News What is the Impact of Income Inequality on Social Problems?

[mheslep]

Maybe I should find a rough estimate of the current amount, add that in, and compare.

Maybe a non-trivial exercise. The census questionnaire (SIPP) includes questions about that, but how many people are going to know, given the docs bill Medicaid/Medicare directly, i.e. 'oh yes Medicaid paid $20k this year to my doc and hospital'.

The place to start might be with total Medicaid outlays, and if you can somehow identify that those are all under that lowest quentile, then simply divide by the number of recipients. I spent some time once looking at Medicaid qualifiers, and they're complicated - some places extending up to 200% of the poverty level, have children or not, etc. And that is all just for Medicaid payments. Edit: Many of the transfer payments don't show up as census income: rent or housing subsidies, food stamps or other welfare, school lunch program, etc

 

[CRGreathouse]

Maybe a non-trivial exercise.

Surely.

First, though, an order-of-magnitude calculation on Medicaid. 2008 expenditures were $191.5 billion. If the benefits were evenly shared amongst the lower-earning half, the lowest quintile's share is 2/5, or $76.6 billion. The US population in 2008 was 304.4 million, or $250 each. If the bottom quintile received all of Medicaid benefits (probably closer to the truth, though certainly an overestimate by some amount) it would be $630 each.

I can't find the exact spending for Medicaid in 1967 (the program having started two years earlier), but it seems to be subsumed in the $2.942 billion "Public assistance (excluding medical care for the aged)". In 2008 dollars, this is $18.8 billion. [CPI-U. Yes, I know... I should really have used the CPI-U-RS.]

That would make the 1967-2008 increase for the lowest quintile about 24% rather than 22%.

 

[mheslep]

Surely.

First, though, an order-of-magnitude calculation on Medicaid. 2008 expenditures were $191.5 billion. If the benefits were evenly shared amongst the lower-earning half, the lowest quintile's share is 2/5, or $76.6 billion. The US population in 2008 was 304.4 million, or $250 each. If the bottom quintile received all of Medicaid benefits (probably closer to the truth, though certainly an overestimate by some amount) it would be $630 each...

Sounds low. SSA reports 2006 total number of recipients 57.7 million, total 2006 payments as $268.5 billion*, and average yearly payout as $4,651.
http://www.ssa.gov/policy/docs/statcomps/supplement/2008/8e.html
The next question is does the census' bottom fifth capture all of that income.

*Which BTW has been doubling every ten years.

 

[DivingMullah]

I can't quickly locate it in quentiles which is what you likely wanted, but here is per capita income aggregated:
http://www.census.gov/hhes/www/income/histinc/p01AR.xls
which shows per capita US income in 2008 dollars about doubling from 1967 ($13.8k) until 2008 ($27k), a 95% increase. By comparison, household income over the same period shows:

1967 to 2008, in 2008 dollars
Bottom fifth: $9k to $11k (22%)
Top fifth: $100.4k to $171k (70%)
Top 5%: $158.4k to $294k (86%)
http://www.census.gov/hhes/www/income/histinc/h03AR.xls

One thing census doesn't include is the capital Gain, which actually makes the top 5% income increase much more disproportionate than rest of the group, tax cuts for them aggravated the situation even more.

This paper discusses how and why there has been more downward mobility post 1980 than in the previous decades.

http://findarticles.com/p/articles/mi_m0254/is_n1_v53/ai_15163028/pg_8/?tag=content;col1


The health of any society is measured in the social upward mobilities of its citizen. From 1950s till 1970s it was the golden age of the middle class, despite relative high taxes the society was prospering and there was an explosion in the middle class income and wealth, Not only our national deficit was the lowest since WWII, we were the largest lender of funds and the largest exporters of goods (signs of a first world nation)

[unsourced claims deleted]

Diving Mullah

 

[WhoWee]

Sounds low. SSA reports 2006 total number of recipients 57.7 million, total 2006 payments as $268.5 billion*, and average yearly payout as $4,651.
http://www.ssa.gov/policy/docs/statcomps/supplement/2008/8e.html
The next question is does the census' bottom fifth capture all of that income.

*Which BTW has been doubling every ten years.

