Instinctive anger at the wealthy and/or wealth contrasts

How can she not accept such an offer? <snif> Ahhh, romance!!

Sure... let me assure you you'll be nursing more than just cold beer.

Thanks, I thought it was pretty common to have a momentary, instinctive impulse like that (for some reason or other, I mean, the triggers differing per person). A split-second urge you'd never actually act on. I mean, for example, every day millions of people in traffic jams around the country mentally curse the guy in front of them, even though he cant help it either - yet only the insane would actually get out of the car and yell at the driver in front.


Oh I dont know, I think we've pretty much fleshed it out in this thread. I think we've come up with the whole picture of what triggered the anger and how it got played out.


Definitively. If stark enough.

And as Diane pointed out in the beginning, a lot of that has to do with how you were raised as well, by whom, what values were imbibed on you (my parents were both passionate socialists/social-democrats).


Eorl. Yes, the anger was about the unfairness of the degree of inequality, and by being "shown" right after the poor couple, this random rich couple became the object of its projection. A "Kuleshov effect" of sorts.

Is that Dag I hear singing Oh Sweet Mystery of Life?

yes, Diane. Don't I sing pretty?
It's more of a tragicomedy though.

Pretty, but that zit is kind of distracting me..

So - the other day JpinMilwaukee PM'd me with some good questions that came forth from my earlier posts on this topic.

I responded, with, I'm afraid, possibly the longest answer I've ever written in a PM. He seems to be admirably unperturbed by my verbosity, though - and was also OK with moving the discussion back to this thread.

I'll post his questions first, and then my answer, in two parts because it's so long. The first part is quite specific, about tax cuts and revenues, the second part is long and more philosophical, and might qualify as the longest manifesto of my political beliefs I've ever written :wink:

He already wrote back about the tax thing, and will be posting that reply here too, and I'd love to benefit from the expertise of others here (Thomas?) as well.

As for the general explanation of my beliefs, anyone not bored to tears with it is very welcome to respond to that as well

Here's JP's questions:

Hi JP

Before going off on the essayistic digression that your first question sent me on, let me paste in my (equally lengthy) answer to your second question first, since it is in more of a nitty-gritty dimension.


Hmm ... that is a very debatable assertion, that opinions are quite deeply divided over I believe.

For random example, see this WaPo quote from someone who can hardly be considered liberal:


link

Now Foxfyre, I think, pointed out that she has read about Viard also saying the opposite, and though I dont particularly trust her memory on that I wouldnt be surprised - he is at the AEI, after all, a neoliberal free-market think tank. But the point of showing that even Viard was quoted admitting the above is that many, if not most economists less to the right than the AEI do not think at all "that lower tax rates produce higher tax revenue".

The table you link to certainly does not, to me, seem to show proof of it, unless I'm missing what you wanted to show with it. What I see is that after Bush Jr. came into office, "Receipts In Constant (FY2000 Dollars)" went down for three consecutive years, in total from 2,025.5 billion to 1,665.5 billion. Only last year was the level of 2000 recovered. That means that, in the tax-cuts period of 2000-2006, the total receipts compensated for inflation stagnated - whereas in the previous, non-tax cuts period of six years (1994-2000), the receipts in constant dollars rose by no less than 40%. That hardly seems to confirm "that lower tax rates produce higher tax revenue".

In fact, the "Receipts In Constant (FY2000 Dollars)" have increased steadily throughout ever since 1959, with as only significant exceptions the periods of 1970-1973, 1981-1985, and 2000-2006. Ie, the only three periods of over two years in which the receipts stagnated in the past five decades include the two eras of great tax-cutting, under Reagan I and Bush Jr. I and II. That hardly seems to confirm "that lower tax rates produce higher tax revenue" either.

I'll note that the column that measures the receipts as share of GDP shows the same patterns. In fact, as share of GDP the receipts are estimated to remain well below the 2000 level all the way up to 2012.

So - I'm no economist - but I'll let you guess where my take on the matter lies :wink: - and this table only confirms it. It would be interesting to just bring this exchange of posts back to the thread though. I'm sure that Thomas, for example, has more expertise to respond to this. Since he is a tax-cutting libertarian by ideology I'm taking a big risk by letting him speak <grins> .. but still I'd like to see his, or others', takes.

OK, now towards the more philosophical.
-------------


Both.

For a while (in the time when I was sort of, kind of rebelling against my socialist dad :wink: ), I was arguing that inequality in itself doesnt matter - as long as the poor also see their income increased, however slightly. Who cares if the rich have their income increased by a multiple proportion, as long as the poorest, too, come out better in the end?

