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Where the money is

July 27th, 2011

Over at Crooked Timber, there’s been an extensive neoliberalism (mainly, though not exclusively, in the US sense of this term, which is broadly akin to “Third Way” Labor”) and political theory. I’ve been largely on the sidelines. That’s mainly because, observing the US political and economic situation, I have a very clear view on what policies could, in principle, sustain a progressive political movement, but (given my distance from the scene and the absence of anything substantial enough to force its attention on the mass media) no real idea about how such a movement might develop. Here’s a post I put up there, slightly edited to remove some points that led to thread derailment.

My analysis is quite simple and follows the apocryphal statement attributed to Willie Sutton. The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.[1]

If their 25 per cent, or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.

In both policy and political terms, nothing can be achieved under these circumstances, except at the expense of the top 1 per cent. This is a contingent, but inescapable fact about massively unequal, and economically stagnant, societies like the US in 2010. By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

The problem is that most policy analysts and commentators grew up in the world of the 1950s and 1960s, or at least in the mental world created by that era. So, they are busy fighting about tax expenditures, barber licensing and teachers unions, and the implications of these things for a hypothetical working class mobilisation. Meanwhile, most of the anger created by the collapse of middle class America is being directed not at the rich but at those who don’t look, sound or pray like Americans of the vanished golden age.

fn1. When I was at the American Economic Association meetings in January I went to a session where a group of Very Serious Economists (Holtz-Eakin, Elmendorf and others) discussed the US budget problem, which comes down to the fact that on a structural basis US public expenditure exceeds revenue by something like 7 per cent of national income. I made the comment that this gap was almost exactly equal to the increase in the share of income going to the top 1 per cent of households over the last decade or so. The Very Serious Guys declined to respond, and waited for a serious question. I wasn’t surprised, but I wasn’t impressed either.

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  1. July 27th, 2011 at 09:23 | #1

    You say it yourself in the anecdote. A beaut thread starter dealing with all the zany lunacy of the neolib post 2008 world.
    The logic creates a space for monsters like Breivik and Bolt, Murdoch and Brooks, given that life is reduced to nothing better than atomisation and “self will run riot”.

  2. Freelander
    July 27th, 2011 at 10:08 | #2

    There are so many absurdities going on in the world nowadays who knows where to begin. Not necessarily the place to start but triple A should have gone some time ago for US debt. The Chinese rating agency Dagong took that away from the US some time ago. No wonder they won’t let them into the US market.

    http://www.dagongcredit.com/dagongweb/english/index.php

    The US has been increasingly dysfunctional for many years now. Given the weaponry they have amassed this is a clear and present danger.

  3. gerard
    July 27th, 2011 at 10:42 | #3

    Congress Continues Debate Over Whether Or Not Nation Should Be Economically Ruined

    WASHINGTON—Members of the U.S. Congress reported Wednesday they were continuing to carefully debate the issue of whether or not they should allow the country to descend into a roiling economic meltdown of historically dire proportions. “It is a question that, I think, is worthy of serious consideration: Should we take steps to avoid a crippling, decades-long depression that would lead to disastrous consequences on a worldwide scale? Or should we not do that?” asked House Majority Leader Eric Cantor (R-VA), adding that arguments could be made for both sides, and that the debate over ensuring America’s financial solvency versus allowing the nation to default on its debt—which would torpedo stock markets, cause mortgage and interests rates to skyrocket, and decimate the value of the U.S. dollar—is “certainly a conversation worth having.”

  4. John Foster
    July 27th, 2011 at 11:23 | #4

    A middle class with stagnating income and stripped of much of its wealth, a small and dominant group of very rich individuals, a heavy and unmanageable deficit because of war, an ineffectual social democracy, the rise of right wing extremism. How come I keep thinking of Germany in the 1920s?

  5. TerjeP
    July 27th, 2011 at 11:26 | #5

    This top tier group you refer to. How rich are they. Ie what is their median income and median net worth. Obviously they are not all Bill Gates. Also how will they respond? Is there capital highly mobile or is it domestically contained? To what extent will they take it off the table (ie capital strike) from an investment perspective under a higher tax regime?

    I think they need to start abolishing federal departments. Ie Education, NASA etc. The states need to fill any void but given many of the duplications that may not mean more state spending.

    I’m interested in other perspectives and insights. I’m not that intimate with US data.

  6. frankis
    July 27th, 2011 at 12:03 | #6

    The US today is a long way from the ethos of sacrifice for the Nation’s good that characterised the “greatest generation” and was echoed by Kennedy’s “ask not what your country can do for you … ”

    The traditional slavery on which the US long depended has become latter day economic slavery, where it’s simply accepted that poor people need more than one full-time job in order to subsist in the USA. The country sees it as necessary that there will always be somebody to flip its burgers and clean up its messes both domestic and, miltarily, foreign, but an actual individual found doing such a poorly paid job must be poor through their own failings or laziness.

    There’s a logical flaw at the heart of the US economy today and at best a small minority of people capable of seeing that (hardly any of them in Congress).

  7. TerjeP
    July 27th, 2011 at 12:51 | #7

    “ask not what your country can do for you … ”

    I always took that to mean don’t ask for handouts. And whilst they were not delivered before his death Kennedy slashed the top tax rate. See his speech on YouTube about a rising tide lifting all boats (ie another metaphor for trickle down).

  8. may
    July 27th, 2011 at 12:57 | #8

    when they talk about “sharing the load” why not take them up on it?

    naive,disingenuous but possibly credible?

  9. frankis
    July 27th, 2011 at 13:04 | #9

    @TerjeP
    At Wikipedia there are more of those pithy quotes from Kennedy’s inaugural speech: http://en.wikipedia.org/wiki/Inaugural_address_of_John_F._Kennedy

    I’m suggesting that in a time of national crisis those with the means to help, it might be hoped, might volunteer to help. The unemployed, working poor, and increasing fractions of the middle class in the US have less capacity to sacrifice for their country today than do those who’ve done far better than have they over recent decades.

  10. frankis
    July 27th, 2011 at 13:08 | #10

    [OK as even one hyperlink appears to put my comment into moderation (as a result Terje probably never even got to see a response I made to him on a previous thread "yet-more-monckton") I'll take off the beginning of the link to Wikipedia]

    @TerjeP
    At Wikipedia there are more of those pithy quotes from Kennedy’s inaugural speech: en.wikipedia.org/wiki/Inaugural_address_of_John_F._Kennedy

    I’m suggesting that in a time of national crisis those with the means to help, it might be hoped, might volunteer to help. The unemployed, working poor, and increasing fractions of the middle class in the US have less capacity to sacrifice for their country today than do those who’ve done far better than have they over recent decades.

