What is the Impact of Income Inequality on Social Problems?

[rewebster]

The US doesn't have 300m living in poverty, and I don't accept that 50 such people like Bill Gates or Warren Buffet 'control' the poor, nor even spend much time worrying about how they might do so. I don't accept they need a change of heart before doing philanthropy. If the poor are controlled by anyone, it is government fiats.

"That is, if one wants thousands of spectacular libraries built around the US in 1910, one needs an Andrew Carnegie ..."

well, that's what Carnegie did and how he got rich---paid extremely low wages and ruled with an iron fist


"It occurs to me that there the US needs more super rich"

For some to be SUPER RICH, many, many have to be super poor

 

[DavidSnider]

The fundamental problem with "trickle down economics" claims are the absurd claims about how government originally has the cash, gives it to the rich so it will trickle down. That's not only absurd, but just delusional logic.

Who claims the government 'originally has the cash'? Trickle down economics is cutting taxes for the rich with the belief that it benefits everybody.

 

[madness]

I don't find this surprising at all. Wealth envy is rampant and promoted by many politicians to stir up hatred and gain power.

And the fact that the poor today are much better off than the middle class of a few decades ago is less important to some than the unimportant fact that rich people have more "dollars", despite the fact that those "dollars" of the rich simply do not represent buying power that could theoretically be transferred to the poor. It only works that way in the propaganda of the power hungry and the minds of those that don't know any better, not in reality.

As I said before, the study isn't about the amount of wealth that the poor have, it claims to show trends which are independent of the wealth of a country. The study is about social problems - homicide, prison population, infant mortality, obesity, depression - and their relation to income inequality. I don't think obesity or infant mortality can be argued away as "wealth envy".

And it seems obvious to me that one can't advocate the use of force to "redistribute wealth" and simultaneously claim that theft and robbery are inherently wrong, independently of their illegality.

What you say doesn't follow. "Wealth redistribution" may be theft to you, but then property is theft to someone else. You can't assume your own political stance in order to prove it. Besides, I don't think the kinds of tax in countries like Norway could be called wealth redistribution. In the US the richest are paying an effective tax rate of less than 1%, which is wealth redistribution in reverse.

 

[CRGreathouse]

For some to be SUPER RICH, many, many have to be super poor

Why?

In the US the richest are paying an effective tax rate of less than 1%, which is wealth redistribution in reverse.

[Assuming, for the purpose of argument, that this is true] Why?

 

[madness]

Have you spent any time in a third world country? The poor in America are only poor in comparison to other Americans. They are rich in comparison to the poor in most parts of the world. Not only are the poor here well fed, they have the most opportunity to not be poor if they so choose."

I think this misses the point. The study in my first post shows the poor in America are the poorest in the developed world. Are you implying that poor people are poor because they have chosen not to be rich? This is almost offensive.

Edit: I just realized that the study doesn't show what I said. I don't have statistics on the poor in the US compared to the poor in other developed countries. What the study shows is that the US suffers from the most social problems traditionally associated with poverty.

 

[madness]

[Assuming, for the purpose of argument, that this is true] Why?

Because the rich are being taxed much less than the poor. How is this any less wealth redistribution than taxing the rich higher than the poor?

 

[rewebster]

Who claims the government 'originally has the cash'?

the govt issues the money initially---they 'make' the money and determine how much they 'make'

 

[rewebster]

see below post #45

 

[DavidSnider]

--------------------------------------------------------------------------------
Originally Posted by rewebster
For some to be SUPER RICH, many, many have to be super poor

=CRGreathouse;2593109]Why?

/QUOTE]

because, if everyone was rich, money wouldn't mean anything

You seem to be mistaking poverty with income inequality.

 

[rewebster]

For some to be SUPER RICH, many, many have to be super poor

Why?

because, if everyone was rich, money wouldn't mean anything

 

[rewebster]

--------------------------------------------------------------------------------

For some to be SUPER RICH, many, many have to be super poor

You seem to be mistaking poverty with income inequality.

I was answering madness and his referral to the 'rich'

 

[mheslep]

"That is, if one wants thousands of spectacular libraries built around the US in 1910, one needs an Andrew Carnegie ..."

well, that's what Carnegie did and how he got rich---paid extremely low wages and ruled with an iron fist

History records Carnegie's abuses, but he didn't kidnap people and put them to work under the lash. They came to work for him because, for example, it was better than grovelling away on a subsistence farm. Along the way he made rail steel affordable so that the common man could move long distances quickly.

