
Capitalists, Arise: We Need to Deal With Income Inequality - kareemm
http://www.nytimes.com/2015/08/09/opinion/sunday/capitalists-arise-we-need-to-deal-with-income-inequality.html?smid=fb-share&_r=1&assetType=opinion
======
MrTonyD
Am I supposed to take the article seriously? A rich guy suggesting that the
first thing to do to solve the 1% having 50% of our wealth is "Government can
provide tax incentives to business". It made me think of the quote from John
Kenneth Galbraith."It is a strange idea that the rich work better if they
constantly get richer, while the poor just work better if they get poorer".

We need to stop incentivizing the rich - they have been incentivized for too
long already.

~~~
gremlinsinc
Amen brother- -the only way to solve this is a Guaranteed Basic Income across
the board... With maybe a 50-60% tax on the rich, we don't need to go all the
way up to 80%. They'll get it back probably in loopholes, and business breaks
anyways.

~~~
TheHydroImpulse
As a libertarian, basic income seemed quite against everything initially.
However, if basic income were to completely replace the current entitlement
system and all it's defects, I would absolutely support it.

It would cost considerably less and thus higher taxation would be less of a
concern (as a way to stifle more money from the rich to the poor).

~~~
ScottBurson
I like the basic income idea, but from what I've read it would cost
considerably more than our current entitlement system, if it provided anything
like the same level of benefits. The big reason, as I understand, is the
number of young, low-income men who currently receive no support at all, but
would under a basic income system. (Many low-income young women, by contrast,
are already eligible for support, as they have children.)

Do you still like the idea if it's more expensive rather than less?

~~~
TheHydroImpulse
As with anything, details matter. There are no single definition of what basic
income would entail. For example, would it truly be unconditional, regardless
of income? I doubt those who make $200,000/year want a basic income cheque.

I think the difference would be in the efficiency and simplicity of such a
system. Currently, the U.S. spends over a trillion dollars on state and
federal welfare programs (spread across 126+ programs). However, the
government spends it quite poorly and in many indirect ways. Giving them a
cheque would certainly be better.

You're right in that it could actually be more expensive. I'm not sure what my
stand on the subject would be in that case. Even with my libertarian beliefs,
(and there are good arguments that basic income is perfectly compatible with
libertarianism) I have to keep in mind of the realities related to the surging
amount of poverty and that it's unsustainable.

------
ctdonath
Stop taxing away so much income. Resolve the entitlements cliff that makes
earning more than $12/hr untenable until breaking even at $38/hr. Back off the
regulations that make inexpensive living practically illegal. Help people
relocate out of high cost of living areas (NY Times location take note). Slash
the red tape making business startups near impossible. Squelch the tort,
liability, insurance and other laws making risk costs overwhelming.

You can't fix social problems by demanding capitalism be socialism.

~~~
mc32
One of the things he suggests --raising minimum wages and medium wages as
well, I think would go a great way to curb the disparity... (the extreme
example is the Seattle company having a $70k/yr minimum salary... but I'm also
afraid this would make quite a few low-skilled people permanently unemployable
as it becomes cheaper to invest in automation.

Young adults can be retrained, but there are lots of people in their 30s 40s
etc. who don't have a secondary education some of which never finished
elementary school in their native languages (thus illiterate). What happens to
them? Do we let them find themselves back as they can't find a job and
contribute to a high-skills economy?

~~~
ctdonath
That company with the $70k min salary is hurling toward bankruptcy. Top
performing employees quit because they got nothing while low performers got
fat raises. More than quit had to be hired to replace them. Customers left
anticipating increased prices. Stockholders sued CEO for incompetence.

