"It can't be helped, the poor sods should have made better life choices to avoid ending up as janitor" is the attitude by which the matter is dismissed - as if requiring everyone to be a member of the educated elite just to be able earn a decent living.
There is so much wealth out there. This wealth is the product of society's common strive. Why not try to change the world instead of just submitting to the way things are?
Wars of I BC century and Roman laws that put people into slavery for debts had brought hundreds of thousands of slaves into economy bringing cost of labour close to zero. Conquest of Egypt and North Africa flooded markets with cheap grain.
That market disruption made artisan shops and small farms unable to sustain/compete on the market with larger enterprises based on slave labour.
Majority of citizens of lower class had been then entitled to free food and free entertainment (bread and circus). It was necessary for keeping their votes and for keeping appearances of the republic. (Even what we call Roman Empire were still nominally a Republic with Senate and elections held for various offices every year at Fields of Mars).
I recommend everyone reading Rubicon by Tom Holland. https://www.amazon.com/Rubicon-Tom-Holland/dp/1400078970
I voted for Bernie personally -- not a full out socialist... but I do think single payer + ubi + free college makes sense -- take the stress out of living paycheck to paycheck... at least somewhat... Not saying make everyone a millionaire and inflate the crap out of thnigs...but there needs to be some equilibrium...
One good policy might be capped CEO pay at say 200 * average employee salary. In this way - for CEO to get a raise, average salary must go up -- this can happen either by raising across the board or by moving more people to management and increasing upward mobility. Any money the CEO makes over 200* from that company is taxed at 100% including benefits, stocks, etc...
I'm currently very impressed by the work of Prof. Richard Wolff, an economist that heavily criticizes Capitalism and tries to make actual practical changes in the lives of people starting from their workplaces.
Here is a talk he made in front of Google employees (the irony): https://youtu.be/ynbgMKclWWc
I do like UBI though along with (the pragmatist in me) believes gov't should work like agile dev teams... push changes up to a github like interface for bills.. the all bills should be VERY succinct and serve 1 goal, and that they should be repealable pretty easily like reverting a change on github... I think we have WAY too much bloat, and omnibuses just don't make sense at all and should be illegal.
Congressmen make very good money and benefits -- and have lots of perks so they should be required to work as hard as the next guy in America - -40 hours per week IN congress discussing bills and voting - -anything to 'market' themselves for future elections is NOT part of their job and outside their 'paid' duties and should be done on their own time.
I think automation, etc will disrupt the entire fabric of society soon, and honestly I hope we can move back to middle-age work days... they worked maybe 20 hours a week, if that and some weeks not at all - if farming the winter was pretty much just don't freeze to death... While their lives weren't long, I have to think they enjoyed life more than we do today.
If I could live for free (no rent, free food, free electricity, etc), I probably would quit. I don't have much savings and my quality of life would drop a little, but I would probably take 6-12 months vacation and just dick about, playing video games and concentrating on my hobbies.
That said, I agree with your point, just bad example.
The hoops some members of this forum will jump through to convince themselves that building CRUD apps is some zenith of intellectual might just continues to astound me.
Maybe if jobs for all skill-sets were still growing (in availability and compensation) it'd be easier to write off a good portion of the population as mentally inferior, but now that knowledge jobs are gaining a monopoly on living wages/salaries I don't think it's as easy to be that glib.
We need to do better as a society.
We're not that glib when it comes to children and early education, and I don't think we should change attitude just because a person has reached adulthood. Laziness and/or the attribution fallacy seems to get the better of a lot of us on HN.
Presuming we want people to have good lives who aren’t able or inclined to do jobs requiring much higher intellectual demands than janitorial ones (and I certainly do want us to presume that!), we need to figure out how to in the short term allow people doing those jobs to have good lives and in the long term allow them to have good lives while robots do those jobs.
Perhaps I’m misunderstanding your comment.
This economic system isn't working for the vast majority of Americans, hence the support for Bernie and Trump.
However, small sample size notwithstanding, I have been involved with mentoring in an outreach program targeted at people with little to no CS experience. And these students were coding circles around "CS" grads in under 6 weeks. Sure the theoretical foundations aren't there yet, but, do you really need that much math to stand up an app, build a website, or do any of the work expected of a junior dev?
I 100% agree with you in that most people don't have the aptitude to become the next John Carmack, but, at least in my experience, that's not where the jobs are anyway. You don't need to be Linus to generate business value using Linux, and you don't need to be James Gosling to working Java enterprise apps. The jobs of the future need an army of people to modernize infrastructure and build using existing tools. These are the middle class anchors of the 21st century; I'd say look no farther than the "analyst" pipelines of the American finance industry to see this happening.
Have you ever been in any kind of teaching role, or observed some students at tutoring labs? Some people are just unteachable/not cut out for it.
then they can become janitors.
but you're right, ubi is essential. not everyone can handle janitorial work. ;)
manufacturing went away, agriculture went away, mining went away, all through automation. coincidently, this corresponded to growth in the people working in tech and other intellectual labor. but it's sloppy thinking to say that automation causes growth in intellectual labor, which seems to be the presumption. automation causes whatever it automates to shrink. intellectual labor will be automated-- possibly before janitorial work.
If everyone had better options, fewer would be willing to be janitors, and the need for janitors would cause janitorial wages to increase.
Basically, society is partly competitive.
If a position does not pay well enough for someone to have a family and raise and educate two or three children, it can be said not to pay for itself: which is to say, not to pay for its renewal from generation to generation. This is the real standard by which we must consider the wages paid to those positions, like waiters and teachers and janitors, which are perennial.