  11. Ernestine Gross
    July 27th, 2011 at 13:12 | #11

    It seems to me if the influential people in the USA were to re-focus their debate on the ‘material welfare’ of all the people in the USA then the people in a large part of the rest of the world wouldn’t have to worry about the monetary externalities of the outcome of their budget debates. Alternatively put, the mess is too big to fit it into a ‘budget debate’.

    If the Chinese and the Indian governments were to also focus on the material welfare of all the people in China and India, we might end up with something sensible.

    If there ever is an opportunity for the USA to provide leadership in democracy and demonstrate a lose but important relationship between ‘market economies’ and democracy then it is now . Lets see what happens.

  12. Fran Barlow
    July 27th, 2011 at 13:53 | #12

    @TerjeP

    “ask not what your country can do for you … ”

    terje continues …

    I always that to mean don’t ask for handouts. And whilst they were not delivered before his death Kennedy slashed the top tax rate. See his speech on YouTube about a rising tide lifting all boats (ie another metaphor for trickle down).

    The quote ends: but what you can do for your country … How did that slip by? An oversight, doubtless.

    FTR, from about 1932 to the early 1960s, IIRC the top US marginal tax rate was never less than 70% and for a period after the war (i.e. when America was seen as at the peak of its power) it hovered around 90% peaking at 93%.

    Tax rates fell sharply after 1980, and the US has never recovered.

  13. Fran Barlow
    July 27th, 2011 at 14:01 | #13

    In my opinion, the first task of the jurisdiction (though surely not the last) is to see to the needs of its people. That means reconciling the resources you have or can contrive, with the minimum standard you think consistent with dignity of the life of even your least advantaged citizens while ensuring that the standard is in fact maintainable over time. While seeking to do that as effectively and efficiently as possible is prudent, that costs what it costs and you levy what you need to in order to get that done, or if the resources don’t exist, in order to approach getting that done. If wealthier people have to dig deeper or work harder, then so be it. If that means some marginal business operations head off-shore into some tax haven, then that’s too bad. If that means you can’t afford a two-ocean navy or to occupy 2 or 3 foreign countries, or prop up some sympathetic dictator, then that’s a clear bonus.

  14. fred
    July 27th, 2011 at 14:13 | #14

    In partial answer to Terjep’s questions “This top tier group you refer to. How rich are they”.
    Somewhat dated but a starting point and maybe others have more recent specific info.

    http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html

    “in the last survey year, 1998, the richest 1 percent of households owned 38 percent of all wealth.”
    Wollf is worth reading.

  15. Ernestine Gross
    July 27th, 2011 at 15:10 | #15

    @TerjeP

    You inquire about ‘capital mobility’. The short answer is that those who invested their savings in mobile homes can move their ‘capital’ south over the Mexican border or north into Canada. Beyond this presumably quantitatively trivial example, the notion of ‘capital mobility’ isn’t all that self-evident. As for financial capital mobility, as long as the USA was pursuing the income tax cut ideology* financial capital flight was a real problem for smaller countries (eg some in South America, some in the EU). Where is US private financial capital going to go to in response to an increase income tax for the high wealth and high income people? To Greece? Into gold? Under the bed? At which exchange rate are the Swiss going to convert massive amounts of US dollars into sfr?

    *I distinguish between an income tax cut, includig that of the top income bracket, under some conditions and income tax cut as a policy objective per se. Only the latter is an ideological position in my books.

  16. Freelander
    July 27th, 2011 at 18:00 | #16

    Capital mobility (flight) doesn’t move physical assets (given that gold is no longer used for settlement). It does, however, change asset prices, and wreck balance sheets, regardless of how efficiently a business is being operated (that is, unless big bad government steps in to stop the madness). Given that a lot of business are now globalised, the US going down the drain could result in a major headquarters move, which would further erode the US tax base. In addition, the loss of reserve currency for the world status, and safe haven status, which provided some revenue through seignorage and an implicit subsidy on various borrowings (both government and private sector borrowing) will do the US further damage.

    We are getting a chance to see why Socrates and Plato were not too keen on democracy. (One thing though, the franchise was not as wide in ancient Greece, and their electorate was not nearly as stupid as the current US electorate. Nor did they have such exquisite instruments for their own destruction.)

  17. David C.
    July 27th, 2011 at 19:13 | #17

    I think they need to start abolishing federal departments. Ie Education, NASA etc.

    I cannot imagine private enterprise putting an amazing piece of purely scientific research kit like the Hubble telescope into space. Unfortunately some people don’t seem to understand that there are more important questions than “how much money can we make out of this?”. And these questions and their answers make our lives all the more richer.

  18. July 27th, 2011 at 19:13 | #18

    Fran points and I look. Yes, great Terje, when Murdoch, Koch Bros, Wall st Bankers, Lockheed Martin, Halliburton on Carlyle and all the rest ask, “what they can do for their country” rather than the opposite.
    Leader ship by example, for the poor?… bwwwaaawwhhhaaahha
    !!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  19. Freelander
    July 27th, 2011 at 19:47 | #19

    For the Murdochs, Koch Bros, Wall St Bankers, and so on of the world, their current nationality is always just a flag of convenience. That flag is always as disposable as a used tissue. The US is at present and has been a most convenient flag, and there has been lots of money from wrapping it around oneself. The wealthy, via their lobbyists, have been able to suck the blood out of that country, and via American hegemony, out of the rest of the world. But if that changes, and another flag offers superior benefits….

    You “ask not what your country can do for you, but what you can do for your country” and by extension what you can do for the wealthy of your country. But don’t expect the wealthy of America to do anything for you. In fact, when they are finished don’t even expect them to leave you a country. Having sucked heavily past the point of death, and with nothing unexploited and unlooted worthy of the effort, they will simply walk (or sail or fly) away.

    New Zealand is lucky they had the Christchurch earthquakes. After the Lord of the Rings trilogy, that country had been popular with Americans looking for their bolt hole. Now the shaky isles have managed to shake their interest off, we will have to be on the watch for wealthy American refugees – boat people of a type we will definitely be better off without.

  20. Ikonoclast
    July 27th, 2011 at 20:33 | #20

    I agree with Prof. JQ. The tax strike by the richest 1% is exactly why the US deficit is so large. I call it a tax strike because that is effectively what it is. The richest 1% have engineered a situation financially, politically and propaganda-wise whereby they can go on indefinite strike against paying taxes. The weakness of American democracy is that the rest of the polity has let them get away with it.

    We are now approaching the endgame of this tax strike. Fiscally, the approach is no longer sustainable. Massive deficit spending via printing money would would keep things going a while longer until hyperinflation kicked in but this too has been expressly vetoed by the right. The only other real alternatives now are collapse and revolution or a declaration of Martial Law.