Look up "Gravity Investments" in recent news.

~~~
jonknee
> Stockholders sued CEO for incompetence

To be fair it was the CEOs brother who sued and was part of a long time feud
and not about the new minimum wage.

------
cottonseed
"I’m scared. ... the income gap will most likely be resolved in one of two
ways: by major social unrest or through oppressive taxes, such as the 80
percent tax rate on income over $500,000"

I stopped reading here. Try again. Current top income tax rates are insanely
slow by historical standards. They were 90% in the 40s and 50s and 70% in the
70s [0]

[0]
[http://taxfoundation.org/sites/default/files/docs/fed_indivi...](http://taxfoundation.org/sites/default/files/docs/fed_individual_rate_history_nominal.pdf)

~~~
wmeredith
I had s similar reaction to this example of an "oppressive tax". This is just
the sort of taxes that were in place when America was taking over the world.
It's not oppressive. It's a good idea. It hurts the oligarchs, it helps the 99
percent, which is who drives the economy.

~~~
liquidise
I have never understood the notion that taxes at or above 50% are at all
ethical, and yet some argue openly for 80%+.

The idea that the government is entitled to more of someone's earnings than
they are is shocking. To then suggest the government is entitled to 4 out of
every 5 dollars a person earns is, quite frankly, beneath consideration in my
eyes.

What right do you, i or anyone else have to call this anything but theft?

~~~
1971genocide
Do you know what is theft ?

When kids born today are unable to afford to go to college, while the same
people who are against +80% tax were born in an era when tax was way higher at
+90% that helped pay for their education and create the infrastructure that
allowed them to earn their wealth.

"Surplus Wealth is a scared trust which its possessor is bound to administer
in his lifetime for the good of the community " \- Andrew Caregie.

Guess what if you think the government is treating you unfairly then be
prepared when society bifurcates and returns a stack error in the form of
"bolsheviks".

~~~
yummyfajitas
More kids than ever before can afford to go to college.

[http://www.bls.gov/opub/ted/images/2010/ted_20100428.png](http://www.bls.gov/opub/ted/images/2010/ted_20100428.png)

~~~
rosser
Having little choice but to sign yourself up for a mortgage-sized debt that
can't be discharged isn't the most obvious definition of "affordable" I've
ever encountered.

~~~
thetopher
Little choice? There is a wide spectrum of choices for higher-education in the
US.

While I think the idea that everybody should go to college is fundamentally
harmful, I do think that everybody who wants to should be able to go to
college. On the other hand, taking out $200,000 in loans to study comparative
literature at an ivy league school, and then demanding that the universe
provides means to pay it all back is ridiculous. People should buy into their
education with a long-term plan. Most people cannot afford the luxury of
majoring in an unprofitable subject while incurring enormous debt.

------
tempestn
I was recently having a conversation with some friends about what major
technological changes we might see in the future. The idea was that when these
changes happen, they tend to alter society in ways that couldn't easily have
been predicted beforehand. It would have been hard to imagine the ubiquity of
the internet or smartphones in our lives before they existed. So what could
the next major change be? Self-driving cars on the scale where manual driving
is illegal on city streets perhaps? That actually isn't too hard to envision.
Something else?

One thought that came out of that is that a major change I would love to see,
although not a technological one, is for a major economy to implement a
workable guaranteed basic income. It's been a popular subject on HN, and does
seem to be starting to gain traction in the 'real world'. While obviously
there are issues to solve, it's something I see as really having a chance of
working. _Something_ will have to happen to address the growing inequality as
technology keeps moving us closer to a post-scarcity society, and a basic
income seems to fit the bill.

Or perhaps it will be something else. But some kind of a transition to a post-
scarcity society seems inevitable at _some_ point if the human race survives
long enough, so maybe significant strides in that direction will be made in
our lifetimes. It would certainly be exciting.

~~~
1971genocide
I do not think basic income is a solution.

I know programmers are thrilled at the magic of modern AI but its very simple
to tip it over even theoretically.

Self Driving cars are not even that good, they are better than the average and
that is an immense amount of creative labour destruction. But if you look back
at history there has been a greater amount of labour destruction both physical
and mental.

Coming back to basic income.

