Let's discuss the minimum wage

This is what Krugman says in his textbook, published 2006. He sounds much more skeptical of the minimum wage in his textbook than he does in this column. Anyway, my point was that if you want government to help the poor, the minimum wage is an inferior way to do it compared to expanding the earned income tax credit. My point wasn't that the minimum wage is inferior to not even trying to help the working poor.

Figuring that the vast majority of people making the minimum wage support no children, the max earned income tax credit is a big-deal $428.


Next Tax Year 2007
Earned income and adjusted gross income (AGI) must each be less than:
$37,783 ($39,783 married filing jointly) with two or more qualifying children;
$33,241 ($35,241 married filing jointly) with one qualifying child;
$12,590 ($14,590 married filing jointly) with no qualifying children.
Tax Year 2007 maximum credit:

$4,716 with two or more qualifying children;
$2,853 with one qualifying child;
$428 with no qualifying children.
Investment income must be $2,900 or less for the year.

The maximum Advance Earned Income Tax Credit (AEITC) for TY 2007 the employer is allowed to provide throughout the year with the employee's pay is $1,712.

If your "big deal" is sarcastic, I agree. Expand it! Massively!

Helping the plutocrats!

^9/10//07: Where's My Trickle?

By PAUL KRUGMAN

Four years ago the Bush administration, exploiting the political bounce
it got from the illusion of success in Iraq, pushed a cut in capital-gains
and dividend taxes through Congress. It was an extremely elitist tax cut
even by Bush-era standards: the nonpartisan Tax Policy Center says that
more than half of the tax breaks went to Americans with incomes of more
than $1 million a year.

Needless to say, administration economists produced various misleading
statistics designed to convey the opposite impression, that the tax cut
mainly went to ordinary, middle-class Americans. But they also insisted
that the benefits of the tax cut would trickle down -- that lower tax
rates on the rich would do great things for the economy, helping everyone.

Well, Friday's dismal jobs report showed that the Bush boom, such as it
was, has run its course. And working Americans have a right to ask,
"Where's my trickle?"

It's true, as the Bushies never tire of reminding us, that the U.S.
economy has added eight million jobs since that 2003 tax cut. That
sounds impressive, unless you happen to know that a good part of that
gain was simply a recovery from large job losses earlier in the
administration's tenure -- and that the United States added no fewer than
21 million jobs after Bill Clinton raised taxes on the rich, a move that
had conservative pundits predicting economic disaster.

What's really remarkable, however, is that four years of economic growth
have produced essentially no gains for ordinary American workers.

Wages, adjusted for inflation, have stagnated: the real hourly earnings
of nonsupervisory workers, the most widely used measure of how typical
workers are faring, were no higher in July 2007 than they were in July
2003.

Meanwhile, benefits have deteriorated: the percentage of Americans
receiving health insurance through employers, which plunged along with
employment during the early years of the Bush administration, continued
to decline even as the economy finally began creating some jobs.

And one of the few seeming bright spots of the Bush-era economy, rising
homeownership, is now revealed as the result of a bubble inflated in
part by financial flim-flam, which deceived both borrowers and investors.

Now you know why 66 percent of Americans rate economic conditions in
this country as only fair or poor, and why Americans disapprove of
President Bush's handling of the economy almost as strongly as they
disapprove of the job he is doing in general.

Yet the overall economy has grown at a reasonable pace over the past
four years. Where did the economic growth go? The answer is that it went
to the same economic elite that received the lion's share of those tax
cuts. Corporate profits rose 72 percent from the second quarter of 2003
to the second quarter of 2007. The real income of the richest 0.1
percent of Americans surged by 51 percent between 2003 and 2005, and
although we don't yet have the data for 2006, everything we know
suggests that the income of the rich took another upward leap.

The absence of any gains for workers in the years since the 2003 tax cut
is a pretty convincing refutation of trickle-down theory. So is the fact
that the economy had a much more convincing boom after Bill Clinton
raised taxes on top brackets. It turns out that when you cut taxes on
the rich, the rich pay less taxes; when you raise taxes on the rich,
they pay more taxes -- end of story.

But it's not just trickle-down that has been refuted: the whole idea
that a rising tide raises all boats, that growth in the economy
necessarily translates into gains for the great majority of Americans,
is belied by the Bush-era experience.

As far as I can tell, America has never before experienced a disconnect
between overall economic performance and the fortunes of workers as
complete as that of the last four years.

