The Myth of Income Inequality

[_Analytics]

Understood. But, just to point it out, in the libertarian arguments for smaller government, a "small" government is a necessary, but not s sufficient condition for an economy to grow. ;) Even the "anarchists" of the Austrian School would not argue that any anarchy would work. A lot of education, "enlightenment", and in my view, indoctrination would be needed. Further, what constitutes a "small" government is an open question. Equity and foreign exchange markets are offered of examples of near market efficiency, but these markets can't exist in a vacuum without any regulation.

I love talking about theory as much as anybody. However, I judge truth by emperical evidence--not by how convincing a theory might sound. Just as you've never seen the labor market offer an example of market efficiency, has the world ever offered an example of a country with a "small" government that meets the necessary and sufficient conditions (whatever they may be) that thrived in the long term?

[_Gadianton]

has the world ever offered an example of a country with a "small" government that meets the necessary and sufficient conditions (whatever they may be) that thrived in the long term?

Since you offered Haiti as an example of a small government, let's start there. According to our conservative think-tank friends at the Heritage Foundation, Haiti has the 142nd most free economy in the world. Since the main barrier to economic freedom is government, we may have different ideas as to what counts as a "small government."

http://www.heritage.org/index/ranking

You offered this suggestion for Haitian reform:

But if we added to the list a robust public education system and a police force that was paid enough to do its job without relying on crooked cops, it would be a step in the right direction.

If government size is determined by the strength of the legal system and police force, sure, Haiti has a small government. But for starters, the rule of law is only one aspect of government. Haiti historically has had a large government work force. Taxes are moderately high, trade tariffs are high, and trade barriers abound. According to Heritage, "The budget deficit has been chronic." Haiti has no stock market and it barely has banks, which in recent years, offered a unsustainable, government imposed 10% interest rate. Wiki quoting a World Bank report on Hatian regulation says:

"In Haiti, the process of business regulations is complex and customs procedures are lengthy."[7] On average, opening a business took 204 days. For comparison, the average was 73.3 days in Latin America and 16.3 days in OECD countries.[7] It took an estimated 5 years and 65 bureaucratic procedures for a private person to buy land from the state.[7] It took 683 days to register a property.

I think it's more accurate to say Haiti has a crumbling government rather than a small government, and it goes without saying that a society on the brink of collapse will have a weak government. If a weak government can be considered a small government, it's not the kind of smallness conservatives and libertarians are interested in.

According to Heritage, the prime example of economic Freedom is Hong Kong. Hong Kong's growth has been exponential. It has super low taxes, it is top rated for "ease of doing business", trade has no barriers, it has an epic stock market, and it's outstanding in regards to rule of law and fiduciary oversight. Per Wiki:

Hong Kong's gross domestic product, between 1961 and 1997, has grown 180 times while per capita GDP rose by 87 times.[23] Its economy size is slightly bigger than Israel and Ireland[24][25][26] and its GDP per capita at purchasing power parity is the 6th highest globally in 2011, more than United States and Netherlands and slightly lower than the Brunei.

Unemployment is 3.4%, and interestingly enough, Hong Kong has no central bank, so it has somehow managed to acheive these numbers without even the possibility of putting Keynesian montetary rocket fuel in the tank.

Hong Kong has numerous high international rankings in various aspects. For instance, its economic freedom, financial and economic competitiveness, quality of life, corruption perception, Human Development Index, etc., are all ranked highly.[33][34][35][36][37][38][39] According to both UN and WHO estimates, Hong Kong has the longest life expectancy of any country in the world from 2012.[40]

Hong Kong is the country that comes to my mind when (normal) conservatives speak "small" government, not a Haiti. While it does have public health care and welfare programs, it finances these without running a deficit to do so. Of course, there are economic problems in Hong Kong, for instance, inequality is increasing and class mobility is weak.

Granted, Libertarians are interested in freedom beyond economic freedom, and Hong Kong's skyline is straight of out Blade Runner. An Onion article I read years ago described a corporate totalitarian future where among other things, credit card fraud is punished more severely than murder. It's arguable that in terms of law and policing, capitalist success stories still cary an imposing and undesirable government element that many libertarians would see at odds with personal freedom. So if what you're thinking of is a Hong Kong or a Signapore, but with a tiny legal footprint, I don't think such a place exists. Such a place might be the dream of some libertarians, but I think most mainstream conservatives would be happy to cite Hong Kong's government as small enough to be considered small.