Do you think the way we use resources in the modern world is anyway efficient
? Speaking from Physics we are still way off from having solved major problems
in society.

Right now 1/2 of adults in the UK are on entitlement which puts immense debt
burden on the other half.

Both US and Europe are heading in that direction.

Both US and Europe need a massive restructuring of their infrastructure if
climate change is to be dealt with.

Not to mention helping african countries get on their feet.

Right now that burden is shared mostly be china who are helping build roads
and other developed nations within africa like nigeria.

The faster we can get contraceptives to africa we can stop the problem of the
african baby boom due to industrialization right at its toes. We know from
data that the country of Nigeria alone will have 750 Million people by 2100.

These are real problems facing the globalized economy.

There also the problem of deflation.

Economically once the poor global south industrialize there will be immense
downward pressure of wages for all forms of jobs.

We know what happened when 700 million chinese joined the global economy. What
happens when the rest of the 3 billion join ? Most of them of younger age and
would constitute higher labour productivity.

China as a country is already much more efficient - they have high speed rail
links connecting their entire nation. No need to buy fossil fuels when all
their transportation is powered via electric. which is generated by solar
panels in the gobi desert.

They have one of the most sophisticated supply chain producing all our iphones
and computers.

Now they are interested in doing the same in central asia which geographically
is the most mineral rich regions on earth.

Yes all of this doesn't matter if you are in Europe where the population is
low enough and the resources is high. But the cost of production will get
lower and labour gets cheaper along with resources. We will end up with a
situation where something in Europe costs significantly higher than produced
in africa.

~~~
TheHydroImpulse
Basic income could absolutely create a better minimum for the poor (and
everyone, really) if it replaces the current entitlement disaster. It would
most likely be cheaper (edit: it might not be, depends on the details) and
become much more efficient considering you're sending a cheque that would
ideally have no conditions associated with it.

When large quantities of manual labor jobs or easily automated jobs are
replaced, basic income, I think, would push that class of folks to a livable
standard. Not much, but just enough. You'll have more people transitioning off
the streets and into normal lives.

(Even as a libertarian, I say this, which at first, might be at odds with the
philosophy but there are good arguments that make it perfectly compatible.)

~~~
tempestn
Yes, exactly. A basic income would both make sense for the ideal future we're
trying to create (but which the parent correctly states is a long way off) and
also for many of the issues of the present.

I'm personally pretty skeptical that it would indeed cost less than what we
have. (I'm in Canada, but basically the same arguments apply.) I expect there
would have to be a significant tax hike, which could be structured so that it
cancels out the basic income somewhere in the middle class range, leaving the
poor better off and the wealthy nominally paying more.

 _However_ , it could also achieve so much more than the current minimally
effective (if that) safety nets. People would not be forced to take a job just
to survive. They could instead pursue work that they enjoy, and most likely
end up making a greater contribution to society. This would apply for the
middle class as well. Rather than being so focused on compensation, people
would have more freedom to pursue the job that gives them maximum
satisfaction, again benefiting all of society. Sure, some few would just milk
the system, but it's ingrained in human nature both to produce something of
value and to try to better one's state in life, so I expect that would be the
minority.

Even though I wouldn't directly benefit financially from a system like that, I
would love to see it seriously explored.

~~~
TheHydroImpulse
Absolutely! (I also live in Canada)

It might be more expensive than the status-quo. It depends on the details of
such a system.

To add to your point about people working not to survive but to thrive: re-
education, or education would be a more realistic possibility. Currently,
going back to school at 30 or 40 years old when you've held low wage jobs is
really hard.

A family member of mine, after a divorce that ended her up with nothing, was
able to raise her 6 kids, upgrade her high school and get a university degree,
all without a job. This is simply not possible with the safety nets currently
available (welfare helped but definitely wasn't enough). This was only
possible because of her family taking a second mortgage to buy a house that
she "rented" and a line of credit for food and necessities.

The amount of people that will have to be re-educated to find a job will only
increase. This would only be a positive for the workforce.

