The Inequality Speech That TED Won't Show You
roundtable.nationaljournal.com
roundtable.nationaljournal.com
> But even if the talk was rated a home run, we couldn't release it, because it would be unquestionably regarded as out and out political. We're in the middle of an election year in the US. Your argument comes down firmly on the side of one party.
So now it's unfairly partisan to point out that the evidence supports one party's position but not the other's? Really?
What on earth is the point of taking an evidence-based approach to public policy issues, if not to draw conclusions about which public policies we should support?
-- Shrinking Middle Class == Partisan
-- Failing Healthcare System == Partisan
-- War on Women's Rights == Partisan
But we're not allowed that anymore, even Intellectualism is partisan now since it's "so Elitist".
Welcome to the era of Politically Correct Stagnant Decline.
TED is about exciting ideas (or at least, that's what I understand them to be).
From the talk: "In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich."
That is his "exciting idea" -- something that pretty much anyone who is interested in tax reform has heard before. There was nothing groundbreaking about it, no new information, and certainly no unique solution to the problem. It was literally a reiteration of political talking points that have existed for a very long time, which to be frank, is not very interesting. I even remember Mark Cuban blogging about this very same topic a few months ago, and this is an idea that isn't particularly unique.
Still, since he was invited to speak, I think his video should be part of TED's web site, but saying that he was bringing any new discussion to the table is quite generous.
Instead of implying that its motivations were political, TED could have simply said this: "The talk was interesting, but we had other talks we wanted to feature first." Boom. Done. No PR headaches.
I think this is a more generous summary of Anderson's intentions from the article: "Nick, I personally share your disgust at the growth in inequality in the US, and would love to have found a way to give people a clearer mindset on the issue, without stoking a tedious partisan rehash of all the arguments we hear every day in the mainstream media."
The talk didn't present anything new, so it doesn't need to be featured.
I come down way on the side of Hanauer in this debate, and agree with your point above, in general. But my reading of the speech was that it was a partisan fluff piece.
If you asked any number of my liberal college-educated friends to vamp for three minutes on the subject of "the wealthy as job-creators and drivers of economic growth" and then gave it a quick edit you'd get something comparable. The only difference being Hanauer makes a fallacious argument from authority (although I think his opinion is correct).
Considering some of the TED talks I've seen in the past, Hanauer's talk doesn't make the cut. I could've just as easily gone to MSNBC and heard the same thing -- although I agree with his opinion, his idea is neither unique nor substantiated by unique data.
There is nothing partisan about it. The 1% are not a party, any more than a single senator is a party. The ability of the Corporate Rich to spin the public argument, and make it seem like there is a split conflict, that is the root of what we "end-users" perceive as partisanship. In this case, they have spun & won. The public discussion about this talk is partisanship, not the issue itself.
And Hanauer points this out. The spin of the conversation is influencing the outcome of policy. This is not new under the sun, but it is an idea worth spreading.
Shame on Chris Anderson for the poor handling of this.
To illustrate how silly it is to make job creation the goal, let me share with you a very simple policy that would eliminate unemployment: Outlaw grain combines.
Without grain combines, hundreds of thousands of workers would be needed to pick things like wheat, corn, etc.
If you look at economic issues with the idea that employment is a goal, then you are bound to arrive at policies that move in the direction of this absurd idea.
Job creation != economic growth.
Good jobs are essentially highly paid office jobs with good benefits -- and the easiest way to create more of those is to outlaw the computer, which would mean that thousands of workers would be needed to do reports for companies, the federal government, etc.
But it would also destroy a great source of real wealth.
Where do you get this? Take a look at the median-salary multiple for buying a house 50 years ago vs. today. Used to be you could be a grunt and buy a house.
You know, the ones you get from having a well-educated and empowered workforce.
Hard labor is only worth $10 an hour when a society is unable to provide enough opportunity.
Edit: What I'm trying to say is that laborers will benefit from the higher paying jobs, but only if a society can provide enough educational opportunity that it will shrink the number of people who have to do the labor.
Social mobility is the key.
We define ourselves by our training, our job, and we expect the economy to stand still and allow us to continue doing something we were trained to do decades ago... all the way until retirement.
We feel indignation when a job goes away, and we feel that it's appropriate to be proud of skills that the economy no longer needs. This is absurd. Learn something new.
Society provides plenty of opportunity, the problem is that people have unrealistic expectations of what amount of effort ought to result in a particular standard of living and a particular level of job security.
Is that the only reason? Surely the labor supply matters, but so does the value of the work to others.