[_MeDotOrg]

http://www.aei-ideas.org/2011/10/5-reasons-why-income-inequality-is-a-myth-and-occupy-wall-street-is-wrong/

3. A 2008 paper by Christian Broda and John Romalis from the University of Chicago documents how traditional measures of inequality ignore how inflation affects the rich and poor differently: “Inflation of the richest 10 percent of American households has been 6 percentage points higher than that of the poorest 10 percent over the period 1994–2005. This means that real inequality in America, if you measure it correctly, has been roughly unchanged.” And why is that? China and Wal-Mart. Lower-income families spend a larger share of income than wealthier families on goods whose prices are more directly affected by trade. Higher income folks, by contrast, spend more on services which are less subject to foreign competition.

4. A 2010 study by the University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan notes that official income inequality statistics indicate a sharp rise in inequality over the past four decades: “The ratio of the 90th to the 10th percentile of income, for example, grew by 23 percent between 1970 and 2008.” But Meyer and Sullivan point out that income statistics miss a lot, such as the value of government programs and the impact of taxes. The latter, especially, is a biggie. The researchers find that “accounting for taxes considerably reduces the rise in income inequality” over the past 45 years. In addition, “consumption inequality is less pronounced than income inequality.”

5. Set all the numbers aside for a moment. If you’ve lived through the past four decades, does it really seem like America is no better off today? It doesn’t to Jason Furman, the deputy director of Obama’s National Economic Council. Here is Furman back in 2006: “Remember when even upper-middle class families worried about staying on a long distance call for too long? When flying was an expensive luxury? When only a minority of the population had central air conditioning, dishwashers, and color televisions? When no one had DVD players, iPods, or digital cameras? And when most Americans owned a car that broke down frequently, guzzled fuel, spewed foul smelling pollution, and didn’t have any of the now virtually standard items like air conditioning or tape/CD players?”

This is actually funny if you sit down and think about it for a while. What the author is saying is that the cost of being rich is going up and the cost of being poor is going down. What is this based on?

"Remember when no one had DVD players, iPods or digital cameras?" Yes, the cost of manufacturing electronics has decreased. That's Moore's law, not economic statistics. Has the increase in car mileage kept up with the cost of gasoline, maintenance and insurance? How many poor people have dishwashers? Where in this is there a discussion of the two biggest expenditures for the poor: housing and health care?

This article, like a magician's trick, an exercise in misdirection.

[_Analytics]

Hong Kong is the country that comes to my mind when (normal) conservatives speak "small" government, not a Haiti. While it does have public health care and welfare programs, it finances these without running a deficit....

Do you think U.S. Conservatives are being internally consistent when their idea of a free, small government is Hong Kong? After all, Hong Kong has universal healthcare, doesn't have the death penalty, and has strong gun control laws. Given that Conservatives think that America is the USSR now that we have universal health care (of sorts), what would we be like if we took away everybody's guns and balanced the budget by cutting military spending?

A huge difference between liberals and conservatives in the U.S. is that conservatives think that Reagan was speaking literal, universal truth when he said "the government is the problem," and talks about how taxes are a form of theft, government can't create wealth, etc. For conservatives, the government is at best a necessary evil. In contrast, liberals think the government can be a source of good—liberals look for solutions that work.

[_cinepro]

For conservatives, the government is at best a necessary evil. In contrast, liberals think the government can be a source of good—liberals look for solutions that work.

I guess the most important question would be what the limitations are on the government's ability to be that "source of good"? Are there any?

It isn't a matter of government being "good" or "evil". It's just acknowledging the practical reality and limitations inherent in the system, as defined by the Constitution and math. And realizing that anything the government does comes from first taking the money forcibly from its citizens, printing it, or borrowing it.

If you want to know whether or not someone is a liberal or conservative, have them watch the animated movie "Puss in Boots". There is a plot point where a character starts giving everyone in a small town golden eggs. I asked my son and daughter what they thought about that. My daughter thought it was great that there wouldn't be any more poor people. My son commented that everything in the town was about to get really, really expensive.

