we're talking about public libraries, even an order of magnitude higher %age of budget attributable to the Federal funding is a whopping...4%.
The State that's the most reliant on Federal spending is New Mexico; 14% of its budget comes from the Federal government.
In every State except for Oklahoma, YoY education spending increased in 2019.
I'm sure the impact of federal spending cuts will be small on schools whose per-student budget is already large, and large on schools whose per-student budget is small.
In other words, cuts would hurt the poorest schools the most, and increase the divide that the parent article is talking about.
https://www.governing.com/topics/education/gov-state-educati...
The State that is the most reliant on the Federal government is New Mexico (14% of its education budget).
The State Massachusetts has more people than the entire country of Norway. At the state level, scale is more than sufficient.
To use one of the cited programs, the US school system, as an example: per-pupil inflation-adjusted spending on schools is the highest it's ever been, and has been continuously increasing: https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...
Also, Federal spending only covers about 8% of public school budgets: https://theconversation.com/federal-spending-covers-only-8-o...
the unemployment benefits come from state funds as well
Second, a significant source of federal funds is newly printed money, which the states do not (currently) have the ability to do.
This is half-true, and to the extent that this is the case, the major political party that GP is attacking here has essentially made it its mission to reduce those high federal taxes.
But on the other side of the coin, itt's also worth mentioning that the US Federal taxes are some of the lowest among the OECD. Germany’s second-highest marginal income-tax rate of 42% kicks in for married households earning around €112,000 ($124,000). An American couple with that income pays a marginal rate of only 22% and would need to earn $612,350 before paying the top marginal rate of 37%[1]. If there's a state that wants this kind of a couple to pay taxes that are comparable to Germany's, they have a LOT of room to work with.
> Second, a significant source of federal funds is newly printed money, which the states do not (currently) have the ability to do.
1. This is true of the EU as well. Each member state has to get approval from the ECB to print new money.
2. the numbers I've cited are the spending numbers, that's downstream of taxes and money printing.
[1] https://www.wsj.com/articles/the-middle-class-always-pays-11...
Talking about EU/ECB is a red herring as the system hasn't been in existence long enough to collapse under its own incentives.
But sure, another answer to your question is "nothing". As in, various states might be raising taxes after this is all said and done. The Covid crisis and this orchestrated destruction of the federal government could usher in a return to more localism. It's hard to say what's around the corner from this point.
That's because US federal tax-base is extremely narrow. Ironically the US has the most progressive tax system in the developed world; the top 1% pay ~45% of the Fed budget, but there's only so much we can raise by targeting the rich, since by definition the base is so small. In contrast, in EU countries the tax bases is broad, it's a large number of middle-class taxpayers that pay high income taxes and high consumption taxes (VAT). While the funding is more regressive, it raises more revenue which enables more progressive spending. The net result is that, after taxes and transfers, the higher middle-class tax nations are more progressive.
> This creates a general anti-tax sentiment, fueled by a focus on individual states' taxes rather than the bulk tax of the federal government.
That's a feature, and not a bug — States competing with each other on tax rates creates a downward pressure on taxes in the same way that enterprise competition creates a downward pressure on prices. I already mentioned the EU, but Switzerland works exactly like this too. The top marginal Federal tax rate in Switzerland is ~10%, while the Cantonal tax rates vary wildly between 16-30%. The net result is that the Swiss enjoy some of the lowest taxes in the developed world while enjoying one of the highest standards of living and superior services. Much like the rest of the OECD, Swiss taxes are broad-based middle class taxes as opposed to top-heavy progressive taxes like the US.
https://en.wikipedia.org/wiki/Disposable_household_and_per_c...
You're absolutely correct about that, and the linked article I showed does exactly that. It computes the multiple of the average wage at which the top marginal rate kicks in. The U.S. top marginal rate applies only to taxpayers whose wages are 9.3 times the average wage. In Belgium the top marginal rate ensnares workers earning 1.1 times the average, and in the Netherlands 1.4 times. This pattern persists across all peer OECD nations. The US is an outlier in its progressivity.
First, the distribution of tax payers to different marginal tax rate brackets differ. That is, how many percent of US tax payers actually pay top marginal rate vs how many in Belgium do.
Second, the differences in purchasing power. What does the average income (or the top income for that matter) actually get you in different countries.
By definition, the the metric takes into account the median. Because the top marginal rate kicks in at 1.1x the median (in Belgium), it is the middle of the distribution bears the top marginal burden. Likewise, in the US, 9.3x the median is at the top end of the distribution.
> Second, the differences in purchasing power. What does the average income (or the top income for that matter) actually get you in different countries.
https://en.wikipedia.org/wiki/Disposable_household_and_per_c...