~~~
1971genocide
I agree that the status-quo is terrible. Here in the UK the welfare state has
gone out of control.

No one is arguing for people to be homeless and its not the fault of the
working class.

It lies squarely on the fault of the govt.

I notice houses falling apart at the same time 23 year old are on welfare.

I am sympathic towards disabled people but a lot of disabled people could help
run shops and participate in white collar work.

Heck - There is a massive demand for teaching english to Africans and Chinese.

My point is there is no shortage of work.

Right now not only are a huge percentage of adults on welfare due to
demographics reasons - average age is higher.

But adults with perfectly good education are also on welfare. How is that
possible ?

It shows a massive loss of potential in society.

And its going to get worse as more people enter old age and are unable to work
for any job.

I think a lot of people in the west are completely oblivious to the fact that
so much labour is needed to produce their clothes, iphones, fossil fuels,
coffee, . .

Just because you cannot see it doesn't mean some person in rural china is not
picking tea for you.

And because of deflation ppl complain that its "too expensive to hire in
canada/england/US"

The fact is the world price point has shifted and money supply hasn't been
keeping up.

Almost everything is cheaper due to the force of the globalization economy.
Not politically but economically.

This should have resulted an aggressive move towards a more unified form of
global governance, but there wasn't enough political will. Imagine when a
english major graduates in the States they get to travel to africa to teach
thousand of kids english.

Or labour moving to Europe to transform the infrastructure and install solar
panels.

Or a concession amoung europeans and africans to solarize the sahara and
provide clean energy for europe and africa.

The only country that is able to do this ( limited form ) is china in 2015.
But I hope more countries can work to solve the big problems of humanity.

------
DickingAround
This all just beats around the bush. What's killing incomes for some and
raising others is automation. One day soon, the only asset people are born
with (minds and bodies) will be essentially zero value. Until now, everyone
has at least that asset and now they won't.

That might imply we need guaranteed income. And maybe we do. But if that's
coming from the government, remember who we're talking about; they lie to
start wars, they're replete with corruption. If we ask the government to
redistribute out wealthy, they'll redistribute it to their friends. The power
to take everyone's money is too tempting for anyone to have.

~~~
mc32
I think you're right. If not right now, some time in the future. I think at
this time outsourcing and off-shoring are dampening wage growth --but in the
future it will be automation which puts the kibosh on it. For sure higher
minimum wages will accelerate the obsolescence of low-skill low productivity
jobs.

The one question about guaranteed income is who is qualified for it? Anyone
and everyone? What do rich countries with high automation do about illegal
immigrants, send them back? If minimum income is offered to everyone, why
wouldn't everyone for whom the guarantee is above their own incomes want to
come and undermine everyone else's income?

------
yummyfajitas
This article is incoherent. Title discusses income inequality, then 13
paragraphs discussing issues which are completely orthogonal to inequality
(mobility, "poverty" and overconsumption). The article never actually
addresses inequality at all.

Then it starts comparing unrelated statistics (productivity and wages) and
cribbing about how they diverge, and ignoring the real cause (the rise of non-
wage benefits) for the divergence.

Finally, it devolves into random peripheral solutions like reducing share
buybacks. Because somehow it'll be good for America if Qualcomm can't return
money to shareholders to invest in Tesla? I guess it's better for CEO's to
spend profits on empire building than for investors to seek returns?

Why is this nonsense here?