Does that outlay include the payment of Medicare Part B premiums ($96.40 to $110.50 each)?

Another benefit that might be accounted separately is the LIS program (technically part of Social Security) that coordinates with Medicare.

 

[CRGreathouse]

Sounds low. SSA reports 2006 total number of recipients 57.7 million, total 2006 payments as $268.5 billion*, and average yearly payout as $4,651.
http://www.ssa.gov/policy/docs/statcomps/supplement/2008/8e.html
The next question is does the census' bottom fifth capture all of that income.

*Which BTW has been doubling every ten years.

I got my numbers from
http://www.hhs.gov/asrt/ob/docbudget/2010budgetinbriefm.html

Unfortunately there's no overlap, so I can't say with certainty that one is wrong. Are these measuring different things?Edit: While I'm at it, here's my source (poor as it is) for the 1967 spending:
http://fraser.stlouisfed.org/publications/usbudget/page/11438

 

[CRGreathouse]

One thing census doesn't include is the capital Gain, which actually makes the top 5% income increase much more disproportionate than rest of the group, tax cuts for them aggravated the situation even more.

This would be extremely hard to measure properly, though, with the changes to tax law over that period. With income tax falling relative to capital gains over that period, more tax would be reported as income rather than capital gains in 2008 vs. 1967. (The top tax rate in 1967 was 70%; in 2008, 35%.) So my guess would be that the change in real earnings to the wealthy over that period would be overstated by looking only at income and understated looking only at capital gains. (Obviously, the wealth of the wealthy would be understated compared to lower percentile groups if only income was considered.)

So insofar as we're comparing change within groups, I disagree.

 

[Zantra]

Also there's an issue here of equality of outcome vs. opportunity. Even if you look at individual income (household income being even more skewed, naturally), the top quintile works many more hours than the bottom. So in one sense it's not as unfair as it would otherwise seem. But many/most of those in the lowest quintile are not working as many hours as they would like to work: they are unemployed or working part-time when they want to work full-time.

How do people here feel about that?

It all goes back to education. Lowest quintile have the lowest education and skillsets, thus have the highest levels of unemployment and lowest incomes. Those in the top quintiles are among the most highly educated, or with skilsets in enough demad as to make them extremely valuable from an earnings perspective. I'm sure this must have been stated elsewhere in this thread.

 

[russ_watters]

It all goes back to education. Lowest quintile have the lowest education and skillsets, thus have the highest levels of unemployment and lowest incomes. Those in the top quintiles are among the most highly educated, or with skilsets in enough demad as to make them extremely valuable from an earnings perspective. I'm sure this must have been stated elsewhere in this thread.

Agreed. If someone is 30 and has an 11th grade education, how are they any better than a 16-year old in 11th grade? Why give them any better a job than an $8 an hour part time job ad McD's? Yeah, they want a full time job and medical benefits, but they are competing against 16 year-olds who don't need either at a job where an $8 an hour pay rate doesn't justify a $4 an hour medical benefit. It is neither reasonable nor realistic for those in that 30% who haven't finished high school to expect that they can make enough money to get out of the bottom income bracket. And when the government pays to support such people, they are essentially paying out a reward for a poor life choice. Beyond just softening the sting of the failure, they are actually rewarding people for it.

 

[CRGreathouse]

Agreed. If someone is 30 and has an 11th grade education, how are they any better than a 16-year old in 11th grade? Why give them any better a job than an $8 an hour part time job ad McD's? Yeah, they want a full time job and medical benefits, but they are competing against 16 year-olds who don't need either at a job where an $8 an hour pay rate doesn't justify a $4 an hour medical benefit. It is neither reasonable nor realistic for those in that 30% who haven't finished high school to expect that they can make enough money to get out of the bottom income bracket. And when the government pays to support such people, they are essentially paying out a reward for a poor life choice. Beyond just softening the sting of the failure, they are actually rewarding people for it.

You want people to take responsibility for their actions; I understand that (radical as that would be as a policy, in general). But what if the person wants to work 40 hours at McD's, but can only work 18? Or they work as a landscaper, but business is down and they can only work a few hours a week... etc.