Generally speaking, our economy doesn't accurately price in how exhausting and difficult it is to work with your hands because there's less of a barrier to entry when it comes to labor. If there was equal opportunity, there would be a larger number of people competing for white collar jobs in an air conditioned office.
In "The Roman Empire and Its Germanic Peoples," Herwig Wolfram asks the question of why the Eastern Roman Empire outlasted the Western Roman Empire by so long. The answer he comes up with is that the Western Empire had much greater concentration of wealth in the hands of the senatorial class. This meant that it was hard to collect taxes to pay for things like an army, and at the time of the invasions of the Goths and Franks, the Eastern Empire was collecting three times in taxes what the Western Empire was collecting, and thus spending more on their army than the Western Empire was collecting in taxes.
Without sufficient tax revenues he military machine could not sustain itself, and when three senatorial households had a budgets that combined equalled the entire tax revenue of the Western Empire these super-wealthy were just too politically powerful to tax. Wolfram also suggests that this is what doomed Ostrogothic Italy when they fought the Byzantines.
I strongly suspect there was some other reason it wasn't posted.
Fwiw, TED doesn't publish all talks, especially not all TEDx talks, so it's not as if this was singled out to be suppressed. But it sounds like it wasn't selected for publication due to a mixture of: 1) Anderson personally disagreeing with its politics; and 2) TED's attempt to carefully manage its image on anything political, which involves closely planned and timed releases of things like the two "political" videos they did publish, on global-warming and contraception.
The main PR mistake TED made, afaict, was to say enough to give an impression that it was political. If it just got lost in the shuffle, like most TEDx talks do (few are posted on ted.com), it'd be one thing, but Anderson arguing against points in the talk, and then giving the impression that it was scheduled and later pulled due to partisanship concerns, created a fiasco where one wouldn't have existed.
> "Nick, I personally share your disgust at the growth in inequality in the US, and would love to have found a way to give people a clearer mindset on the issue, without stoking a tedious partisan rehash of all the arguments we hear every day in the mainstream media.
And you are right, this is hardly controversial. You couldn't find a politician who would disagree that a strong middle-class is the backbone of our society.
For instance, it is a small step from "job creator" to "The Creator".
We did not accidentally choose this language.
The reality is, the idea of a 'job creator' is somewhat ridiculous, but the language was chosen for a reason which is worth examining.
I happen to agree taxes on the rich should go up, but that's not the point
I could point out that the largest expansion of the US middle class on record happened during the 1950s when the top personal income tax rate was over 90%. But that could just be coincidence as well.
I can point out that economic theory says that the economic impact of giving a person a dollar is directly connected to their likelihood of spending it. Since the rich are less likely to spend than the middle class and the poor, taxing them hurts the economy less than taxing anyone else. But once you descend into economic theory, everyone has a theory and an argument and you get a morass that normal people can't make heads or tails of.
I could point out that the Republican ideology that less taxes on the rich is always good has exactly no evidence supporting it. That's a very thin amount of evidence for the huge social experiment that we're currently running in this country. But once you descend into politics everyone already has their minds made up, so that's a lost cause.
All of which begs the real question; if the proposition is true, what evidence would suffice to actually convince people of it who are not already convinced?
More precisely, that was the marginal rate on income over $1 million/year. That would be about $5-6 million in today's dollars. Given much lower CEO compensation at the time, very few people encountered it. (And given those taxes, CEOs had less incentive to increase their salaries.)
The tax code was loaded up with deductions
Deductions have a tendency to accumulate over time. There were a bunch of deductions, but fewer than today.
only direct compensation was taxed, and you could still easily convert wages into capital gains
Theoretically true, but historically stock options were a much smaller portion of executive compensation than is the case today. See http://faculty.chicagobooth.edu/workshops/AppliedEcon/archiv... for a reference. (Incidentally their estimate is that only about 30% of the raise in CEO compensation is due to shifts in taxation policy.)
which even in that time were significantly lower than wage rates.
Massively so. If your ordinary taxes were over 50%, you could opt a 25% capital gains rate.
There has not been a bracket that high since 1941. http://www.hkmscpa.com/hist%20tax%20rates.htm#5
> (And given those taxes, CEOs had less incentive to increase their salaries.)
Of course. So they just gave themselves company cars and executive washrooms and million dollar desks.
> Deductions have a tendency to accumulate over time. There were a bunch of deductions, but fewer than today.
We got rid of a bunch in the early 80's. As a simple example, all interest (not just interest on primary housing) was deductible before then.
