A quick follow up to last week’s Hackonomics discussion, where we looked at how little alleged wealth inequality there is in America.

Part of our critique was that dividing the US into quintiles was a variation of the median/average error, and only served to hide the exhorbitantly greater wealth, income and consumption of the top few percent. To that end, there are two peices of evidence I want to point you towards: One anecdotal, and one data driven.

The first one is THE ONE PERCENT, to be shown Thursday night on Cinemax, at 6:30pm Eastern (and throughout the month). The film is directed by Jamie Johnson (yes, Johnson as in the Johnson Johnson & Johnson). Its his follow up to his "Born Rich,” shown on HBO in 2003.

Here’s the Cinemax description:

Four years after turning his camera on himself and other affluent
youths in his documentary Born Rich, filmmaker Jamie Johnson presents
this look at the "wealth gap": the growing divide between the rich and
the poor in America. In this film, the 27-year-old heir to the Johnson
& Johnson fortune explores the political, moral and emotional
rationale that enables a tiny percentage of Americans–the one
percent–to control nearly half of the wealth in the entire country.
Along the way, Johnson collects the points of view from a wide variety
of Americans, ranging from media mogul Steve Forbes and Kinko’s founder
Paul Orfalea to Florida taxi drivers and Chicago residents in danger of
losing their low-income homes. (TVG) (NA)

Looks to be rather intriguing.

One last thing: In the original Hackonomics, I buried the detailed spending habits of the of the upper echelon of wealth in America. I suspect you will find this data a bit more unequal than the quintile nonsense we saw from Alm and Cox.

Here is how this group spent their money as follows:

Dollars Spent Category - 2007 Spending per Affluent Elite Household
                    Category           Category
                    Spending           Spending
Summer Spending        *       2007       *      2005    Change 2007/2005
Activity               %      $ Spent     %     $ Spent  $Change %Change
Yacht Rentals        10.60%  $384,000    9.50% $317,000  $67,000  21.14%
Redecorating         44.90%  $129,000   30.90%  137,000  ($8,000) -5.84%
Villa Rentals        15.70%  $106,000   13.80%  $79,000  $27,000  34.18%
Experiential
Excursions          25.80%  $103,000   22.70%  $79,000  $24,000  30.38%
Jewelry/watches      73.70%  $94,000    63.20%  $63,000  $31,000  49.21%
Luxury Cruises       47.50%  $92,000    43.10%  $71,000  $21,000  29.58%
Charitable Giving    97.50%  $82,000    98.40%  $52,000  $30,000  57.69%
Vacation Home
Rentals             12.10%  $82,000    11.80%  $64,000  $18,000  28.13%
Out-of-Home Spa
Services            67.70%  $61,000    48.70%  $49,000  $12,000  24.49%
Summer
Entertaining        93.90%  $56,000    92.40%  $39,000  $17,000  43.59%
Luxury Hotels        95.50%  $48,000    93.40%  $36,000  $12,000  33.33%
Luxury Resorts       84.80%  $41,000    82.60%  $23,000  $18,000  78.26%
At-Home Spa
Services            53.50%  $38,000    47.40%  $26,000  $12,000  46.15%
Apparel/accessories  92.40%  $34,000    86.80%  $16,000  $18,000 112.50%
Audio/visual         51.50%  $31,000    50.70%  $14,000  $17,000 121.43%
Wines and Spirits
for Social
Entertaining        86.90%  $24,000    77.00%  $19,000   $5,000  26.32%
Wines and Spirits
for Personal
Consumption         84.80%  $17,000    74.30%  $11,000   $6,000  54.55%

                                  2007             2005     $Change  %Change
    Total Luxury Summer
    Spending/Household       $622,202.02        $399,187.50 $223,015  55.87%


    *Percentage of those surveyed spending in this category
Survey of Households with Net Worth $10 Million +

Prince & Associates (2007)


Yeah, that consumption spending looks pretty egalitarian to me! I got your top quintile RIGHT HERE.

