
The 99 percent - njohnw
http://www.economist.com/blogs/dailychart/2011/10/income-inequality-america
======
guimarin
Five points for the OWS guys.

1\. Transparency. We need to see where every dollar of the US federal gov't is
spent. It needs to be on the internet, and it needs to be easily accessable.
An exception can be made for classified spending in specific, but not so
categorically (IE we spend X on classified stuff). Additionally, just like
there is a Surgeon's General Warning on cigarette packages, there needs to be
a link on every candidates webpage that lists their top 100 donors, and what
industry they are in. This website URL needs to be easily visible and placed
in every television and radio advert as well.

2\. Investment banks cannot also be commercial (depository banks). Investment
banks become partnerships where c-level owners are financially responsible for
the actions of their banks. The banking system survived before things changed
from this, and it will survive afterward.

3\. There should be a small federal tax on the sale of any type of derivative,
bond, stock, or other financial instrument every time it is sold. Say $.10 per
share, every time. The financial markets are for raising capitol for
companies, not for financial hackers to make money. HFT is a waste of time and
energy, adds unnecessary volatility, and has yet to be shown to be anything
more than tangentially related to the goals of a financial security market,
established for the purpose of raising capitol.

4\. The tax code needs to be simplified. There are a number of ways to do
this, but the end goal should be to end loopholes that allow companies like
exxon to pay no federal taxes. Or any company for that matter to realize
losses in the US and gains in a foreign country.

5\. Finally, there should be a 4 term limit on US Senators, and an 8 Term
limit on US Representatives. Self-explanatory.

~~~
noahc
Can anyone with more experience and knowledge explain the effects of #3. I've
read that HFT is actually a good thing because it basically acts as a market
maker. This is just a back of the napkin opinion, but it seems that #3 would
reduce liquidity in the markets.

We know that markets aren't perfect or else Buffet and other value investors
couldn't survive. Does HFT make markets more or less perfect at pricing? Does
this matter for making markets more efficient in reality, not some
hypothetical perfect market?

~~~
jarek
The standard response to claiming HFT as a market maker is that it provides
minute amounts of additional liquidity and its costs and drawbacks, or
potential costs and drawbacks, outweigh the benefits. Of course some amount of
market making is necessary, but you could claim that without HFT you'd just
settle your trades in 0.1 s rather than 0.02 s and with 0.5% spread rather
than 0.49% spread.

I don't know enough to form a proper opinion whether or not this is the case.

Of course part of the problem is defining HFT or algorithmic trading. If you
build a robot to press an appropriate button at a trading terminal really
fast, is that algorithmic, HFT, and should that be banned? Do you fix the tax
at 10 cents, and if so how do you react if companies just create massive
securities worth millions of dollars and trade those?

~~~
mjtokelly
According to some recent research, HFT appears responsible for lowering
spreads by more than an order of magnitude:
[http://marginalrevolution.com/marginalrevolution/2011/10/mor...](http://marginalrevolution.com/marginalrevolution/2011/10/more-
on-high-frequency-trading-and-liquidity.html) That's a definite social good
that would go away under proposal #3.

~~~
jarek
Right, we'd have to get some concrete numbers for the drawbacks of HFT (if
any) and then compare with the benefits. What's the societal value of having a
$20 spread vs a $230 spread on a million dollar transaction? What is an
acceptable trade-off spread value, how do we define it in the first place?

------
dgallagher
The graph is a bit hard to read since it's labeled poorly. The X-axis is the
year. The Y-axis is the percentage of income relative to 1979, after-tax. They
do not mention if these numbers were adjusted for inflation, but the report
linked to on the page says the numbers are adjusted for inflation:

 _Income is adjusted for inflation using the Bureau of Labor Statistics’
research series of the consumer price index for all urban consumers (CPI-U-
RS)._
-[http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome....](http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf)

That report is much more detailed than the Economist's summary.

So, in 2007 the top 1% made ~375% of what they did in 1979 (~275% gain). In
2007 the bottom 20% made ~120% of what they did in 1979 (~20% gain).

~~~
msbarnett
> They do not mention if these numbers were adjusted for inflation...

The graph is labelled "US _real_ average after-tax income" (emphasis mine).
Real income is, by definition, income that has been adjusted for inflation.

~~~
dgallagher
Ah, I missed that. Nice catch! :)

------
colanderman
Here's why the rich get richer: because the 99% _produce_ too damn much.