 

[Zantra]

You want people to take responsibility for their actions; I understand that (radical as that would be as a policy, in general). But what if the person wants to work 40 hours at McD's, but can only work 18? Or they work as a landscaper, but business is down and they can only work a few hours a week... etc.

Responsibility for your own actions. Great idea. if you need 40 hours and you work at mcdonalds-why? You're obviously not a teen. Those kinds of jobs are targeted at young adults, teens, and retirees, not 40 year olds with families and homes, right? Yet it ends up that way, from time to time. If you're working there, why? If you can only get part time work, then you need to work 2 jobs-OR..just a thought here.. go to SCHOOL.. whether that's college or trade/vocational school, it beats 2 mimimum wage jobs.

And where does this lead? So and so can't work full time at their McD's job because they have KIDS and they are a single PARENT. (note: no offense to any single parents out there). But then you have to ask WHY are you a PARENT when you work at mcdonalds? It's just one big fat slippery slope of errors in judgement, poor life choices, and they generally happen one after the other after the other.

Why am I ranting? because I have firsthand knowledge of these scenarios, and I've watched them play out again and again, with friends and family members, and it really saddens me that people try to find reasons for their situtations but refuse to start with the one in the mirror.

and I quote "DESERVE'S GOT NOTHIN TO DO WITH IT"

No one WANTS to be 30 and working at mickey D's, but it does happen. You may WANT a better paying job with benefits, but if you're 30 and doing that, something clearly went very wrong in your life. I think the vast majority of folks in that lowest quintile are capable of getting SOME kind of training to move up, so it becomes a choice, or just a lack of motivation to improve.

Wanting something and doing something about it are 2 different things.

I'm not dealing in absolutes here, but I think it's safe to say most of the bottom quintile don't get a pass due to circumstances.

 

[TheStatutoryApe]

Agreed. If someone is 30 and has an 11th grade education, how are they any better than a 16-year old in 11th grade? Why give them any better a job than an $8 an hour part time job ad McD's? Yeah, they want a full time job and medical benefits, but they are competing against 16 year-olds who don't need either at a job where an $8 an hour pay rate doesn't justify a $4 an hour medical benefit. It is neither reasonable nor realistic for those in that 30% who haven't finished high school to expect that they can make enough money to get out of the bottom income bracket. And when the government pays to support such people, they are essentially paying out a reward for a poor life choice. Beyond just softening the sting of the failure, they are actually rewarding people for it.

They have experience and hopefully a track record of reliable work habits with good references if nothing else. They are also capable of working flexible full time schedules. Would you prefer to hire a teen who only wants to work after school and may grudgingly take weekends over an adult with experience who can provide evidence of their work habits?
Certainly they should at least make sure to get a high school diploma but to say that they have no value as workers over 16 year olds is pretty ridiculous.

Responsibility for your own actions. Great idea. if you need 40 hours and you work at mcdonalds-why? You're obviously not a teen. Those kinds of jobs are targeted at young adults, teens, and retirees, not 40 year olds with families and homes, right?

Not so much. Far fewer teens take jobs now a days* and most young adults that are going to get a college education don't want jobs working at Mickey Dees, they work in the library or labs at school. Most kids who are going to college are going to college because of the stigma attached to having a job asking people "do you want fries with that".
Besides, most employers prefer reliable employees who can work flexible hours and this becomes all the more important in jobs with a high turn over where employees tend to not be very reliable. Teens, especially those going to school, do not have flexible hours and tend to work only seasonally.

*http://www.bls.gov/opub/ils/pdf/opbils49.pdf
The stats only include up to 2000, it was the first source I found.

 

[russ_watters]

But what if the person wants to work 40 hours at McD's, but can only work 18?

Mcd's is not obligated to give people whatever hours they want. And I suspect that if they did, the legal requirements on benefits change.

 

[russ_watters]

They have experience and hopefully a track record of reliable work habits with good references if nothing else.

Not if they are applying for an $8 an hour job at Mcd's they don't.

They are also capable of working flexible full time schedules. Would you prefer to hire a teen who only wants to work after school and may grudgingly take weekends over an adult with experience who can provide evidence of their work habits?

I'd hire adults to work when the teens are in school and teens to work other hours. But if an adult has experience and evidence of good work habits, they shouldn't be applying for that $8 an hour job.