Why is it? A job is better than welfare, therefore it has value. The requirement that jobs are 'renewable' is only required of the average job, not every job.
Accepting the idea that renewability is either slightly more than 1.0 or slightly less, if the "average job" is renewable it suggests most of the common jobs have to be renewable in practice.
We could argue this in another way, which is to say that the average "career life course" or let's just say "life course" has to be renewable. This is where we encounter the idea that people should be setting themselves up for promotions -- but most people don't get promotions. It's not how life works. Promotions don't address the concern for the average life course.
The main features of janitorial work is few barriers to entry. There is fair demand, but there is plentiful supply which is why it is relatively low paid.
If Janitors could only replace Janitors, then being "non-renewable" would reduce supply, increasing wage, and maintaining balance.
In reality, the main feature of Janitorial work is most people otherwise lacking qualifications can do it; i.e. anyone. So it's not true that the renewability of janitorial work has a direct affect on supply.
Instead, it depends on overall supply of unskilled labour.
I thought about this for a while after you wrote it.
In a stable setting, where there is not a large and pre-existing supply of prey, prey animals tend to have large broods. Many off their offspring are preyed upon or otherwise unable to reproduce, but just enough make it in each generation and likewise manage to have large broods.
This is not a behaviour that seems plausible with modern people. The amount of time required to educate someone prior to their entering workforce is enormous now -- we can't afford to do something like what prey animals do, with regards to work.
Where does the unskilled labor come from?
It's not the core job, it's the fact that there's zero growth or mobility even possible that is the issue.
If you're a contracted employee, there's zero investment in you as an employee. You come in, do the task, and leave.
In the Bay Area schools my kids attend, they are working hard to emphasize this growth mindset. I think it's huge component in job mobility, whether it be upward or sideways.
Not everyone is a 'striver.' Some folks just want to pay their bills and enjoy what time they can with their family and friends.
I think everyone deserves to be able to have vacation time, especially single parents.
An article that focusses on inequality due to low income should perhaps pick an example with a more typical family situation.
To live a life free of consequences? As in have more kids, same quality of life?
How will that work?
> everyone deserves..
And who pays?
To live a fulfilling life without the constant fear of not being able to adequately provide for yourself or your offspring?
>And who pays?
Since it'd be us, collectively, as a society who would benefit it'd make sense for us, collectively, as a society to pay.
And this comes, for free, with no obligations? What is the standard for a "fulfilling life"? One child? A hundred? If I think my life will be fulfilled by skydiving, or playing XBox, or hookers and blow - should the state pay for those as well?
> it'd be us, collectively, as a society who would benefit
What you are describing is a market, but with no feedback or control; When someone ends up a burden on society due to a poor upbringing, does "society" get a refund?
If we are paying for people to bring up children, it would make more sense if the we initiated it; rather than people self-select for parenthood and get child welfare as an individual right.
I meant a mistake by society, i.e. it's a mistake to put people in a dead-end job, functionally ever.
You and I, maybe we made the right decisions. I'm doing pretty well for myself as a software engineer.
But when I see the misfortune of others -- people who saw the bottoms fall out of their careers -- let's just say it makes me hesitant to whistle past graveyards.
Apologies to pick on you without addressing your main point, but this sentence is an example of an error I see a lot yet I rarely see addressed.
Specifically, you're claiming a chain of causation where by inequality causes poverty. But in fact the relation between these two isn't causal at all, but rather logical.
(Well, not actually. Inequality is independent of poverty -- you could have no poverty but lots of inequality, or no inequality but lots of poverty. The assumption that inequality and poverty are so closely linked seems to me to be be basically assuming that we live in a zero-sum world. But let's just continue with that assumption right now, because that's not the point I want to address.)
Point is, why put the arrow of causation that way? Why not the other way around? Of course either way you put it's still not actually a causal relation -- but I think putting it the other way around is a much more useful way of thinking (mathematicians still think in terms of things causing things, because it's a useful way of thinking, even though mathematics doesn't actually have causation). I think there's something wrong with the assumption that inequality is somehow primary, and poverty just an effect.
You see this a lot in other contexts too -- people claiming "A causes B" when in fact the correct relation is "B is an example of A". (OK, that's not exactly the same error as here, but it's closely related -- mistaking a logical relation for a causal one, and putting the arrow of "virtual causation" in the wrong direction. As if someone said "all-cause mortality causes accidental deaths"; how silly would that be?) Watch out for this!
>Apologies to pick on you without addressing your main point, but this sentence is an example of an error I see a lot yet I rarely see addressed.
You're not picking on me - you're picking on something I wrote. This is perfectly fine!
Would you think it more appropriate to talk of poverty and inequality being elements in a feedback loop?
This is relating to your parenthetical, not your quibble with causation, of course. But inequality of income is different to inequality of wealth, and there can be a causal link there.
However, take Monaco. There appears to be significant wealth and income disparity among residents of Monaco and yet nothing that we would reasonably identify as poverty.
That doesn't mean that this would make the world a better place.
The world should absolutely try and help the poor and solve their problems, but this has nothing at all to do with inequality".
But equality of opportunity seems a good idea.
The demand for, and productivity of, high-skilled workers is increasing rapidly, while the supply is not increasing very much. The masses have responded to these price signals by going to college more, but aren't actually coming out the other side with higher skills, or even diplomas, probably due to deficits in K12.
Notably, this is not a story about the top and bottom 1%. The premium has widened enormously across the board, i.e. between the 25th and 75th percentiles.
As you said it essentially comes down to 'they should've made better choices and got a better career path!' while having everything handed to them at birth. It's the sort of thing that really made it apparent how different my upbringing was from my coworkers because I experienced that sort of deep poverty.