    I am beginning to wonder whether the lunatic Tea Party fringe are simply a convenient cover for a much more focused extreme right in the USA. The agenda of this extreme right appears to be to deliberately precipitate a world crisis at this point. The reasoning would be;

    1. Provoke an world economic depression to reduce consumption of limited resources.
    2. Declare martial law in the US to take complete control.
    3. Activate war plans to fight a protracted global war over the remaining resources.

    Of course, such a plan is insane and is clearly a lose-lose-lose-lose proposition right round the table. But ask youself, are you confident that the American elite are still in touch with reality?

  21. stockingrate
    July 27th, 2011 at 21:37 | #21

    7% of GDP is also the difference between US (19%) and French(7%) health care costs (Cassandra does Tokyo)

    Americans cannot afford their health care insurers, their doctors, their military, the high labour costs of some firemen, teachers and police, nor their low taxes on the wealthy.

  22. Tom
    July 27th, 2011 at 21:54 | #22

    John, do you have a good infographic of the type shown in the ‘global wealth pyramid’ from this Credit Suisse report:

    http://www.zerohedge.com/article/detailed-look-global-wealth-distribution
    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/shirakawa/Global%20Wealth%202_0.jpg

    that also shows wealth condensation with the proportion of wealth controlled by the upper tier increasing over time – the 25% controlled by 2% to which you refer? My understanding is that the last few decades have seen a massive redistribution of global wealth up to the richest, but I’m short on a good source online. Thanks in advance in case you’ve got something.

  23. Salient Green
    July 27th, 2011 at 21:58 | #23

    The following is someone else’s post from someone else’s blog I saved a couple of years ago.

    “How to create a Third World nation:

    Allow the home market for your industries to be captured by foreign firms that aggressively protect their own home markets.

    Allow mass immigration that undercuts wages and overloads schools, hospitals, neighborhoods, infrastructure, police and the natural environment.

    Promote a popular culture that glorifies gangsters, pimps, drug addicts and strippers.

    Allow a parasitic “investment” banking cartel to dominate the economy and political system, while using as its propaganda arm the media and academia.

    Pursue a costly foreign policy that stations hundreds of thousands of troops overseas in order to defend economic rivals, allowing those economic rivals to spend very little on their own defense. Entangle your nation with alliances that are not in your national interest, putting the lives of your youth on the line for powerful and corrupting special interest groups or to secure loans made by bankers.

    Spend billions upon billions on foreign “aid” while your nation is running massive budget deficits and your own infrastructure is falling into disrepair, and poverty in your own nation is widespread and increasing.

    Create huge government debts that place a heavy burden on future generations and lower their living standards below that of previous generations, while enriching usurious and parasitic international bankers.

    Follow these simple steps, and Voila! A great nation and culture is reduced to a vast slum with small pockets of opulent enclaves.”

  24. TerjeP
    July 27th, 2011 at 23:50 | #24

    Fred – telling me that the top 1% controls 38% of wealth does not tell me what their median wealth and median income is. Although thanks for trying to be helpful.

  25. TerjeP
    July 27th, 2011 at 23:55 | #25

    I’m suggesting that in a time of national crisis those with the means to help, it might be hoped, might volunteer to help. The unemployed, working poor, and increasing fractions of the middle class in the US have less capacity to sacrifice for their country today than do those who’ve done far better than have they over recent decades.

    Were I a wealthy American and assuming I was moved by your words to want to help the less fortunate in society why on earth would I choose extra tax payments as the vehicle for such a good deed? Better to bypass Washington and give directly. Not only would it be more efficient but I’d also get accolades for being a great guy. As such I don’t see how such a plea helps correct problems with the federal budget.

  26. TerjeP
    July 27th, 2011 at 23:59 | #26

    The quote ends: but what you can do for your country … How did that slip by? An oversight, doubtless.

    It isn’t the quoted bit I was responding to. However in full my interpretation of his words would be:-

    1. Don’t ask for a handout.
    2. Be a productive member of society.

    It’s pretty good advise. I wish a few modern politicians could say it in such a moving way.

  27. gerard
    July 28th, 2011 at 00:45 | #27

    I am beginning to wonder whether the lunatic Tea Party fringe are simply a convenient cover for a much more focused extreme right in the USA.

    I’m beginning to wonder whether their rich, astroturfing benefactors decided some time ago to liquidate all their real estate, stock and bond investments and buy stacks of gold, and are now counting down to payday.

  28. jrbarch
    July 28th, 2011 at 07:48 | #28

    One definition of ‘money’ from a Tibetan monk that I know of, is (paraphrasing liberally): ‘the concretisation of vitality or human energy, guided mainly by desire, with a little bit of thought thrown in’.

    I think this human aspect sub standing money is just as important as any systemic discussion. The thing about money is that it has grown over the millennia from something meant to minister to personal and family needs, to something in the hands of the great capitalistic systems – the future we desire for it is to minister to group and world need.

    This will be impossible unless greed, selfishness and short-sightedness are overcome.

    Money currently flows into all of the myriad homes; the great capitalistic systems and monopolies, religious, philanthropic, educational and medical institutions of the world – yet such a teeny proportion of it is spent in reality on betterment of human living; or for the inculcation of values that will lead to Peace and better human relations.

    These are the true ‘imbalances’ of the world.

    So much money is deflected into non-essential material aspects of living that are little better than entertainment or indulgence; or money is held back because of separative differences in opinion, or prejudice – such that the true assistance of humanity (one species on one planet earth – the only one for light years around) is overlooked.

    Not one Government (who are supposed to be the champions of public purpose) has a Department of Peace, or a Department of Ending the Suffering and Starvation with a budget to match the essentialness of its mission. Yet people have always clamored for peace, justice and a sense of security.

    In all of this, the right use of money and a realisation on the part of our so-called ‘world leaders’ as to their actual responsibilities would help. This sense of financial responsibility is to be found nowhere other than in a few. While we wait much of humanity starves, remains uneducated, or is brought up on false values.

    All because of the wrong use of money.

    Besides ministering to personal need, money is useless without meaning and purpose (Bill Gates). I wish that were ‘the focus of reality’.

    Instead, the ‘sovereign chimp’ rules.

    Cheers …
    jrbarch

  29. TerjeP
    July 28th, 2011 at 08:00 | #29

    jrbarch – pure sophistry.