~~~

Source:
A Gaping Divide: Straddling Capitalism’s Fault Line
By GINIA BELLAFANTE
NYT, February 21, 2008
http://www.nytimes.com/2008/02/21/arts/television/21bell.html

The One Percent
Jamie Johnson 
February 19, 2008 | 06:31 PM (EST)
http://www.huffingtonpost.com/jamie-johnson/the-one-percent_b_87459.html

see also

Borrow and Spend   
Floyd Norris
NYT, February 11, 2008,  12:42 pm
http://norris.blogs.nytimes.com/2008/02/11/borrow-and-spend/

Consumption and Income Inequality
Economist’s View February 10, 2008

http://economistsview.typepad.com/economistsview/2008/02/consumption-and.html

What is wealth?
Saturday, May 22, 2004 | 08:34 AM
http://bigpicture.typepad.com/comments/2004/05/what_is_wealth.html

Category: Economy, Taxes and Policy, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “Hackonomics, Part II”

  1. Bruce F says:

    If the majority of people don’t benefit, why should they play? There are other games in town…..

    Fun with statistics, from Thomas Geoghegan:

    “It took ten years—almost all of the 1990s—for the median family income to get to the same level that it was, in real terms, in 1989. But in 1999, when we got to the same income level we had in 1989, the “median” family had to work six more weeks a year.”

    this was after the “boom years”. Wonder what the numbers look like now.

  2. scorpio says:

    i like the fact they spent marginally more on “wines and spirits” for social entertaining than for private consumption. would want the truly rich to be home, drinking alone. might imply they’re embarassed about their new-found semi-fraudulent fortunes.

  3. michael schumacher says:

    Ask Mexico how well that worked out in the long haul…..

    Ciao
    MS

  4. scorpio says:

    wouldnt want them home, drinking alone. wouldnt.

  5. John F. says:

    Barry: your lack of intellectual self-awareness astounds me. The Princeton economics department will never hire you unless you learn to pick apart someone else’s argument directly. Or are you merely aspiring to become a hackonometrician yourself? What you’re saying isn’t news to anyone who’s lived in Manhattan anytime in the last 20 years. Your entire intellectual value added to the (very serious) issue on inequality in this country seems to be an implicit but unexplored claim that one point on the Pareto curve is somehow more significant than the other.

    ~~~
    BR: I did that the last time:
    http://bigpicture.typepad.com/comments/2008/02/dishonest-econo.html

  6. Ross says:

    Interesting that in the last issue of International Yacht (have nooo idea how I got on that mailing list) there was a whole section devoted to “Which helicopter fits your needs and your yachts”.

    I suppose if your springing $25mm for a yacht, might as well include a $4.5mm chopper!

  7. Shreksodus@gmail.com says:

    Does sound interesting. I really enjoyed his first documentary. Im not so sure that being born super rich gurantees any kind of happiness. I really think it can lower a lot of peoples self esteem and ocnfuse them about what to do with there lives.

  8. bluestatedon says:

    $17K per household in personal swilling for a summer may seem like a lot, but @ $200/bottle that averages out to 85 bottles. If you figure that the summer season is 90 days, then that’s less than a bottle per day per household. I think the elite rich are to be commended for their sensibly restrained alcohol intake. Thank god for that, since we wouldn’t want our overlords to be completely hammered whilst being helicoptered from summer home to yacht and back.

  9. DoctorOfLove says:

    This repeated topic seems to be veering towards political screed, of which there is already a vast surplus on the intertubes, and away from capital markets. I can get more than my fill of political rants elsewhere. Perhaps either Barry misunderstands his audience or possibly he should get a diary on daily kos and put this stuff there.

    I realize its his damn blog and he can do anything he wants but perhaps he should amend his logo at the top.

  10. DoctorOfLove says:

    How about an analysis of Ackman’s rather interesting plan http://www.nakedcapitalism.com/2008/02/ackman-proposes-breakup-plan.html to break up, or rather send down, the muni insurance business from the structured finance insurance business by moving the muni business into separately managed and financed subs of the (now separate) sf insurance cos. This plan is actually legally doable, unklike the various split ups, since the sf insureds and stockholders of the ins cos have no theoretical basis to complain.