1. The meritocracy tied into Christian belief - that person has sinned (whatever you interpret sin to be), therefore of course their life is like that.
2. The ignorance of never having experienced a life where your merit doesn't influence your personal success. One sickness, accident, etc, usually starts to 'cure' this mindset.
These highly individualist supermen don't need society or anyone else for their success. They stand alone. Celebrating themselves while seeing others suffer and blaming them for their suffering is simply the natural order of things. Empathy is completely absent in this impoverished binary world view of success and failure.
But life and human beings cannot just be reduced to a primitive ideology of success and failure, especially when the successful are riding on generations of privilege. It's obscene for those starting a 100M race at 90M to lecture others on achievement.
While these self centred achievers stroke their egos millions if not billions of human brains are wasted just trying to survive, their intellectual output never given the opportunity to shine. And its not just their loss but a social catastrophe because its only leisure and stability that allowed our tryst with science to begin.
Luckily, most of the things we as a society value as being a "good" thing to do are in fact really good things to do as an individual looking out for one's own self interest.
Have you or I benefited greatly from the work of Jobs & Woz, Gates, Einstein, Pasteur, etc? I'd say yes.
Would it stand to reason that we would benefit significantly from future contributions from similar people?
Well, if that is true, we should probably support social programs like good access to education and healthcare, so that those potential innovators have fewer obstacles in their path.
Does a society that revolves around mass production tend to innovate faster when the masses have stronger spending power? Makes sense - so perhaps fiscal policies that mitigate income inequality would be wise - from an innovation standpoint (completely ignoring the moral case).
Yes, there are dumb people out there who read Rand and overlooked (a) that she was reacting to having lived through the awful aftermath of the Russian revolution and (b) was writing fiction in dystopian universes (before she got a bit too cray cray and just started writing philosophy). You can read Orwell and not think there's actually talking animals. And a lot of the proclaimed Randians happen to forget that in her most nuanced work, Atlas Shrugged, the populist movement was the lesser villain to the larger villian of crony capitalism, lobbying, and government intervention on behalf of those interests.
It's actually quite refreshing to look at socialist policies from a perspective of selfishness, because if you ask yourself the question of "will these policies benefit me even if I'm not a direct beneficiary?" - the amazing thing is that the answer is"yes" given a long and broad perspective. We shouldn't as a society make the case for these policies because of moral arguments, but can and should make the case on the basis of their impact on economic growth and the rate of progress.
Most investors prefer reinvestment to dividends for long term holdings. And that's exactly what social programs, and policies addressing income inequality, are. They are a reinvestment into the country instead of a dividend (aka tax cut) paid out annually. Let's make that case using the language and reasoning they already understand.
I am not a follower or a fan of Ayn Rand but I really don't see any other category within which to place:
Steve Jobs, Arnold Schwarzenegger, Elon Musk ... perhaps even Donald Trump ? George Lucas ?
They seem to fit the archetype ...
I think this is a structural problem. When your only source of wealth is your own time and labour, there's a limit to wealth creation and accumulation. The rich isn't limited to just their own time or labour, but is able to take many people's time and labour as part of their own.
One of the essential patterns of history is the vacillation between freedom and equality as societal ideals. A freer society is a more unequal society, and vice versa. It's a fairly paradoxical and nuanced idea because we (particularly Americans) don't tend to think of those principles as existing in tension with one another.
Furthermore, once a civilization reaches a certain threshold, it follows that a great majority of people become unproductive deadweight. Technology accelerates that deterioration.
These aren't terribly inspiring human truths, but I find they do hint at the futility of bemoaning the condition or hoping for emergent and sweeping policy solutions.
Better to empathize where possible, feel eminently thankful for our good fortune, and donate whatever surplus of time and capital we might have to a helpful cause.
That's doing some reductio ad absurdum on your argument but you are saying we should just give up trying to fight something that bad and give some minor help when possible, correct? We can try to do better
I'm saying more broadly that we're all probably at the mercy of an inescapable cycle that may not end until humanity is willing to cooperate perfectly at the global/species level of abstraction.
'The Lessons of History' also comments that competition is also inherent to our biological nature. There's a passage about how we usually only cooperate in order to compete at plural granularities (e.g. families, corporations, nations, religions). This has obvious implications for the tradeoff between freedom and equality.
“Because, if you’re honest with yourself, if you step away and look at what this world is and what it’s becoming… we’re really not far from a reality where everyone is condemned to the pits. Everyone is lost. Maybe not this generation. Maybe not the next. But surely, somehow, if you cherish anyone, anything, any legacy at all, you can’t let them win, destroy it all, and erect some… mockery in its place. Rewritten history, modified, subjugated, and broken people.”
Organize a small band of hardened cadres and wait for your opportunity. Major war not going as well as planned or other crisis, few million frustrated citizens with arms and your small cadre have a chance to take over largest country on Earth.
Combine both - thirty years of exhausting war plus new religion and you can take over everything from Afghanistan to Morocco in just few years.
Refuse violence and keep repeating your arguments despite oppression - it might take shorter then you think - like British leaving India or Soviet Union leaving Central Europe and Central Asia.
Just few examples of impossible and unthinkable happening.
The sad reality is that this is not actually possible. This kind of inequality is a constant and cannot be changed. There is a segment of society that cannot pull themselves up by their bootstraps so to speak, and the way a society treats and cares for these people is the true yardstick of compassion and fairness.
Human life has positive ROI, as evidenced by the fact that our species has done better in the world over time. The largest returns are highly unpredictable too - the majority of "origin" stories for the greatest contributors to moving our species forward have come from modest beginnings.
