The Pitchforks are Coming

[_Spanner]

I have little interest in American politics, but I thought this was interesting.
http://www.politico.com/magazine/story/ ... 6_QvPmSz9s

What he is advocating is similar to the "welfare state" model of many countries like my own (the term "welfare" is a misnomer which has resulted in a variety of misconceptions over the decades). A number of rightwing politicians are trying to polarise our country along US lines using "welfare" as a scare word; this makes me nervous. The welfare state was initially regarded suspiciously by the left, as state facilitation of capitalism masquerading as socialism, when it was first proposed; both the left and the right were wary. It is still not perfect. But, I cannot imagine a situation where, for example, my employment (or employer) dictates my medical treatment. To me that smacks of indentured servitude.

I posted this because a couple of posters on the board appear not to be able to differentiate between "welfare state" and socialism, and I thought of them reading this article.

[_MeDotOrg]

Excellent article. If I may paste one quote:

It’s when I realized this [high wages create middle class consumers] that I decided I had to leave my insulated world of the super-rich and get involved in politics. Not directly, by running for office or becoming one of the big-money billionaires who back candidates in an election. Instead, I wanted to try to change the conversation with ideas—by advancing what my co-author, Eric Liu, and I call “middle-out” economics. It’s the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines—and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.
Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.


Read more: http://www.politico.com/magazine/story/ ... z361z41fZQ

[_Bach]

So Nick wants his wealth to be equal to others? If not, what's your or his point?

[_EAllusion]

So Nick wants his wealth to be equal to others? If not, what's your or his point?

He wants higher entry level and mid-range salary ranges to grow consumer buying power, reduce inequality, prevent political destabilization, and increase quality of life for more people. He doesn't offer much in the way of policy remedy on this besides advocating a $15 min wage.

That might be high enough on the curve to hurt the employment rate. I'm not sure. Outside of people who lost their jobs or now can't get them, who it really damages is people who are making at or near $15 an hour now, as they just went from having a premium to being min wage workers. The inflation increase that comes with min wage increases is distributed throughout the entire economy, so the person who gets a massive wage increase from current min wage isn't that hurt by the minor inflation it causes. But if you made $15 an hour already, you get hit with the inflation without any increase in salary to compensate. You just took an effective pay cut.

Something like an EIC is a much more efficient means to reduce inequality through wealth redistribution that doesn't involve market distortion and screwing over a poorer segment of the worker base. That is distributed more reasonably through the progressive tax system. Unfortunately, that reads as pure welfare to people and is less likely to pass than min wage laws, which at the end of the day are convoluted redistribution schemes to the poor and underemployed.

[_EAllusion]

America does have a very serious and rapidly worsening income inequality problem going on. I don't disagree there and I think denying it or paying it no mind puts you in an ignorant category. You likely are a consumer of conservative media that is indirectly funded by the very groups the wealth is concentrating into with a vested interest in convincing you it is no big deal.

As a libertarian, I see the problems more in terms of government policy facilitating the flow of capital into the hands of a few. I don't see it so much as an issue of not enough wealth redistribution to the poor so much as too much wealth redistribution to the rich. In any case, it is a problem. We are a consumer economy.

[_Kevin Graham]

He wants higher entry level and mid-range salary ranges to grow consumer buying power, reduce inequality, prevent political destabilization, and increase quality of life for more people. He doesn't offer much in the way of policy remedy on this besides advocating a $15 min wage.

The problem is how most modern corporations are structured. With ownership (stockholders) divorced from management (Board of Directors), you're going to have this kind of problem because that small group of people running the company is responsible for wage increases, and so they mainly increase their own wages because those are the only wages they really care about. When hourly workers kick ass on production and produce record profits, in a just world, a self-conscious company, their wages would increase accordingly. Instead, they use those profits to boost CEO pay, as if the CEO is the primary reason why thousands of workers busted their asses to be more productive. With nothing regulating that, the result will always be immoral. This is why CEO pay has skyrocketed since Reagan while everyone else's has stagnated, despite increased productivity. It is refreshing to hear one of the super rich admit it. And he admits he isn't really a hard worker and never was. He was an opportunist who was born in the right place at the right time, and took full advantage of economic realities that were there and which had absolutely nothing to do with him.

