Hudson on the Piketty Phenomenon

[DSpencer]

Re: Hudson on the Piketty Phenomenon

Whoops. In my case, yes, it was all for nothing and I'm sorry for having a brain glitch that didn't see that. However, the article does say that PPP is not a very precise way of measuring things and there's going to be some hand-waving. Hand-waving by economists always lights up the "fiction" sign in my head. That said, even if PPP is an accurate way of measuring purchasing power across nations, it's my opinion that it's not good enough to say, "We here in the U.S. have a standard of living comparable to places like India and China if we factor in PPP. Good enough. There's no real reason to want any better."

Whatever happened to the ideal that had 1950's billboards in the U.S. proclaiming, "The highest standard of living in the world."? Are we also going to be content if our universities become comparable to other universities in typical countries of the world? Should Kennedy have said, "Let's not bother going to the moon because, heck, it's not like anyone is close to landing a man on the moon!"?

I hardly consider myself a liberal and I positively detest giveaways but it really bothers me that there are citizens in this country who want to earn a living but can only find work that pays about $8.00/hour. Yes, these people are unskilled but at $8.00/hour, they'll be hard-pressed to amass enough money to pay for everyday living expenses (rent, food, transportation, utilities) and still have the time and monetary resources to pursue additional training that will allow them to earn more money.

One of the things I like(d) about the U.S. is that even truly wealthy people can walk among regular people without much worry about getting kidnapped, robbed, or murdered. This is only possible in a nation where the regular people are generally well-off. If the U.S. continues on its road of impoverishing the vast majority of its population, it will end up being like South America where the wealthy live in concrete houses surrounded by concrete walls topped with barbed wire with armed guards patrolling the premises. If that should happen, who are the prisoners? The people inside the walls or the people outside the walls?

Sorry to be a jerk on the PPP issue but I was frustrated. I agree it's not a perfect way of comparing things, but I don't know of a better one.

It may be worth remembering, this is not a book written by an American about how America can retain a higher standard of living. This is a book written by a Frenchman who is advocating a GLOBAL system of taxation to combat inequality.

My point is that someone in the US who is making $10 an hour should thinking carefully about what it means to push for global wealth equality when they are already in the top half.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

But no one here is advocating that?

I'm referring to the position that Piketty and Hudson apparently advocate:

“Well, you need to somehow tax the wealth away”. Well, that’s true, but that’s for another book in the future.

Or maybe you take issue with the "give it to ourselves" part of my comment. If so, all I can say is that is implied because it is always the M.O. Whether directly or through reduced taxes for others the end goal is always the same. This isn't like the scene from Batman where the joker burns a pile of money. They obviously want to redistribute it. Even if they did burn (or delete) it, it would be a deflationary way of accomplishing the same thing.

[Woodsman]

Re: Hudson on the Piketty Phenomenon

Sorry, buying none of it.

First of all, most of the extremely rich did not earn their billions. Read Joan Didion’s Where I Was From for an eye opening account of how the rich stole the public’s land and money and gave back a pittance. Many of the colleges and universities we take for granted are named for scoundrels. Thaksin Shinawatra maybe the only man on earth who was a cop in his thirties and a billionaire in his forties. The US has many such characters. Bill Gates may be giving much or even most of it away, but what a tax he put on individuals, schools, governments, and businesses to get that rich.

It's total, unmitigated bullshit, this idea that the very rich are "giving" their wealth away. It's part and parcel of the long discredited notion that philanthropy is a sufficient replacement for public action and investment.

One would imagine most anyone considering putting forth such an argument would self-censor to avoid certain embarrassment at revealing their credulity, but such is the heady mix of ideology, self-interest and faith that lies at its base. In my opinion, there's not a popular article, speech, video, book, or scholarly monograph that would put the slightest dent in the certainty of the people who advance this idea.

Now there's no question that nominal amount of dollars going into philanthropy has increased along with the fortunes of the top out of sight rich, but so has every metric associated with that tiny minority community. And all things being equal - which they certainly aren't - it is better to encourage philanthropy than to discourage it. It can and has been transformative when focused on specific organizations and select groups of people.

But in terms of resolving vexing social challenges like extreme inequality, it makes the problem worse. The very rich may be selfish and immoral, they may be small minded and provincial, but what they are not is ignorant of those actions and arrangements that keep them wealthy. Does one imagine they actively pursue lines that threaten their position? Of course they don't. They use philanthropy to strengthen those arrangements that make extreme inequality possible in the first place. To them it is part of the arsenal of class warfare. The very rich use philanthropy as a carrot to win people over to their ideology and as a complement to their stick of political largess.

By far the finest example of this approach are those charities and advocacy groups founded by David and Charles Koch. The tens of millions they spend yearly on federal and state lobbying goes hand-in-glove with their nonprofits’ public advocacy, and all for reasons having everything to do with the brothers’ sprawling business and ideological interests. Far from helping the public, this brand of misanthrope philanthropy is a form of self-therapy for the world’s very rich. The world’s wealthiest in the end give to nobody but themselves.