So disadvantaging large swaths of the population with poor access to quality education or healthcare biases the system against the masses, and as a result, reduces the productive potential of that population segment. A janitor today may not be the next Steve Jobs. But his kid might, if given access to a good education and not burdened by needing to accept a "safe" work choice to support his parents.
In addition, that janitor is likely putting a much larger portion of his wealth back into the economy directly by purchasing "things." And in a global economy that revolves around mass production, it would make sense that economic policies favoring the spending power of the masses would be a key factor in the pace of innovation and moving industry at large forward.
If only Wall Street can afford 4k TVs, they'll be watching a lot of upscaled 1080p content. It's not until the janitors, electricians, etc (i.e. the masses) can afford the sets that they'll see the majority of content switch over to 4k. (This is a knowingly superficial but illustrative example of a larger principle).
Even in my own case - I have a pre-existing medical condition. If it weren't for Obamacare, I wouldn't have been able to co-found my startup, which last year (first operational year) did $350k in sales, and this year looks like it may hit $700k. I'd have needed a job that provided good group health insurance, and our company simply wouldn't exist.
We like to talk in the entrepreneur community about the need to take risks to be successful. But too often the community turns a blind eye to the fact that if you cut away enough of the public safety nets, the only people that will be taking risks are the people that either (a) have a personal safety net already, or (b) have such poor judgement in risk assessment that they are destined to fail.
Social programs and policies aren't "entitlements" or things we should be doing from simply a moral standpoint - they are economic "growth" programs and make a great deal of sense if you look at the broader picture and with a perspective of 10, 50, 100 years instead of fiscal quarters.
Income inequality unchecked is going to destroy our national competitiveness the same way an executive cutting themselves a massive salary and underfunding corporate reinvestment is going to drive that company into the ground. We're cutting national reinvestment in order to further advantage the previously successful (several generations past in many cases), at the cost of the potentially future successful.
If all super rich people were magically erased from the earth, would the poor have it any better?
The only other option I can see is that some tiny percentage of the country or of Apple would disappear. But what part, specifically?
This comment to me is characteristic of thinking of ownership in far too simplistic terms. Very rich people don't actually own productive things, they just own rights to income streams.
There are certain exceptions, such as the Koch brothers who do own their companies. If those companies disappeared that would also be a net benefit to US citizens.
The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. 
We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your investment returns (which then gets taxed at 15% instead of 35% for ordinary income). If you don't spend all of that $2M, you'll continue to make more money just by having more money.
By taxing income instead of wealth, we're also essentially penalizing labor and rewarding wealth. We shouldn't penalize something that actually contributes to the economy and instead ask people who have more (not earn more necessarily) to contribute via taxes.
The argument against a wealth tax, is that it penalizes savers, and rewards spenders. Which is not what we want as a society. It's better for both the individual and for society if people invested their money into productive enterprises, instead of spending it on luxury goods.
If the goal is to provide a more egalitarian quality of life across society, this can be perfectly achieved through an income tax alone. Specifically, by treating capital gains the same way as salaries, and by increasing the marginal tax rates for high earners.
I disagree. Wealth provides financial security to an even greater degree than high current income. Wealth provides the means to move your family to a place where they will be safe and thrive. Wealth provides a means to start the next generation with a leg up, financially, socially, and academically. High current income can go away next year for most people and is often not portable to a new city or country. High current wealth is far more durable.
I don't think it's the billionaires that are the only "problem". Those with 50+ million USD also live a life essentially devoid of the concerns of financial catastrophe.
I see an incredible amount of logistical challenges in implementing an annual wealth tax (though some countries already do so), but far fewer philosophical problems, even though I am overwhelmingly likely to be one of those targeted by a wealth tax (low single digit millionaire household from 25 years of working, saving, and investing).
I think it good social policy to institute an additional amount of drag on wealth accumulation, preferably by directly taxing it (annually or upon transfer), rather than further penalizing productive income-generating activities that are already taxed at nearly 50%.
Yes, but unless you're talking about a wealth tax in excess of 10%, this is not going to change. Someone with multiple millions of dollars in diversified investments will always be financially secure, unless we're considering drastic measures like a communist revolution.
Regarding all the benefits of wealth you mentioned, note how these benefits only arise when the investor liquidates his investment. Hence my point that instead of taxing wealth when it is being productively invested, tax the wealth at the point of liquidation instead.
I'm also in favor of high estate taxes, but that's an entirely different tangent.
An annual wealth tax of 10% would wipe out most wealth concentrations within 50 years. I think such a level is absurdly too high, though.
Looking at Switzerland as an example, I think 0.25% to maybe as much as 1% range is far more reasonable (roughly in range with their wealth taxation today) with a per-household exemption of $1MM or thereabouts [to prevent nuisance calculations over $10 in taxes].
> note how these benefits only arise when the investor liquidates his investment
"essentially devoid of the concerns of financial catastrophe" is a tremendous benefit that confers to the wealth holder without need of spending the wealth.
We can of course quibble about the details... Mostly just trying to shift the way of thinking and talking about a UBI...
I also think that UBI in its first version needs to be more like $600/mo/adult. It's going to be austere for sure, but a figure much higher is not supportable (and so DoA when proposed).
First: wealth inequality is the result of persistent and pervasive income inequality.
Second: there are frequently individuals with very-highly-fluctuating incomes. Performing or creative individuals in particular -- actors, writers, filmmakers, musicians, athletes -- may have a few good, and many lean years. Taxing their good periods excessively would actually be counterproductive.