> but historically stock options were a much smaller portion of executive compensation than is the case today
I wasn't suggesting stock options. You don't have to rely on stock options to convert your salary into capital gains. If you were a doctor or a lawyer pulling down a lot of money, you just formed a company and left the money you weren't consuming immediately in the company's bank account.
Few people paid the 90% rate because the income bracket was so high that few people actually made enough money to fall into that bracket. The tax code had fewer deductions in the 1950s then it does now. All compensation was taxed back then, not just direct compensation. And it was much harder to convert wages into capital gains because they defined compensation much more strictly than they do now.
Capital gains rates were not lower than ordinary income rates, however, they used an "exclusion" system (similar to a deduction) that lowered the effective rates to what would be today's ordinary income rates.
More precisely, you could exclude half your capital gains income, or opt to have all of your capital gains taxed at an alternative rate of 25%. Most people would choose the former, but top earners could benefit from choosing the latter instead.
This just isn't right. It was a significant change when, for example, the company car became a taxable benefit. Now employers can't pay for your schooling without paying taxes on it.
Almost everything (except for health insurance) gets taxed today.
It took Western civilization something like 4000 years to write an equation for gravity, a phenomenon exemplified by millions if not billions of examples, each of systems consisting of one moving part. And that was just a description, Newton didn't begin to say _why_ it worked.
Economics necessarily depends on subjective judgment, which doesn't exclude rigor, but does include the possibility that any given set of experts is vulnerable to distortions in judgment from their own political preferences and personal ambitions.
Which means anyone leaving it to these experts is doomed. If you don't understand the basics of the methods and theories well enough to detect when things aren't adding up, you'll just go wherever they lead. And, surprise! most politicians, lacking understanding, discover that the most convincing economists happen to have the prescriptions most convenient politically. A review of the policy sustainability of the world's industrialized economies shows how well that model has worked out. Not convinced? Ask yourself how well Congress would do writing an operating system, an undertaking conceptually much simpler than managing the US national economy.
The problem isn't evidence, or even theory. It's the generally low level of understanding and the dishonesty of the discussion, on all sides.
In that case, tax policy may dampen or slow the decline, but won't fix it.
I agree with almost everything you say, but I think your first two paragraphs only imply that expansion is relatively insensitive to tax rates (so republicans' tax paranoia is unwarranted).
But is it good evidence that raising tax rates today would substantially improve the situation of the middle class? I don't think it is.
Also in recent decades the most successful tax avoidance system has been the systemic pressure from Grover Norquist and allies to reduce taxes at every opportunity and never, ever, let them come back up. We're now at historically low tax rates with a broken budget. Raising taxes can't solve the underlying fiscal problems by itself. But a refusal to do so does make them impossible to solve. (At least without a dramatic restructuring of our country that most would not like.)
Languages are defined by usage, not by some proscriptive description. It is true that "begs the question" is the name of a specific philosophical fallacy that has been discussed for millennia. However in English it is common to say "begs the question" where you mean "raises the question", and therefore that is acceptable usage among native English speakers. (I don't know where that usage came from, at a guess it is a shortened version of the phrase "begs us to ask the question". Anyways it is common usage.)
Now did you have a comment on the actual content of what I said?
The New York Times regularly posts hand-wringing debates between "the usual suspects" on this issues.
Everybody in these debates seems to take it for granted that taxing the rich will hurt economic growth, but maybe just maybe there are some benefits to equality that will make up for that.
Nobody mentions that an economy has a hypothetical failure mode (like the game of Monopoly) where all of the money ends up in one person's hands -- and then trading stops.
Huh? I'm having a really hard time imagining how this could possibly happen. Does that person not ever need to buy anything? If they don't buy things they're taking that money out of circulation, and if you have a central bank targeting anything (or free banking, or most banking systems humans have tried) the people who can make more money will make more money in order to hit their targets. I'm pretty sure that nobody mentions that because the idea is, well, pretty ridiculous.
Of course, even at that point the remaining humans can just form an economy among themselves which the rich man doesn't participate in...
Stunning level of ignorance.
If I interpret the parent correctly, the point is more to argue that there has to exist some level of inequality which even the most hardened libertarian would agree is sufficiently bad for the economy to justify an intervention. Hence reducing it to a question of degrees, a trade-off rather than a pure matter of principle.
The pre-existing money would be massively devalued, sure, but it's only one guy affected so who would care?
Frankly, whenever I hear the phrase "job creation" I tune out immediately, because I know that nothing intelligent will follow that phrase ever.
People hire people to do things when they have work to do. You "create jobs" by increasing economic activity. The problem is, business these days is all about consolidation and labor arbitrage.