    You don’t like rich people getting richer. Check.

  11. “misunderstands his audience”? Judging from the comments, it seems that a lot of Barry’s audience is composed of people who have a strong interest in finance but think today’s level of income inequality is unhealthy. And I’d happily count myself as one more in that category.

  12. scorpio says:

    hey Doc, get your own site

  13. Pat G. says:

    We’ll assume that the 1% have problems that most of us on this blog are unaware of but wouldn’t it be at least fun discovering them?

  14. Ironman says:

    If the affluent elite are spending some of their money on these things, who’s taking it from them? Who’s providing them these things and services for money?

    And what exactly is it that you think those people should
    be doing instead of providing all these things and services to the affluent elite for money, Barry?

    ~~~

    BR: Its not for me to tell people how they spend their money, nor for other people to tell me how to spend mine.

    The point of this entire episode is to point out the falsity of the claim made by Alms & Cox that there is no financial inequality in America.

    As the arguments used to make that claim were so willfully misleading and utterly disingenuous, too also point out the people who made those claims are wankers.

  15. E says:

    Call me dense, but I’ve never seen anyone make a compelling argument around the income inequality story.

    Rich people spend a lot of money on luxuries? Well I hope so. That’s what I would/will do if/when I get rich. That’s the fun of being rich. That’s why I work, save, invest, and I’ll admit it, occasionally pay the “daydream tax” (the lottery – $270 million jackpot this Friday!).

    Is all this luxury spending bad for the country or the economy? Would we prefer that each rich person buys 35 Chevy’s and 45,000 boxes of Cheerios per year? I don’t see those as realistic ways of getting the money out of their hands and into the economy.

  16. bluestatedon says:

    I thought the whole point of the various tax cuts enacted over the last several years was that they would enable the wealthy to use their increased capital productively, ideally in a way that makes our nation stronger economically and more competitive internationally. At least that was the assertion of messrs. Kudlow, Bush, & co. The summertime expenditures of the elite may be keeping people employed, but we’re talking about waiters, chauffeurs, pool cleaners, cabin attendants, masseuses, Rolex salesmen, and housepainters. A service economy like this is a perfect machine for general downward mobility.

  17. Ross says:

    I remember stories about how my Grand Father lost his business on Wall Street in 1932.

    Seems some despondent banker jumped from the 22nd floor and landed on his apple cart. Killed the banker and destroyed the cart. Just like a banker trying to take the little guy down with him!

    Seriously, there was a story about a Florida banker who shot himself after loosing $19mm of his $22mm fortune. Goes to prove it is all relative.

  18. DoctorOfLove says:

    Ok, let me try it this way.

    Rich people may or may not be getting richer relative to the rest of us.

    There are two arguments that this is bad.

    a) I am morally, religiously, esthetically opposed to rich people, and the notion that they are getting relatively richer makes me crazy. This is not an economics argument, it is a moral, quasi-religious, esthetic statement and is by definition undebatable. You don’t like them, so there you go.

    b) This is bad because the rest of us are worse off in some economic, measurable absolute sense. The economy is a long-term zero sum game (or almost so), and if the rich have more, I have less. Note that this argument has to confine itself to materialism, otherwise, it becomes just a restatement of a).

    Barry attacks the logic of a story that apparently argues something to the effect that the rich aren’t really getting proportionately richer. Ok, lets assume they are. So what? Where’s the beef? How am I worse off in an absolute material sense because Bill Gates traded in his old and busted Gulfstream V for a new hotness 737?

    First you have to show that everyone else is in fact absolutely worse off (not relatively worse of, absolutely worse off), and then you have to show the causal connection between the rich getting richer and everyone else getting poorer. Or you are just making a statement of esthetic opinion.

    Which is fine, the intertubes are overwhelmed with esthetic opinions, but Barry’s market share of the esthetic opinion blog market is miniscule in comparison with his market share of the capital markets/economics blog market.