But first of all, there is the question of whether this has actually worked out like that. Just reading newspapers and journals, I've seen varying data; one showing, say, that the poorest 10% in the States now actually has less buying power, if you calculate inflation in, than in the seventies, while the richest 10% has seen its buying power multiply; one showing that the average income of factory workers has stagnated over the same thirty years; another again showing a marginal increase of buying power for the lower-income brackets against a skyrocketing one for the higher-income ones; another showing that those on unemployment benefit in the Netherlands lost 15% of buying power during the reforms of the 1980s and early 1990s.

All of this is by heart, and some numbers I've seen may have applied to the US, others to the Netherlands, or the UK -- I'm no economist, and have long given up maintaining an organised archive of news clippings.

But the lesson I drew from the various pieces is that, in these past three decades of boosted wealth, the same liberalised market forces that had the stock and housing markets booming have benefited below-average earners only marginally at best, and the poorest have perhaps actually lost buying power. So my argument against my father (in effect a variation on the trickle down theory) has, in my perception, been debunked by time - as has the Reaganite trickle down theory itself among serious economists, I believe.

And all of that, of course, is even just on a national scale, contrasting the fates of rich and poor within countries. The global scale, with the poorest countries having gotten poorer rapidly, the "medium" showing mixed results, and the richest getting richer exponentially, is much starker, and whereas bad governance, dictatorships, wars and AIDS have all weighed down immensely, no small portion of the "flying wheel" effect is the result of the nature of the system and of how the cards are stacked in the global economy (rich countries protecting their own markets while having the IMF impose open-borders policies on the poor, etc).

All that aside though, there are also deeper reasons than the mere pragmatic one why I've come back on that belief.

What underlied old socialist, social-democratic, and much of Christian-inspired politics, was that fairness was a valid, independent variable of politics. This was before we, as society, it appears to me, sold out the idea of being entitled, even just collectively, to views about economic fairness, in exchange for the assumption that, since the market economy has proven the most succesful at creating wealth in total, we should also accept whatever distribution of that wealth it creates. As a given, at the very least -- and from what I read, increasingly also as a measure of virtue by itself. Most of us appear to have come to see the way that the laws of supply and demand structure wages as not just a technical/mechanical outcome of the economic system, but as the actual and only "reasonable", moral definition of the worth and virtue of one's work.

The thinking I witness, in this thread for example is that my work does not just get a five times higher a reward than that of the streetsweeper, it deserves five times higher a reward, because the laws of the market have determined so. It is not just my given reward, it is my just reward. And therefore any move that would take a slice off that income (through taxes) is robbing me of my just reward. As if the laws of supply and demand have a moral or ethical dimension - as if they dont just determine how much people are willing to pay for something, but how much someone deserves to receive.

This thinking remains alien to me. I just dont "get" it. In these times, it sounds childish to say so, but I still cant wrap my head around why I should get five times as much as the streetsweeper. Considering that I know very well that I dont work five times as hard. Good, I've invested in education, so that should logically be paid out back later in higher wages - but the difference is much starker than that. And I dont see why that should be so. I can accept that thats the way it works - thats the numbers the machine comes up with in order to make the system work optimally - but it's not by any independent, moral standard, right or fair.

Now do I therefore give away half of my net income to, say, myself give the good example? No, I'm no saint either, and I love my Sunday cup of tea, my fourmonthly flights back home.. the flesh is weak. But standing up and angrily proclaiming that I deserve this income, I have a right to this income, it is my just reward, so nobody touch it - <shakes> - I just cant conceive of it. And I therefore have honestly never winced about paying my taxes - in Holland, I paid about a third of my gross income in taxes, here its practically half, if you count the obligatory contributions to the national pension fund, the national health insurance, the national unemployment insurance (which pays for the unemployment benefits).

So yeah. I guess I could do loads of things with that half, for sure. But I just dont really consider it mine in the first place, since I dont see, beyond the technical / economical machine-related dimension of it all, why I should get the income I get in the first place. When others who work as hard get less. (And mind you, it's not even like I'm super rich or anything - in Holland I was in the bottom 20% income bracket, here I dont know, I'm guessing I'm probably at one-point-something times the average wage.)

All of this to say that I have only been reinforced, over time, in my conviction that the inequality itself is an injustice, apart still from the obvious first priority of getting the poor to be better off materially period.