Consumerism worked for a while to keep things even, but we've reached a
plateau. People can only buy so much crap. But we're more productive now than
ever [1].

So where does all that extra money go? The people at the top take it. CEOs
don't give their employees raises, and pocket the rest. Bankers play games
with your excess money you've dumped into the market and "lose" it. etc.

No-one's missed that extra money until now, because there's always been enough
work to go around. Now there's not. Maybe people aren't buying because their
"confidence" is shaken. Maybe the Chinese are "taking our jobs". Maybe people
don't need more crap.

Guess what, it doesn't matter. Everyone's stuck on debating _why_ there's not
enough work to go around. But really, the solution's simple.

Everyone should do less work.

The _only_ way to _simultaneously_ (a) reduce the income gap, (b) lower
unemployment, and (c) not return to wasteful excessive consumerism is to
_shorten the work week_ and _raise the minimum wage_.

Those at the top will be forced to pay more per hour worked due to decrease in
supply. This will fix the income gap.

The unemployed will suddenly find work, now that more workers are required to
perform the same amount of work.

And no-one needs to find any arcane means of "increasing consumer confidence".

I propose a mandatory maximum of 35-hour non-overtime weeks, coupled with a
20% (or greater) increase in minimum wage. Necessarily will likely be a short-
term (5-year or less) exemption from these policies for small business owners
(defined as those whose executives take home in salary + bonuses less than
some threshold, say $200k).

There once came a day when humans were productive enough that a two-day
weekend was warranted. As we continue our march down the road of automation,
it is only natural that we give ourselves more time to enjoy the fruits of our
labors, and not devote our time to serve those more fortunate than us.

[1] <http://research.stlouisfed.org/fred2/series/USARGDPH>

~~~
brc
Hoo boy are you wrong.

You are so, so wrong.

I was hoping you were being ironic, but apparently you're serious.

Raising minimum wage and cutting working hours will drop productivity like a
stone. You're effectively saying that all workers are equal, and
interchangeable. You want to forcibly stop the more productive ones from
working, so that their tasks and livelihoods can be given to others.

In the case of a software company you're introducing the twin evils of bad
hires and oversized teams. For what? An inferior product produced at a higher
price.

Dropping productivity means a drop in living standards for everyone, not just
the rich people.

The reason people are out of work is because too many people are paying back
too much debt, and that equates to negative savings.

Minimum wages increase unemployment because they set a price floor above the
clearing price for the going price of a worker. Now, that's not an argument
for getting rid of minimum wages, but you can't argue against the reality of
what they do.

The solution is to continue paying back debt, and learn the lesson not to
borrow so much next time around. Yes, that sucks, but hard lessons seldom have
pleasant consequences.

If you want to stop a lot of wealth accumulating at the top end of the
pyramid, by all means break up banking cartels and break the ties between
legislators and big business, you won't get many arguments from most people.
But fairyland schemes to force people to pay more than wages are worth, and
force people to work less hours than they want? Hello, central planning.
Hello, centralised control. The only way for this to work is to put the needs
of the state above the needs of the individual. Which must, _by definition_ ,
mean less individual freedom and more state control. What are you going to do
with someone who works more than 35 hours? Lock them up at the point of a gun?

"Wasteful excessive consumerism" is an entirely relative proposition. One
persons waste is another satisfactory standard of living. To impose an
arbitary living standard on someone is to completely control their lives.

You're asking everyone to do less work. Less work by definition means less
production, and less production means a lower living standard. And guess where
the bulk of that lower living standard will fall - that's right, you can bet
your peasant clothes it won't be on the 1%.

To conclude : you're effectively asking for centralised control of peoples
wages, centralised control of how much a person can work, and centralised and
arbitary division of what is small, medium and large business for the purposes
of handing out favors, subsidies and handouts. Eventually businesses will
start to fail and so will seek more handouts, bailouts, concessions or are
nationalised because they are vital to society (eg mining, energy, farming).

You've effectively described a blend of National Socialism and Stalinism. And
we know that both eventually lead to mass murder and misery of millions. This
experiment has been tried before, it ends badly for all involved.

I hope you're young and still learning, because if you're of any reasonable
age, you should know better by now.

~~~
alastairpat
You're exactly right - by killing productivity and massively increasing
employment without reason, you're going to have massive increases in exogenous
consumption.