  19. Gary says:

    “it seems that a lot of Barry’s audience is composed of people who have a strong interest in finance but think today’s level of income inequality is unhealthy.”

    I don’t know about a lot of people, but I think it’s unhealthy. Forget pitch forks and torches, guillotines are coming.

    “I’ve never seen anyone make a compelling argument around the income inequality story.” Uh, French Revolution; Russian Revolution.

    Jared Diamond’s words while speaking to the extreme fit here — “In the long run, rich people do not secure their own interests and those of their children if they rule over a collapsing society and merely buy themselves the privilege of being the last to starve or die.”

  20. Hack says:

    Even if the government were to take the money and redistribute it evenly, it would find its way back to the most productive agents and again be unequal by a wide margin. should we take the profits from successful investors and redistribute it to the crappy ones? I don’t think one investor should have better returns than another, I don’t care about the work of the investor or his/her advisor – it’s just not fair.

    Most of the damage done to the economic well being of Americans is self-inflicted through poor decision making whether it is to study/stay in school, saving rather than borrowing, or deciding to be more interested in what *they* should doing rather than what Hollywood/Athletes are doing. While the US may not be a true free market it is free-er than most and that means freedom to succeed or fail.

    People should worry less about what others could do for them and think more about what they can do to improve their own lot in life. Whether people want to believe it or not, there is no other place on this planet that offers a better opportunity for economic freedom and the resulting cash than the US.

  21. BDG123 says:

    There is a real divide that has developed for the first time in nearly eighty years. Usually wealth creation is used by socialistas to bash those who actually have created wealth and achieved economic success. But, this time it really is different. It’s different in the sense that history repeats itself and the last time we saw this environment coupled with other contributing factors was the 1920s. It also explains why Wall Street is so disconnected from main street. I have done some pretty heavy duty work around this area. This is a highly overlooked area of economics that seems to float right by without most naybobs even acknowledging it. The outcomes, both positive and negative, are very quantifiable, predictable and substantial.

  22. Gary-

    That was beyond hyperbole. The median American’s life is amazing in absolute terms — it would be hard to prove otherwise, unless the only thing that matters is where you stand relative to the wealthiest people in your society. And if that’s the case, definitionally, your bound to advocate some form of socialism. And in that case, the real outcome is the wealthy and the productive just move somewhere else — or at least, arrange it such that they don’t pay taxes here.

  23. Ross says:

    I just took a closer look at those stastics. What jumped out at me was how much inflation the suffering rich absorbed. Up 55.9% in just two years!

    Whaddya mean you want $15,000 a week for that yacht? It ain’t even 50 meters…

  24. E says:

    BDG – could you expound on that some more? The part about how “it’s different this time”. I’m not being argumentative – I read and like your blog. I just don’t see how existing levels of relative wealth inequality within what is top to bottom the most wealthy society in this planet’s history is a big story. We’re all well off, even the poorest of Americans, when compared to predecessors or economic peers in other nations.

  25. VJ says:

    Bruce,

    Ya gotta be careful with supposed metrics like “family income“, as it can be problematic, just as “Household Income” isn’t really a measure of ANYTHING (unless one is comparing the exact same households over time).

    The chief of the Census Bureau’s ‘Housing and Household Economic Statistics Division‘ has pointed out that while reported inflation-adjusted median “Household Income” has been rising for years, inflation-adjusted median wages and salaries have been falling over the same period.

    As to the (post ’92) 1990s, we experienced the longest consecutive yearly increase in inflation-adjusted wages since the 1960s.
    .

  26. Don says:

    Poverty and wealth are always only relative measures. It’s why Jesus’ could correctly point out that the poor will always be with us (which never ceases to confuse the theologians but makes perfect sense to me). In any ranking, there has always got to be a bottom.

    That said, the poor in America today (the bottom quintile) are fabulously more wealthy than the rich were even a couple of centuries ago. They are only poor by comparison w/ the rest, that are richer still. Compare them to the world’s poor in sub-Saharan Africa, and again they are rich beyond pale.