To pre-empt an obvious response to that, inequality is also, of course, a necessity, as it spurs on individual ambition, education and inventiveness. But I believe that that practical virtue is no longer at stake beyond a certain level. If you can earn two, three or six times as much by educating yourself, working harder and coming up with inventive ideas, you will certainly be more motivated to do so. But does it really make any difference anymore whether you can earn 60 times as much or 600 times as much? Would Bill Gates not have worked as hard as he has if he'd "only" earned 1,000 times as much as your average guy, rather than 10,000 times as much? There is no rational sense, nor sense of just deservance, behind the spiralling inequality anymore beyond a certain point. Whereas left to itself, the capitalist system does appear to only spiral the contrasts ever further out and out.

Apart from violating an innate sort of sense of justice and fairness, the kind that kids nowadays are taught to repudiate as childish once they reach their working years, there is also increasing evidence that it's simply not healthy for society. I am on slippery ground here, because of a lack of data, on my part in any case. But one thing that caught my attention a while ago was an article about the still experimental discipline of "happiness studies" - research attempting to survey and measure the experience of happiness. Results found showed that there was no difference between rich countries and poor countries. Some of the richest countries had low self-reporting of happiness, while some of the poorest countries had a high proportion of people describing themselves as happy. But the situation wasnt inverted either - there was just no pattern to it.

However, there was a correlation between the experience of happiness and the distribution of wealth. Relatively egalitarian societies had happier respondents than countries with sharp contrasts between rich and poor - regardless of whether they were rich (say, Sweden versus the UK) or poor (the examples escape me).

Though I have no link, this finding echoed for me findings of my own modest Masters dissertation (or whatever the term is in English). The subject was wholly different (political mobilisation on ethnic grounds), but the pattern I found then was that people would not mobilise (and protest) if they were doing badly in an unchanging way, or, obviously, if they were doing well consistently. They mobilised when they perceived a threat of their social/economical status worsening, or, paradoxically, when they saw a chance of it improving (and were triggered into action by anything that made them anxious about "missing the boat"). It was not deprivation in absolute terms that provoked mobilisation, but anxiety when there was a threat or chance of flux, downward or upward.

The liberalised market economy, with its evisceration of life-long jobs or even professions, its increase of temporary, low-security jobs, its expectation of the worker's perennial mobility (move states, move countries), its abolition of much of the state-provided "safety net", and its ever upping of the ante (rise higher, fall deeper), may be the perfect model for creating maximum material wealth, for a country as a whole. But apart from the obvious question/concern over whether the lower incomes benefit from this ever increased wealth at all, does this economy of anxiety and insecurity as well as opportunity really make us happy?

It does the winners, the people who are confident, talented and inventive enough to know that they'll always find a way out and up. But call it jealousy if you will, the way some rightwingers do, but many people get unhappy at the sight of the sheer lottery of it all, the way that being born with or without the right talents, into the right family environment of imbubed social skills, educational displine and networks of contacts or into the opposite, in the right neighbourhood or country or the wrong one, can catapult people up into relatively secure prosperity or hurtle them down in challenging environments where only the most steeled succeed. It's not fair - not if one's moral compass goes beyond Darwin's survival of the fittest.

And thats where those old-time socialist, social-democratic and mainstream christian-democratic politics come in. For many decades, at least since the thirties, if not centuries, back from before the French Revolution, whole mass movements of people have thought it only normal to work and fight to make the way we govern ourselves, collectively, as nations or democracies, more fair. Considered it only normal to think that, as societies, we have the right to tinker with "how the [economical] system just works" to better fit our values - including our values about what is fair. And yet now we are to embrace the way the system works not just pragmatically because it yields the better total $ results, but as some kind of moral measure of its own? To consider the numbers that the play of supply and demand ends up spurting out from one year to the next as the proper measure of what we individually "deserve", and woe those who want to redistribute it a little more fairly or evenly?

Thats not where I come from, I guess, and I wont.


For random example,

• Guaranteed basic health care for everyone, whether poor or rich, on welfare, a temporary job or a long-term contract. My friend is from a welfare family, where there was no money to afford regular visits to the GP, so instead, if anything came up, they would wait until it was bad enough to get (free) help at the hospital emergency care. Hell, you'd even earn much of the investment into a national, low-cost health care insurance back just by the way it would promote cheaper, preventative care and deburden the emergency service. (But thats a wholly different thread.)
  
  
• Making the bottom income category tax-free (if it isnt already, situation differs per country), and lowering taxes for the lower middle class and average-incomes.
  
  
• A system of affordable (government-built or just -subsidised) housing. Say, 10% or 20% of the housing, so that even those who are hardest up (or for that matter, f*cked up most) dont end up on the street or in shantitowns (like the Roma here). Being in the poorest 10% and having no money for any "luxury" spending is already punishment enough even for the lazy or stupid, people ending up homeless doesnt encourage them any further to do better.

