Wealth Inequality - again

[traineeinvestor]

The Economic Mobility Project recently asked people what was more important, reducing inequality or ensuring that everyone has a fair chance at improving their economic standing. More than 60 percent "strongly" felt opportunity was more important, while just 16 percent felt strongly about reducing inequality.

If you have to choose, I'd vote for opportunity as being more important than reducing inequality as well.

That said, given correlations between educational achievement and income levels, the seemingly unending escalation of the cost of education may be having an impact at both ends. (The obvious exceptions to this are the entreprenurial types who manage to take advantage of the ease of starting a new business using the internet and other low cost technology.)

As an aside, I'm often struck by the fact that many of those argueing for action taken to reduce fiscal inequality (i) ignore the fact that the "rich" pay most of the taxes already and (ii) most of the the "rich" aren't rich enough to be hot with enough additional taxes to make a material difference and (iii) that in absolute terms poverty has declined a lot over the last 50-60 years and (iv) over the last 20-30 years, on a global basis there has been a huge increase in the number of people who have joined the middle class (nothwithstanding the problems the middle class faces in some developed markets).

 

[Nords]

Help me out here: this issue is one none of us can do anything about and its not even clear that we should (if we could). Its like getting upset about gravity or the tax code. So why all the hand-wringing, threads, etc.? Who cares. Ignore it and get on with life.

We're just killing time until the next batch of homebrew is ready for [-]sampling[/-] bottling...

 

[martyp]

If you have to choose, I'd vote for opportunity as being more important than reducing inequality as well.

That said, given correlations between educational achievement and income levels, the seemingly unending escalation of the cost of education may be having an impact at both ends. (The obvious exceptions to this are the entreprenurial types who manage to take advantage of the ease of starting a new business using the internet and other low cost technology.)

As an aside, I'm often struck by the fact that many of those argueing for action taken to reduce fiscal inequality (i) ignore the fact that the "rich" pay most of the taxes already and (ii) most of the the "rich" aren't rich enough to be hot with enough additional taxes to make a material difference and (iii) that in absolute terms poverty has declined a lot over the last 50-60 years and (iv) over the last 20-30 years, on a global basis there has been a huge increase in the number of people who have joined the middle class (nothwithstanding the problems the middle class faces in some developed markets).

Given what you have described above it is interesting that, based on the Norton/Ariely survey, people not only underestimate the inequality gap but would also prefer a smaller gap than what they estimate the gap to be. Couple that with the idea that facts don't seem to move public opinion much, where does that leave the debate?

Even though some in this thread think the gap is a law of nature that doesn't address the size of the gap. Is there a gap? Does size matter? Can any public policy move it either way? If the gap was where people want it would it what would that mean to those people?

 

[Mulligan]

Not only can we not do a lot about it, it probably wouldn't matter anyway. Even if all wealth was distributed equally to everyone, within 10 years the people who had little to begin with would more than likely return to that. Something like 75 percent of all NBA athletes are broke after 5 years from retirement. Having wealth and protecting/preserving wealth are 2 different animals as most successful ER people here are well aware of I'm sure!

 

[Spanky]

Yes, we see the "winner takes all" scenario being played out over and over again in this modern world, even though there is often little evidence that the winner is really "best" at whatever we value.

The sad thing is that the very "best", in general, is only marginally better than the "worst". Yet the "best" takes it all. This is most evident in sports. For instance, the top 10 tennis players made $165 million last year while top 1000 in the world made only 3k.

 

[photoguy]

Help me out here: this issue is one none of us can do anything about and its not even clear that we should (if we could). Its like getting upset about gravity or the tax code. So why all the hand-wringing, threads, etc.? Who cares. Ignore it and get on with life.

I disagree. We can all play a part in shaping the country that we want this to be. This may be through writing your congressman to support laws that you think will reduce inequity or more directly by say tutoring underprivileged children. All of these are small steps but you have to start somewhere.

 

[Spanky]

.. Even if all wealth was distributed equally to everyone, within 10 years the people who had little to begin with would more than likely return to that. !

I promised not to waste the wealth distributed to me.

 

[traineeinvestor]

Does size matter?

Based on comments in the latest net worth poll, there appears to be a clear consensus around here that size does matter. That said, somehow I doubt that you will get many takers for a debate on how to address inequality on that topic.

 

[NW-Bound]

Based on comments in the latest net worth poll, there appears to be a clear consensus around here that size does matter. That said, somehow I doubt that you will get many takers for a debate on how to address inequality on that topic.