In fact, the median disposable income after adjusting for purchasing power in the US is higher than that of Belgium as well as Germany. That means that the median person in the US has a higher purchasing power AND pays much less in taxes than the median Belgian, who pays the top marginal rate (well, 1.1x the median, but that's basically the same).
If California would hold the money that it is sending to subsidize red states it would be doing perfectly fine.
BTW in 2025 the tax cuts on middle class will expire completely, and unless you make $200k or more you will be affected. Meantime Bezos is now worth $200 billion thanks to the wonderful tax cuts.
Oh and one interesting thing, the 2018 tax cuts also made it even more beneficial to outsource jobs to other countries, I suspect that was the primarily reason trump started trade war to mask it.
> BTW in 2025 the tax cuts on middle class will expire completely, and unless you make $200k or more you will be affected.
This is not because "party B" wants to raise taxes on the middle class. It's because Senate budget reconciliation rules require a revote after 8 years for certain revenue changes. It's a parliamentarian technicality. There's almost no doubt that, if they were in power in 2025, they will vote to continue those cuts. If it was up to them, they would reduce taxes to 0 across the board.
> Oh and one interesting thing, the 2018 tax cuts also made it even more beneficial to outsource jobs to other countries, I suspect that was the primarily reason trump started trade war to mask it.
None of this is relevant to the discussion at hand: almost everyone got a Federal tax cut in 2017 (https://www.nytimes.com/2019/04/14/business/economy/income-t...), which means that there's room for tax increases at the State level.
Yep, they didn't even get it down to 0 and already increased our debt by 2 trillion (more than Obama). Is their plan just start printing money when needed, because some countries already tried that.
> None of this is relevant to the discussion at hand: almost everyone got a Federal tax cut in 2017 (https://www.nytimes.com/2019/04/14/business/economy/income-t...), which means that there's room for tax increases at the State level.
This is exactly what Democrats were complaining about look at the income and how many god tax cut, realize that ones who didn't got it either they got the same amount of tax or (more likely) paid more.
Compare that to a median income, also be aware that the individual tax cuts for middle class gradually expire every year.
Just FYI, the debt didn't increase as a result of the tax cut, it increased as a result of spending. The Federal government's tax revenue actually increased after the tax cut, which means that the deficit is being driven by spending increases, not tax decreases.
https://www.taxpolicycenter.org/statistics/federal-receipt-a...
Also, the SALT deduction overwhelmingly benefited the rich, who arguably don't pay enough in taxes.
Then again, I'm in favor of removing all deductions. If government wants to incentivize some activity, then they should just pay for it. That way it can be properly accounted for.
Edit: I typo'd and wrote "I don't see why people would be against SALT deductions" instead of "I don't see why people would be for SALT deductions".
When the Federal government allows you to deduct certain line items from your taxable income, it's usually as an incentive for that thing (eg charitable donations deduction). It's really debatable if we really want to be incentivizing higher state taxes. While taxation is an important way to pay for necessary services, you need some downward pressure on it (just like prices) that ensures that we're spending every dollar as efficiently as possible.
If you have a more federalized tax structure where you pay more in state taxes than Federal taxes, you probably don't even need this kind of affirmative incentive anyway.
> If government wants to incentivize some activity, then they should just pay for it.
Agreed, and that's essentially what critics of the SALT deduction call it: the Federal government paying for, and as a result incentivizing states to increase their taxes.
Why can the federal government tax money that can only possibly be in my pocket if I've committed tax fraud against my state?
If I make 100K and my state takes 5%, I now only have 95K. There's no option for me not to pay 5K to my state.
(and no, for most people uprooting yourself for tax purposes isn't a tenable option)
Now, I have to pay the federal government. Why should I be on the hook to pay taxes on 100K in income, when I truly only earned 95K?
With sales tax, you could theoretically not buy things subject to sales tax. With real estate tax, you could in theory just rent.
Yes, in practice it's not like taxes are so punitive that > 100% of my income will be demanded, but it seems unfair to levy such taxes.
This assumes, of course, that the state has the first dibs on a person's income. I'd be just as happy if the federal government amended the constitution saying that all states levying income tax must deduct federal taxes paid from taxable income amounts.
This is not double taxation.
https://www.investopedia.com/terms/d/double_taxation.asp
The federal government charges you x% for its services. The state government charges you y% for its services. The city government charges you z% for its services. The county government charges you a% of some arbitrary "assessed" property value. These are different entities who have the power to tax you.
>Why can the federal government tax money that can only possibly be in my pocket if I've committed tax fraud against my state?
What? This would only be the case if total taxes on your income exceed 100%. And typically, that would then be up to the courts to decide who is the senior creditor that deserves to get paid.
>Now, I have to pay the federal government. Why should I be on the hook to pay taxes on 100K in income, when I truly only earned 95K?
I disagree that you truly earned $95k. You earned $100k.