Guess which one I predict will be conservative, and which will be liberal?

[_Gadianton]

Do you think U.S. Conservatives are being internally consistent when their idea of a free, small government is Hong Kong? After all, Hong Kong has universal healthcare, doesn't have the death penalty, and has strong gun control laws. Given that Conservatives think that America is the USSR now that we have universal health care (of sorts), what would we be like if we took away everybody's guns and balanced the budget by cutting military spending?

Which conservatives? Hillbillies who shoot each other on weekends with paintballs and complain about government? The Heritage Foundation? Libertarians who don't like being called conservatives? The Heritage Foundation had to put someone first on the list. The existence of relatively effective public healthcare alongside private healthcare in a low tax, debt free economy must not have, at worst, offset its other virtues. That's a guess. I'm not intimately familiar with their platform, however.

As for military spending, I think many conservatives would be happy not to have Bush's war debt. That's a guess again, as I don't really follow politics.

A huge difference between liberals and conservatives in the U.S. is that conservatives think that Reagan was speaking literal, universal truth when he said "the government is the problem," and talks about how taxes are a form of theft, government can't create wealth, etc. For conservatives, the government is at best a necessary evil. In contrast, liberals think the government can be a source of good—liberals look for solutions that work.

And part of solving the problem is castigating conservatives as uninterested in solving problems, and forcing them to adobt Haiti as their poster child? ;) If the Heritage Foundation believes Hong Kong is their poster child, and Hong Kong has universal healthcare, rather than questioning their consitency, why not go with it? I can't think of a better starting point for a liberal to reason with conservatives on healthcare. Per the Heritage Foundation think tank, in partnership with the Wall Street Journal: Hong Kong, Singapore, Australia, and Canada all have unversal healthcare and all rank higher than the US in terms of economic freedom, they are, in fact, at the very top of the list.

As for solutions, part of the free-market doctrine is that intelligent, well-meaning people can't beat the market. The implication of much policy is that the market can be out-smarted. To the extent that conservatives exaggerate and misunderstand the questioning of policy in market economics, sure, I agree it's a problem. And my informal barometer tells me that presently, conservative morons outnumber liberal morons.

I don't like politics at all, and one of the reasons is that virtually everyone is so "partison" about issues. Given the complexity of world problems, the probability that conservatives have the best answers and liberals are always wrong, or vice versa, is next to zero. It's apologetics on a global scale.

[_Analytics]

Which conservatives? Hillbillies who shoot each other on weekends with paintballs and complain about government?

Yes, that’s is the precise group I'm talking about. Describing that group in more detail, I mean the mainstream Republican Party and its propaganda machine which includes Rush Limbaugh, Sean Hannity, Grover Norquist, Fox News, the editorial board of the Wall Street Journal, and yes, the Heritage Foundation.

The Heritage Foundation had to put someone first on the list. The existence of relatively effective public healthcare alongside private healthcare in a low tax, debt free economy must not have, at worst, offset its other virtues. That's a guess. I'm not intimately familiar with their platform, however.

As for military spending, I think many conservatives would be happy not to have Bush's war debt. That's a guess again, as I don't really follow politics.

This is the point where it’s pretty-much impossible to have a sincere, intelligent, public conversation with a Republican (i.e. a “conservative” as defined above). Grover Norquist famously stated his intentions by saying, “I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” To further this aim, he came up a "taxpayer’s protection pledge" which states, “oppose any and all efforts to increase the marginal income tax rate for individuals and business; and to oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” He succeeded in pressuring 95% of republicans in congress to sign the pledge.

So that is where the Republicans are coming from—they look for opportunities to ratchet down tax rates, in order to force the government to get smaller. However, they insist that we continually increase the size of the military—spending a trillion dollars a year on things related to the military isn’t enough—they need more and more and more. So given how Republicans fight for high spending and low taxes, I have no sympathy for them when they talk about their desire for low debt.

A huge difference between liberals and conservatives in the U.S. is that conservatives think that Reagan was speaking literal, universal truth when he said "the government is the problem," and talks about how taxes are a form of theft, government can't create wealth, etc. For conservatives, the government is at best a necessary evil. In contrast, liberals think the government can be a source of good—liberals look for solutions that work.