OK, thats just three, but this here Internet cafe is closing.

And my original response:

Nihm

There is a lot here that I would like to respond too. I don't have the time right now, but think there are some good points to start a discussion.

One thing I would like to respond to quickly, is the higher tax revenue. Reading off of the chart you provided for the top tax rates and comparing it to the federal receipts link I posted, I see a strong correlation in reduced tax cuts and increased tax revenue. Starting in 1951-1964, your chart has a 91% tax rate. In 1965 that rate drops down to 70% and tax receipts rise slightly from 112.6 to a 116.8, the tear after it increase all the way to 130.8 and 148.8 the year after.

The 70% rate goes on for till around 1982 when it drops another 20% to 50%. The first year tax receipts do indeed go down, but then explode in '84 and continue to climb.

Viard stating that taxes would be higher if the taxrate was higher, seems disingenuous to me, as the number do not seem to back it up.

Trickle down economics, as some people call it, does work. I was at a dentist once and while he was drilling into my tooth was having a discussion about this with his assistant. They both agreed that it was crazy and didn't work. As I had a drill in my mouth I couldn't very well respond, so once he was done, with my mouth numb and swollen from novocaine, I pointed out how well it was working right there in his office. He could decide to do everything himself: clean teeth, schedule appointments, file insurance papers, fix cavities, clean the office, etc. etc.. Of course he would spend more time doing things besides seeing patients. This would allow him to keep 100% of the profit, but the profit as a whole would be dramatically reduced due to all the extra tasks involved.

Instead, he decides to share his profit. He hires appropriate people to do appropirate work for a price that the market set and all involved agree upon (I'll get back to more of this point later). The benefit to him is that he gets to spend more time seeing patients and less time doing the time consuming stuff that is necessary to do, but not necessary for him to do.

The end result is he has more profit not only for himself, but has an entire office full of people that are sharing that profit that would not be if he decided to do it all on his own. A side effect of that is that he is more wealthy than he would be if he did it all hinself as well.

Now that is a pretty small scale operation... maybe 15-20 employees. On a large scale, just look at one of the richest man in the world, Bill Gates. He has made a vast fortune himself, and in the mean time has helped shape the future of the entire world. There are complete industries around that were not around 30 years ago. It is impossible to count the ways that computers (and I'm not giving Bill credit for inventing computers... it is just that he helped mainstream them both in personal and business life) have changed the way the world works. With the global economy expanding and once high paying manufacturing jobs going to predominantly poorer countries, these high tech high paying service oriented jobs is the perfect piece to fill in the loss of manufacturing. But that isn't all it has done.

There is ebay and google and online shopping and information for sale and improved efficiency and improved communication... the list is nearly endless. Bill doesn't get credit for all of this, but he certainly helped push things in that direction.


Now I alread wrote more than I had planned and am extremely late, so I have to run... back for more later.

Nimh, this is very interesting.

Also, thank you, this is the first time I have ever seen anyone here answer the question "What would you do, specifically?".

Good stuff.

Nimh refers to happiness research in passing, this isn't the data he referred to but it's related (and is what I referred to earlier):



http://www.able2know.com/forums/viewtopic.php?p=352735#352735

I quote both of us here because it is interesting to see that we both look at the same table, yet see something radically different.

I see the tax revenues in real terms (ie, the "Receipts In Constant (FY2000 Dollars)") stagnate for years whenever big tax cuts are implemented (as in under Reagan and Bush Jr). First they drop outright, then they eventually recover, but slowly enough for the whole period of, say, five years to compare negatively with any non-tax cut period.

Basically, say I, tax revenues have grown steadily ever since 1959. They have not grown any faster after tax cuts than in periods without them - if anything, tax cuts slowed down the growth.

You see something very different: you see each major tax cut triggering, directly or with two or three years delay, a newly boosted increase in tax revenues.

Statistics as Rohrshach image?

If I were an economist, or even just reasonably good with mathematics, I'd apply some kind of complex data correlation analysis. But I'm not.. so all I can do to doublecheck my first impression of the numbers, and yours, is simply plot the two data sets on a graph.

Of course the comparison is imperfect, because the tax table we're looking at only gives the top tax rate, whereas a government could, for example, have implemented big tax cuts while leaving the top rate in tact - or vice versa. But I wanted to see the picture, anyhow.

First, the overall picture in absolute terms. This shows us that, since the fifties, several governments have cut the top tax rate significantly - and also, that tax revenues have grown almost throughout the whole period.