In theory, it could be problematic if all of your taxes add up to >100% of income, but I think that's more incentive for people to participate in their government and make sure that doesn't happen. But I don't see why a state that mismanages their defined benefit pensions and infrastructure, and hence has high taxes due to shifting costs from 30 years ago to today, should be getting a benefit for it.
> Double taxation is a tax principle referring to income taxes paid twice on the same source of income.
and later
> Double taxation also occurs in international trade or investment when the same income is taxed in two different countries.
This state/federal dichotomy for the purpose of taxation is really no different than two countries taxing the same source of income.
Two entities are taxing the same income, and both must be paid. This is double taxation by the definition of the source you brought into the discussion!
> What? This would only be the case if total taxes on your income exceed 100%. And typically, that would then be up to the courts to decide who is the senior creditor that deserves to get paid.
No, it's true regardless of how much I've paid to my state. The 5K is gone. I don't have it. It's deducted from my paycheck. It never hits my bank account. I'm being asked to pay taxes on money I've used to pay taxes.
> I disagree that you truly earned $95k. You earned $100k.
You're probably right that earned was an imprecise phrasing for this. Received, perhaps? Regardless, the point still stands.
And to be clear I'm arguing from the standpoint of what I believe the principles ought to be, not of what the law is. As you state, when asking for money that I truly don't have due to contradicting demands on my income, courts would decide who receives what. I'm just arguing that the law ought to define that hierarchy, and any money already used to pay taxes ought not be taxed again by the secondary payee.
No, those are user fees.
> We don't deduct prices of other goods & services (food, clothing, rent, transportation) from our salaries before paying taxes on them, do we?
Yes, we do, with a choice to take a simplified default amount.
But with SALT, I think the better argument is that the absence of the deductions (or limitations on them, which work the same way at some point) causes federal taxation to artificially incentivize low-tax state policy since it can switch policies from net expected positive to net expected negative value before to after consideration of federal taxation, whereas with SALT deeuctibility federal income taxation does not have any effect on the direction, only the magnitude, of expected value of state tax and spending policy.
Pre-tax benefits for transportation are also not universal, and the State governments can deduct Federal taxes in their calculations if they want to follow that model.
With a deduction for state tax, it's a lot more cut and dried "hey I don't have this money anymore because the state whose laws you officially sanction by virtue of their being part of your union is going to throw me in jail if I don't pay them".
Edit: it's not really on the income taxed, it's on the money already spent to pay a seperate income tax.
Edit: after looking it up, I'm wrong, you can deduct most state and local taxes such as property, income, and sales, although you can only pick either income or sales so it does incentivize states to only use one.
It still encourages wasteful tax spending though as my comment below explains.
SALT is not a tax credit (you won't get $5,000 back), it is a deduction which means the $5,000 is not taxed, because it was already used to pay a tax.
As a hypothetical, imagine 1 state which has very low taxes, say 5k on 100k income and does not provide very many services requiring the citizens to use post income tax money on all the goods and services they require such as rent, food, and healthcare. Now imagine another state which has super high taxes, say 40k on 100k of income, but the state massively subsidies their rent, food, gives them completely free healthcare and such.
Why should the person in the high tax state get to deduct the state and local taxes used to pay for similar services as the low tax one who has to pay for it with post federal income tax money?
To put it in more economic terms, SALT deductions incentivize state and local governments to increase taxes and spending to the point that the marginal utility of $1 provided by the government to citizens to equal the marginal cost of citizens taxes which include the SALT deductions or (1 / (1 - citizens marginal federal income tax rate)).
That literally creates waste because it incentivizes states and local governments to increase taxes to the point where citizens are seeing equal benefits with overall tax burdens at the cost of reducing the federal governments budget which ironically then encourages them to increase taxes to make up for it which then lowers the denominator in the states marginal utility to overall tax burden calculation in a positive feedback loop.
They are complementing the federal government so it doesn't have to provide these services.
If federal government would take care of everything and this was some extra service then I would agree with you, but it isn't.
The State and Local governments provide a basket of services, and taxation is the price of those services. It's no more double taxation to pay all of the different governments for their different basket of services as it is "double payment" to pay different service providers the price of their goods & services independent of one another.
A Spotify subscription is a price we pay for the benefit of unlimited music streaming.
Both represent an exchange of money for services.
1. Not true of all low tax states (Nevada, Washington, New Hampshire, South Dakota, etc)
2. More representative of which states have the most senior citizens and military bases, because most of the Federal budget goes into Medicare, Social Security, and the military.
3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted
Even many of the military bases are just unneeded make-work facilities for civilians. The military leadership has constantly been blocked from closing bases that it said it didn’t need by Congress. There are many military bases that are really just poorly disguised subsidies.