Taxing nonproductive wealth -- withheld or idle capital -- would put it to productive use. That's the fundamental principle of a land tax, as advocated by David Ricardo and Henry George. That concept fails to properly account for the withdrawal or degradation of natural capital, often at tremendous rates relative to the financial profit booked, and a case where natural capital is simply an off-books aspect of activities.
Ensuring that all citizens can meet the fundamental needs of life is crucial -- something Adam Smith, David Ricardo, Robert Malthus, Karl Marx, and John Stuart Mill each advocated for. "A man must live by his work" -- Smith.
"it's not what you earn it's what you keep" - someone on the internet
The 'average Joe' is, by the numbers, consuming more than they are producing. There are two ways this can be sustainable:
1) Transfer from economically productive to economically unproductive individuals
2) Net economic consumers become net economic producers. In practice, this would almost certainly look like spending less and investing more.
The argument of my grandparent seems to be that incentivising the _reverse_ of (2), ie net producers to become net consumers, is a terrible idea that will make the fundamentals of the problem worse. That argument is good as a matter of principle. It is particularly relevant in the current context of America.
Saving is paramount to growth in the classic economic model.
Another word for savings is "deferred consumption". If I earned 1000 dollars this month, and spent 700, I have 300 in savings, or, put another way, I deferred consuming 300 of those dollars.
Now, 300 in a checking account doesn't do anyone any good but me, but if I took half of that money and invested it w/the bank at a 7%/year interest rate, I'd be investing $150/month, and once I started getting that return back, I'd be getting $160.50 back.
What that does for the bank is gives it capitol to loan out to businesses.
If someone went to the bank and got a loan of $150, with a promise of paying it back at 9% in a year, they'd borrow that $150, pay the bank back $163.50 in a year, and the bank would pay me, the original creator of those funds, $160.50. They'd get a profit of $3.00, which is the difference between loaning that money out at 9%, and paying me back at 7%.
If the bank couldn't create money out of thin air, and doesn't fraudulently loan out customer's deposits, the only way to obtain a loan would be if someone else deferred consumption.
Obviously, banks can create money out of thin air (by loaning out funds on deposit), and when they do so, they don't have to give the money back with any interest, so they do. They can loan out $150 at 5% (cheaper than anyone else, perhaps!) and they can keep all of the profit, or $7.50. (more than twice the earlier profit of a non-fraudulent loan.)
I suspect OP subscribes to a more "savings-based economic growth" theory, in contrast to a "consumption-based economic growth" theory.
I obviously am an advocate of the savings-based approach vs. consumption-based approach.
That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.
The crash is an inevitable response to the boom, and any policy that wants to have booms without crashes is a logical fallacy.
I hope this helps a bit! I can gather some more sources if you're curious, but the basic gist is in accordance to the Austrian school of economics. Read more on that, and you'll encounter much better explanations than mine!
Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?
I'll accept that some of this is tax shenanigans to defer US repatriation... but only some of it.
I'm not an Austrian economist but I don't know why it's so far fetched that Apple is simply saving the money for the inevitable fire sale ...
Why buy Disney today when you can buy Disney and Ford tomorrow ?
As a shareholder, because that money could be put to productive use today, rather than waiting for a future which may not come. To my mind, that's why the pressure for Apple to pay a dividend finally built up to the point that Apple now pays dividends.
(Still an honest question. I've never understood this about the Austrian school.)
To be fair, Austrian school of economics is more occultism than anything else in the field, while Chicago School Economics (Milton Friedman&co) have more accepted models and economic ideas. The 'neoliberal' model as far as I understand can't really explain corporate cash hoarding. The situation today is very unique: historically cheapness of money could easily provoke inflation, which would promptly push any cash hoarder to spend.
If the U.S. had a small spike in inflation the whole thing could change quickly.
Imagine if banks couldn't 'print their own money', then businesses would depend on people investing to get funding and demand far outstrips supply. So we'd have economic contractions on a massive scale.
You can probably guess this puts banks in a very privileged position. Hence the high requirements for being able to start a bank of your own, and the government regulation intended to control inflation and fraud.
Sure, that is a reductionist argument but so was yours.
The real argument against taxing wealth is that it isn't really feasible; you'd just encourage banking in other countries or buying up a lot of land.
I also agree that capital gains being taxed at a lower rate is insane and makes sense only when you realize that's how politicians tend to get wealth.
Inherited wealth is another matter.
Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.
"The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.
Is there a limit you see in taxes?
Do you have investments yourself? Maybe you donated all of your investments to the government after realizing how little you were being taxed?
Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.
It's arguable whether giving government more money results in government working better.
By some accounts government is a demonstration of waist and an exercise in excess.
Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".
We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.
That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold.
And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains.
It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all.
It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work.
And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.
Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan.
Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends.
As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.
The real fuel of the economy is money being spent on Apple products, walmart, amazon, --hell even yachts/airplanes (somebody has to build those)..
To fight income inequality, I think we need to tax at the point of investment.. --if you buy anything you're taxed on it..this includes investments/stocks/bonds/etc... just flat consumption taxes... give a UBI to offset the poorer folks...
But have a mandatory flat tax...do away w/ the IRS/income tax. If you're not a U.S. citizen and not getting UBI sorry--but you're sales tax will not be subsidized by UBI--and if you're here illegally/unpapered -- you're now a tax payer congrats we can stop trying to deport everyone since now we make more tax money off of them!
But I'm not an economist and am somewhat skeptical of macro-economics in general, which seems a bit like reading tea leaves.