    Personally, so long as I and mine have got food, clothing and shelter, (and TBP) the rest is gravy, and it bothers me not a wit that some (perhaps lesser-endowed in other areas) feel compelled to fly helicopters off of yachts to prove their worth–so long as I don’t have to subsidize their yachts and helicopters, directly or indirectly.

    I won’t get break out the guillotine so long as they don’t try to take money from me to pay for their toys. France and Russian, and to some extent the Nationalists in China, fell because they were doing just that. That has mostly not been the case here in America, at least until this latest banking crisis essentially nationalized the mortgage banking system so a bunch of rich guys could stay that way…we’ll see how that turns out.

  27. ramster says:

    DocLove, I think it goes something like this:

    - the finance and senior managerial classes have created an increasingly complex and unstable financial system that is now tottering on the brink
    - this has been driven by greed and recklessness
    - in doing so, they appear to have skimmed off a huge amount of wealth for themselves while plunging the entire economy into peril
    - everyone’s about to suffer the consequences
    - the same clowns also want to be bailed out of this with public funds (you know, privatize the profits, socialize the risk).

    There are lots of us who support free markets and believe in capitalism and yet look at this and fume.

  28. SumBitch says:

    The problem isn’t rich people being rich. The problem is the tendency to burn down the bridges behind them that led them to success.

    Monopolies and govmint intervention on behalf of the few is the real story.

  29. ramster says:

    And incidentally, people who work in finance may be even more inclined to feel this way since they see the dirty dealings up close and personal. Only insiders can truly know how rotten a system is. (I’m not one myself)

  30. E says:

    I believe Barry posted something here a year or so ago about how the perception of income inequality and unfairness was highest among the near-rich. Paraphrasing, the study showed that many well-to-do people in the top 1-2% range resented the uberwealthy above them.

    Does this ring a bell with anyone else?

  31. B.B. says:

    E, Doctor of Love, Hack,

    Couldn’t agree more! I don’t care how much Kobe Bryant makes, he can play BBall way better than I. Or Bill Gates, he had the brains, inginuity, and hard work to emass his fortune, that I didn’t. I just dont get the arguement that they need to give more. Why? Because they have talents that I don’t? Thats life. Takes all kinds. I found my niche and am doing better everyday, thats all that matters to me and my family. If your talent pool left you with the skills of bagging groceries for the rest of your life, thats cool to, but accept it and live within your means.

    And I dont want to hear how poor everyone is. I have seen more ‘poor’ kids with Ipods and $100 tennis shoes than ever in my life.

    ok, sorry no more politcio rants, back to making money!! ya!

  32. DMR says:

    Moral of these statistics:

    Money can’t buy you happiness. But, it can buy you a boat big enough to pull up right next to it.

    Now, I’d like to know (not!) what In-home spa services are. So, that’s what people do when they get bored and want to spend money :)

  33. MensaJD says:

    So why does one assume that the wealth divide is a bad thing? So long as mobility exists amongst the classes, the divide is a big yawn (speaking as a lawful immigrant that started from the bottom 1% and is now in the top 1%). As long as we have relatively inexpensive, elite, public universities (go Bears!), ce n’est pas de probleme…

  34. VJ says:

    E,

    Call me dense, but I’ve never seen anyone make a compelling argument around the income inequality story.

    Warren Buffett ?

    Felix Rohatyn ?

    President Clinton ?

    Bill Gates ?

    Bill Gates Sr. ?

    Me ?
    (Plutocracies are anti-democratic, throwing money at the Rich & Corporate has never worked, etc.)
    .

  35. Gary says:

    Yes, my comments were probably extreme. Just trying to make a point and learn. I have no problem with the rich per se, but I happen to agree that having an increasing amount of the nation’s wealth controlled by a smaller and smaller pool of people is not healthy and not good for the country.

    My premise is that free-market capitalism is a necessary but not a sufficient condition for a successful society. If that makes me some kind of socialist — so be it.

    Just because someone is rich does not mean they are productive nor does spending money equate to creating wealth.