I say, if we can drag Buffett, Gates, Ellison, Soros, and the like into this forum to vote in the poll, we will still have a super majority vote on the way we would all like to address inequality.

Else, what is there to redistribute?

PS. Moemg will need to redesign the net worth brackets in her poll to accommodate those whales.

 

[traineeinvestor]

Even though some in this thread think the gap is a law of nature that doesn't address the size of the gap. Is there a gap? Does size matter? Can any public policy move it either way? If the gap was where people want it would it what would that mean to those people?

I'd like to think that it is beyond debate that there is a gap.

Whether it matters is a very open question. My own view (and I'm happy to be convinced othewise) is that it does not matter and we should not attempt to do anything about it:

1. historical attempts to rectify preceived fiscal inequality have generally resulted in lower standards of living accross the board - the colossal human tragedies of the communist/socialist workers' paradises being the most extreme example;

2. I'd like to believe that if the less well off demographic segments of society are still (i) enjoying a reasonable and improving standard of living and (ii) are able to see at least the existence of reasonable opportunities for advancement, then our society is doing a better job of looking after its people than many (most?) other societies have done historically. In other words, absolute poverty is a greater issue than relative poverty.

 

[martyp]

I'd like to think that it is beyond debate that there is a gap.

Whether it matters is a very open question. My own view (and I'm happy to be convinced othewise) is that it does not matter and we should not attempt to do anything about it:

1. historical attempts to rectify preceived fiscal inequality have generally resulted in lower standards of living accross the board - the colossal human tragedies of the communist/socialist workers' paradises being the most extreme example;

2. I'd like to believe that if the less well off demographic segments of society are still (i) enjoying a reasonable and improving standard of living and (ii) are able to see at least the existence of reasonable opportunities for advancement, then our society is doing a better job of looking after its people than many (most?) other societies have done historically. In other words, absolute poverty is a greater issue than relative poverty.

I agree.

 

[ItDontMeanAThing]

Help me out here: this issue is one none of us can do anything about and its not even clear that we should (if we could). Its like getting upset about gravity or the tax code. So why all the hand-wringing, threads, etc.? Who cares. Ignore it and get on with life.

But we can do something about it. Redistribute wealth using taxes and handouts until there is no more wealth inequality. They we'll all be happy members of a worker's paradise. See, for example, the USSR, Communist China, Cuba, North Korea, etc.

On a less cynical note, some people care about wealth inequality because it's existence is prima facie evidence that the mass of people are being kept down by The Man. They want to fix that. What they don't realized is that they're trying to fix human nature. Ain't gonna happen, it's failed everywhere it's been tried.

 

[cb7010]

Help me out here: this issue is one none of us can do anything about and its not even clear that we should (if we could). Its like getting upset about gravity or the tax code. So why all the hand-wringing, threads, etc.? Who cares. Ignore it and get on with life.

I agree 100%. An interesting stat, but what does it really mean or matter. The reality is that some people are stronger than others or smarter or more motivated or even luckier. It's always been this way and likely always will, it's natural law. We should all get on with living our lives and not worry too much about what others have. That said, any individual who happens to have more than they need is absolutely free to redistribute part of their own wealth or possessions to anyone else and at anytime they like...

 

[Westernskies]

That said, any individual who happens to have more than they need is absolutely free to redistribute part of their own wealth or possessions to anyone else and at anytime they like...

+1

But, cb7010, it's more sanctimonius to try to do it with other peoples money...

I find it interesting that no one on this board who advocates for higher taxes has voluntarily stepped up and sent the IRS a big fat goodwill check to salve their conscience. (AFAIK, I'm sure someone will correct me if I'm wrong) If you really feel that way, what difference does it make what your neighbor is doing? Do you donate to your favorite charities because they do? Do you try to match what they put out for the Goodwill truck? Buy the same amount of Girl Scout cookies? When the rubber hits the road, talk is cheap.

 

[youbet]

But we can do something about it. Redistribute wealth using taxes and handouts until there is no more wealth inequality. They we'll all be happy members of a worker's paradise. See, for example, the USSR, Communist China, Cuba, North Korea, etc. .

But wealth inequality still exists (ed) in those places and times. Greater wealth is (was) held by members of "The Party." Here in Illinois, we refer to "The Party" as "Da Machine." But it's all the same thing.

 

[haha]

After reading the NYT article I find it interesting the author suggests wealth "should" be redistributed - implying if you have money you're part of the problem and you should start giving it too those that don't have money.

