Friday, April 17, 2009

The New Gilded Age

According to the latest CBO report the gap in real income reached a record level in 2006, showing a concentration of wealth in the top 1 percent that hasn't been seen since 1929.

Surely there must be some way to blame this on President Obama.

[More posts daily at The Detroit News]

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Blogger OpenMindedRepublican said...

The really interesting thing is that this really encapsulates what I have long believed.

The left tends to focus on who gets how much of the 'pie'.
The right tends to focus on how big the 'pie' is.

This graph kinda prooves them both right. Everyone got 'more'. Some people got more 'more'. (yes, that's intentional)

This level of inequality in income understates the problem, though. The lower brackets spend their income, little or none of it becomes 'wealth'. The top bracket invests a sizable chunck of theirs, turning it into 'wealth'. So the wealth gap is compounded.

1:37:00 AM  
Blogger Libby Spencer said...

Well OMR, I think the left focuses on how the pie is distributed because everyone contributes to the ingredients. It's a fairness thing. But it's true that those at top get to keep more because they don't need to spend every penny just to survive.

9:50:00 AM  
Blogger Capt. Fogg said...

"So the wealth gap is compounded."

Yes and because the extra income resulting from their special tax cuts gets put into hedge funds, the markets and real estate, rather than creating jobs as the dogma would have it, we get a bubble and a bust. It happens every time the top bracket dips below 50%

11:52:00 AM  
Blogger OpenMindedRepublican said...

Fogg - I am not sure how the tax rate affects all of this. The highest taxes in the last 30 years were during the second half of the Clinton administration, that was also the first really explosive increase in the wealth gap, essentially identical to what happenned from '02 - '06.

Also, the notion that Bush cut taxes for the wealthy more than anyone else seems to be a bit of a creative comparison. In terms of tax rates, by 2006 the top 20% were at about a 30 year average for tax rate, everyone else was at the lowest tax rate since '79. (maybe earlier, that is the beginning of my numbers)

3:07:00 PM  
Blogger Capt. Fogg said...

When you say "highest taxes" I'm not sure we're talking about the top marginal rate. You can look at the graph I posted on my blog a few days ago and see what I mean.

You'll also not the correlation between cuts and collapses.

The top bracket was over 60% from the early 50's through the early 80's. It was over 80% before that and under the "Great Marxist" Dwight Eisenhower, it was 90% and stayed that way until almost the mid 60's.

The tiny change proposed by Obama seems statistically meaningless to some.

3:31:00 PM  
Blogger OpenMindedRepublican said...

Yeah, I am not looking at the marginal rate but rather the 'effective' rate - how much was actually paid.

The effective tax rate was 55.7% for the top 1%, curving down to 49.3% in 2000, during one of the most explosive growths in income. That 55.7% was the highest since 1979, so it is hard to see a correlation between tax rate and income inequality.

And yeah, inreasing the marginal rate back up 3% does not seem like the end of the world.

3:54:00 PM  
Blogger Capt. Fogg said...

After living through Weird Week you'd think it was the end of Capitalism, the end of liberty and the simultaneous onset of Fascism and Communism.

Funny that the most concerned about the 3% are people with no chance of ever seeing a quarter of the income needed to put them in that bracket, but such is the power of Fox. Calling for open revolution and secession while calling themselves conservatives.

Does making sense actually make sense any more?

No economic phenomenon has a sole cause, but many economists seem to believe that the Bush temporary tax cut did help the investor class to invest rather than to trickle it down to the middle class -- but of course it's an oversimplification.

4:38:00 PM  
Blogger OpenMindedRepublican said...

I think that one area where people on the left err is the belief that people on the right vote for self interest.

People I know who dislike (more) progressive taxes have no illusions about how it will affect them, they just believe it is wrong. Telling them that they will get more themselves matters not at all. Make of that what you will.

The revolution thing is overblown. They are talking about voting a revolution. Not a big deal.

The secession thing... OK, that's just strange.


I am beginning to form the opinion that government, and especially the president, have a lot less ability to control the economy than they are credited with.

5:08:00 PM  
Blogger Libby Spencer said...

I got up much too early to contribute to this discussion. But in general I'd say the economy is a very complicated thing with a lot of factors that affect it. As a practical matter, all I know for sure is my wallet tends to be fatter during Democratic administrations.

11:30:00 AM  

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