    Don — I agree with much of your post, but “That said, the poor in America today (the bottom quintile) are fabulously more wealthy than the rich were even a couple of centuries ago.” A strong case can be made that this isn’t so. And when you say “Compare them [America's poor] to the world’s poor in sub-Saharan Africa, and again they are rich beyond pale.” I would ask why, what makes this so?

    And while I don’t care how much most rich people like Kobe or Bill Gates make, I would question what makes someone like Angelo R. Mozilo such a productive and deserving individual. Though even this comment regarding how much someone makes is besides the point.

  36. VJ says:

    MensaJD,

    So why does one assume that the wealth divide is a bad thing? So long as mobility exists amongst the classes…

    Aye, but there’s the rub. It doesn’t.

    Income mobility used to exist in our society, but as I’ve previously posted, income mobility between generations has been falling since the radical change to our tax system in the early 1980s, whereas in prior decades to that it had been rising. Now, most children of rich parents stay rich, and most children of the poor stay poor. This is in stark contrast to nations such as Canada, Finland, France, and Germany, as well as to our nation’s own history prior to the shift to failed RightWing economics in 1981.

    Sure, there was a temporary reversal of this trend from ’93 to 2000, but it resumed it’s dismal march once again from 2001 onward.
    .

  37. DaveW says:

    From what I have read, some feel the Great Depression’s root cause was an issue of wealth in-equality. The problem comes from where the wealth goes so follows the power. Just look at who is paying the income taxes these days.

    Some think the same thing is happening now with a similar result. This might be more what Barry is concerned about than a morale issue.

  38. MensaJD says:

    VJ, my life is a counterexample to your premise that “Income mobility used to exist in our society,” so why should I believe you rather than my own experience? And I grew up in the “the hood.” Please don’t reply, it’s a rhetorical question…

  39. Pat G. says:

    Gary don’t defend your post as you are spot on. A rising tide is supposed to lift all boats. When Buffet pays less in taxes than his hired help something is amiss. Look no further than our government for the root of this problem.

  40. TDL says:

    Who really believes Warren Buffet pays less in taxes than his hired help? Unless Buffet has no income whatsoever then I highly doubt that he pays less taxes than the hired help. Furthermore, would someone care to detail what laws, regulations, and taxes are keeping people in the same “classes” they were born in? Someone made the comparison of France and Russia earlier. In Russia, unless you were part of the nobility, people were mostly legal tied to the land and were for the most part prevented from starting businesses. The Ancien Regime was basically the same as Russia. Where are the laws that tie individuals to the “class” they were born into? Where are the laws that prevent the poorest of the poor from starting a business and attempting to make a better life for themselves. The study that Mr. Ritholtz decided to criticize may indeed be disingenuous, but the claims that income inequality is increasing at an alarming rate and that is threatening our republic (note: the U.S. is not a democracy it is a federated, representative republic) are equally disingenuous. Stealing from one group to give to another does not creating a better society, it merely undermines society as a whole. Apologies for the long post.

    Regards,
    TDL

  41. freejack says:

    No stats for private aviation?

    You know these folk are NOT putting up with all the security measures & showing up 2 hours before flight time. (Buffet didn’t buy Netjets because he liked the catering)

  42. VJ says:

    MensaJD,

    VJ, my life is a counterexample to your premise that ‘Income mobility used to exist in our society,’ so why should I believe you rather than my own experience?

    First, because allegorical examples are notoriously unreliable. I could make the very same claim as you, but neither of us represents the majority in our society.

    Second, because a whitepaper on the subject, recently updated, was done by Bhashkar Mazumder, an economist at the Federal Reserve Bank of Chicago, and it details just what I posted, that unlike the decades prior to the early ’80s, income mobility between generations has been falling, with most children of rich parents staying rich, and most children of the poor staying poor.

    EARNINGS MOBILITY IN THE U.S. – LINK

    Please don’t reply, it’s a rhetorical question…

    No it isn’t.
    .

  43. freejack says:

    “Who really believes Warren Buffet pays less in taxes than his hired help?”

    Nobody. Not even Buffet.