Fantastic, except where are all of these consumed goods going to come from?
You'll see huge inflationary pressure which means tighter monetary policy;
higher interest rates and reduced borrowing and lending. Yes, there will be
economic growth and increased GDP on paper, but there won't be any benefit to
society. Furthermore, inflation actually helps the '1%' through arbitrary
redistribution of wealth.

First year macroeconomics - I seriously think it should be a prerequisite to
adulthood.

~~~
brc
Unfortunately history tells us that the person who promises something for
nothing to the people who want more will always get traction. It is very
difficult for people to accept the reality of the world and many people spend
hours creating fantasies about how, if they were in control, they could 'fix
things' which is just code for controlling everyone else and arranging things
the way they like it, and phooey to whatever anyone else wants.

You can't herd invididuals, as anyone who has tried to round up a group of
cats knows. You either accept that individuals have the right to be
individuals or you have to force people submit to your plans and forego their
individual choices. Too many people come out of education nowadays thinking
they could organise society, if just given a chance. But the truth is that
society is a loose collection of individuals, and by nature can only be
convinced, not coerced. You either believe in the fundamental human right to
choose your own destiny, or you don't - there are no half measures.

~~~
Jach
I mostly agree with your point, but I want to ask a question: if you had the
power to kill about 50,000 people of your choice, at the times you wanted,
without any repercussions on you personally, do you think you could use this
power to effect a much better world than we currently live in? Major choices
that have huge consequences are increasingly being made by individuals, major
choices that affect a lot of people for the better or worse. Remember Petrov
Day.

~~~
brc
>if you had the power to kill about 50,000 people of your choice, at the times
you wanted

What kind of question is that?

No, I wouldn't want to harm anyone. You definitively can't make things better
by killing people. You can make things better by letting people get to work
and build their lives and families in peace.

Kill anyone? I'm aghast at the way Gaddafi was treated, even though I thought
he was an evil despot.

~~~
Jach
I ask it in the way those annoying moral dichotomy type of questions are
asked. The goal is to see what you would actually do or believe, not to get
your opinion why the situation would never happen or why the situation is
Forbidden. I agree with you completely on the notion that killing people is
wrong, I find it sick how he was killed and how his body was treated, however
I recognize that, in the following toy scenario, killing is the optimal choice
from the set of available choices {kill, do nothing}: an Oracle reveals to you
that if you don't kill Mr. Bob within the next five minutes, 5 billion people
are going to die; do you kill him?

Even Gandhi recognized the right outcome here, but I agree with him that in
most real cases the set of choices usually contains something else, such as
maiming or more generally "disabling" to include relatively harmless things
like tackling. (Hence I still criticize soldiers who shoot-to-kill brainwashed
and/or insane kids coming at them with a machete for not shooting them in the
knees or somewhere easier to hit but less likely to kill.)

My original question is dependent on you believing that there exists some real
situation where killing one or more people makes the world better, the classic
(sorry to Godwin the topic) being to kill Hitler to save who knows how many
lives (regardless of if the war still happened). Since you've said you don't
believe that, I guess I got what I really wanted to know. I should have just
framed it that way to begin with. I agree with you that too many people
falsely believe they could fix things, I don't agree with you that a single
person couldn't fix things given the right opportunities such as being able to
kill the most damaging 50k people.

------
mhartl
_Second, that the people at the top have made out like bandits over the past
few decades, and that now everyone else must pick up the bill._

I have no idea what _The Economist_ could possibly mean by "pick up the bill"
in this context. They know as well as anyone that wealth isn't conserved. If
my company makes twice as much money next year as this one, I've _added_ to
the world's wealth, not subtracted from it.

~~~
danssig
I think everyone understands that companies are creating wealth. The question
is: who is capturing that created wealth? Right now the scales are heavily
skewed toward the 1% capturing a _lot_ more than they traditionally did.

~~~
mhartl
"Capture" is a loaded term. It could be that "the 1%" are simply creating more
than their previous share of wealth. Clearly, some of them are looters, but
lumping the looters in with the creators does the latter a tremendous
disservice.