But is there any correlation between the two? That the graph can't tell us. The US economy has been growing throughout almost the entire period, so revenues increased also throughout almost the entire period - pretty much regardless of whether tax cuts were implemented, or not.

In defense of my argument, I'll only note that the growth appears to have been by far the fastest between 1993 and 2000 - following an increase in at least the top tax rate, in 1993. And that the only eye-catching hit it took was in the first Bush years - after big tax cuts.

(Of course I admit that there is never any 1:1 relation, as we're arguing only one out of X influences on the economy - there was the dot com boom, there was 9/11... But that holds true for any time period we look at).


(click for full size)

Here's the sources again: Top Federal Income Tax Rates on Regular Income and Capital Gains since 1916 and Historical Federal Receipt and Outlay Summary.

What we want to know here is: did cutting taxes (or, in this case, the top tax rate) boost the increase in tax revenues, beyond its regular growth, as you say? Or did it do the opposite - slow it down, like I say?

So on the next graph, I've plotted the level of the top income tax rate in comparison with the increase (or decrease) of the tax revenues.

Here it's plotted against the increase/decrease in absolute terms (+/- billion dollar):


(click for full size)

A bit distracting here is that, with the economy (and tax revenues) growing steadily throughout the entire five decades, the volume we are talking about became ever larger, and thus the ups and downs in the graph could become by definition larger too. Thats not quite fair - a decrease or increase of a hundred billion dollars when the total is 2,000 billion is not the same as when the total is 500 billion.

So in this final graph, the level of the top income tax rate is plotted against the increase/decrease of the tax revenues in percentage.


(click for full size)

Clear as mud, eh? Well, I can observe some things, but I'll let you go first ;-)

Ha!... clear as mud on a foggy day.

I'm digesting the info and studying for a final at the same time so I hope to respond with my thoughts tomorrow. I just want to make sure I have this straight first. In the last graph (top income tax rate plotted against the increase/decrease of the tax revenues in percentage), did you figure the increae/decrease percentage from the year before?

1940 = 6.5 billion; 1941= 8.7 billion for a 33.8% increase
1941 = 8.7 bilion; 1942 = 14.6 billion for a 67.8% increase

Perhaps one conclusion here could be that, at first sight anyway, there is no visible correlation either way :wink:


Yes, exactly - except to take inflation into account, I havent taken the first data column (Receipts in current dollars), but the fourth one (Receipts in constant (FY2000) dollars).

As an aside, I'm really liking Eorl's theory. I've noticed it when I read the paper. There will be some really depressing story, and I'll close the paper either because it's TOO depressing or because I just finished the depressing story. On the back of the paper (NYT), several times in the past week, has been a full-page ad featuring a picture of a couple of grinning, giddy teenagers, thrilled with their new... cellphone, I think. I get SO annoyed at those stupid clueless teenagers -- especially after I've just finished an especially heavy story. I noticed a correlation there. (Light story, see kids, neutral reaction; heavy story, see kids, get annoyed.)

It's kind of confronting ain't it, because one implication is that "who you are" isn't as static as you think. "Who you are" right now, depends as much on what you were thinking 5 minutes ago, as your entire nature/nurtue package.

Yep.

Ties right in with all kinds of other brain stuff I've read lately, I love it.

Well... I would certainly feel comfortable stating that it doesn't look to be the main driving force behind tax revenues.

Now onto the chart (percentage growth and top tax rate). One thing I noticed is that as tax rates decreased, the volatility of the chart seems to decrease as well. Not only in the amount of the rises and falls of the chart, but also in the slopes of the rises and falls. From 1983-2007 the range of percentages is around +/- 10%. This includes the very volatile time after 9/11. Prior to that, the ups and downs are much more drastic. So while some of the largest increases are during times of high tax rates, some of your largest decreases are during that same time.

If you still have the chart on your computer, it would be interesting to add economic growth in terms of percentage as well. If tax rates are not the fundamental force behind tax revenue, how does economic growth effect it and what effect does tax rates have on economic growth. I haven't found a good source for that data yet, but if you want to PM me the raw data of the chart you made, I can try to locate and add the data for economic growth.

Hey Eorl, have you read "Blink" by Malcolm Gladwell?

I'm about a third of the way through. EEEEnteresting. Lots of stuff that applies here but when I tried to quote some I realized that it refers back to other stuff and doesn't really make sense without it, and I'm currently too busy to paraphrase all the pertinent bits.

Really cool stuff though. Basically about how we have two brains each, and implications thereof.