Edit: although i don't know how to read (insane vs. inane), this does not fundamentally changes anything in context...
I declare it inane because the speech described by the article isn't very controversial at all.
It was the work of the disgruntled speaker whose talk was refused in a normal editorial process and who proceeded to hire a PR firm to create this ruckus.
http://www.reddit.com/r/politics/comments/tqi15/too_hot_for_...
basically, this talk is mostly partisan and not supported by a lot of data. this TEDtalk, on the other hand, is:
http://blog.ted.com/2011/10/24/how-economic-inequality-harms...
"TEDChris 21 points 9 hours ago
Chiming in here, as TED's Curator..
First of all, thanks for all the attention. Glad you guys care.
We do too. Income inequality is a huge issue. Most of us here at TED are pretty passionate about it.
The trouble with this talk is that it tackled the issue in a way that was explicitly partisan, framing it as a critique of "an article of faith" for Republicans. TED is avowedly non-partisan. We want to share ideas in a way that brings people together, doesn't throw sand in their faces.
We release one talk a day on our home page, and that talk is pretty much guaranteed 50,000-100,000 views within 24 hours. Every day there are numerous amazing talks competing for that slot. We have to make the best call we can. Talks that aren't selected aren't being censored, any more than the NYT (or Reddit) is censoring a story it decides isn't appropriate for its home page.
The text from this particular talk is already out there. You can make your own judgement.
Thanks, and let the discussion continue. We're listening. "
http://en.wikipedia.org/wiki/False_dilemma
You can't attribute the existence of "jobs" exclusively to "businesses" or exclusively to "consumers", because "trade" definitionally requires the existence of two parties.
It's not about putting all the blame on one side or the other, it's about the factual question of whether a particular policy improves or worsens the job situation.
> only consumers can set in motion this virtuous cycle of increasing demand and hiring.
>the true job creators are consumers
It's a tad nonsensical, all economic exchanges definitionally require the existence of two parties to occur, both parties are essential regardless of the good or service being traded. One can easily take the opposite position to the speaker, that production precedes consumption, because in the state of nature man must first produce and labor for his or her own survival before surplus exists with which to trade. Either way, it's not a sufficient basis for asserting normative proposals in regards to tax policy.
The only thing I can see not working this way would be an extreme version of kickstarter, where consumers would put out a bounty for a specific product or service and have businesses form to provide it. At that point, they would be more actively "creating jobs."
In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich."
Not saying I disagree, but I remember a few years ago when the economy was booming all over the world, there was this discussion about how bad "consumerism" is for our societies.
So which is it then? Is consumerism a bad thing because it makes us buy all sorts of dumb things, or is it good because it enriches everyone? Or is there another alternative?
In addition to the lack of sustainability (adding back in the ecological issues), consumerism seems to drive a general cultural malaise wherein the people try to find meaning by buying crap, rather than living fulfilling lives.
IMO, consumerism is detrimental in the long run to people's mental health and the environment (and it's not sustainable); however, it has been shown to be a solid driver of economic growth.
This argument only considers half of the problem. Yes consumers are needed to create jobs but what is needed to create consumers? Jobs. You can't be a consumer without an income, and for the vast majority of people, you don't have an income unless you have a job.
Therefore for failing to acknowledge this fundamental, very simple and might I say, quite obvious fact, I think it's fair to say Nick Hanauer's reasoning is at best weak, and at worst disingenuous.
It makes one wonder what his motivations really are. Attention seeking contrariness? A desire to ingratiate himself with the 99%?
"rich people don't create jobs, nor do businesses, large or small."
Ok, where to start
You can have "a job" essentially in two ways:
- Being self-employed (doctor, lawyer, etc), or create your own company. This is usually the minority of people
- Having a job at a company
So, yes, companies create jobs, next
Big companies create more jobs (per 'unit'). Smaller companies create less jobs (per 'unit') but combined they make more jobs in total.
Companies create an opening because of: increased production (or more customers, in case of services), new line of business. This is ignoring regular turnaround where someone quits to go somewhere else and someone is hired to replace.
Hence, new jobs comes from: - New products / services
- More people consuming existing products
(we could add loss of efficiency as well)
Now, bigger companies have a much easier time hiring new people. HR is set and knows the drill, they usually can accomodate new people with their existing profits (maybe not a lot, still)
Smaller companies have a much harder time hiring another people. Suppose you are a one man company, and you want to hire someone. You have to be HR (this cuts into your time). You may be not sure if adding this person is going to increase the profits enough to cover for the extra costs, etc
So when you cut taxes to all companies, sure, you're helping the big guys, but also the small guys.