  30. jrbarch
    July 28th, 2011 at 11:26 | #30

    Dear John,

    More sophistry for TerjeP to gnash his teeth over. For a more sophisticated understanding please head over to Warren’s: Moslereconomics

    Cheers …
    jrbarch

    People
    Values & Trust

    Human beings ‘value’ things;
    They do not like their values compromised;
    Sometimes they exchange things according to their values;
    Values are dynamic, and can never be frozen or represented objectively in time and space;
    When kids play they demonstrate this dynamic interaction of values – settlement can only be made when each party to an agreement is satisfied – each child in themselves is the ‘in the moment’ value;
    That is why people wish each other ‘Peace’ first, then prosperity – they know prosperity without humane values and human dignity is chaos;
    People created ‘credit’ as a somewhat imperfect ‘store of value’ – the ‘credit’ of one person a ‘debit’ for another (shall now refer to these simply as credits);
    When a debt is extinguished, so too is the credit – they sum to zero;
    When human beings respect each other, values and credits are sustained – honesty, trust, confidence, respect, right human relationships – are always the life breath of credits;
    The amount of goods and services that can be exchanged is limited only by the natural world, human creativity, productivity values and relationships;
    Credits (values) in these are represented materially as ‘real numbers’;
    In times gone by, credits recorded ongoing exchanges in goods and services equal to their outstanding value – these records were cleared regularly, simplifying agreements between diverse parties;
    As a somewhat awkward convenience, people created ‘money’ as a physical token representing a portion of the credit/money extant;
    Sometimes, people transacted in or loaned their credits under an agreement;
    No matter what form credits took, the common quality underlying all was a ‘sense of value’;
    Fulfillment has always been the ultimate ‘value’ that drives human beings.

    Sovereign Governments & Banks

    Credits can now only be created by Government, typed in at computer keyboards as real numbers, to appear as deposits in the reserve accounts of commercial banks;
    They are in demand, because people have to both pay taxes in these credits and use them as legal tender;
    Government need not rob, borrow, work, save, tax, beg, or prostitute itself in order to create or ‘spend’ these credits – unlike households and firms, government can always through fiat:

    Issue its own sovereign currency ‘out of thin air’ to benefit the people
    Forever be solvent in it’s own credits and money
    Control the number of credits (inflation) available to the non-government sector
    Make political decisions to benefit the people:

    setting the ‘price’ of money (interest rates)
    buying goods and services for sale to fulfil public purpose
    taxing (destroying credits) to curtail demand and set the public/private mix
    controlling private sector prices – setting as an employer of last resort, a basic wage floor to the economy through which no-one can fall
    distributing essential resources equitably, and regulating economic societal and environmental impacts so that no ecological system lives ‘in poverty’
    setting ‘fees’ where necessary for use and provision of societal infrastructure

    - as monopolist of its own currency.

    Credits typed in at computer keyboards by banks are met with a corresponding debit – they sum to zero, and do not affect real numbers in the real economy;
    Bank credits are used to leverage real numbers and grow the real economy;
    Government provides new real numbers consistent with this growth as bank reserves – however, flooding commercial banks with reserves does not ipso facto make the real economy grow – banks only loan to viable customers;
    10% of the population own 71% of the wealth in the USA, 20% own 85% – the bottom 40% of the population own just 0.2% of the wealth;
    Much of this wealth is amassed through fraud – the political agenda of most governments is bought and paid for by a wealthy elite;
    Money is just an accounting record – in the end, there is just the ‘skin of the earth and its resources’ – and human values extant;
    Therefore, subject to human values and real constraints, there is no reason why any truly beneficient government, at any time, with the public interest sincerely at heart – could not provide to the people that which the private market does not, viz:

    Full employment – adequate food clothing shelter health education – and infrastructure!It doesn’t ‘cost’ the government anything!
    It just means a modest redistribution of resources!

  31. fred
    July 28th, 2011 at 11:29 | #31

    @TerjeP

    From the article I cited :

    “A household in the middle — the median household — has wealth of about $62,000. $62,000 is not insignificant, but if you consider that the top 1 percent of households’ average wealth is $12.5 million, you can see what a difference there is in the distribution.
    …….The bottom 20 percent basically have zero wealth”

  32. Freelander
  33. Freelander
    July 28th, 2011 at 11:34 | #33

    Things are bad when someone who runs Sarah Palin as a credible VP candidate want to disown them.

  34. jrbarch
    July 28th, 2011 at 12:23 | #34

    Apologies to Terpe re the assumption of ‘gnashing’. Would be interested in something a little more explanative than the one word ‘sophistry’ though (if you feel like it).

    Cheers …
    jrbarch

  35. TerjeP
    July 28th, 2011 at 13:06 | #35

    Fred – thanks. $12.5 million is an exceptional sum. However it is the average for the top 1%. I suspect the median is vastly lower. The top 1% may control most of the wealth but I suspect the bulk of them are not exceptionally wealthy, just wealthy. And those that are exceptionally wealthy don’t represent the bulk of the wealth.

  36. Ernestine Gross
    July 28th, 2011 at 15:18 | #36

    Our host has been very careful in expressing how a feasible policy is to be implemented.

    Interesting link, Freelander. McCain had to teach some of the people, who run under the label republican, elementary arithmatic.

  37. fred
    July 28th, 2011 at 16:44 | #37

    @TerjeP

    From here:
    http://elsa.berkeley.edu/~saez/saez-UStopincomes-2007.pdf
    See figure 3.

    In 2007 the top .01% of US families earned [if that is the right word] around 6% of all income.
    To become a member of the top .01%, income had to exceed $11,477,000 for that year.
    That’s income not wealth.

  38. Freelander
    July 28th, 2011 at 17:26 | #38

    Addition is yet another liberal plot.

  39. Tim Macknay
    July 28th, 2011 at 17:56 | #39

    Addition is yet another liberal plot.

    I’m surprised no-one in the Republicans has yet pointed out the obvious evils of writing, which is perhaps the ultimate liberal plot. After all, Karl Marx wrote the Communist Manifesto!!1!!!1!

  40. John Goss
    July 28th, 2011 at 18:59 | #40

    Quiggin is very good at pointing out the key issue. In this case again his point is spot on, but it is also depressing, as changing the situation is difficult given how much power the rich have because of their wealth. Its a classic example of the golden rule, where he who has the gold rules not only politically and in the media but also in the world of ideas. I think the rise of neo-classical economics in the academy has a lot to do with the influence of the rich in the USA.
    Some nice graphics and tables on inequality in the link below.
    http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

  41. Ernestine Gross
    July 28th, 2011 at 21:58 | #41

    Under some condition, there is a tight relationship between ‘addition’ and ‘feasibility’. Those who can’t do additions don’t understand the word ‘feasibility’ even if they can write it. McCain said a lot.

  42. Ernestine Gross
    July 28th, 2011 at 22:04 | #42

    John Goss, fully concur with you regarding Prof Quiggin’s blog posts pointing to key issues. But, I can’t concur with you regarding neo-classical economics – at least not all of it. For example, the Arrow-Debreu model can be considered neo-classical. In this model there is a minimum wealth condition (without it the notion of ‘freedom of choice’ would not make sense). After reading Prof Q’s blog for a few years, I’ve made up my mind that ‘capitalism’ has been hiding behind neo-classical economics. There is a difference.