And just so I can’t be accused of quoting sources from the “liberal media”
https://www.militarytimes.com/news/pentagon-congress/2019/08...
Social security and Medicare are also just another form of government subsidizing people.
No, what they paid in doesn’t come close to paying for what they received.
https://www.politifact.com/article/2013/feb/01/medicare-and-...
That...wasn't the argument. On average the pattern of "net-takers" and "net-contributors" is a proxy for where senior citizens live because Social Security and Medicare account for over half of the Federal budget. Yes, there are outliers (like Mississippi, Alabama, Kentucky), but there are outliers in the other direction as I pointed out (Washington, Utah, South Dakota, New Hampshire). I addressed this in the final point, that the disparity is:
"3. Better alleviated by directly targeting net-takers rather than trying to approximate which states are net givers and takers based on the state and local tax rates, which is ham-fisted"
> No, what they paid in doesn’t come close to paying for what they received.
None of your sources actually adjust for Medicare/SS/military expenditure.
Social Security especially is a method to redistribute taxes. The amount most senior citizens get from SS is much less they put in - even if you account for inflation.
In fact, research shows that accounting for Social Security essentially cancels out the recent increase in inequality: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668
https://www.salon.com/2018/11/16/how-blue-states-help-red-st...
To caricature the situation a bit: Red States don't like to pay Federal taxes. They only like to receive tax-dollars from the Federal Government
https://www.sfchronicle.com/politics/article/California-no-l...
The balance is made up by government debt, which will eventually be monetized by inflation, which acts as a tax on savers & retirees for the benefit of those who receive direct government payments. Not sure why more people aren't mad about this, but maybe the economic effects are a bit too indirect for people to notice.
In any case, there is no massive subsidy from "blue states" to "red states". As claydavisss mentioned, Californians get back about $0.99 for every $1 they pay in federal taxes.(http://www.latimes.com/politics/la-pol-sac-california-federa...) Each Oregonian gets about $2,000 more from the federal government than he pays in taxes (https://osc.state.ny.us/reports/budget/2015/fed_budget_fy201...). Of the ten states with the highest per-capita surpluses (i.e., the ones that are "subsidized" the most by other states), five voted for Trump and five for Clinton.
Can you gives us a link to this statistic? Thanks
"Thanks the reason I was asking was that in that document I don't see data about which state voted for Clinton or Trump. But I can see that of the states which paid the least most seem to be "Red States". No? West Virginia Kentucky New Mexico Arkansas Idaho South Carolina Alabama Utah North Carolina Tennessee Georgia Maine Arizona Indiana Louisiana Ohio Oklahoma Missouri "
You are looking at the wrong list. The one on page 6 only shows per capita taxes paid to the federal government by residents of the states. The one on page 9 shows how much per capita the federal government transfers to states and to individual citizens. The one on page 5 combines the two.
Of the ten states at the top of the page 5 list—the ones that get the most back (after subtracting taxes paid) from the federal government—five voted for Trump (MS, AL, WV, KY, SC) and five vote for Hillary (NM, VA, ME, HI, MD).
"High-tax, traditionally Democratic states (blue), subsidize low-tax, traditionally Republican states (red) — in a big way."
The 10 states at the bottom of the Rockefeller report's per capita list—that is, the states that benefit from the most federal spending per person compared to how much each person pays in federal taxes—are
Hillary-voting states: VA, NM, MD, HI, ME
Trump-voting states: KY, AK, AL, WV, MS
... which is exactly what I said, based on the State of New York report I cited.
So the 4 biggest payers in 2018 were New York, New Jersey, Massachusets and Connecticut. Aren't these all "blue states"?
The 4 biggest recipients are Alabama, Kentucky, Maryland, Virginia. Aren't those all "red states"?
https://www.usnews.com/news/best-states/articles/2020-05-15/...
Actual numbers: https://rockinst.org/issue-areas/fiscal-analysis/balance-of-...
Yes, but my point is that those states are subsidizing almost the rest of the country, no matter who those other states voted for.
>The 4 biggest recipients are Alabama, Kentucky, Maryland, Virginia. Aren't those all "red states"?
No. Maryland is a very Democratic state, and Virginia is a swing state that has recently voted mostly Democratic, including for Hillary in 2016.
>Actual numbers: https://rockinst.org/issue-areas/fiscal-analysis/balance-of-...
Why are you linking this URL as if I needed to see it, as if I didn't cite it in my previous comment?
This is just plain stupid divide-and-conquer. They're playing you on social issues (abortion, social justice, ...) while looting the 99%.
I'd rather at least have my freedoms while being looted than not.
Look up "divide and conquer". The basic idea is, to avoid facing your enemies all at once, you seed division between them (splitting them in different groups) so they fight among themselves, leaving you alone. That's what the top 1% (or rather top 0.001%) is doing to the rest - all around the world, just particularly obvious (and important) in the US.