Certainly they should at least make sure to get a high school diploma but to say that they have no value as workers over 16 year olds is pretty ridiculous.

A person over 16 certainly can have more value than a 16 year old without a diploma, but you can't assume they do. What you suggest is sometimes true and it sometimes isn't. It is also very likely that the diploma is a reflection of those other traits: someone who would have demonstrated reliability wouldn't have quit high school in the first place.

[edit]Actually, I think for a job at Mcd's, the lack of age and experience itself would be an attribute in some important ways: It means having no adult responsibilities and no salary history, so no pay/benefit expectations and higher flexibility outside the normal business day. Just by looking at a report card with lots of A's on it and math club as an activity, a prospective employer can figure they are going to get a high quality employee who they don't have to pay as if they are a high quality employee.

 

[TheStatutoryApe]

Not if they are applying for an $8 an hour job at Mcd's they don't.

That was not stipulated by your argument...

If someone is 30 and has an 11th grade education, how are they any better than a 16-year old in 11th grade? Why give them any better a job than an $8 an hour part time job ad McD's?

You simply make the assumption that they are not worth giving any better a job than that.

 

[CRGreathouse]

Mcd's is not obligated to give people whatever hours they want.

Of course. The point was that there are low-skill employees who are willing but not able to work a desired number of hours. A person can make ends meet at a low-skill, low-paying job working 50 hours a week, but not so much working 28 hours a week. Can nothing be done?

A person who brings home little money because of low skill and unwillingness to work long hours has no sympathy from me. But when they want to work and just can't find any/enough... that seems a real problem to me.

 

[WhoWee]

Of course. The point was that there are low-skill employees who are willing but not able to work a desired number of hours. A person can make ends meet at a low-skill, low-paying job working 50 hours a week, but not so much working 28 hours a week. Can nothing be done?

A person who brings home little money because of low skill and unwillingness to work long hours has no sympathy from me. But when they want to work and just can't find any/enough... that seems a real problem to me.

Often the "working poor" hold mulltiple part time jobs.

 

[Al68]

Okay, I understand better now. How about some of the other "other examples"? Taxes provide for a police force, fire departments and a military. If I recuse myself from those services, should I be exempt from paying taxes to support them? Isn't it inherently wrong to extort money from me for a service I do not ask for?

Some would say so, but the argument with a long history is that although those services (maintaining law and order, fire protection, and national security) are not explicitly asked for by everyone, they are in fact provided to everyone, so the taxes are owed. The argument is similar to a hospital bill for a heart attack victim who never explicitly asked for medical care, but was provided the care anyway, and billed accordingly. Even if you disagree about whether they should be billed, it doesn't fit the definition of theft.

While one might argue that those services aren't requested by each individual, at least the services are actually provided to everyone. This is very different from taking money from someone by force without even a pretense that it is in return for services rendered.

Those services, law and order and national defense, are the only reason to even tolerate the "necessary evil" of government. At least in the minds of post-Enlightenment classical liberals, or libertarians, like me.

 

[rewebster]

Those services, law and order and national defense, are the only reason to even tolerate the "necessary evil" of government. At least in the minds of post-Enlightenment classical liberals, or libertarians, like me.

just a quick 'aside' comment--that is what I've heard from neo-conservatives that that is the ONLY responsibilities of the government are.


One thing I'm reading on this thread is a lot of generalities about the 'poor'---every 'poor' person has there own reason(s) for the situation that they're in.

Whether or not a person perceives that there should be less inequality, to me, is both personal (whether a person believes that its moral), or the morality of the nation and the constitution (how it is interpreted).

 

[Zantra]

I guesss all the kids like the ones in this video are just "lucky"

http://www.cnn.com/video/#/video/us/2010/03/04/simon.ca.education.cuts.cnn?hpt=C2

If you want something badly enough you CAN make it happen, in most cases.

 

[CRGreathouse]

Often the "working poor" hold mulltiple part time jobs.

Right. That's mostly an artifact of the laws requiring benefits for those working at least 40 hours.