~~~
guelo
Productivity and wages are most definitely related. Increased productivity is
surplus value created per worker. In a strong labor market workers are able to
demand some of the generated productivity surplus as wages. When workers have
no power all the gains go to the owners which is what causes inequality to
rise.

~~~
yummyfajitas
In a strong labor market workers are able to demand some of the generated
productivity surplus as _compensation_. Wages have been somewhat flat because
employers are paying workers in (untaxed) health and retirement benefits
instead of (taxed) wages.

Secondly, there is no particular reason wages should track productivity.
Productivity is output / workers. If output increases due to capital (e.g.
automation), there is no reason for wages to go up.

------
Mz
_We business leaders know what to do. But do we have the will to do it? Are we
willing to control the excessive greed so prevalent in our culture today and
divert resources to better education and the creation of more opportunity?_

I think we need to wrestle with the fact that the world has changed and
education and credentialing are different things. Education and information
can be made available to large numbers of people for very little money via the
Internet. It doesn't get you a status-y sheepskin, but that doesn't always
matter.

This new reality requires a new approach to sharing the wealth. I don't know
what exactly that will look like, but I am confident that we need to hammer
that out.

 _The fact that real wages have been flat for about four decades, while
productivity has increased by 80 percent, shows that has not been happening.
Before the early 1970s, wages and productivity were both rising. Now most
gains from productivity go to shareholders, not employees._

This is a serious problem and needs to be clearly addressed.

 _There is a way to start. Government can provide tax incentives to business
to pay more to employees making $80,000 or less. The program would exist for
three to five years and then be evaluated for effectiveness._

I have my doubts that this is the way to address it.

Generally speaking, poverty solutions that start by trying to help 'poor'
people are dead ends that do not work. A more oblique approach, that defines
the problem in other terms, is usually more effective.

------
doubt_me
Reminds me of this Ted Talk from 2014

Nick Hanauer: Beware, fellow plutocrats, the pitchforks are coming

www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming

------
thetopher
Excuse my ignorance, but I have an honest question. I assume that income
inequality can be approximated by measuring the difference between the income
of a certain group of high-earners and a certain group of low-earners. If the
income of the low-earners is increased by mandate then wouldn't the entire
system, over time, adjust upward? Wouldn't the difference between the two
groups (income inequality) remain the same?

------
adventured
Ok, let's deal with the root cause of why income inequality soared from
1995-2015:

The Federal Reserve debased the dollar, paying for wars, terrible government
spending choices and entitlements that are ballooning. They also spurred
numerous asset bubbles through bad policy choices. It's entirely understood
that the Fed can cause asset bubbles by holding interest rates too low for too
long. They've been aggressively using that understanding for the last six
years.

The rich can deal with the dollar losing half of its value in a decade. Nobody
else can. The rich have capital, and make a lot of money on the Fed's
intentional asset bubbles in real estate and stocks. The S&P 500 - and the
wealthy who own most of it - benefits massively from a debased dollar, as
their exports boom - while most of America suffers from a vast loss of
purchasing power.

The end of the strong dollar of the 1990s, is what began the era of
dramatically increased inequality. It's not a coincidence. The currency race
to the bottom, is really code for a decimation of the median standard of
living. This is especially true in a country that consumes so much of its own
manufacturing.

Debasing the dollar and sending commodities soaring benefited a very small
group of people (Saudi Arabia, Canada, Australia, Norway, commodity
investors). Who it didn't benefit: US manufacturing that is consumed
domestically. The oil price boom of the mid 2000's, caused by the weak dollar,
also harmed the US dramatically as deficits soared and the Middle East got
uber rich. It acted as a huge wealth transfer to Canada as well.

The soaring inequality was caused by the Fed's horrendous, and repetitive
monetary policy mistakes. You'll find people on the left go out of their way
to evade ever pinning any blame to the Fed (it makes the welfare state
possible through deficits and debt, so they love the Fed), and the people on
the right don't want to talk about inequality at all.

What did QE accomplish? Primarily it reinflated wealthy people's balance
sheets, and reinflated the housing market (which disproportionately benefits
the top half in the US). The median net wealth of Americans still hasn't
recovered, even with housing and stocks so high. Skeptics will claim QE helped
to heal the economy, generate jobs and so on - as though the US economy didn't
do that on its own for 200 years prior to the Fed utilizing QE.