  43. stockingrate
    July 28th, 2011 at 22:50 | #43

    @Salient Green
    Australian and USA have much in common.

  44. BilB
    July 28th, 2011 at 23:29 | #44

    TerjeP,

    Applying a little bit of arithmetic,

    that 1% of 310,000,000 ….3.1 million, with their average 12.5 million wealth, command 39 trillion dollars. 9 trillion of that paid as taxes would not severely impinge on the life styles of these people, but it would have a huge effect on the financial status of the nation.

    This is the argument under way. Those with the greatest living comfort insist that those with the least living comfort should sacrafice to solve their nation’s problems, so that those with the most can continue to improve their situation with the least effort.

    Which side of the argument do you support?

  45. BilB
    July 29th, 2011 at 00:16 | #45

    Hang on, adjustment required.

    That was households, not people. So with 2.59 being the average household size, then the top 1 percent of households (1.197 million) with their 12.5 million, command 15 trillion dollars.

    The other 99% of the households (119.3 million) with their 62 thousand dollars command 7.4 trillion dollars.

    So assuming the figures are correctish then it paints a pretty clear picture of how effective wealth distribution efforts have been for the US public. It works really well for the 1 percent.

  46. TerjeP
    July 29th, 2011 at 02:03 | #46

    9 trillion of that paid as taxes would not severely impinge on the life styles of these people, but it would have a huge effect on the financial status of the nation.

    Are you proposing a wealth tax rather than income tax? Taking a quarter of their wealth may not cripple them in the first year but on such a plan it won’t be more than a few years before they have no wealth at all. Who does the government eat then?

  47. Gypsyland
    July 29th, 2011 at 06:34 | #47

    I think @TerjeP you are defending the indefensible.

    What intrigues me is that while the figures for GDP and income share are reasonably well known to the informed that there is no political discussion for the US Government (or any government for that matter) to manage supply and demand with the same automatic stabilisers that kick in at different phases in the business cycle.

    What’s wrong with targeting income distribution and profit/wage shares with a super tax/rebate if these persistently move in one direction? And why can’t asset inflation be targeted and taxed on a moving scale in the same way as CPI (consumption) inflation? And why can’t national targets be set for health, education, transport and defence as a percentage of GDP, with appropriate adjustments, such as a war tax when defence blows out due to wars (which would at the least discourage them).

    Neo-liberalism to me seems a failed ideology doing what @TerjeP is doing here; offering a fig leaf of increasingly diaphanous rationale for the ongoing and escalating MAD (mutually assured destruction) class war now raging at a global level.

  48. BilB
    July 29th, 2011 at 07:27 | #48

    Not a wealth tax, Terje, but a slightly more progressive level of taxation in the first place. That in conjunction with a dynamic move to get the US “working” again.

    The second of these is under way driven mostly by the plunge of the US dollar. I spoke to the President of a large dental consumeable manufacturer yesterday, I was hunting for some chemical information, and took the opportunity to talk about getting the US working and he said that his business was pulling much of its manufacturing back form China and re-equipping for local manufacture with a bank of CNC machines and injection moulding machines.

    That is the only approach that will work. Tone down the greed, and up the work effort. It is a very solid business model.

  49. Fran Barlow
    July 29th, 2011 at 09:23 | #49

    @BilB

    Equally, AIUI, the largest corporates in the US pay virtually no tax at all, as a proportion of their profits, revenues, equity or whatever. Ultimately, it is these untaxed funds that flow, in part, to the richest 1.12 million households in the US, so ensuring that the corporates and the upper income earners contribute more reasonably needs to be spread across both heads, so as to avoid tax avoidance strategies.

    Effective personal and corporate taxation needs to be kept closely reconciled. This is an argument for a diversified tax mix accompanied by suitable mechanisms for transfer payments to ensure that the resultant benefits distribution meets at least reasonable equity tests — geographic, social and temporal.

  50. Chris Warren
    July 29th, 2011 at 09:48 | #50

    TerjeP :
    Fred – thanks. $12.5 million is an exceptional sum. However it is the average for the top 1%. I suspect the median is vastly lower. The top 1% may control most of the wealth but I suspect the bulk of them are not exceptionally wealthy, just wealthy. And those that are exceptionally wealthy don’t represent the bulk of the wealth.

    This is a denialist presentation. If you “suspect” something, this could be your own propagandist intrusion.

    If you want to maintain such a position then you need to provide evidence.

    The rotten state of US (and other capo-states) taxation regimes are well known and wealth and income inequality has been well described ever since the 1960′s.

    All due to a capo-Keynesian misunderstanding of a propensity to consume which is unmatched by the capitalist propensity to pay wages and share wealth.

  51. gerard
  52. Tom
    July 29th, 2011 at 17:42 | #52

    Thanks for the links and infographics. The Mother Jones link was particularly good.

  53. TerjeP
    July 29th, 2011 at 18:24 | #53

    Chris – to suspect something for which you have neither solid evidence for nor evidence against is not denialist. It’s called having a hunch. A denialist is somebody that maintains a position contrary to evidence. If you show me with evidence that the median for this group is not vastly lower than the average for this group then I’m more than happy to accept such evidence. Perhaps you can’t be bothered looking for the evidence which is fine but in that case we just have contrary hunches. I’m not going to call you a denialist merely because your hunch is different.

  54. Chris Warren
    July 29th, 2011 at 20:53 | #54

    @TerjeP

    Unfortunately when it comes to the distribution of wealth, introducing “hunches” is not appropriate. It is typical of capitalists who seek to deny and blur the underlying trends that are ravaging capitalist economies and are about to get dramatically worse.

    As 1% of the population control much of the wealth then by definition they are exceptionally wealthy. 1% of the population only has the right to around 1% of the wealth.

    Any statement that these 1%-ers are ‘not exceptionally wealthy”, now camouflaged as “suspect” or “hunch” is denialism.

  55. Freelander
    July 30th, 2011 at 02:03 | #55

    Terje should be able to do the research to answer his own query. Shouldn’t be hard. That is, if he was interested in having it answered.

  56. TerjeP
    July 30th, 2011 at 05:22 | #56

    Chris – I think you miss the my point. You also make a strange claim about a “right to wealth” which I think is outrageous in the extreme and clearly shows a deep seated communist impulse but I’ll ignore it for the moment.

    JQ says that the top 1% have 25% of US income. Fred says they have 38% of the wealth. I merely asked what the median income is for this group.

    Fred offered the insight that their average wealth is $12 million or so. However the average wealth doesn’t tell us what the median income is or what the median wealth is.