America was a highly unequal society during the Gilded Age, but workers'
living standards nonetheless improved as the economy grew. Inequality
rose rapidly during the Reagan years, but "Morning in America" was
nonetheless bright enough to make most people cheerful, at least
temporarily. Inequality continued to increase during the Clinton years,
but wages rose, as did the availability of health insurance -- and the
great majority of Americans felt prosperous.

What we've had since 2003, however, is an economic expansion that looks
good if not great by the usual measures, but which has passed most
Americans by.

Guaranteed health insurance, which all of the leading Democratic
contenders (but none of the Republicans) are promising, would eliminate
one of the reasons for this disconnect. But it should be only the start
of a broader range of policies -- a new New Deal -- designed to turn
economic growth into something more than a spectator sport.
-------------------------------------------------------------------

It's an interesting article, sure, but what does it have to do with the minimum wage?

It illustrates the wonderful treatment accorded by the Reps to the super-wealthy as opposed to the niggardly treatment of the poor.

Well, $4,716 is a big deal. And $2,853 is a smaller big deal, but a big deal. And often the debate is centered around children, so when children are involved, people get a very nice break.

Something else seldom if ever mentioned by Democrats is the cultural cause of poverty. It isn't politically correct nowadays. But the truth is families with two parents do much better. Increasing intact families would probably do more to combat the poverty rate than almost anything the government could try to do.

Okie, to get the max, one's income must be way above the minimum wage. Moreover, there are not many on minimum wage raising children.

Why do you insist on continuing your snide comments about "niggardly" treatment of the poor? I was poor at one time and I don't recall any "niggardly" treatment, nor do I remember the Democrats doing anything all that noteworthy. Why don't you just propose everyone get the same salary or income regardless of education or skill, if that is really what you seem to want?

I agree with you that many poverty problems are culturally based. People never learn their way out of it. We will have to have some real changes in our society in order to change this fact.

But, I must say, an extra 5k when you make 22k a year - not all that much. It helps. But it isn't enough to raise a family on. I make way, way more than that, and I can't imagine living a life with kids, or big medical bills, car payments, the things families come with. No way. You can add 5k on to someone making that much, and they are still poor.

Cycloptichorn

Well, so Republican tax policies suck. What else is new?

Well, I know somebody that does. They have health insurance through the employer, they don't live in a mansion, they don't drive a luxury car, and they don't go on long vacations. They eat well, have a roof over their head, and wear decent clothes. They may be poor but they still live well. I would say 5k is alot more than it used to be, cyclops. What do you want for them, 10k, or why not just give them all the money they need, after all just tax the rich so they could quit working altogether.

By the way, their lifestyle is far better than most people that live in London.

Again, be specific. What tax policy would you institute, Thomas?

LOL

5k rebate is alot more rebate than tax rebates used to be, dimbulb.

Read the context and you might get a clue, dyslexia.

I described it in my first post about the minimum wage -- the one you said you agreed with.

I am presuming it is included here from your quote?

"If you want public policy to support the working poor, there are better ways to implement it: Carve out a low-income tax bracket and "charge" a negative tax rate from the people in it. Or in other words, give them a wage subsidy. You can pay for it by raising taxes in the top bracket. This solution isn't perfect either, because it causes some missed opportunities in upper income employment. But you'll get much less waste, misallocation, and law-breaking this way."

We already have the negative tax rate through the credits allowed. It isn't accomplished by a negative tax rate, but in effect it is, for those people that work for their income, especially for families with children, which are the people we want to help the most.

We already have higher tax rates for people that make more money, although you probably wish to raise the rates higher, I'm not sure how much? Here, you enter the debate over whether even higher tax rates actually increase revenues, or increase revenues as much as predicted. They might somewhat, but you must also deal with reduced economic activity as a result of those tax policies. The top income people continue to pay the vast majority of the tax revenues, regardless what the tax rates are, so I don't know what you are really accomplishing by raising rates. Are you assuming a zero sum game here? I agree with a graduated tax, but we probably don't agree on where the rates should be. I would consider a higher rate for very high numbers, like a few hundred thousand or a million or more, not that I think it might bring in alot more money, but for the purpose of reducing irresponsible compensation practices at the top of the corporate world.

But raising the minimum wage doesn't necessarily help the lowest end either. A study from the last min wage hike showed that employment of poorly educated, young males dropped strikingly while employment of older workers increased. (I think I posted a link earlier in this thread.) One conclusion you could draw from this is that increasing pay adds workers to the labor pool (in this case retirees) and displaces poorly qualified workers.