Ranked choice voting is the only way to fix this (and getting rid of electoral college, increasing number of reps in house, and getting rid of gerrymandered districts), but that's all a pipe dream. I have to play with the cards I'm given.
Republicans sought to "starve the beast" by reducing taxes, on the theory that would force cuts in government spending. As shown in my sibling post, that never happened. Spending on social programs and safety nets has continually increased dramatically since Reagan was in office. Insofar as these "government programs and safety nets" are a "complete failure" the problem is operational, not budgetary.
Federal receipts as a % of GDP has basically been flat since WW2: https://fred.stlouisfed.org/series/FYFRGDA188S
If the Republicans have sought to "starve the beast", I'm not convinced they've even done a good job of that.
Keeping in mind that I'm not "both sides"-ing this, consider that neither party actually uses their power to address the deep systemic issues in education. While it's easy to point at one and note their overt rejection of the entire idea, you don't have to look hard into the other one to find widespread pushing of the charter school system (something that works way differently than most people think) and zero attempts to force equitable funding of education or solving poverty.
This is also because it is in capital's interest to oppose these things because it increases their taxes and removes opportunities to sell things to schools/kids/the poor. They don't even have to coordinate outside of industry lobbying groups. Their influence and money captures both parties, promoting the destructive components of the one overtly opposed to public education and controlling the opposition of the one ostensibly in favor of it.
While some democratic leaders have gained applause for “believing in science,” very few have done anything beyond this acknowledgement to provide the material supports needed to stop the spread of the disease. Instead, they’ve bowed to the demands of business and real estate leaders that bankroll their campaigns that people “get back to work.” They have the perfect foil in Trump because they can serve their donor class by washing their hands of the problem and pointing at him.
I agree, this "segregation by class" is also proxy for "segregation by color". I grew up going to public schools that were about 50% white. The AP classes were all at least 75% white, and 100% upper-middle class, or better. Part of the problem was that lower-class kids didn't have the resources at home to perform well in school. I think another part was that upper-class kids looked cleaner, and had parents that advocated for them to get into AP classes, whether they were more advanced or not. Full-disclosure, I wasn't in lower-class/non-AP group.
1) Excluding federal funding (which is directed to poor school districts) 20 states provide meaningfully more per-student funding (> 5% difference) to poor districts. In 6 states, poor school districts get 15% more funding than rich ones. Only 4 states provide meaningfully less per-student funding (> 5% difference) to poor school districts versus rich ones: https://www.usnews.com/dims4/USNEWS/39d5daf/2147483647/resiz....
2) More generally, per-student spending, adjusted for inflation, has more than tripled since 1960: https://www.motherjones.com/wp-content/uploads/2020/02/blog_.... Aside from a very small dip in 2008-2010, spending has been monotonically increasing for the last 60 years.
3) In the United States, nearly everyone, about 95% of students, attends our well-funded public schools: http://www.oecd.org/education/EAG2014-Indicator%20C7%20(eng).... The OECD average is closer to 80%.
4) Public social welfare spending, as a share of the economy, has consistently increased over the last 50 years, except for a brief dip after the 2008 recession: https://ourworldindata.org/grapher/social-spending-oecd-long.... In 1990, we spent about 13% of the economy on social welfare. Today, it's over 19%.
So please explain to me, what "got cut?" There is so much talk about "austerity" and America being "hollowed out" but it's not reflected anywhere in the numbers. If I were being cynical, I would say that people are gas-lighting the public to deflect attention away from the fact that the Great Society project didn't work. (Or at least insofar as it did work, some other aspect of society is crumbling faster than the government can increase spending to remedy the effects.)
Budgets were ballooning but not being spent on hiring more teachers to teach. Class sizes are huge.
Bottom half of households wage is stagnant over past 50 years.
In nearly all districts funding is allocated on a per student formula equally to schools.
> Budgets were ballooning but not being spent on hiring more teachers to teach. Class sizes are huge.
K-12 pupil teacher ratios have shrunk dramatically: https://nces.ed.gov/programs/digest/d09/tables/dt09_064.asp
In the 1970s, there were over 20 students per teacher in public schools. Today it’s under 15.
> Bottom half of households wage is stagnant over past 50 years.
Not true but I don’t want to get side-tracked on a separate issue, since we are talking about supposed “cuts” in public services. What got cut?
But if you suffer from poor education, you fall behind and it gets increasingly harder to catch up, to the point you may never truly find the motivation to dig yourself out of the hole, and even if you do, it may be too late. Your life will be battered by bad, uneducated decisions that you spend most of your time trying to fix.
Inequality in America will not be fixed until after the COVID generation. If at all.