    It may be that the median individual in this group is worth only $1.5 million which in many places merely means they own a nice house. Or it may be that the median is $10 million in which case these people are loaded. However we are not discussing a wealth tax so this is largely irrelevant anyway.

    What is more relevant is the median income. It may be that whilst the top 1% has 25% of the income the top 0.1% has 24% of the income. I don’t have the relevant data to inform on this point. However before implementing a “soak the rich” policy I think it would be reasonable to find out.

  57. TerjeP
    July 30th, 2011 at 05:24 | #57

    Freelander – just because I haven’t done the research doesn’t mean I’m not interested in the answer.

  58. fredn
    July 30th, 2011 at 08:50 | #58

    It’s not hard to find economies with wealth in the hands of a few, a small middle class and poverty. The difference between the USA and others is they went through a period where they had a large middle class.

    The real question is, how much can they blame (after all they voted Bush in)themselves and how much fox news for bumming down debate tot eh point where it is useless. I suspect that by creating the economic and media environment that produced Murdock, Australia has done more damage to the USA then even the continual wars that seem to cost and are never really won.

  59. Chris Warren
    July 30th, 2011 at 10:45 | #59

    @TerjeP

    It is obvious that in a modern democracy, everyone has an equal right to wealth. If the top 1% get much more than 1% then this indicates unfair exploitation. This is basic humanity.

    By misusing quotation marks – to pretend people are saying things that have not been said – you disqualify yourself.

    If you know how to use Google, and if you know that the ABS has household data, then you have no excuse for pursuing your protect-the-rich campaign given that you state:

    I don’t have the relevant data to inform on this point.

    According to economic justice – everyone gets the wealth they produce. According to social justice, wealth is transferred from some to look after others.

    You make no real point trying to dispute facts based on the difference between median and average. This is a denialist distraction. If the median is very different to average, then this implies that the distribution is highly skewed. So, if your distinction is marked – this is evidence for wealth and income inequality. So it seems you are arguing against yourself.

  60. Ernestine Gross
    July 30th, 2011 at 11:59 | #60

    Where the money is, is the issue at present. The short answer is that most of the ‘money’ is with those who don’t want to pay taxes and there is plenty of evidence to say that having been more ‘productive’ in the primary economic sense is not a justification for most if not all of them.

    The ‘money’ in question has been generated by private enterprise, losely referred to as Wall Street bankers. This type of ‘money’ production has generated a bifurcation point in the sense that there was an accute risk – in 2008 but building up from about 2 years earlier – the ‘world’ financial system would collapse (there were a few hours or even days when this was effectively the case except that the ‘world’ is not perfectly linked and various governments took quick action to counteract this catastrophic development). The US governments (more than 1 was involved) defended their currency by means of converting this privately generated dollar denominated financial mess into official dollar holdings (due to lack of an appropriate financial transactions recording system, the mess couldn’t be disentangled). It was the generation of a financial mess that made a some people very wealthy (and many of them converted their ‘foam dollars’ into physical assets). Those people are now called upon to pay up. Since they don’t do it voluntarily, taxation is a mean to achieve a binding commitment.

    The distinction between ‘economic’ and ‘social’ justice is not as sharp as presented by some. Private wealth is not necessarily the outcome of being ‘productve’; wealth transfers (expropriation of some economic agents by others) is possible too and it does happen, in the small and in the large.

    It seems to me the Tea Party people, like other fundamentalists, have a problem with the complexity of the contemporary real world. They want something simpler, something they can understand. Assuming I am not totally off the mark with my assumption about fundamentalists, perhaps an effort could be made to make the financial system simpler – so they can understand and others may benefit as well.

  61. Sam
    July 30th, 2011 at 14:06 | #61

    @TerjeP
    Well you can call discussions of “the right to wealth” as communist in the extreme, but such discussions form the philosophical basis of the “right to tax.” I understand you may personally be against compulsory taxation, but that opinion is in the extreme minority. Of the vast majority of thinkers opposed to your view, very few are communists. Ike Eisenhower presided over a huge increase in the top marginal tax rate, and no-one could call him a communist.

    Whats more, even if it were a communist position, that shouldn’t be enough to render it obviously bad. Someone like you, who advocates policy positions far outside the Overton window, should not be so quick to dismiss other currently unfashionable views.

  62. may
    July 30th, 2011 at 15:36 | #62

    har har hee,i’m cracking up.

    “a deep seated communist impulse”.

    ayy?whattt.blardy ell.

    turgids a seppo–i can tell.

    “deep seated communist impulse” waaah.

    i know–i’ma nong. but what else can one say.

    but it will be ignored for the moment?

    carry on.

  63. Jarrah
    July 30th, 2011 at 18:18 | #63

    “If the top 1% get much more than 1% then this indicates unfair exploitation.”

    No, it doesn’t. You may be interested in the fact that, even if everyone had exactly the same income, same expenses, same savings, same super, same return on investments, we would still end up with massive differences in wealth because of accumulation over time and compound interest effects.

    Personally, I think it’s fine for the top 1% to have x% of total income, as long as they pay at least x% of total tax.

  64. Freelander
    July 30th, 2011 at 18:27 | #64

    @TerjeP

    The research would not be difficult to carry out. Why not try?

  65. Fran Barlow
    July 30th, 2011 at 19:12 | #65

    @Jarrah

    I’d object on at least 2 grounds.

    1. Until such differences fully reasserted themselves, there would be equity. That could take quite a while, perhaps as long as one person’s working life.

    2. That could not occur in practice this side of the kind of radical reconfiguration of income and asset accumulation structures that would resist the kind of reversion you assert would occur. Such a thing could not drop de novo from the heavens.

    I’m not personally insistent that everyone have exactly the same income and assets. I think this improbable, impracticable amidst scarcity and probably less important, at least on timelines meaningful to us in 2011, than that everyone get what they need, regardless of the impact of the richest folk, and that we focus on making it possible for the burdens and benefits of productive work to be settled onto the shoulders of as many people as possible.

    That said, an income distribution in which the top 1% have more than the bottom 99% is clearly radically wrong, and likely to subvert equity in public policy.

  66. Ikonoclast
    July 30th, 2011 at 19:27 | #66

    In a sense, the steps to the GFC of 2008 and to the current debt default face-off were all planned. I am not saying that the GFC was overtly planned nor that a debt default is overtly planned. I am saying that all the events that led to these things were planned.

    The under-taxation of the rich was planned.
    The relaxation of financial regulation was planned.
    The issuance of junk mortgage bonds was planned.
    The creation of CDOs was planned.
    The continuation of the tax strike by the rich is planned… and so on.

    It’s the same way that a drunken smash is planned. A person plans to drink heavily at a party they drive to. This person plans to still have their car keys in their pocket when all rationality is lost. Thus, the smash, while not overtly and consciously planned still has its planning implicit in all the ill-advised and quite planned steps leading up to the final event.

