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May 16, 2005

The Dichotomy is Dead, Long Live the Dichotomy!

I very much like Matt's point on this:

Like most Americans, though, I'm inclined to forgive inequality if it leads to nationwide prosperity and if our society remains mobile -- the sort of place where a person born poor has a fair shot at getting rich. The common presumption is that America is an unusually mobile country in this sense, more mobile than tradition-bound Europe and more mobile than the more hierarchical, slower-paced economy of decades ago. The reality is that this isn't really true. The United States has grown somewhat less mobile since the 1970s, and exhibits less mobility than do the continental European welfare states or Canada. We're slightly more mobile than the relatively laissez faire United Kingdom.

It's not just, however, that we're willing to forgive inequality if it offers prosperity and mobility, we're actually willing to trade it. The American ethos is a value judgment that we'd prefer the potential for greatness over the guarantee of goodness, and we've structured our economy, to a large degree, as if the two are mutually exclusive. But if the studies are true and Europe's socialist utopias are offering greater social mobility and a guarantee of relative equality, at least on basic levels, then we've really screwed up along the way, haven't we?

I've little hope that we'll address this, though. The overarching evils of vast inequality and the transcendent good of do-it-yourself mobility are such foundational philosophical tenets of America's two parties that I can't see either coming to recognize that the fix, such as one exists, might be the same for both. Indeed, while the Democratic party may be convincible simply because the solutions line up with our proposed programs, Republicans will, for good reason, never relinquish the strict dichotomy they've created between individual mobility and general equality. The belief that large social programs must be avoided because they tamp down on individual virtues stretches back to Hoover and Associationalism, it's not going to be given up now.

May 16, 2005 in Economics | Permalink

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» It's gonna be a class war from Pandagon
Prometheus 6 points out that the NY Times is going to be running a series on class in America, which is an idea that's long overdue. The introduction to the series talks about how American class mobility is on the... [Read More]

Tracked on May 16, 2005 6:32:18 PM

» It's gonna be a class war from Pandagon
Prometheus 6 points out that the NY Times is going to be running a series on class in America, which is an idea that's long overdue. The introduction to the series talks about how American class mobility is on the... [Read More]

Tracked on May 16, 2005 6:33:42 PM

Comments

Actually, I don't view mobility as a great good in and of itself, and one would expect income redistribution schemes to result in a great deal of mobility (especially when looking at the lower half of the income distribution.)

More signifigant to me is general quality of life for the poor. I don't care about inequality if everyone is doing better, the fact that some are doing better than others seems largely irrelevant if even the poor are improving.

Certainly some data in the past few years that indicates wages are growing at a slower pace than inflation is worrying, and if the trend continues for a time will be a cause of great concern. For the most part though, this has certainly not been the case in America and it seems likely to me that it is a temporary abberation of the economic cycle.

It is also important to note that poor people in America have as much money as average people in Sweden. While comparing quality of life from country to country can be difficult, I think that most people will agree that at least in terms of disposable income and 'stuff' Americans are better off that almost all other nations, even our poor do very well when compared internationally. Things like subsidized/nationalized health care can offset that balance somewhat, but it certianly isn't as clear as you make it sound.

Posted by: Dave Justus | May 16, 2005 2:00:03 PM

Ehh, Dave...

No?

Poor people in America do not have as much money as average people in Sweden. That's simply not true. Poor Americans are really, in absolute terms, worse off than poor Swedes (let alone average Swedes).

And the British Sutton Trust has just published a report in which the UK and the US also competed for the title of most class-ridden nation of the developed world, but where the data showed the US was just slightly worse than Britain. You can read my rant here.

Posted by: jasper emmering | May 16, 2005 4:10:39 PM

Perhaps the EU socialist "utopias" have greater social mobility DOWNWARDS?

Also which countries are the destinations of choice of third world economic migrants? I would suggest USA, UK and Australia would be higher up the list than Belgium, Finland and Sweden.

Posted by: Boethius | May 16, 2005 7:49:19 PM

"Perhaps the EU socialist "utopias" have greater social mobility DOWNWARDS?"

Huh? What does this even mean? Did you actualy *read* the data? It was all about relative speed in upward mobility...