As a libertarian, I see the problems more in terms of government policy facilitating the flow of capital into the hands of a few. I don't see it so much as an issue of not enough wealth redistribution to the poor so much as too much wealth redistribution to the rich. In any case, it is a problem. We are a consumer economy.

And you think this is more of a government problem? Please, do tell. How has government caused CEO salaries/bonuses to reach beyond the stratosphere? How is it the government's fault that CEO's and the BOD tend to hire within their own social circles, making the process more about who you know and less about what you know? Why is the government responsible for the fact that Hedge Fund managers make more in an hour than most people make in a year, despite doing absolutely nothing most of the time?

You also argued in the past that increasing the minimum wage would result in less employment, which this guys seems to have refuted quite easily. You're relying on economic theory and he's dealing in economic reality. His example cities Seattle and San Francisco provide the coffin nail on that point. If there is one thing I have against the Libertarian types, it is that they have no practical answer on economic issues, probably because their dictum of "let everyone do what they want so long as it doesn't infringe upon my rights," sounds too much like the long lost brother of the Right's absolute free market, trickle-down theory. Your comments blaming government is indicative of that.

[_ajax18]

Outside of people who lost their jobs or now can't get them, who it really damages is people who are making at or near $15 an hour now, as they just went from having a premium to being min wage workers.

Doesn't a first year teacher make $30k/year? If this $15/hr. minimum wage thing really takes off, I don't see how they're going to find people to put up with babysitting other peoples kids and taking crap from adminstrators to be on salary for what amounts a lot longer than a 40hr/wk. Oh and they'd like you to borrow $25-30k in schools loan and invest endless amounts of time getting all the necessary certifications to earn what minimum wage could earn them right now.

[_MeDotOrg]

So Nick wants his wealth to be equal to others? If not, what's your or his point?

I don't think he was saying all incomes should be equal. I think he's saying that a strong middle class is what lubricates a consumer economy.



As long as the middle class is falling behind, their spending, which drives the economy, is also going to lag, no matter how many tax breaks you give to the wealthy.

The idea that we should genuflect to the 'job creators', and grant them huge tax breaks doesn't translate into more spending power for the middle class.

I personally believe that a strong middle class tends to be a good moderator of political extremism. Look at Germany in the 20's: Hyperinflation destroyed the middle class, and people either gravitated towards communism or fascism.

If you want a society where people think capitalism is NOT the answer, destroy the middle class.

[_ajax18]

This entire argument assumes that minimum wage laws are enforced. People are already voting against capitalism. The Democrats have been in power basically since 2006. Inequality has continued to increase under their rule, not decrease. What I see in the future is a burgeoning black market economy where people realize that the only way to upward mobility is by breaking the law.

[_EAllusion]

You also argued in the past that increasing the minimum wage would result in less employment, which this guys seems to have refuted quite easily.

Min wage, if high enough, will inevitably cause less employment. If the min wage is raised to $100 an hour, the economy would collapse. What studies have found is that modest increases in the min wage don't necessarily increase unemployment (or, put in a more sophisticated way, create a net drag on the employment rate). But $15 an hour isn't a modest increase those studies look at. I've pointed this out several times in the past, and you still don't seem to grasp the point. It'll be interesting to see how Seattle is affected. As I said, it may very well be high enough on the curve to cause unemployment depending on local conditions. That such a min wage hurts people with salaries already in the range is not controversial at all. Like I said, if you distributed the equivalent injection of capital into the hands of low-income earners via an EIC, you would have the same wealth redistribution effects, only it would be spread across the progressive tax system rather than disproportionately on the backs of relatively low-income earners. But that isn't as politically viable and economic ignorance is the rule of the day for people who think the solution to poverty is simply to raise wages by legal fiat.

Regarding the government, there are many ways it has affected income inequality in favor of the wealthy. In other threads, when the argument suited you, you complained about those. Established businesses receiving significant government advantages in tax policy, subsidization, and land use ultimately benefits the wealthy for example.

A change in tax policy for high level executive pay under the Clinton administration, ironically meant to curb it, is widely understood to be a major contributor to the massive rise in salaries in for CEO's complained about in this article.

http://www.businessweek.com/stories/200 ... st-ceo-pay

Even worse, since it incentivized compensating company head's with stock options, it created a motive to cash out high salaries by short term increases in stock price that might be deleterious long term, which is a now well understood problem after the fact.