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

The richest are already planning to give away most of their wealth to philanthropy:

Sorry, buying none of it.

First of all, most of the extremely rich did not earn their billions. Read Joan Didion’s Where I Was From for an eye opening account of how the rich stole the public’s land and money and gave back a pittance. Many of the colleges and universities we take for granted are named for scoundrels. Thaksin Shinawatra maybe the only man on earth who was a cop in his thirties and a billionaire in his forties. The US has many such characters. Bill Gates may be giving much or even most of it away, but what a tax he put on individuals, schools, governments, and businesses to get that rich.

[vt]

Re: Hudson on the Piketty Phenomenon


"he should use his exceptional abilities to deploy his money to improve society as Andrew Carnegie suggests in The Gospel of Wealth."

The richest are already planning to give away most of their wealth to philanthropy:

http://givingpledge.org/

Go to this site and see huge commitment to society that the top .001% is giving back.

The Giving Pledge is a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to philanthropy.

Bill and Karen


.

[Milton Kuo]

Re: Hudson on the Piketty Phenomenon

What befuddles many who are not wealthy, including myself, is why anyone with high income and/or net worth is attacked for success.

The counterpart to that question is: Why would anyone support laws that create dynasties of wealthy when most of those people are likely to be harmed by such policies? The answer to that, I believe, is because estate taxes are framed as the government taking away the pittance of an estate that most people leave their heirs. It's my understanding that in the vast majority of cases (over 90%), there are no inheritance taxes at all since the estate isn't large enough to cross the threshold for taxation to come into effect. This is similar to how people who have a $200,000 mortgage falsely believe that eliminating the mortgage interest rate deduction would increase their tax burden.

I've found two lines of thought among people who are calling for some sort of legislation to prevent dynastic wealth. The more extreme thought is along the lines of, "I don't see why anyone would ever need $70bln. The government should take away $X from everyone and allow them to have a maximum net worth of $Y." This argument also calls for modifying income tax laws such that every dollar of income over a certain amount is taxed at some extremely high rate, say 99% or so. A wealth tax (I believe Piketty supports wealth taxes as a policy but admits that it's politically impossible) is another common idea among this line of thought.

The second line of thought is to allow people to accumulate as much money as they want while they're living and tax the the estates heavily once the wealthy person dies. If the nabob doesn't want the government piddling his money away on $100,000 hammers and other such silly things, he should use his exceptional abilities to deploy his money to improve society as Andrew Carnegie suggests in The Gospel of Wealth. Whether a certain amount of money can be inherited by heirs tax-free or not is not something I've run across.

Of the two lines of thought above, I am a proponent of the second. I also support the ability for exceptionally wealthy people to bequeath something like $20mln, adjusted for inflation, tax-free to each of their beneficiaries so that the beneficiaries would never have to worry about money in their lifetimes. (Buffett's, "Enough that they would feel they can do anything, but not so much that they could do nothing.") Anything above that amount should be punitively taxed to prevent dynasties of wealth that ultimately get bored and start buying politicians.

[vt]

Re: Hudson on the Piketty Phenomenon

Inequality was the highest during the early 2Oth century:






This is a good non-partisan study of inequality:

http://www.stanford.edu/group/scspi/...U_2014_CPI.pdf

[vt]

Re: Hudson on the Piketty Phenomenon

http://money.cnn.com/2013/12/30/tech.../tim-cook-pay/

Tim Cook took home $40 million in 2013, not $365 million. Though one could argue even $40 million was way too much. Figures should be backed up by documentation.

Business owners who sacrifice and build a business (often failing a couple of times along the way, including bankrupticies), plus create jobs also deserve higher pay.
Most can agree that certain corporate executives, hedge fund managers, etc. are paid way too much.

As for Doctors we've reviewed this before. Not only do they have 4 years of medical school, but in some cases 6 to 7 years of very low paid residency. They lose a decade or more to those with a bachelor's degree. They deserve higher pay and work harder than most people.

The problem with the Piketty's argument is that it treat anyone with an income of $250K as undeserving. We already taxes estates greater than $5 million at a high rate. There are people with higher incomes that deserve them and many who don't. There are those with higher net worth that use it for good and many who don't. How does one decide who does and who doesn't?

We've also discussed charity where some bequests have done much more than government programs, many of which enrich bureaucrats and lobbyist clients.

In high tax states incomes are already being taxed at over 50% above certain levels.

What befuddles many who are not wealthy, including myself, is why anyone with high income and/or net worth is attacked for success.