"It occurs to me that there the US needs more super rich"

For some to be SUPER RICH, many, many have to be super poor

Well I suppose that point of view explains your objection. C'mon, that's a statement out of the middle ages. To get super rich today in a developed country, I mean top 50 rich, one can't steal it all from somebody else, or even sit back and collect rent. I can't find a single member of the Forbes 100 rich list that did it via a career in shuffling money on Wall Street. Most of them come to it from a collectively huge innovation or an enabled increase in productivity over time. Bill Gates didn't make $30B by stepping on the necks of the poor. He was part of the mechanism that enabled the affordable personal computer.

 

[drankin]

I think this misses the point. The study in my first post shows the poor in America are the poorest in the developed world. Are you implying that poor people are poor because they have chosen not to be rich? This is almost offensive.

Edit: I just realized that the study doesn't show what I said. I don't have statistics on the poor in the US compared to the poor in other developed countries. What the study shows is that the US suffers from the most social problems traditionally associated with poverty.

Poor people are poor because they haven't yet taken advantage of the opportunities that are available to them. That would be their choice. Yes, people chose to be poor in the US. How can I say this? Because I used to be poor. I grew up poor. I grew up with poor people who were content to do just enough to get by. And some of them despised the rich because they assumed that the rich were doing the same thing but for some unfair reason just had more money.

I took advantage of opportunities available to me and became middle class. If I chose to, I could become rich. I just don't want to work that hard.

 

[mheslep]

My new signature when I get around to resubscribing (whether or not he really believes it )

This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. - President Obama, Feb 4, 2009

 

[CRGreathouse]

Because the rich are being taxed much less than the poor. How is this any less wealth redistribution than taxing the rich higher than the poor?

Wealth redistribution, to me, means that wealth from one group is reduced and that this reduction is used (at least in part) to raise the wealth of another group. For a low tax rate on the wealthy to redistribute wealth to the wealthy, the poor would have to be poorer than if the wealthy were not there, yes? So if a person with an income of $100 million dollars pays $1 million (1%)* in taxes, the poor would presumably be better off if the government spent less than $1 million providing services (roads, etc.) for the rich person. I posit that this would be highly likely.

Now I have not claimed that this would be fair! But it does not appear to distribute wealth to the rich. Which leads me to...

A related topic: I would be very interested in a thread on the justification for taxation (and hence where the burden should rightly fall). There was one here on PF not too long ago, but most of the posters were fairly hardcore libertarians, and I'm curious about the large 'everyone else' demographic. That is: I make $X per year, and pay $Y in taxes. Is this too low or too high? Why should my taxes be what they are rather than higher or lower? Is it germane that I receive $Z in services from the government? Etc.


* For comparison, I calculate that the median tax rate was roughly ~13% in 2007. A better analysis would take into account transfer payments; mine does not, but gives at least some kind of idea.

 

[CRGreathouse]

because, if everyone was rich, money wouldn't mean anything

That says that not everyone can be rich. It doesn't support the statement that "For some to be SUPER RICH, many, many have to be super poor". It is easy to imagine a system where a large majority are well-off, but there are still super-rich. Actually, I would say that the US is such a system. The living standard of the 5th percentile (poor) in the US today is probably higher than that of the 95th percentile (well-to-do) from 200 years ago.

 

[DavidSnider]

Most of them come to it from a collectively huge innovation or an enabled increase in productivity over time. Bill Gates didn't make $30B by stepping on the necks of the poor. He was part of the mechanism that enabled the affordable personal computer.

Could you name a technological innovation that originated at Microsoft? Name one of their products, I'll tell you where it came from.

 

[CRGreathouse]

I don't think obesity or infant mortality can be argued away as "wealth envy".

Obesity is interesting, but I would sooner attribute it to lifestyle than income inequality. Judge Posner attributes it to differing preferences.

I'm not convinced that infant mortality is strongly connected to income inequality (rather than, say, income). The EU's infant mortality rate, 5.72 per thousand live births, is not too different from the US 6.26 (2009 estimates in both cases). It would be interesting to compare plots of both, but controlling extraneous variables would be hard. (I imagine there would be some value in the raw data, but wouldn't like to draw unwarranted conclusions.)

 

[russ_watters]

"Propping up" the bottom is what reduces the inequality - they are propped up by taxes from those at the top. The fact that European countries have more socialism is the reason they have less inequality, it's not a separate complicating factor.

I know it's due to socialism. That wasn't my point. My point is that if you propped up the bottom without taking the money from the top (say, by using a flat tax with the bottom 20% of the population cut off), you'd still end up with high income inequality, but low poverty. My only point in saying this is to highlight that it isn't the difference between rich and poor in the US that causes the problems, it is the poverty itself. Which is related to:

Did you look at the graphs? They are all developed countries and the trend is very clear. On pretty much every issue the US is out on its own with a big gap to the next worst.

Yes, I read the link. It is very weak (particularly as applied to your point). The claim in the first sentence of your thesis is this: "I claimed that inequality is more important than poverty when it comes to crime and other social problems." The link you provided does not analyze poverty anywhere in it, so how can you say that it supports your point about poverty?