~~~
MrTonyD
I'm not saying you're completely wrong...but it is worth noticing that the
middle class had growing prosperity until the mid 1970's - and since then has
either stagnated or slid down. The GDP during that time was rising - but going
disproportionately to the wealthy. So it is worth examining other factors in
the change - I would argue that "debasing the currency" becomes no more than
an occasionally contributing factor.

~~~
_rpd
I'll suggest the change is the globalization of the US economy. The US
effectively added a billion low income workers to its economy, and that group
has seen large relative gains in income over the past few decades. Some of
those gains were, as predicted, effectively a transfer of wealth from the US
middle class. Although newspaper articles about globalization are now
relatively rare, it is a day to day reality that I'm sure many HN readers live
and breathe.

While the massive destruction of poverty in the developing world has been an
unqualified good, it was no secret that the trade-off was stagnating wages in
the developed world until the developing world 'caught up'. There has been a
reduction in income inequality, but it has been at the global scale. The US is
not a gated community like Scandinavia. The US is deeply embedded in the
global economy. Any attempt to ignore the global economic perspective will be
misleading at best and ultimately futile.

------
astrocyte
I'd like to strike at the core of this ...

Why is that every such time a system is extorted/exploited to the point of
disaster, the same individuals who pushed it to that point then want to say
'We need to deal with the problem'.. The problem they very well and knowingly
created.. And they never speak up before this point.. It's only after they've
sucked every last drop out of the system.. And Oh' b.t.w:

> lets not solve it by fixing the exploits that created the problem in the
> first place

> lets not go after the individuals who exploited it the most and their gains

Lets solve it by :

> extorting/exploiting the income of everybody

> Putting a band-aid on the problem

> And Oh', btw, lets put the people who created the disaster in charge of
> administering the program

Is this supposed to be a joke? And why does society fall for it every-time?

And I like how socialism is being promoted as a solution while the very same
jokers who decimated American culture/free market capitalism are pumping in
illegals by the boatloads. It's as if they're already prepping to tank/exploit
the next system that gets paraded as a solution. Yeah, so there's not enough
jobs and the jobs there are don't pay enough because we allow corporations and
individuals to extort the crap out of everything a person needs. So, lets
ignore all of that and have :

> Guaranteed income

> Free healthcare

And since there isn't enough to go around in way of jobs, lets have :

> Open borders so people can overload the system

> Tons more legal immigrants

> Tons more illegal immigrants

And lets not focus at all on education so people can actually be productive...
In fact, lets make it harder for the educated individuals by importing tons of
competition from outside the country...Yeah, that'll work out great

Who pays for all of this? Certainly not those who create/created this
disaster. But yeah, socialism will fix things. After-all, it works in Europe
where they have all of the things we don't have :

> Far more strict immigration

> Far more Homogeneous culture and population

> Far less exploitative economic system

> Far more educated and involved populous

> Far less corrupt government

*Facepalm .. Here we go again .. For anyone who doesn't see that this country is in sharp decline, I wonder.

Every time, America puts the foxes in charge of the hen house and then people
wonder why it ends in disaster...

When you fix a bug, do you target the root or do you try to find the most
inefficient and indirect way of fixing the code issue? If you have an
unreliable code base (economic equality), do you initiate an unbridled code
blitz among your worst software engineers (Unbounded illegal immigration)?

I feel like I'm in the twilight zone sometimes in this country... But then, I
stop and look around and I decide to see it for what it is and then things
don't see that strange after-all.

~~~
Qantourisc
> And why does society fall for it every-time?

Who says we are falling for it ? Most people think: "What are we going to do
about it ?" And that's actually a rather good question. At this point the best
solution are avoiding buying from abusers, and voting better (if that is a
choice where you live).

The alternative are mobs/pitchforks/revolutions. But that's a bit like war,
you only start one (well any sane person/country anyway) if it's (one) of your
last resorts.

------
tomjen3
No we don't. Socialism failed for a reason instead we should encourage people
to be less jealous.