Even if you if you don't buy into supply side economics, I think "Money doesn't do anyone but the holder any good sitting in an offshore account" is somewhat misleading. Savers and investors, through loans and capital, certainly help someone.
The economic principle you're looking for is "velocity of money". If you think of a GDP in terms of a multiplier in how often/fast money circulates, then you can analyze whether investment or spending is more important.
The second economic principle to look into after that is "marginal propensity to consume".
The vast majority of money people invest doesn't go into giving companies capital, though.
It goes into people selling pieces of companies to each other. The very first time the share was bought, the company got some capital, and the vast majority of money people invest is not going into initial purchases of shares.
A world with a few super-heavy investors may not be as effective as a world with a more distributed (democratic) investor base. Fewer investing eyeballs, more tunnel vision.
And more to your point, we already have a defacto wealth tax in the US because inflation is not deductible. If you hold a bond paying 2% per year, and inflation is also 2% per year, you pay tax on those gains even though you've made a post-tax loss in purchasing power. At 2% long term inflation, the defacto wealth tax works out to be the 2% multiplied by your capital gains rate, or from 0.47% to 0.74% for high earners depending on what state they live in.
We have actual wealth taxes, too, in the form of property taxes.
What are some solutions you're aware of that are equally effective and less invasive?
I don't really agree with this. Taxes are distortive and doesn't necesarily help inequality. It might even make it worse. But also, there is taxation as a progressive system of government funding, as there is taxation as in "You will never own more than X, because the government will seize it".
In terms of solutions, I'm not a professional economist, but as I read different authors and books, it really seems like we don't understand why we have inequality in the first place. Even Piketty's Capital feels more like explaining that its going on than why. So I'm jitterish about any solution that doesn't help resolve the core cause, for the which there doesn't seem to be consensus
The CEO's pays is a small but funny example about that: CEO's pays increased enormously after by a law thought to dimishing their returns, made their salaries public, and increased CEO's ambition and bargaining power. The very idea to dock their pay increased it.
But those are small bits at the macro-economic level.
In Argentina, the state collects a heft tax on property transfers when the propietor dies. So basically all property is donated from parents to children in-life.
Poorer property owners that cant afford or dont know better, or people stricken with tragedy in an early death are likely the ones that pay the most of that tax.
Conclusion, 'death taxes' are paid by the poorer half and hence worsens inequality.
On results: lets say that I were to tell you that all the money in your bank account is going to be worth 0 tomorrow. Are you going to invest that money in long term capital growth? Are you going to donate it to the government?
I'd say the most reasonable reaction is drugs and hookers all the way!
The latter is definitely not great economic policy.
And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
Inherited wealth is anathema to meritocracies.
Well, this is were we clearly disagree. I am very certain that if i knew that i was going to die in 6 months, id be burning all my money into some kickass 6 months with "Burguers" and "Premium Tinder accounts".
Consumption vs Investment is a core battle between Keynesian and Chicago School economics, so it depends on which you subscribe.
I actually do wonder who argues in favor of meritocracies. Sure as hell not liberal-economics.
"Get what we deserve? I hope to god we don't get what we deserve" - Milton Friedman.
> And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
This just compromises the original concept of equality of opportunity: if you do that, anyone below 50k will be in an unfavourable position relatively. So what you did with that limit is imposing something on a group, intended to be a minority that wouldnt be able to repeal such rule. The fact that these rules end up like this has been extensively exposed by people like MF.
Its like saying that you are going to base justice on "protecting good people and punishing bad people".
I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
That's exactly what our justice system is... Sometimes we fail at abstracting our morality to the courts but that's exactly what our goal is.
>I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
So your logic is "people usually use meritocracy as a knock against capitalism" and then establish your premise? "meritocracy is bad"? Doesn't make any sense. A perfectly meritocratic system doesn't exist and probably never will but systems which try to promote equality of opportunity are generally good. Our defense of "meritocracy" comes from the Rawlsian veil of ignorance. Behind it, it becomes obvious you would want to live in a society which provides a relatively equal chance for everybody and which, if you seize that chance, will reward you.
Who are you to make that decision for someone?
And, frankly, you're delusional if you think an estate tax is non distortive. The entire meaning of wealth would change for the elderly.
One cannot treat wealth like a zero sum game. More importantly, we need to rid ourselves of this growing crabs in a bucket mentality, because we all suffer when we hold society's best back. Is it "fair" in the sense of absolute wealth? No, but people shouldn't be so focused on their neighbor's plate then theirs is full enough that they can spend hours complaining online about how much more money the 1% have. Perhaps we should redefine fair wealth distribution to rightfully consider merit, which is shockingly absent from the majority view here.
And your definition of "fair playing field" is skewed because, again, you treat economics as a zero sum game. You are making the classic mistake of conflating equality of outcome with equality of opportunity.
In any case, this class warfare inspired policy of exhaustively taxing wealth won't fix a mismanaged budget or a broken scholarly culture. You are simply punishing the people who seem to have benefited most in the context of the system while ignoring merit.
Further, it is absolutely absurd to suggest that modern people in poverty dont live "good" lives. They have refrigeration, air conditioning, entertainment, access to the internet, emergency healthcare, they live like kings once did. Once again this is a problem of looking at other peoples' lives and concluding that only in comparison you deserve more for simply existing.
Taxation will not fix what is fundamentally a cultural problem.
Aside: Look at how absurd the entire argument is! We dont question in absolute terms how our poor are living, we focus entirely on the fact that the wealth is distributed unevenly. Like children complaining that their classmates have extra candy. The whole mindset is petty.
Don't you think that inheritance is a pretty bad way of achieving that? After all, traits like intelligence (which probably dominates the ability to use resources efficiently) are only about 50% heritable.