    Now if you want to look at what he really said…..
    “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”

    http://business.timesonline.co.uk/tol/business/money/tax/article1996735.ece?print=yes

  44. VJ says:

    TDL,

    Who really believes Warren Buffet pays less in taxes than his hired help?

    Buffett never claimed he “pays less in taxes than his hired help

    Why are some so baffled by his well documented assertion ?

    The study that Mr. Ritholtz decided to criticize may indeed be disingenuous, but the claims that income inequality is increasing at an alarming rate and that is threatening our republic … are equally disingenuous.

    By what measure ?

    (note: the U.S. is not a democracy it is a federated, representative republic)

    Of COURSE America is a democracy. It is a representative democracy in the form of a republic.

    Stealing from one group to give to another does not creating a better society, it merely undermines society as a whole.

    Yep.

    The massive levels of Corporate Welfare and tax cuts for the Rich & Corporate are disgusting.
    .

  45. Pat G. says:

    “Who really believes Warren Buffet pays less in taxes than his hired help?”

    He does. Those were his words not mine.

    “Stealing from one group to give to another does not creating a better society, it merely undermines society as a whole.”

    Like the FED socializing risk by creating money out of thin air in order to bailout corporations at the expense of average U.S. citizens through inflation.

  46. Diogenes says:

    Oh for God sake Barry, you can see right there, they had to cut back on decorating!

    And yacht fuel has gone through the roof!

  47. larry says:

    This backs up my theory that America is dumbing down at an accelerated rate. Why? A goodly number of the people that vote in the politicians that cut taxes for the rich and give out no bid contracts, etc are blue collar or mid range white collar. However, due to some superb polilicing to the gun crown, the anti-abortion crowd, the evangelicals, etc. the do not taqx the rich crowd maintains their power. This is not a political blog, but until people vote their economic interests, there will not be politicians that develop policies that help the middle classes. If you want your children to have a financially secure, healthy future, do not vote for some bozo simply because he is anti-abortion, favors gun rights or whatever hot button issue is out there. If we did this there would be an infinite variety of investing options in the USA.

  48. MensaJD says:

    “First, because allegorical examples are notoriously unreliable. I could make the very same claim as you, but neither of us represents the majority in our society.”

    So if you’ve made it to the top 1% from the bottom 1% then you’ve proved my point re: social mobility. Quit whining…

  49. Street Creds says:

    Don’t get too envious. I was in a competitive business to NetJets, and I don’t think Buffet ever made a dime on it. Too few customers, too much competition, and too many fixed costs.

  50. wunsacon says:

    >> Personally, so long as I and mine have got food, clothing and shelter, (and TBP) the rest is gravy,

    Don, there are people out there less fortunate than you and me who don’t even have what you just enumerated. Tax-cuts-for-the-rich — and sending the poor or middle-class to fight in Iraq — is not a moral choice.

    >> speaking as a lawful immigrant that started from the bottom 1% and is now in the top 1%
    >> So if you’ve made it to the top 1% from the bottom 1% then you’ve proved my point re: social mobility. Quit whining…

    The question isn’t “is there any mobility?” The question is “how much mobility is there?”

  51. rexl says:

    sometimes this blog is beautiful lika a jazz riff.

  52. VJ says:

    MensaJD,

    So if you’ve made it to the top 1% from the bottom 1% then you’ve proved my point re: social mobility.

    No, you’ve proven my point. Allegorical examples are notoriously unreliable, not to mention unrepresentative.

    Read the whitepaper, instead of being uninformed.
    .

  53. drtomaso says:

    Clearly this survey is not scientific- lap dances were not even listed.

    When I finally break into the 1%, thats how I plan to redistribute my income.

  54. Dave says:

    On a worldwide basis the average American is in the top decile, and the average upper middle class American is in the top 2%

    If you really don’t like income inequality just give all 90% of your money to the worldwide poor.