    It’s nice to know that the strategic financial management of our civilization shows about as much smarts as a lush on a bender.

  67. TerjeP
    July 30th, 2011 at 20:56 | #67

    Saying the top 1% should have 1% of the wealth (or income) is pure communism. It basically assumes that nobody should have (or earn) more than anybody else. It isn’t a modest aspiration it is an ideologically mad aspiration. It says that the 70 year old who has worked a lifetime should have no more than a 17 year old who is just starting out. You’re totally crazy!

  68. gerard
    July 30th, 2011 at 20:59 | #68

    it’s more like saying that the 70 year old can’t give the 17 year old a lifetime’s worth of wealth as an inheritance

  69. Chris Warren
    July 30th, 2011 at 21:15 | #69

    So unable to deal with a plain statement:

    If the top 1% get much more than 1% then this indicates unfair exploitation.

    some change it to:

    Saying the top 1% should have 1% of the wealth (or income)

    and then run their own agenda on top of their own innovation.

    Jarrah’s attempted fix, by taxing those with x% of wealth so they contribute x% of total tax is meaningless. If the exploiters have x% of wealth they should contribute (x+y)% of total tax.

    Of course if people have different saving behaviours different outcomes will result – but this is a different point. The wealth distribution being observed in the world today is that the 1% has vastly more wealth than the rest constructed by exploitation, and all these silly diversions are just trying to set-up smokescreens.

    You can always find fair and just reason for 1% to have more or less than another 1% but as I said, if this difference is much more than 1%, this indicates exploitation.

  70. TerjeP
    July 30th, 2011 at 22:02 | #70

    I think you have a rather cockeyed notion of what “exploitation” is. It is entirely natural that some segments of society should have more accumualted wealth than other sections. The most obvious reason is age. However there are a multitude of other factors including effort, skill, innovation etc. Your year zero mentality is actually rather chilling.

  71. BilB
    July 30th, 2011 at 22:15 | #71

    Terje 2/4

    What is your curiosity with the median income for the wealthy 1%, Terje? Are you curious as to what you can hope to gain when Libertarians take over the world?

  72. Chris Warren
    July 30th, 2011 at 22:24 | #72

    @TerjeP

    Please indicate where anyone has said:

    the 70 year old who has worked a lifetime should have no more than a 17 year old who is just starting out.

    Presumably a social strata of 1% of exploiters have a similar distribution of ages as the rest of society. You are jumping at shadows, without realising that you are the shadow.

    So if you want to make a rational point, then you should compare the exploiting 1% of 17 years olds (Paris Hilton) with 99% 17 year olds (for the same year) on junior rates.

    You should also compare 1% of 70 years olds (Howard Hughes) – the exploiters, with 99% 70 year olds (at the same date) who have sweated for 60 or 50 years on average wages.

    As Lachlan Murdoch moves from 17 year old to 70 year old he may continuously have much greater wealth than 99 normal workers as they move from 17 to 70.

    The age is not the determining factor.

  73. fred
    July 31st, 2011 at 07:55 | #73

    Prof JQ

    Now for something completely different, or maybe more of a different same.

    I have here in front of me a 26 page survey under the letterhead of Deakin University [and others] apparently compliled by a group named Datacol Research.
    It is titled “Water management and Desalination…A survey of your views and experiences”

    Interested?
    In the light of your recent post about the futility of water issues in this country maybe not.
    Then again maybe …
    Anyway if you want to know more [presuming you don't already] then just ask.

  74. Ikonoclast
    July 31st, 2011 at 08:16 | #74

    TerjeP is suggesting that Chris Warren has a “chilling year zero agenda”. CW is probably a bit further left than I am prepared to go. However, TerjeP has a real “chilling year zero agenda” all of his own. As far as I can read it, TerjeP is in favour of the abolition of effective democratic government. TerjeP wants taxes reduced so far (probably to nil going by some of his comments) that government, democratic representative government, would have to be abolished.

    Well TerjeP, you may get to see your experiment carried out in contemporary USA. At the current rate, democratic government in the USA (what’s left of it) is about to have huge slabs of its functions abolished by insolvency. This insolvency is a direct result of the tax strike by the wealthy. What escapes you is that the wealthy create none of the wealth they appropriate. Wealth is material product and material service. Material products and material services are produced by workers (manual workers and intellectual workers), that is by the people who actually do the work.

  75. fred
    July 31st, 2011 at 08:22 | #75

    Prof JQ

    I have here a 26 page survey from Deakin University compiled by a research company titled “Water Management and Desalination ….A survey of your views and attitudes”.

    Interested?

  76. J-D
    July 31st, 2011 at 08:30 | #76

    If you’re looking for Federal government departments to be abolished, why put Education and NASA at the top of the list? Why not the DEA, Defence, or ICE?

    Better yet, why not abolish the whole Federal government?

  77. J-D
    July 31st, 2011 at 09:02 | #77

    I take it that the essence of the original point is that in a massively unequal and economically stagnant society nothing can be done about an economic crisis except at the expense of the small number who have most of the money. If 1% of the population have 25% of the money, it looks on the face of it as if they’re the people the argument is pointing at. But on closer examination it is of course true that it’s possible that most of that 1% are not exceptionally rich. Maybe most of that 25% is concentrated in the hands of a smaller fraction, maybe 0.1% of the population, or maybe 0.01%, or maybe even 0.0001%. That observation isn’t a basis for rejecting the original suggestion that nothing can be done about the economic crisis except at the expense of the tiny minority of vastly disproportionately wealthy people.

    Maybe Terje has some other good argument against the idea that a resolution of the economic crisis is only possible at the expense of that tiny minority. But arguing about exactly which fraction of the population make up that minority is just a distraction.

  78. BilB
    July 31st, 2011 at 10:08 | #78

    You’re grasping at straws there J-D. It is time that America gave up the idea that anyone should be a able to become a billionaire. There is a huge need here for some moderation in wealth creation, and a little more sharing around of the profits of performance, along with a shut down of profits made from trading in money and derivatives.

    The other thing that needs ot happen is the disconnection of the Chinese Yuen to the US dollar. The US dollar has collapsed because the US economy can no longer afford to pay at the same price as before. The US economy needs to get the trigger that the “free ride” on cheap labour is over , and get it self back into home production mode. The collapse of the dollar should be that trigger, but with the cost of Chinese imports remaining fairly constant the trigger is not working as it should. At least not for Chinese imports. In fact this tactic could very well be driving US imports from other source countries into the hands of Chinese business, another potential distortion of the world’s economy.

    You have to finally give socialist capitalism (or whatever we call the Chinese political system) the credit for whipping the pants off western democracy.