And part of solving the problem is castigating conservatives as uninterested in solving problems, and forcing them to adobt Haiti as their poster child? ;) If the Heritage Foundation believes Hong Kong is their poster child, and Hong Kong has universal healthcare, rather than questioning their consitency, why not go with it? I can't think of a better starting point for a liberal to reason with conservatives on healthcare….

Yes. For the last four years, the conservatives in power didn’t want actual problems to be solved—their main goal was to make President Obama a one-term president. Having a constructive dialogue with him and negotiating in good faith on actually fixing things would hinder their goal of making Obama fail.

If their goal was to maximize economic freedom as measured by the Heritage Foundation’s index, they shouldn’t have signed Norquist’s pledge.

Per the Heritage Foundation think tank, in partnership with the Wall Street Journal: Hong Kong, Singapore, Australia, and Canada all have unversal healthcare and all rank higher than the US in terms of economic freedom, they are, in fact, at the very top of the list.

It should be noted that the United States does make the top-ten list of economically free countries. When comparing it with Hong Kong, the United States is hammered because of high government spending, crony capitalism, and high debt. If the Heritage Foundation were being honest in their analysis of this, they would give a lot of the blame to Republicans for their insistence on obscenely high military spending, which includes hundreds of billions in crony capitalism of the first order to military contractors, and their pledge not to allow tax rates to rise in order to fund all of it.

As for solutions, part of the free-market doctrine is that intelligent, well-meaning people can't beat the market. The implication of much policy is that the market can be out-smarted. To the extent that conservatives exaggerate and misunderstand the questioning of policy in market economics, sure, I agree it's a problem. And my informal barometer tells me that presently, conservative morons outnumber liberal morons.

Agreed.

I don't like politics at all, and one of the reasons is that virtually everyone is so "partison" about issues. Given the complexity of world problems, the probability that conservatives have the best answers and liberals are always wrong, or vice versa, is next to zero. It's apologetics on a global scale.

Absolutely. Although I seem like a liberal on this forum, the only candidates for whom I donated money and actually voted for were Republicans and Libertarians (Huntsman and Gary Johnson). That was because they were the least partisan about things and seemed interested in actually dealing with reality.

[_Gadianton]

Yes, that’s is the precise group I'm talking about. Describing that group in more detail, I mean the mainstream Republican Part...

Lol! You're killing me dude. OK, point taken. I did follow up on some of your comments and searched for Heritage Foundation comments made at the turn of the century as Bush's spending spree unfolded. I found some serious criticism, but the same author was far harder on Obama in later years, and in retrospect, used JS-style of apologetics to defend Bush's spending.

Grover Norquist famously stated his intentions by saying, “I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

Thanks for the context, I don't really follow the news, so this helps. Other comments edited out for now.

So that is where the Republicans are coming from—they look for opportunities to ratchet down tax rates, in order to force the government to get smaller. However, they insist that we continually increase the size of the military—spending a trillion dollars a year on things related to the military isn’t enough—they need more and more and more. So given how Republicans fight for high spending and low taxes, I have no sympathy for them when they talk about their desire for low debt.

If their goal was to maximize economic freedom as measured by the Heritage Foundation’s index, they shouldn’t have signed Norquist’s pledge.

Back to this: Actually, I had to edit this after reading what you wrote again. Your Norquist context is more general that I had read it the first time. Sure, It's more than a little hypocritical that they signed this. So yeah, back when Bush went on a spending spree, I found critical comments from Heritage, before the precedent was set. Obama gets no mercy whatsoever, of course, and in retrospect, Bush is vindicated Joseph Smith style, by comparison. Further, after the fact, Obama spending less on military is a security risk, and they imply the link to preserving rule of law and property rights so they can discount the level of government-ness when Bush did the spending. Though, most of this is reflected in blogs, not the actual information on the rankings. There was not concern just post 911 from what I can tell that Bush's mega-military budget was necessary to maintain freedom per rule of law, rather the greater fear was putting freedom in jeapordy by dangerous levels of fiscal policy, and it looks like the US fell in its "freedom" ranking post Clinton probably for that reason, but I can't find the details on that.