Why dont we spend more federal funds on gifted children? We watch the trainwreck that is our school system as we fail to match pupils in other countries at senior high school level. The issue is, again, not taxation, on the contrary, we are not spending enough where it counts because of the greed of the entitled.
Outcome and opportunity is a false dichotomy. But if we were to go along with it, isn't a tax on inherited wealth a great way to maintain equality of opportunity?
About merit, I think I know about merit. If you take the public transport at 5:30 in the morning you will see a lot of people that go to work for years for a ridiculous small pay and, that if they stopped doing that, society as we know would stop. That, I think, have a lot of merit.
On the other hand, in any standard corporation, you can find people with huge wages, with company car, that never pay a lunch because they put in the expenses account and that employ its time in political movements to try to go up in the ladder.
Of course, if you think that markets give everyone whatever they deserve, or you have not been in the public transport at 5:30, then, what I'm saying doesn't make any sense.
Leaving the metric to optimize to the optimization process doesn't look a good idea, the same way it's not a good idea to leave the thermostat to choose the temperature.
In my experience, the only people that think that the thermostat it's who should choose the temperature, it's the people that feels very comfortable with the current one and don't care about the comfort of the others in the house. Or, maybe, also the people that grew up in a house without thermostat and thinks, correctly, that anything is better.
First, it's much easier to get a rough idea of how many people states have killed than markets, to be sure. But many wars are fought and nations are conquered (and, for that matter, created) for market-driven reasons: oil, tea, diamonds, slaves, to name a few egregious examples off the top of my head. Millions of people have died throughout history that would not have if states were not acting to protect, expand, or create markets.
Second, while it's probably harder to get a rough idea of how many people states have saved than markets have, the number is not inconsequential. I certainly wouldn't suggest states are forces for unrequited good--there's copious valid criticism of them across the political spectrum--but I would suggest that they're hardly forces for unrequited evil, either.
Care to explain?
 ignoring the whole subject about luck and what it means to earn something when two equivalent folks just have different dice rolls go their way, etc. Or especially in the context what it means to earn something when you just inherited it. (I have a bunch of friends who have inheritance coming their way and just totally expect it, they lead very different lives because of that than those I know who don't have that.)
It would have negative consequences besides that. Many, many people do things for "legacy". It's a powerful motivator. Taking away all wealth would eliminate something that encourages good long-term decision making.
It would hurt people who aren't the rich people. What would happen if Sam Walton's net worth was taxed when he died? Massive disruption to Walmart employees at a minimum. How would the net worth be calculated? Well, given his net worth, he'd be irresponsible not to have an army of lawyers and lobbyists making sure the number is as small as possible.
So, given the above, the idea isn't that simple.
Finally, there are ethical implications to that sort of policy. It implies that citizens earn at the pleasure of the government, not that the government rules by the consent of its citizens.
None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.
All of these actions decrease efficiency, and none of them have a significant positive impact on poverty.
I just don't see the point of insisting we "do something!" when none of the similar "solutions" we've tried have made for any positive change, and all of them have measurably cost us in efficiency and growth. The "do something!" model of governance is cruel and deficient; if it would be better, all things considered, to do nothing, then do nothing!
Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put on the economy.
Well before any of these programmes became so comprehensive, Norway, Denmark, and Sweden were very productive and comparatively equal.
I.e. giving poor people money doesn't end up with the poor spending more money.
This spring I cut very high pine because it shadowed my entire backyard and I want to grow more smaller trees on the perimeter.
There is unrest in the forest
There is trouble with the trees
For the maples want more sunlight
And the oaks ignore their pleas
The trouble with the maples
And they're quite convinced they're right
They say the oaks are just too lofty
And they grab up all the light
But the oaks can't help their feelings
If they like the way they're made
And they wonder why the maples
Can't be happy in their shade?
There is trouble in the forest
And the creatures all have fled
As the maples scream 'oppression!'
And the oaks, just shake their heads
So the maples formed a union
And demanded equal rights
'The oaks are just too greedy
We will make them give us light'
Now there's no more oak oppression
For they passed a noble law
And the trees are all kept equal
By hatchet, axe, and saw
But you can have varying levels of inequality and the extremes are probably not healthy. My suggestion above wouldn't create perfect equality, it just fixes the broken incentives we currently have that reward us for hoarding wealth and penalize us for earning it.
The F-150 is the best selling vehicle in the US, and they're certainly not all going to people in the construction industry.
And $50k/yr is more than enough to save money in most parts of the country. That's a good salary.
What economy doesn't have inequality?
There is an inherent value to a currency system, and that value amplified by network effects. The government definitely anchors that network (through many mechanisms, not just taxation), but there's still a lot of inertia there regardless.
What other (governmental) mechanisms do you view as anchoring the currency?
Well, the primary reason is that US dollars are declared by government fiat (hence the term) to be "legal tender for all debts public and private". You can't legally refuse to take US dollars (in the United States, obviously ... other countries give their own currencies a similar status). That seems only tangentially related to whether the dollars come from taxes or printing presses.
Government accepting payment for public debts in legal tender... is taxes. They're the first market maker for a fiat currency. It's certainly possible to just run printing presses, but that typically leads to hyperinflation and the replacement of the currency.
Having taxes to have circulatory value sounds pretty dumb to me.
Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.
Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles.
That doesn't make a wealth tax entirely unworkable, though, in my estimation.
What about just printing money? Not ideal obviously, but there'd be no way to avoid the inflation "tax".
So we already invade your privacy to appraise the former, and the later has to be be public because companies need to know who owns what shares and the trading platforms need to associate users to shares they own. Both can be used by government to provide ownership details.