 

[Gokul43201]

Some would say so, but the argument with a long history is that although those services (maintaining law and order, fire protection, and national security) are not explicitly asked for by everyone, they are in fact provided to everyone, so the taxes are owed. The argument is similar to a hospital bill for a heart attack victim who never explicitly asked for medical care, but was provided the care anyway, and billed accordingly. Even if you disagree about whether they should be billed, it doesn't fit the definition of theft.

While one might argue that those services aren't requested by each individual, at least the services are actually provided to everyone. This is very different from taking money from someone by force without even a pretense that it is in return for services rendered.

Those services, law and order and national defense, are the only reason to even tolerate the "necessary evil" of government. At least in the minds of post-Enlightenment classical liberals, or libertarians, like me.

You appear to be varying the requirements for morality on a case-by-case basis. How is it not immoral to demand payment for a "service" that I insist that I do not want provided to me (and threaten me with imprisonment if I fail to pay up for something I don't want)? How is that any different from a protection racket?

 

[Ivan Seeking]

Yes, but it's how Democrats describe "trickle down economics" that is fraudulent and nothing like Reagonomics. The name "trickle down" itself was coined for the purpose of such fraud.

And yes, I'm sure the wiki page doesn't say that.

In fact, the wiki page gives a reference attributing the expression to Will Rogers, from the time of the Great Depression. This is supported by other sources.
http://en.wikipedia.org/wiki/Trickle-down_economics
http://www.hks.harvard.edu/news-events/publications/impact-newsletter/archives/autumn-2009/trickle-down-economics-revisited

 

[Ivan Seeking]

Some would say so, but the argument with a long history is that although those services (maintaining law and order, fire protection, and national security) are not explicitly asked for by everyone, they are in fact provided to everyone, so the taxes are owed. The argument is similar to a hospital bill for a heart attack victim who never explicitly asked for medical care, but was provided the care anyway, and billed accordingly. Even if you disagree about whether they should be billed, it doesn't fit the definition of theft.

While one might argue that those services aren't requested by each individual, at least the services are actually provided to everyone. This is very different from taking money from someone by force without even a pretense that it is in return for services rendered.

Those services, law and order and national defense, are the only reason to even tolerate the "necessary evil" of government. At least in the minds of post-Enlightenment classical liberals, or libertarians, like me.

Do you support abolishing public education; garbage collection; water and sewer services; the national highway system; government-funded dams and power plants; national parks; protection for endangered species like the Bald Eagle [which has recovered]? Should we abolish the EPA, labor laws, OSHA, the FDA, and the USDA?

When the pro-nuclear power people want to build a plant, the first thing they do is to ask the government for a loan. Should we nix Obama's plan to build nuclear plants - let the effort die because of a lack of funding?

 

[Al68]

You appear to be varying the requirements for morality on a case-by-case basis. How is it not immoral to demand payment for a "service" that I insist that I do not want provided to me (and threaten me with imprisonment if I fail to pay up for something I don't want)? How is that any different from a protection racket?

That was my point, that government providing those services by using force to obtain payment was considered to be an "evil" by the U.S. founders, but a necessary evil.

In other words, necessity required tolerating the necessary evil of government for the protection of liberty. Of course their means of collection was much less an invasion of privacy and oppressive than an income tax, but it did use force.

 

[Al68]

Do you support abolishing public education; garbage collection; water and sewer services; the national highway system; government-funded dams and power plants; national parks; protection for endangered species like the Bald Eagle [which has recovered]? Should we abolish the EPA, labor laws, OSHA, the FDA, and the USDA?

When the pro-nuclear power people want to build a plant, the first thing they do is to ask the government for a loan. Should we nix Obama's plan to build nuclear plants - let the effort die because of a lack of funding?

As far as garbage collection, water, etc: In many places, those are done by private companies rather than government, anyway. Even when done by government, they are authorized by local city charters, and no one is forced to pay for them. Local governments are doing nothing that any private company wouldn't otherwise be perfectly free to do, providing a service for a voluntary price. That hardly has anything to do with my post.

For the rest, I'm a libertarian, not an anarchist, so I agree with the "necessary evil of government" argument for those services that cannot reasonably be done without government, like national defense and maintaining law and order, and other things authorized by the constitution.