The rich have an easier time dodging regulation or sending their profits to Ireland and back, but not the small guy
"And taxing the rich to make investments that grow the middle class" (from the article)
Yadda yadda yadda. You want to grow the middle class? Reduce taxing on them!
But the government won't do it, because the middle class (still) has the most money available (amount of people x taxes payed by each one) and the least resources to avoid them.
I agree, I have stated no position on the absurdly rich and increasing inequality. I think it is unnecessary to stray into this area in order to prove or disprove whether businesses or the wealthy create jobs. Either a business or a wealthy person can or cannot create a job regardless of the taxation laws du jour. He has categorically stated that they cannot. I think this is totally incorrect.
No, he stated that they do not. Businesses don't hire employees they don't need. They can, but if they try it at any appreciable scale relative to their business, they will go out of business.
It's not about what can happen. It's about what does happen. And what does happen, is that employers hire employees when they need them. Not just because they've made money, nor just because they got to keep more of the money they make via changes in taxation.
They could. But they don't. There's decades of data and research on this. It's not really debatable. Tax cuts do not translate into jobs. It's never happened. The increase in wealth of the wealthy does not translate into jobs. It's never happened. Consumer demand and business expansion to meet that demand, does translate into jobs. It always happens.
The question is how, or even whether you should try, to stimulate consumer demand when unemployment is high. (And the follow-on: what problems does that (in)action create)
Your willingness to tolerate risking x% of your wealth goes down as you get wealthier.
But it isn't caused by tax policy: outsourcing and automation of traditional "middle class" jobs are a much bigger force.
We really need to figure out what the middle-class jobs of the future look like. What is above menial service job like retail, and below specialized trades like software?
Even people with college degrees struggle to get into the middle class these days. That should scare us all.
I have no answers to this, but I'm pretty sure tax policy isn't going to fix it, nor would protectionism.
What's the evidence that the middle class has really shrunk? There's certainly evidence that the very highest incomes have climbed substantially since, say, 1980, but can you find numbers that suggest that there are fewer households making at least middle class incomes? Here's a good bit from a guy at Brookings earlier this year:
http://www.nationalreview.com/agenda/288306/guest-post-scott...
Krueger’s claim of a shrinking middle class relies on the same peculiar definition. Specifically, “middle class” is defined as having a household income at least half of median income but no more than 1.5 times the median. I re-ran the numbers using the same definition and data source as Krueger and found that the entire reason the middle class has “shrunk” is that more households today have incomes that put them above middle class. That’s right, the share of households with income that puts them in the middle class or higher was 76 percent in 1970 and 75 percent in 2010—two figures that are statistically indistinguishable.
Jobs are temporary inefficiencies and a lot of economic growth comes when you get rid of them. We've automated most of our farming, but we don't have 90% unemployment because all the farm jobs went away.
One thing is how fast technology grows related to how fast workers can adapt. 'Race Against The Machine' is a thesis that technology is now growing so fast workers can't keep up. I don't know if I buy it, but it's something to keep in mind.
That said, this is not an acknowledged weakness -- Keynes' magnum opus was The General Theory of Employment, Interest and Money, which spells out in great detail how these things are related. The core of this theory is still widely held in economic circles, which is why the mandate of the Federal Reserve keeps shifting from "controlling inflation" to "maximizing employment" -- because this is thought to be something that is controllable through manipulation of interest and money.
I can't understand what is wrong with this question? Its based of real world data, right?
It doesn't stop politicians of all stripes from pretending that they have the magic answer, and that the politicians from the other party are a bunch of nincompoops.
Greed will be the downfall of western civilization. This message will not reach those with the power to fix it. It's their death, they know it, and they're just in a race to bleed the USA out and run. Or maybe I'm giving rich people too much credit and they're really just greedy idiots who don't see the consequences of their actions. In any case, we're screwed.
"I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated."
This is what some people fail to understand and it boggles my mind.
I agree with them in one respect: there are too many taxes, fees, levies etc. People overestimate the amount of tax tax they pay in many cases, but they see so many government charges (whether federal, state or local) that they feel they're being nickel-and-dimed to death.
A 'job' is something that you 'do', in this context, for a wage. So to "create a job" is to cause a need for something to be done, e.g. breaking a window "creates a job".
So we don't want to "create jobs"!
There are certainly lots of people right now who are looking for gainful employment. Let's reframe the problem in terms of figuring out how to get them doing stuff that actually needs doing. I think that means creating things of lasting value, not just throwing money around to stimulate ourselves.