I feel like this type of education is the one that you get at home rather than at school. No amount of continually lowering standards, affirmative action, and pushing people through "higher" education will ever fix this.
Problem is, there is a prisoners' dilemma type situation with college. It would be best if nobody went, but nobody wants to be the one left out in case not everyone agrees to do so. So the result is that people waste more and more money on useless degrees, putting those in lower classes into more trouble by trying to better their lives(or just excluding those who won't take the risk).
That seems like a pretty radical thing to say. Sure, some people go into debt for degrees with questionable job prospects, but you really believe that the world would be better off if nobody went to college?
You can call it a "better model that's not called college", but I bet it's going to look a lot like college.
----------------
[0] https://eric.ed.gov/?id=EJ1083795. AFAIT this is from "Journal of Education and Practice", which is a peer-reviewed journal
"What's house X worth?" - Some people might be more willing to trade more money for it than others, and hence inequality ensues. Someone might become a millionaire simply from being in the right place at the right time, and/or buying/selling at the right time.
Or, "What's fair compensation for job X?" - Again different people may value job X differently. Hell, the worst high school teacher I've ever had turned out to be the most highly paid (over $160k a year - 20 years ago). Either it was simply out of generosity, or someone held him in high esteem. If the latter, it definitely wasn't me.
Likewise in education:
"Not everyone can go to university X - who gets to go and who doesn't?" - While a criteria may be used and itself may be objective, which criteria to use it ultimately subject to opinion. In ways, this is sort of similar to Goodhart's law.
"What's a degree from university X worth?" - Again opinion is a factor.
etc. etc...
My parents went from poverty to middle class during my childhood, and I was able to go to college with a reasonable familial safety net to support me as a result. I promptly discovered the joys of chronic depression compounded by undiagnosed ADHD, then failed out, but honestly I feel like it doesn't matter a bit in my day-to-day life.
Meanwhile, my wife and I homeschool/unschool both of our children and are therefore deeply involved in their education. I expect that this will mean that they have man advantages over their peers - if I didn't expect this, I wouldn't have invested so much time and energy into it!
We are all riding a horse we know won't be around for much longer. Most startups exploit the shiny object factor, gullibility, poor education and plain stupidity of people who shouldn't have had any money to buy stuff in the first place - and they soon will not have - but above all they exploit the pyramid of debt as trillions upon trillions of valuations and exits that the founders cash out are the printed money that doesn't really exist. When it will be time to pay it back, it's better to be as far as possible...
I've worked for two startups. Both really did want to change the world in good ways. Yes, we wanted to get rich (in neither case were we exactly successful, although they weren't failures in that regard either), but "milking future generations for cash" didn't come into it at all. Making something people wanted did.
There are plenty of scammers in the startup space, but that is hardly the definition.
System would be balanced if seeking profits and seeking exits was similarly valued and respected, if VCs would invest money looking for stream of dividends as much as exit/IPO of the company... But that would take average P/E about 5..8, not 25-30 it is. Till then, and as long as "revenue business" is a derogatory term, we can know that startups are little but a generational Ponzi scheme.
Some startups take cash and turn it into useful things that benefit future generations. Things like medical breakthroughs for example.
Without that cash, those useful things will not be created, they will just live in someone's head as an unfulfilled dream.
Some use it to make things that make people happy, like games. Don't discount the benefit to future generations of having things that make life happier.
And don't discount the goodness of people being able to work on their dreams, either. It's not just rich people that get to play the startup work-on-my-dream game. Poorer people do as well, admittedly with less chances at it, but it happens often enough to count.
Some even have benefitting others, the less well off, be an explicit goal of their startup. Heck, some even invest their time and money into non-profits for such benefit to others. (I did that.)
And some startups are bootstrapped by people's own personal money that they earned doing a regular job. Imagine that.
Also, i know that the only alternative is the Communism, and i was born in the Soviet Union and old enough to remember a lot of it, and that's enough to prefer the current system.
If you want people to think of David to the incumbent Goliaths, something with a mission to introduce something new and breakthrough to the world, a conduit for the wild dreams of youth to come alive, call it a startup.
If you want people to think stodgy, established, nice stable place to work and pay your mortgage off for 30 years, but no changing the world, call it a business.
Like any branding, that will affect who approaches you and what opportunities you end up with.
Just look at YC. Only two YC backed companies have ever gone public - DropBox and PagerDuty.
1. Has there ever been a nasty shock to economic systems or unforeseen circumstances that do not affect the poor disproportionately? Of course the poor are more affected, that's always the case.
The issue is how effectively (and quickly) government and people create the circumstances to recover from the situation, and how well they choose to target those who are disproportionately affected.
On that measure, we are not doing a great job with top-down spreading money all over the place -- mostly to those who are know how to take advantage of it. Fed, I'm looking at you.