The article is not about income equality and its link to poverty. It's about whether income inequality or poverty are responsible for a variety of social problems. And the study shows that it is income inequality that is responsible.

Perhaps I'm just missing it: could you point me to the place in that link where discusses poverty's effect on those social barometers?

 

[CRGreathouse]

Could you name a technological innovation that originated at Microsoft? Name one of their products, I'll tell you where it came from.

[Assuming the premise for the sake of argument]

I think there's a vast gulf between having an idea and making that idea usable. Xerox may have invented the GUI, but it took Apple and Microsoft to get it to the people. Motion sensors and gyros have been around for ages, but Nintendo's wii was a big breakthrough nonetheless. Mosaic was very important but not too popular; it was supplanted by Netscape which was better. Nescape, in turn, was replaced by Internet Explorer which was yet better; Firefox seems now to be replacing Internet Explorer (and is, in turn, much better than IE).

So even if Microsoft's only role is to popularize and improve technologies that had previously been invented, this is no small role. VRML might have been a good idea, but no one has brought it to the masses yet. Will Microsoft do that? Who knows.

 

[russ_watters]

A couple things to keep in mind for this plot are that a) it's by family not per capita; family size has been changing in the US...

To expand, family size has been dropping in the US, which means the most common measures of income growth underreport income growth.

Anyway, yes, rewebster's graph certainly proves the point. I've never seen the data presented that way (by net worth instead of by income). A picture is worth a thousand words, but I still like quantifying it: http://www.census.gov/hhes/www/income/histinc/inchhtoc.html

The average incomes of the bottom 20% at the last 4 cycle peaks is:

1978...$11,161
1989...$11,726
1999...$12,812
2006...$12,123

Now the increases are slow enough that from one peak to the next (such as 1999-2006), some ground can be lost, but the long term trend is clearly up. The difference between 2006 and 1978 is only 8.6%, but up is up.

 

[russ_watters]

http://www.demos.org/inequality/images/charts/changesrealfamily7905_thumb.gif

Note that that graph picked an unfortunate year for its boundaries. The income average for the bottom 20% went up 3% from 2005 to 2006. That's why it is so critical to compare peak to peak (or trough to trough).

"not individuals"---if you start putting specific parameters on, then, of course, it will be different---should I look for one that includes individuals in families that have dogs?

Dogs aren't people, but people are. Family size really does matter, since if you have the same amount of money as your neighbor but they have a kid and you don't, you'll have a much higher standard of living.

 

[russ_watters]

http://avbp.net/assets/images/poor_poorer.jpg

"In fact, since the 1800s there has been a rapid expansion in the number of poor people on the Earth, both in sheer numbers and percentage (read unable to purchase acceptable living standard) "

http://porena.blogspot.com/2005_10_01_archive.html

That statement is wrong, doesn't have anything to do with that graph, and comes from an unacceptable source.

so, you think that we should have 50 really rich people controlling 300,000,000 living in poverty, with the hope that those 50 may have a change of heart sometime in their life?

We live in a democracy. The people have a vote. What you are saying is nonsense.

For some to be SUPER RICH, many, many have to be super poor.

Not only is that factually wrong, it is awful logic.

 

[russ_watters]

I think this misses the point. The study in my first post shows the poor in America are the poorest in the developed world. Are you implying that poor people are poor because they have chosen not to be rich? This is almost offensive.

Well first off - you're switching subjects: before it was about income inequality, but now it is about poverty. Regardless, yes, for the most part the poor are poor because they have chosen not to succeed. You are aware of the extremely strong corellation between income and education, right? The US government provides free education through high school, yet a full 30% of the population chooses not to take advantage of it: http://www.csmonitor.com/USA/2009/0609/p02s13-usgn.html

Yet, "•In 1999, average annual earnings ranged from $18,900 for high school dropouts to $25,900 for high school graduates." That's a difference of 37%. Just by taking what the government gives you for free! That stat is the main reason I have little sympathy for a large fraction of the poor.
http://usgovinfo.about.com/od/moneymatters/a/edandearnings.htm

Edit: I just realized that the study doesn't show what I said. I don't have statistics on the poor in the US compared to the poor in other developed countries. What the study shows is that the US suffers from the most social problems traditionally associated with poverty.

Sorry I didn't see this post before - I wouldn''t have gone through it a few posts above.

Because the rich are being taxed much less than the poor. How is this any less wealth redistribution than taxing the rich higher than the poor?