Posted by: Ezra | May 16, 2005 8:26:17 PM

Increased upward mobility in Europe makes a great deal of sense when you think about it -- when you have access to as much education as you can stand regardless of how much money your parents have or how highly paid a job you intend to get when you graduate, you can learn stuff that will make you much more productive in whatever you do. When you can start a business without fear of you and your family becoming homeless if it fails, you're more likely to prosper. And if you're not condemned to the underclass for some minor legal transgression in your teen years, just because you're poor, ditto. (There's also an interesting outcome in terms of family trades in Europe -- if you're not going to be uninsured and mired in poverty as a result, being a stonecutter or a baker or a decent-priced auto mechanic is a good living.)

The US seems to be modeling its society ever more closely on one of the stern protestant pilgrim's-progress myths -- one slip from the strait and narrow upward path, and it's the pit for you.

Posted by: paul | May 16, 2005 9:22:53 PM

Regarding average Swedes being poorer than that poor in America here is a source for that: Middle American News. "The study shows that law-abiding Swedes, who are often perceived as living in material comfort and affluence, are poorer than African-Americans, the most poverty-stricken group in the United States."

More detail on the study and how it was calculated are in the article.

As I posted originally, quality of life can be difficult to determine from country to country.

In regards to Boethius's comment and Ezra's reply about social mobility being downwards, IF you judge people based upon the income percentile in their country than for every person who moves up, someone moves down. So the downward mobility MUST equal the upward mobility by the very nature of the ranking system.

That is part of what I don't like about this sort of comparison. I don't believe economics is a zero sum game, it is possible for EVERYONE to improve (and it is possible for everyone to decrease in wealth as well, although that is unusual.)

Posted by: Dave Justus | May 17, 2005 2:34:09 PM

Let me quote Krugman on that:

A few months ago the conservative cyberpundit Glenn Reynolds made a splash when he pointed out that Sweden's G.D.P. per capita is roughly comparable with that of Mississippi -- see, those foolish believers in the welfare state have impoverished themselves! Presumably he assumed that this means that the typical Swede is as poor as the typical resident of Mississippi, and therefore much worse off than the typical American.

But life expectancy in Sweden is about three years higher than that of the U.S. Infant mortality is half the U.S. level, and less than a third the rate in Mississippi. Functional illiteracy is much less common than in the U.S.

How is this possible? One answer is that G.D.P. per capita is in some ways a misleading measure. Swedes take longer vacations than Americans, so they work fewer hours per year. That's a choice, not a failure of economic performance. Real G.D.P. per hour worked is 16 percent lower than in the United States, which makes Swedish productivity about the same as Canada's.

But the main point is that though Sweden may have lower average income than the United States, that's mainly because our rich are so much richer. The median Swedish family has a standard of living roughly comparable with that of the median U.S. family: wages are if anything higher in Sweden, and a higher tax burden is offset by public provision of health care and generally better public services. And as you move further down the income distribution, Swedish living standards are way ahead of those in the U.S. Swedish families with children that are at the 10th percentile -- poorer than 90 percent of the population -- have incomes 60 percent higher than their U.S. counterparts. And very few people in Sweden experience the deep poverty that is all too common in the United States. One measure: in 1994 only 6 percent of Swedes lived on less than $11 per day, compared with 14 percent in the U.S.

Posted by: jasper emmering | May 17, 2005 4:24:58 PM

The belief that large social programs must be avoided because they tamp down on individual virtues stretches back to Hoover and Associationalism, it's not going to be given up now.

Military? Ag subsidies? Highways? Corporate subsidies?

Um.

Posted by: Matt Stoller | May 17, 2005 9:43:19 PM

I don't mean this in a mean way, but the American conservative is the stupidest being on the planet, now that the poor dodo is gone. They literally have not yet grasped the Bill Gates Fallacy yet - if Bill Gates walks into a bar, the average person in the bar is now a billionaire.

Once you realize you're dealing with dumb, dumb to the bone, you see why they think the US is not yet privatized enough, not yet deregulated enough, not yet monopolistic enough, not yet imperialistic enough, and not giving nearly enough out as corporate welfare. Why they think the citizens are too free and the society too equal. Otherwise, they'd retire from politics, their work done, instead of using physical violence and vote fraud to cling to power (2000, 2002 & 2004) for the Republican Party, which states it believes all the things I just listed.

Posted by: Marion Delgado, WH Press Secretary-Designate | May 27, 2005 3:19:39 AM

Vapire style government has got to stop.

The Impact of Tax Corruption in the United States

Section 1 - Annihilation by Taxation
Terrorists blow up a building in New York. The government blows up the economy with an expensive foreign war, and padded tax bills. The concept that taxes can be limitless and do not need to have any relationship to services provided is very old. History has repeated itself again.