2. On the topic of education, I really object to people saying that the education system or government is willfully neglecting or trying to "keep down" the already disadvantaged. Effective public education is a very challenging thing to administer, and it also has such a strong component of parental and family and environmental contribution.
Much of the failure (or poor performance) of the public school system for low-income children is also a fault of the breakdown of family discipline and emphasis on education in the lower/poor classes. The classroom + teachers cannot take the place of parents, who are the main enforcer of childrens' progress.
If a family situation is falling apart, an education system cannot patch that hole. And in fact, schools are almost prohibited from playing the surrogate disciplinarian now, out of "equity" concerns. Further, they are handicapped by having to cater to the lowest / most unruly child in a classroom because they have to serve everyone and cannot kick out kids who misbehave and distract everyone else in a classroom.
Our unwillingness to confront these truths means that education will always be failing the poor, and these "K-curves" will be with us for a long time.
Not only are teachers completely left to fend for themselves in a remote, Zoom-powered classroom setting now, the students themselves are completely disengaged and some of them making the situation even worse.
Students are giving out the Zoom links/passwords to people not even in the classes (or in cases, not even the school itself) and people are Zoom-bombing the classes with, what has been described as, "horrific" content (hardcore porn, violence, gore, etc).
From what I can gather, it's completely lawless and I have insane sympathy for any teacher trying to maintain order in a remote-classroom based world.
The poor don't have stocks or houses, largely renting their space. As such, the 2008 recession felt like "everyone was in it together", because both the rich and poor were affected.
------
This 2020... recession? (or whatever we're in) is seeing a high-flying stock market and housing market for the most part.
The PS5 / XBSX / 3080 launches were completely sold out. Amazon is flying high, etc. etc. Tech is getting a huge boost at the moment (for good reason: home-offices need to be built for WFH, video games are a good opportunity to play with friends while socially distancing, etc. etc.)
This sort of thing makes it look like the rich (or really, the tech world) is doing great. Selling out $500 consoles and $799 or $1500 GPUs in seconds: clearly the people at the top have money to play with
Makes it look like? No this is exactly what's happening. There's a reason Musk, Gates, Bezos etc. have all made tens of billions in the past few months...
Online preorders are a "rich" thing: requiring online accounts, access to banking / credit, and broadband internet to compete.
In any case, the K-shaped recovery shows that consumer spending for the lower-percentiles is down: overall retail spending is down 10% for the lower quartiles of the population.
Yeah it's so hard that every other developed nation on earth outpaces the world's wealthiest country in almost every measure. Weird.
I think The Blitz might be an example of this. When you drop bombs on a city, you destroy a lot of physical property which preferentially harms those who own the most capital.
https://press.princeton.edu/books/paperback/9780691183251/th...
I can't even begin to imagine what life is like for parents who both work 12+ hours a day just to put food on the table and pay rent, which is the case for a lot of low income children. Is it any wonder that the parental component of these families is mostly missing (through no fault of their own)?
In this sense, I feel like the problem is even bigger than schools/education. It's that, plus the fact that parents are working way over time just to make ends meet.
You're not going to have as much time available for disciplining and raising your kids properly when you have to spend most waking hours of the day working multiple jobs, just to afford putting food on the table. The "breakdown of family discipline", as you call it, is just another consequence of being poor.
Seriously, there's just no winning for low-income households in the US.
It can be argued that during the Black Death, the working poor that survived got a decent deal out of it. All the death created a labour shortage, resulting in higher wages and better working conditions.
It probably depends on the metrics. The dead in WW2 were mostly from the uncomfortable classes, but wealth inequality was dramatically improved after that crisis was over.
Let’s assume you are a high income earner at 60k USD as the article points:
How much of this income is made by selling services to lower/middle classes? So long as your labour doesn’t directly serve to top 1%, you will inevitably see your income lowered due to actions taken/not taken by the government. USA literally printed out trillions and gave most of it to the top, this money was in essence taken from lower/middle classes.
I think 60k rate doesn’t show the reality. Reality is, if you don’t make your income by serving to upper classes where most of the stimulus money has flown to, then you will see a direct hit to your income.
This includes most of the software engineers/programmers as well.
Customer turnover requires our sales people to find new customers, and trade shows are off the table. Plus our customers are feeling the pinch. Some will file for bankruptcy, others will reduce spending, at which point we will feel the pinch.
That’s not a real revelation is it? Of course if you’re poor things hit you harder and if you’re rich you have cushion.
When I was poor losing $20 was a big deal. It was food for a week. If I lose it today it’s an annoyance.
This is not a US only thing either. It happens everywhere to differing degrees.
You've alluded to a good point here that I think HN needs to remember.