I think both _The Economist_ and the Occupy Wall Street protestors are
conflating two distinct groups: those who get rich by creating wealth, and
those who get rich by diverting the revenues of the state into their own
pockets. The latter group consists of special interest groups—and certainly
includes virtually the entire banking and finance industry. What most of the
protesters seem to misunderstand is that their target shouldn't be capitalism,
but rather special interest groups—and the system of government that allows
such groups to thrive. Unfortunately, the latter is a problem so big it's hard
to grasp, and solutions aimed at the actual source are, to put it charitably,
off the political map.

~~~
danssig
>It could be that "the 1%" are simply creating more than their previous share
of wealth.

No, the 1% are generally company executives. _The company_ is indeed creating
more wealth but right now executives are taking a very large portion of that
created wealth and actual workers are getting a very small (relatively)
portion.

>those who get rich by creating wealth

Here you probably have in mind people like Zuckerberg, the google guys, etc.,
but this is a small minority. Most of the guys getting capturing so much
wealth are just executives. They're creating wealth cut are they really
creating hundreds or thousands of times more wealth than the people actually
doing the work?

>to put it charitably, off the political map.

Anything that would actually help is off the map. People want sound-byte
fixes. Something you can describe in one sentence. What is actually needed is
a multi-pronged approach to encourage the right kind of change. Personally, I
would like to see a law that says companies must disclose full compensation
for _every_ employee. They don't need to say _who_ gets what but they would
need to list each position and what the total comp was for it (this could be
made a bit more generic so it's harder to tie to exactly who gets what). The
free market works for buying products because we see what the product costs
and we see what everyone else charges. With wages it's hard to pin down
exactly what market rates are. If this data were forced to be disclosed I
think it would strengthen workers' position in negotiation, hopefully driving
labor prices up (and hopefully this combined with market competition would
force executive salaries down closer to realistic numbers).

And that's just one thing, we would need a great many changes to encourage
markets to correct after years of various interest groups doing what ever they
can to distort markets in their favor.

------
nazgulnarsil
Spending years and tens of thousands of dollars studying things no one is
interested in isn't normal, but in the American middle class it is.

the top 1% of earners pay 38% of all income tax while earning 27% of all
income. The top 50% pay 97% of all income tax.

Broken windows fallacy, broken window fallacy and zero-sum thinking everywhere
in this whole debate.

~~~
nazgulnarsil
if you downvote me enough maybe it won't be true!

~~~
CJefferson
Your comment is a commonly claimed statement, which hides many points.

How much of the income does the top 50% get? Without that, your figures are
useless.

Just concentrating on income tax hides the fact lower earners tend to spend a
higher proportion of their income on other taxes (such as sales tax).

ycombinator is not the place to repeat poorly researched, often quoted and
misleading statistics, without a proper discussion of how they effect the
current discussion. Sorry.

------
kb101
That graph doesn't really pack any punch. Leaving politics to one side, this
graph <http://www.lcurve.org/> and this article
[http://www.vanityfair.com/society/features/2011/05/top-
one-p...](http://www.vanityfair.com/society/features/2011/05/top-one-
percent-201105) have more interesting numbers that better highlight how stark
the disparity in income (and wealth) distribution is in the US.

------
jeswin
Graph looks a little suspect.

1\. Choosing 1979. If you started from 1999 all the graphs would look nearly
the same. So, does that mean in the last 12 years the 1% is no better off?

2\. Notice that the 1%'s advantage drops down significantly in a recession.
They seem to have ignored the last one though, and stopped right at the height
of the bubble.

That's what I can read.

------
sgman
The number missing from all these articles is how much taxable income is
generated from the activities of the top 1% (including business tax,
employment tax, sales tax from purchases, etc).

------
suivix
Perhaps it is necessary for the 1% to have huge sums of money and income
compared to the rest in a flourishing economy. For one, it means they can
spearhead the direction of capital. If you look at the graphs, everyone is
doing better. It also leaves out many products that you can get now for less
money or with more features. Everyone uses the same iPhones, college students
and the rich.

There is not an inherent problem in income inequality if everyone has an
acceptable standard of living. The problem is when the poor go without health
care, food, shelter, education, Internet, and heating. Unemployment can be a
large part of this.

~~~
rapind
The problem is that the staples are rising in cost (healthcare, housing,
food), while middle class salaries aren't keeping pace. It's called the
_middle class squeeze_. It's real and has been happening in North America for
a while now.

I don't use an iPhone myself by the way. The smartphone plans are ridiculously
expensive here in Canada. Any middle class family bearing iPhones are making
other non-trivial sacrifices to do so... like education or retirement savings.

~~~
nandemo
The graph in the article says otherwise: inflation-adjusted income for _all
groups_ has been rising.