You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already. That way private business executives cannot tax haven their own stuff under an LLC, and companies like Google / FB are punished for hoarding hundreds of billions in offshore accounts they have no intent to spend or bring back into the states.
Of course, this is all saying "government should do X" which is just for entertainment, pretty much. The US is in no condition to act in the will of the people at all right now anyway, so its all speculation - you would have to fix the broken democracy first.
Henry George proposed this in the 1800's 
I'm not familiar with this being a requirement for foreign, private companies. (Reading between the lines, I'd expect a marked increase in investments in foreign, private companies under such a taxation scheme.)
Those with capital / assets can leverage up, borrow more money, and then pay it back with lesser inflated dollars.
Also the IMF's stance on inflation and inequality is moving from hyperinflation to sustainable inflation leads to reduced inequality but there aren't advantages to moving to a lower inflation than that.
If a major function of government is to protect our property (land, savings, boats, cars, etc...), then it could be said the more property we have the more we benefit from government protection and the more we should pay.
Another function of government is to facilitate trade. For this service, ALL transactions should be taxed (including payroll).
If you look at the totality of this, the actual tax rates would be nominal for every "normal" individual, thus it wouldn't necessarily be regressive. We're talking about a 1% tax rate on property and ALL transactions.
To me this makes sense on so many levels. It captures money from everyone participating in the system and it captures it relative to the person's level of benefit from the system.
The hardest part would be tracking. However, if the tax is nominal and the punishment for cheating is high, then it seems like it wouldn't need outrageously intrusive controls.
If Starbucks owns coffee plantations, roasters, logistics, stores, the cup of coffee you get might be untaxed prior to you paying for it. If a competing coffee company performs the exact same steps, except uses third party farmers, logistics, roasters, and rents their storefront, that cup of coffee was taxed 5+ times before you bought it.
I don't see the societal benefit to encourage vertical aggregation like that.
If there are two layers in my coffee bean acquisition I'm losing the profit made at every layer, so of course I would want to own those layers and capture that profit before we even add a 1% tax.
But vertical integration comes at a risk, which is why only the biggest players will attempt it.
Now, add a 1% transaction to those two layers. You're now losing 2.01%. But at each layer you're already losing 15% net profit made by your supplier. I'm not sure you would change your perspective on vertical integration for 2% when you're already leaving 15-20% on the table.
I wonder if we wouldn't see a shift in grocery store form with the substance remaining as today.
Rather than buying a bottle of Coke from Star Market, you might be buying a consigned bottle of Coke, with Star Market serving only as the marketplace (avoiding Star buying the bottle from Coke), and where Coke is paid directly by you as part of the transaction. Grocers operate on a terribly thin net margin as it is. They would have a lot of incentive to avoid additional transactions in the supply chain (and there's some societal benefit to keeping grocery prices low).
I'm not so much arguing against [though I do oppose a transaction tax] as I am brainstorming how the implementation of such a tax would create different behaviors in the market to compensate or avoid the tax.
If you want to tax wealth gains as ordinary income there should be an acknowledgment of inflation. In practice you end up with roughly the same amount of money going to taxes and a much more complicated system. In this example it would raise the investment income tax revenue by 33%, not the 233% difference in tax rates. But the index fund 4% and the 1.7% inflation were pulled out of orifices and our predictive capabilities are so reflected.
A janitor working as a contractor may not have the chances the people in Kodak had back in the day. But at least he/she still gets to work a shift, gets paid for overtime. There is nothing stopping that person from pursuing their passion and create wealth. The reward of the wealth may be monetary or not.
On the other hand, let's think about the "privileged" workers. The more you get paid, the less life you have. In our current state of capitalism, if the employer pays you a lot, he/she wants to own you and use you until nothing of you is left. The current system doesn't care about long term, it's all about the short term. The people who break are replaced, and because people break, the workload gets heavier. But there is an unlimited demand of new workers fresh out of school willing to work under the same conditions. The work starts in the morning at 9 am, you can't be late, but you can't leave until the work is done. You go home, sleep for a few hours and start again. Sometimes you work on weekends and you definitely take a laptop to your holiday (if you have one).
If you work this hard, generate wealth and you know that if you stop working, all that you've endured would be for nothing, that would be inhumane.
* Wealth (accumulated capitol)
* Income (acquired capitol)
* Consumption (utilized capitol)
* Double taxation (which side is taxed, both?)
* Inequality / Regressive (generic taxes target the poor/middle)
* 'sitting on capitol' isn't taxed
* Taxes exist to fund the public good.
* Taxes should target undesired (by the community) behavior
* Incentives should target desired behavior
* You are what you measure and how you react (punish/reward)
Income: A maximum income target and a 'minimum' income target. These two numbers would be plugged in to a single non-linear formula that applies to all. The more someone makes, the more they're taxed (they would always take home more, but for every dollar over they'd take home less of that dollar). B.I.G. could be built in to this formula as a third number (mostly raising the floor); but to me the minimum number already sounds like it is this number.
Wealth: Some savings is a good idea. Having a year or two of runway (disaster preparedness). Saving to move in to a house. Investing* in active things (stocks/bonds/etc) for retirement. Owning your own means of production / transportation / housing (within reason).
Wealth is more static, when wealth suddenly shows up it should be taxed as income. When it's held over time it should be taxed at a much lower rate, but still taxed (every period, IE year). Society should agree on a divisor that is fair, and how much different types of wealth are discounted. 'wealth' (divided down) would thus be figured in to the total tax liability on the compound curve I described in the income section.