It's less because it is factually wrong. Last year, the bottom 43% of the US population paid no net taxes or were paid by the government. If you try to figure out how much more taxes the rich pay than the poor, you get a divide by zero error; by percentage of income, the rich are taxed infinitely more than the poor

 

[russ_watters]

****THE MISINFORMATION IN THIS THREAD MUST STOP****
I'm sure you guys with the "eat the rich" attitudes probably believe what you are saying, but factually wrong is factually wrong. When you make a claim, you need to back it up with relevant statistics. Hopefully, by actually researching, you'll realize you're wrong before you post. Either way, this misinformation won't be allowed to continue.

[/moderator]

 

[russ_watters]

Depends on how you measure "poor"...the slice they get is as small as ever.

Of course - if you define the slice to be constant, the slice stays constant! Wouldn't it be more useful to define "poor" based on standard of living than to arbitrarily select a certain fraction of the population and perpetually label them "poor" even though they drive better cars, have more appliances and live in better homes than the "poor" of 40 years ago?

In any case, that's mostly irrelevant. We're not talking about poverty rate here. Even if we assume that 20% of the population is poor today and 20% of the population was poor 40 years ago, you can still measure their increase or decrease and when you do...you find out that as a group, they are getting richer.

So how do you think the rich get rich?

Mostly by getting good educations and good jobs.

Where do you think all their money originates from?

That's a pretty deep question. Ultimately, wealth is dug out of the ground and generated by man-hours of labor.

As a percentage of income, I'm quite sure the poor contribute much more to the rich than vice-versa.

You are quite wrong. Whether in absolute terms or in percentage of income, the poor contribute nothing to our tax revenue.

 

[rewebster]

Whether in absolute terms or in percentage of income, the poor contribute nothing to our tax revenue.

Nothing?!-----that's rather an elitist statement-----Nothing?-----I'm surprised you'd say/write something like that at all...really surprised

 

[mheslep]

... Whether in absolute terms or in percentage of income, the poor contribute nothing to our tax revenue.

nothing to our federal income tax revenue. Everybody pays at least a little state and local sales tax. Also, in the US the poor may own a beater car (!) or even a mobile home and thus pay a little property tax.

 

[DavidSnider]

The way some people here talk you'd think Bernie Madoff was a saint.

How can some people be so naive as to think that money can only be acquired by hard work.

 

[mheslep]

The way some people here talk you'd think Bernie Madoff was a saint.

How can some people be so naive as to think that money can only be acquired by hard work.

I'd guess nobody posting in this thread believes that money can only be acquired by hard work.

 

[CRGreathouse]

The way some people here talk you'd think Bernie Madoff was a saint.

Strawman much?

How can some people be so naive as to think that money can only be acquired by hard work.

Who said that? Or is that just another... forget it.

 

[CRGreathouse]

nothing to our federal income tax revenue. Everybody pays at least a little state and local sales tax. Also, in the US the poor may own a beater car (!) or even a mobile home and thus pay a little property tax.

True. Do you know of a good source that takes all taxes (not just income, but property and capital gains et. al.) into account, and also counts transfer payments like SS, Medicade, and EIC?

 

[rewebster]

Well first off - you're switching subjects: before it was about income inequality, but now it is about poverty. Regardless, yes, for the most part the poor are poor because they have chosen not to succeed. You are aware of the extremely strong corellation between income and education, right? The US government provides free education through high school, yet a full 30% of the population chooses not to take advantage of it: http://www.csmonitor.com/USA/2009/0609/p02s13-usgn.html

"the poor are poor because they have chosen not to succeed"

well, well----I just have to ask-------can you back up that statement with a source?

 

[Vanadium 50]

In the US the richest are paying an effective tax rate of less than 1%, which is wealth redistribution in reverse.

Skyhunter's numbers say 16.62%.

I think that one has to argue this on a consistent set of numbers.

My I point out that if the theory you propose is correct, it makes certain predictions. One is that as the US Gini coefficient rises, so does teen pregnancy. However, teen pregnancy has been falling (by almost a factor of 2) since its peak in 1992. That means either US income inequality has been shrinking since then, or that your theory is wrong.

 

[WhoWee]

Poor people are poor because they haven't yet taken advantage of the opportunities that are available to them. That would be their choice. Yes, people chose to be poor in the US. How can I say this? Because I used to be poor. I grew up poor. I grew up with poor people who were content to do just enough to get by. And some of them despised the rich because they assumed that the rich were doing the same thing but for some unfair reason just had more money.

I took advantage of opportunities available to me and became middle class. If I chose to, I could become rich. I just don't want to work that hard.

I have to agree - I think Russ said something very similar as well.

The poor people in the US have access to free food, subsidized rent and utilities, free education, free medical, transportation, cell phones, "earned income credits" and good old cash. If part of a minority group, they even receive preferential treatment for jobs.

Not to get too far off topic - I see people in line at the grocery store buying items with food stamps that I can't justify spending MY cash on.