As far as privately owned nuclear power plants, I think the federal government should only cover the cost of federal regulation involved. Which for nuclear plants would be a large part of the total cost of operation, since in addition to environmental and public safety concerns, there is a national defense concern with the fissionable material.

 

[Al68]

In fact, the wiki page gives a reference attributing the expression to Will Rogers, from the time of the Great Depression. This is supported by other sources.
http://en.wikipedia.org/wiki/Trickle-down_economics
http://www.hks.harvard.edu/news-events/publications/impact-newsletter/archives/autumn-2009/trickle-down-economics-revisited

Yes, he said: "money was all appropriated for the top in hopes that it would trickle down to the needy."

This is obviously fraudulent, since the money in question isn't "appropriated" at all in reality. Democrats are equating money "not confiscated" by government as "appropriated" by government.

As an analogy, I "appropriated" $5000 to you last year. After all, there is that $5000 that I failed to take from you by force. Aren't I generous?

As silly as this sounds, so absurd that it seems to me that nobody could fall for it, Democrats refer to tax cuts as as if they were equivalent to the government "giving" people money routinely, and have for decades.

 

[Gokul43201]

That was my point, that government providing those services by using force to obtain payment was considered to be an "evil" by the U.S. founders, but a necessary evil.

I thought your point was based on a moral argument, not on "because the founders said so".

In other words, necessity required tolerating the necessary evil of government for the protection of liberty. Of course their means of collection was much less an invasion of privacy and oppressive than an income tax, but it did use force.

So it is not that one is morally evil and the other not, but only that one is more evil than the other, and you draw your personal line of tolerance somewhere between them?

But besides that, you are also saying that you find it less oppressive that the Federal Government derive the entirety of its income via the corrupt, protectionist system of import tariffs (at rates near 50% and rising, as manufacturing grew within the US, and as the government realized that it couldn't wage war on a pittance). While this may be a point that could be debated, I can't imagine anyone would suggest a return to the pre-Wilson tariff-based taxation system, given the nature and reach of trade today.

 

[Ivan Seeking]

As far as garbage collection, water, etc: In many places, those are done by private companies rather than government, anyway. Even when done by government, they are authorized by local city charters, and no one is forced to pay for them. Local governments are doing nothing that any private company wouldn't otherwise be perfectly free to do, providing a service for a voluntary price. That hardly has anything to do with my post.

This was in response to the limitations of the role of the government. True, garbage collection is sometimes jobbed out, but water service is, to the best of my knowledge, always under the municipal budget. Why? Could it be a matter of health and public safety? If we agree that this is the motivation for municipal water districts, what in the Constitution justifies a government role here? Or do you believe that municipal water districts are actually unconstitutional?

For the rest, I'm a libertarian, not an anarchist, so I agree with the "necessary evil of government" argument for those services that cannot reasonably be done without government, like national defense and maintaining law and order, and other things authorized by the constitution.

Firstly, Ron Paul does want to abolish the EPA, so this might easily be considered a libertarian position. However, you do extend the role of government beyond law and order, and national defense. Where does the Constitution sanction the EPA, the USDA, or the FDA?

As far as privately owned nuclear power plants, I think the federal government should only cover the cost of federal regulation involved. Which for nuclear plants would be a large part of the total cost of operation, since in addition to environmental and public safety concerns, there is a national defense concern with the fissionable material.

Right now, I am bending to the will of the pro-nuclear crowd because we are running out of choices. Why am I willing to suspend, to a degree, my extreme distrust of industry, in order to allow without objections the building of nuclear power plants? In two words: National Security. There is also public safety. Do you not agree that the ability to provide electrical power to the public, industry, and the commercial sector, is a matter of national security? If so, then how does the Constituiton void government participation here as a lending agency?

 

[mheslep]

...Firstly, Ron Paul does want to abolish the EPA, so this might easily be considered a libertarian position. ...

Well not quickly. He consistently says in response questions about the EPA: http://www.grist.org/article/paul1/"

Also, occasionally I am tempted to write Paul off, but come back when I find him saying something imminently more rational than the priorities of either Obama or McCain:

[Q:]So you don't consider climate change a major problem threatening civilization?

[A:]No. [Laughs.] I think war and financial crises and big governments marching into our homes and elimination of habeas corpus -- those are immediate threats