No way that true wealth will ever be redistributed, other than through divorces and payment of hush money to bimbos and Argentine polo players. Some of our lower middle tier wealth may be expropriated, as we have no real power.

But the truly wealthy own the political process, at all levels. ( And by the truly wealthy I am not talking about those who add in their pensions and SS and count the toilet paper in their closets when they figure net worth.)

Ha

 

[traineeinvestor]

+1

But, cb7010, it's more sanctimonius to try to do it with other peoples money...

I find it interesting that no one on this board who advocates for higher taxes has voluntarily stepped up and sent the IRS a big fat goodwill check to salve their conscience. (AFAIK, I'm sure someone will correct me if I'm wrong) If you really feel that way, what difference does it make what your neighbor is doing? Do you donate to your favorite charities because they do? Do you try to match what they put out for the Goodwill truck? Buy the same amount of Girl Scout cookies? When the rubber hits the road, talk is cheap.

If I did want to voluntarily redistribute my very modest amount of wealth, I would not be sending it to the local tax collectors - most of it would end up being wasted. I'd increase the amounts I give to selected charities.

 

[Westernskies]

If I did want to voluntarily redistribute my very modest amount of wealth, I would not be sending it to the local tax collectors - most of it would end up being wasted. I'd increase the amounts I give to selected charities.

You might have missed the point; there have been quite a few members clamoring for higher income taxes for everyone, but no one seems to want to lead by example...

I agree with you, BTW; with one caveat- check the operating expenses of your favorite charities; you may be shocked at how little actually trickles down to where it's really needed; some of them make the federal government and television ministries look like paragons of efficiency.

 

[freebird5825]

I have money because I w*rked and saved a lot of it.

Some humans did neither.

Any questions?

 

[Pete]

This is one of those topics that always start to smell like fish. Red herrings abound. I read about those people who don't pay taxes, the failures of a few communist countries, the fact that anyone can be rich, and that there's nothing we can do about it anyway.
It seems logical to me concentration of wealth slows the velocity of money. Something we can ill afford at this time. We've been keeping this game going by printing money and pumping it into the bottom of the pyramid thru many gov't subsidies and jobs. We may lose that ability soon. We would all do well to prepare for that eventuality.

 

[eridanus]

What they don't realized is that they're trying to fix human nature. Ain't gonna happen, it's failed everywhere it's been tried.

The "Public Works Trilogy" has a great subplot in it concerning a "bootstraps" character. This former "Master of the Universe" character is given a mandate to sell enough pencils to avoid, well, a personal tragedy. He's a big-time executive! Of course he can do it!

Well, he couldn't do it.

But, hey, that's human nature.

 

[traineeinvestor]

You might have missed the point; there have been quite a few members clamoring for higher income taxes for everyone, but no one seems to want to lead by example...

I agree with you, BTW; with one caveat- check the operating expenses of your favorite charities; you may be shocked at how little actually trickles down to where it's really needed; some of them make the federal government and television ministries look like paragons of efficiency.

I agree completely and understand the point - the burden should always fall on someone else.

 

[brewer12345]

Writing to your Congresscritter? Please. If voting really changed anything, they would make it illegal. That goes double for letters to Congress.

Now individual acts (or volunteering or donating) that offer a helping hand are another story. Yep, there are plenty of charities that are there to line insiders' pockets, but there are lots that are not.

 

[Gone4Good]

I find it interesting that no one on this board who advocates for higher taxes has voluntarily stepped up and sent the IRS a big fat goodwill check to salve their conscience.

I find it equally interesting that nobody who's advocated for lower government spending and cutting entitlements has ever returned a social security check or withheld their medicare card when getting health care or given money to their parents so they could do those things.

 

[Martha]

I
2. I'd like to believe that if the less well off demographic segments of society are still (i) enjoying a reasonable and improving standard of living and (ii) are able to see at least the existence of reasonable opportunities for advancement, then our society is doing a better job of looking after its people than many (most?) other societies have done historically.

Well, they are not seeing a reasonable and improving standard of living and not seeing reasonable opportunities for advancement. Class mobility in the US is problematic and worse than many European countries. US-vs-Europe structural rigidities: A re-think | vox - Research-based policy analysis and commentary from leading economists
http://www.oecd.org/dataoecd/2/7/45002641.pdf

For increasing income of the next generation you are better off in Canada, Australia and much of Europe.

Our education system may be much of the problem.