Most people have no idea of the devastating impact of uncontrolled taxation. They also get hit with indirect taxes in the form of inflation and businesses overcharging for their products. Each one percent tax reduces the population that can be supported by the economy by two percent (see the example below).

The following is a typical (hypothetical, but accurate) tax situation in Stonetown, Maryland, year 2006, in the Washington area.

TAX BASE EROSION
Like other big cities, the Washington area politicians are addicted to overtaxation. They lie awake at night thinking up ways to get the excess revenues into the right bank accounts. The population of Stonetown is 36 percent of what it would be without taxes.

HOW TAX IMPACTS THE AVERAGE RESIDENT
Stonetown has 6433 households, and a $250,000 average house value.
Stonetown tax - Needed for garbage collection:......$450 Paid: $2,000
County taxes - Needed for public schools, etc: $1,750 Paid: $4,000
The padded property tax bill is $6,000. The unpadded tax bill would be $2,200.

The exact tax burden formula is 1-(1-tax)(1-tax). The burden of a one percent tax is 2 percent (double the rate). A one percent tax on income lowers income by one percent and increases the price of goods and services by one percent (1+1=2). With tax amounts greater than 10 percent, accuracy requires that taxes be added together and the formula used.

The average household income is $50,000
Property tax rate: 12 percent of income
Income tax rate: 28 percent of income
Total tax:. . . 40 percent of income, $20,000

The tax is .40; 1-(1-tax)(1-tax) equals 1-(.6)(.6) equals 1-.36 = .64
A 64 percent tax burden that wipes out 64 percent of the population.

A rising population indicates that actual wages are rising relative to the actual cost of living. With skyrocketing taxes and actual cost of living, this will not continue for long.

IMPACT OF A SUDDEN $1,000 RISE IN PROPERTY TAX
An additional $1,000 increases the tax burden to 66.36 percent. This will cause a drop from 6433 to 6011 households (assuming a stable population). The impact is disastrous for the 422 households that were destroyed. Padding tax bills is a criminal activity that never should have been allowed to expand to the present level.

Tax and price controls are long overdue. Establishing tax control commissions and price control commissions is no different than any other government or business organization. There is a constant influx of subversives whose only
goal is the subversion of operations and defrauding of the public. Just as a rest room must be cleaned on a regular basis; crooks have to be removed from an organization on a regular basis.

Section 2 - The Proliferation of Billionaires

Top 10 countries, 2003/2006, billionaires
Rank Country Number
1 United States 269 (390 in 2006)
2 Japan 29
3 Germany 28
4 Italy 17
5 Canada 16
6 Switzerland 15
7 France 15
8 Hong Kong 14
9 Mexico 13
10 England 12
11 The rest 41

The world total was 453 billionaires in 2003, and 793 total in 2006. The US total is 390 in 2006. The lucrative nature of Defense Department spending and spending on overpriced software can be seen in that a number of the top 25 come from Microsoft corporation. The 793 are worth $2.6 trillion, an average of $3.3 billion each. As determined by the last US census, total assets in the United States are on the order of $30 trillion dollars. This is distributed among 92 million households; an average of $325,000 each. The top 10 percent of households own more than 90 percent of all assets.

There is a simple problem with the use of taxes to redistribute $3 trillion in assets from the masses to an American aristocracy that already has $27 trillion. When they already have it all, there is nothing left to redistribute. But they won't let that stop them. 90 percent isn't good enough - they want it all.

If you are one of the 121 people who became billionaires in the United States over the past three years obviously you do not have a problem. However if you are one of the victims whose income has been redistributed, you need to change your life style. Move into a one room apartment shared with five other families, make sure everyone has a job, sell your SUV and get a used motorcycle, limit driving to a maximum of 2000 miles per year, live on bread and water, wear a loin cloth, and forget about wasting any money on health care. Unfortunately, the current culture in the United States is the result of 230 years of progressively expanding corruption. A reversal of the trend is not expected anytime soon.

Section 3 - "Defeating the Global Tradition of Making Wrong Decisions."
Learn why training, careful planning, and regulation is not sufficient to prevent disasters; whether deliberate or accidental. When deliberate they always want to do it again. If accidental, they want to sweep it under the rug. Coming soon. (section 3 currently is unavailable)

(c)2006, Ned D. Smartword, tax consultant, please copy and distribute.

Posted by: Please Read | May 13, 2006 11:09:52 AM

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