HN lives in a bit of a bubble. The proportion of people making less than $60K/year is significantly less than other forums like reddit. Most of us work tech jobs, with a considerable fraction in Silicon Valley making a Silicon Valley wage.
Whenever a topic involving poverty or low wages is brought up on HN, it becomes crystal clear how few people on HN have ever struggled with it.
Most of the businesses often rely on income generated by providing service to those that are affected.
Sure, the poor are in worse shape both relative both to their previous selves and the rich under both of those statements, but the the latter situation is far worse.
I used to think so too, but I'm not so sure anymore. Modern tech companies can operate with very few employees, and by relying on income streams like ads and selling personal information, they don't even rely directly on consumers. So with that in mind, I can now imagine a cloud city of the 1% floating above the exploited masses.
Bottom line: Yeah we are totally all in it together, except that for people who are well off, COVID is nothing but a minor bump on the road to early retirement, while for poor people its a life disrupting, potentially fatal calamity.
But your general point is probably correct, based on the experience of the Great Recession. This study concluded that while all households lost about the same percentage of wealth, the wealthier households recovered more quickly: https://irle.berkeley.edu/files/2015/The-Rich-Got-Richer.pdf. The Economic Policy Institute concluded similarly that the bottom 80% was hit harder than the top 20% (https://www.epi.org/press/news_from_epi_th_great_recession_e...).
I strongly expect to see the lower income unemployment rate drop pretty hard in the nearer future, given that not all states are using the FEMA assistance for their unemployment systems, and even with the number that are, that money will run out and benefits will go back to pre-COVID levels of lower-than-your-original salary. Once that really starts setting in, and with the high job posting rate, employment will jump up.
This ignores the group of people who have pre-existing conditions and really can't go back to work without possibly even excessive social distancing, but I'm unsure the magnitude of impact that will have on the labor force...
...and the group of people who have pre-existing conditions, but can’t afford to miss work, get sick and go bankrupt, become disabled or die.
So "they" seem to have settled on "K" for it.
If I can suggest an alternative, what about "Y-shape" where you tilt your head a little bit so that the bottom of the Y points slightly to the right? (Edit: after googling this it seems I'm not the first to propose this.)
The economic problems started playing out before the shutdowns.
(I'm less surprised by the complete US focus)
1. there's a new disease that is spreading rapidly through the population and you want to prevent the healthcare system from becoming overwhelmed while you figure out how to best reduce infection spread and provide treatment
2. you have a small number of cases and a short lockdown will bring the total to 0, which will allow you to fully re-open your economy with no restrictions (New Zealand)
The US is never going to be in situation #2, and we know enough about how to manage the disease now that we aren't going to be in situation #1 again. Right now I live in Boulder, and the university is under lockdown because cases have increased 1000% in the past few weeks, but the rest of the city is operating normally (including indoor dining!) with a low rate of disease spread.
This is exactly what I'm anticipating more of— localized lockdowns because politicians and others are unwilling to act on leading indicators and so need to overcompensate when it's obvious that things are past the point where they've already lost control.
If you believe that isn't going to last, you can short the market. Just be aware that you're betting against the capabilities of the Fed's printing press.
[1]: https://ourworldindata.org/coronavirus-data-explorer?zoomToS...
[1] https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p...
This seems like the first large-scale data conclusively showing that increasing income at the bottom of the payscale will stimulate the economy more than on the top of the payscale.
( A semi-obvious conclusion, but one that hasn't been proven in data before, or embraced by US govt policy ).
The wealthy have more leisure and discretionary expenses that they can no longer spend on safely, or choose not to because even if they don't NEED to save money right now, they may feel like they should.
For people in the low income bracket, a small increase in income will necessarily cause more spending because there's likely many things they've been putting off buying/doing.
Finally, it's worth noting that percentile changes isn't really apples to oranges here. The folks who were in the high-income bracket were probably spending much more beforehand, so if you're just looking to cause more cashflow in the economy at large, it's not clear that having low-income people spending a bit more would get you as much spending in total as if you did something to cause the high-income group to spend more. And that's before you consider what sectors that spending is in. The businesses that most need stimulus right now seem to me to be the sort that high-income people are more likely to spend on (local small businesses, entertainment, travel). Your local grocery store or chain fast food is probably doing fine, relatively.
This is not to say that we shouldn't support low-income people, that's important as a moral and civil matter, but the economy at large, by volume, includes a lot of things that mostly high-income people spend on, and those things often employ a lot of people.
This is wrong, velocity of money has been understood for a long time
Does this account for the impact of COVID yet to come?
Foreclosures and etc?
I feel like a lot of businesses and various efforts might be running on fumes hoping to see how things play out.
Now maybe they take their losses and they can mange to tread water long enough to get back in the game... but i'm not sure we've got a real handle on what the impact even is entirely yet, especially with no obvious end in sight for COVID itself...