  55. TDL says:

    Just to clarify, I am not a cheerleader for the economy (in fact I’m bearish.) I fully agree on corporate welfare (and welfare of all kinds) and the Fed as mechanisms of redistribution. What I fundamentally disagree about is taxation. Income inequality can not be resolved through a system of theft. The comparisons b/n the U.S. and the Ancien Regime or Czarist Russia are profoundly inaccurate. There are deep systemic problems in the economy and they are caused by government interventions to reduced by government interventions.

    VJ,
    A republic is different from a democracy regardless of the similarities (i.e. voting), the founders were profoundly opposed to democracy and opted for a mixture of different systems. Forgive the digression into political philosophy. Thanks for providing that FRB link.

    Regards,
    TDL

  56. VJ says:

    TDL,

    A republic is different from a democracy…

    An archaic notion.

    It carried some weight when there were requirements that voters were White men who owned property, but in modern times, our republic is a representative democracy.
    .

  57. miami says:

    You have to use a longitudinal study or your results are useless. If you use two different ‘families,’ one that’s worked for 10 years and one that moved here from Mexico last year, you get different results vs tracking the same family.

    US Treasury Study of Income Mobility-

    Note the very, very large gap btw reality and what the media tries to force-feed everyone:

    “This study examines income mobility of individuals [96,000+] over the past decade (1996 through 2005) using information reported on individual income tax returns.”

    http://www.treas.gov/press/releases/reports/incomemobilityst

    ‘• There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years.
    • About 55 percent of taxpayers moved to a different income quintile within 10 years.
    • Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
    • The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).

    • Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation.

    The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

    The degree of mobility in the overall population and movement out of the bottom quintile in this study are similar to the findings of prior research on income mobility.’

    In fact, only 44% and 47% moved up from lowest bracket in the 1967 and 1977 study versus 58% by one measure in the latest study.

    Median income of the top 5% dropped by 7%.
    The top 1% dropped by 26%.
    The lowest 20% bracket of income gained 91%!

    Using 1-year snapshots of income is 5th grade math, not even.

    Finally, the so-called ‘disparity’ in income brackets must always rise, as the bottom end starts at $0.00, whereas the bottom of the top bracket will always rise over time if only due to inflation.

  58. VJ says:

    miami,

    There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005…

    How convenient to choose 1996 as a starting point.

    The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996)

    Again, how convenient to choose 1996 as an end point.

    Try comparing the periods prior to 1981, the period from 1981 to 1992, the period 1993 to 2000, and from 2001 forward.
    .

  59. OhNoNotAgain says:

    “I won’t get break out the guillotine so long as they don’t try to take money from me to pay for their toys.”

    But, Don, they *have* been doing so if you pay SS taxes (which I assume that you do). The SS deal in the 80′s was exactly that. The government raised SS taxes on working people and has since continued to use that money to cover the shortfall in the general fund caused by tax cuts for the upper income brackets and the prosecution of needless wars that provide the wealth for a bunch of buddies that suck on the teat of the US government. Then they go on TV and decry the sorry state of affairs that SS is in and how all of the working joes are just going to have to take one for the team with reduced benefits. It’s outright theft from the working classes into the pockets of the wealthy. If you want to cut taxes for the wealthy, fine. But you sure as hell better come up with a way to pay for it that doesn’t involve stealing money from the retirement fund of the majority of Americans.

    Then there’s the whole recent issue of Wall Street essentially defrauding municipalities and other institutional investors to the tune of billions of dollars by misrepresenting the soundness of these exotic investment vehicles that they had invented out of thin air. One thing I can tell you for sure – that money didn’t go to inner city youth programs. And these funds that are now gone are also the retirement funds for many Americans.

    Many of you here seem to think that this “inequality thing” is all a bunch of hogwash and doesn’t matter. Let me assure you, you’ll find out how much it matters very quickly when the backlash occurs and the top tax brackets start shooting right back up. Contrary to popular belief, people in this country *do* remember that they can vote, and the numbers aren’t on the side of the top 1%. We’ll right this ship, but those that benefitted the most over the last 20 years are also going to be the ones that are going to pay the majority of the tab.