[llanlad2]

Re: Hudson on the Piketty Phenomenon

In fact there IS a particular relationship between a person's income and their value to society. It's called supply and demand. It's partially distorted in the case of government workers but even then there is usually some supply and demand relationship.
The people that take away your garbage are also critically important to ensuring you have a safe living environment. I dare say the service they provide is far more beneficial to society than a surgeon who can remove a brain tumor. However, the skills needed to drive a truck and throw garbage in it are far more common than those of a brain surgeon. For this reason society is willing to pay more for the skills of the surgeon.

This isn't a problem so much as it is a fact of life. The problem comes when people think they can suspend reality and that everyone will benefit as a result.

I agree with you there is a particular relationship between a person's income and their value to society. It's inverse. The more useful a person is to society the less they generally get paid. As for the supply and demand argument it doesn't really hold up. In some countries a surgeon earns 10x a manual worker whilst in others they may earn less. There was no shortage of people who could have been or wanted to be CEO of APPLE. Tim Cook could stay at home 365 days a year and Apple would still make billions-so why does he get paid 365 million dollars a year? I would have done it for far less. If he was taxed 90% on that it would be called "government robbery". Yet he along with the board are are allowed to rob the shareholders for their own personal gain and be respected for it?

[Southernguy]

Re: Hudson on the Piketty Phenomenon

"If that should happen, who are the prisoners? The people inside the walls or the people outside the walls?"
The people inside de walls have the choice to give their richess away and live outside the walls.
The other bunch have no choice.

[Milton Kuo]

Re: Hudson on the Piketty Phenomenon

Which is why the study I quoted uses purchasing power parity dollars which equate nominal amounts into the equivalent purchasing power of $1 in the US.

I also specifically pointed that out in my original post so that people wouldn't have to read the article to realize that. All for nothing it appears.

Whoops. In my case, yes, it was all for nothing and I'm sorry for having a brain glitch that didn't see that. However, the article does say that PPP is not a very precise way of measuring things and there's going to be some hand-waving. Hand-waving by economists always lights up the "fiction" sign in my head. That said, even if PPP is an accurate way of measuring purchasing power across nations, it's my opinion that it's not good enough to say, "We here in the U.S. have a standard of living comparable to places like India and China if we factor in PPP. Good enough. There's no real reason to want any better."

Whatever happened to the ideal that had 1950's billboards in the U.S. proclaiming, "The highest standard of living in the world."? Are we also going to be content if our universities become comparable to other universities in typical countries of the world? Should Kennedy have said, "Let's not bother going to the moon because, heck, it's not like anyone is close to landing a man on the moon!"?

I hardly consider myself a liberal and I positively detest giveaways but it really bothers me that there are citizens in this country who want to earn a living but can only find work that pays about $8.00/hour. Yes, these people are unskilled but at $8.00/hour, they'll be hard-pressed to amass enough money to pay for everyday living expenses (rent, food, transportation, utilities) and still have the time and monetary resources to pursue additional training that will allow them to earn more money.

One of the things I like(d) about the U.S. is that even truly wealthy people can walk among regular people without much worry about getting kidnapped, robbed, or murdered. This is only possible in a nation where the regular people are generally well-off. If the U.S. continues on its road of impoverishing the vast majority of its population, it will end up being like South America where the wealthy live in concrete houses surrounded by concrete walls topped with barbed wire with armed guards patrolling the premises. If that should happen, who are the prisoners? The people inside the walls or the people outside the walls?

[ProdigyofZen]

Re: Hudson on the Piketty Phenomenon

Simply saying "look how much money these rich people have, therefore we should institute a heavy tax on their wealth and give it to ourselves" is not a sound argument in my opinion.

But no one here is advocating that?

[DSpencer]

Re: Hudson on the Piketty Phenomenon

Really, that's what you think? Ever consider how much more do these people take, spence, percentage-wise?

Does this matter at all to the conversation on inequality?

I have seen similar visuals before and never have I claimed inequality doesn't exist. However, I was trying to address the other questions posed by PoZ.

Simply saying "look how much money these rich people have, therefore we should institute a heavy tax on their wealth and give it to ourselves" is not a sound argument in my opinion.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

It costs at least 70% more to live in the U.S. than where the average world worker lives.

Which is why the study I quoted uses purchasing power parity dollars which equate nominal amounts into the equivalent purchasing power of $1 in the US.

I also specifically pointed that out in my original post so that people wouldn't have to read the article to realize that. All for nothing it appears.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

Spencer this isn't much of an argument. Sure everything is relative but the poor living in the US have to live in the US and compete with wages here not the wages in China or India.

But I can agree that usually people who think something should be done are on the lower end (as it benefits them) but then again the people on the high end have benefited from FIRE policies for the better part of 30+ years, why would they complain?

Every leader of every country is "supposed" to enact policies that help their own citizens not the citizens of other countries.


[/COLOR]

You don't think workers in the US have to compete with workers in China or India?

My point is that someone who is "for equality" is not very convincing when they are only for the specific equality that benefits them.

If inequality is bad, then equality is good right? But is that what people REALLY want? Or do they just say that when it's convenient?