  79. TerjeP
    July 31st, 2011 at 14:11 | #79

    Chris – if the richest 1% of the population has 1% of the wealth the no other 1% of the population can have more than 1% of the wealth (otherwise the first group would not be the richest). However nor can any other 1% of the population have less than 1% of the wealth otherwise they would leave too much wealth for the other 98% and somewhere the richest 1% wouldn’t be the richest. As such you are describing a world of pure wealth equality. Everybody has exactly as much wealth as everybody else. That is the logical mathematical implication of what you have said. And if you want a world with zero inequality then 17 year olds and 70 year olds have just as much wealth irrespective of skill or duration of effort. The only way I can see this working is if their is no private property at all or everybody is impoverished. So I’m belong literal when I call this position communist, not antagonistic.

  80. TerjeP
    July 31st, 2011 at 14:17 | #80

    Iconoclast – as best I can tell Australia was a democracy in 1910 when the tax level was about where I think it should be. As for the USA they are more highly taxed overall than Australians so I can’t see how they are symbolic of the dangers of lower taxes. If anything they would be symbolic of the risk of higher taxes.

  81. Jarrah
    July 31st, 2011 at 16:26 | #81

    Fran, those aren’t so much objections as non sequiturs. Your point about equity in public policy is more germane, but also, ironically, a restatement of the classic libertarian objection to greater government power – it is prone to exploitation by special interests.

    Chris, I’m puzzled that you describe my ideal of proportional equality as ‘meaningless’. It’s also funny, since you introduce the variable ‘y’ without defining it, and thus make your own statement literally meaningless. Lastly, you are confused again – I said ‘income’, not ‘wealth’. I can’t see anything fairer than the rich paying the same proportion of income tax as their share of income!

  82. BilB
    July 31st, 2011 at 16:50 | #82

    “As for the USA they are more highly taxed overall than Australians”

    Would you like to elaborate on this, Terje?

  83. TerjeP
    July 31st, 2011 at 19:29 | #83

    BilB – look up “tax freedom day” for the USA and for Australia. Americans hand over their income to the government for more days of the year than Australians. Not a lot more but more. To infer that the USA is representative of how miserable Australia would be if we lowered our tax burden defies the facts. Australia is already taxed at a lower rate than America and has been for a long time. If you want to see the misery of really low tax levels you would have to examine placed like Singapore or Hong Kong. And having visited both I’d say you would have a hard time finding much of it. Of course neither place is perfect but both are prosperous and the people their live well.

  84. Ikonoclast
    July 31st, 2011 at 19:40 | #84

    @TerjeP

    As usual, TerjeP invents totally FALSE statistics to make his argument. OECD figures for taxes as a percentage of GDP are as follows as per Wikpedia;

    Mexico 17.5
    Chile 18.2
    USA 24.0
    Turkey 24.6
    KoreaSth 25.6
    Australia 27.1 (2008)
    Ireland 27.8
    Japan 28.1 (2008)
    Slovakia 29.3
    Greece 29.4
    Switzerlnd 30.3
    Spain 30.7
    New Zlnd 31.0
    Canada 31.1
    Israel 31.4
    UK 34.3
    Poland 34.3 (2008)
    Czech R 34.8
    OECD (unweighted average, 2008) 34.8
    Portugal 35.2
    Germany 37.0
    Luxembourg 37.5
    Slovenia 37.9
    Hungary 39.1
    Netherlands 39.1
    Norway 41.0
    Iceland 41.4
    France 41.9
    Austria 42.8
    Finland 43.1
    Belgium 43.2
    Italy 43.5
    Sweden 46.4
    Denmark 48.2

    QED

  85. Ikonoclast
    July 31st, 2011 at 19:55 | #85

    Also, in 1910, Australia levied tax equal to about 5% of GDP. To look at a modern state which levies a similar rate we must see Angola with 5.7% or Afghanistan with 6.4%. These nations give you an idea of what a modern nation state looks like when it levies about 5% of GDP as tax.

    Singapore levies taxes about 14.2% and Hong Kong about 13%. Neither of these are comparable to true nation states. Hong Kong is not a nation state but a special economic province of China enjoying all sorts of atypical advantages. The revenue of Singapore would include (I have not checked this in detail) atypical receipts from its location as a transport hub and service hub. A similar effect would be obtained if you looked at just London’s or Sydney’s revenues adjusting out the dragging down effect of regional backwaters and also adjusting out certain national costs such as defence.

    As usual, TerjeP both makes up his own statistics and compares apples to oranges in the most untenable way.

  86. TerjeP
    July 31st, 2011 at 20:00 | #86

    Okay I took a closer look. My figures are dated. It seems that over the last few years tax freedom day has come earlier in the USA and also it now comes later in Australia. So touché.

  87. TerjeP
    July 31st, 2011 at 21:22 | #87

    I found the answer to my question. According to the following article in order to make it into the top 0.5% by income you need to earn $277000pa. This tells us the median income for the top 1% of US income earners. So the group that earns 25% of the income are typically on the salary of a senior company executive.

    http://blogs.wsj.com/wealth/2007/02/01/the-rich-o-meter/

  88. Chris Warren
    July 31st, 2011 at 21:51 | #88

    Chris, I’m puzzled that you describe my ideal of proportional equality as ‘meaningless’. It’s also funny, since you introduce the variable ‘y’ without defining it, and thus make your own statement literally meaningless.

    Geez Jarrah, if you want to know the definition of y, then just go back and ask the fellow who introduced x.

    Hang on, that fellow is Jarrah. So why ask me for the definition, ask Jarrah. Whatever x is, y is the same.

    So if you want to dispute some issue of definition start with the x.

    Jarrah’s little tax scheme is not a scheme of “proportional equality”. This is a cosmetic label for propaganda purposes. You only get meaningful equality with a progressive tax scale.

  89. Chris Warren
    July 31st, 2011 at 21:55 | #89

    @TerjeP

    #29 is an impenetrable jumble of nouns and verbs that makes no sense.

  90. July 31st, 2011 at 21:57 | #90

    Let me first state my reading of TerjeP’s argument:

    It’s unfair to tax heavily those on the 1% top bracket, whose average yearly income is $12.5 million, because their median yearly income is surely much lower: if they all were equally taxed, the really rich people (at the right end of the income SCALE) would be paying the same taxes as the not-so-really-rich people (at the left end of this income BRACKET)

    From here my comments:

    All income distributions (empirical or theoretical) have the same properties: medians are always smaller than averages at least along its right tail.

    So, if instead of taxing heavily the top 1% income tax bracket, we chose to tax heavily, say, the richest 0.1%, we’ll find… that oh, no! it’s unfair to tax these people heavily: after all, their median is also… much smaller than their average!

    Whaddaya know!

    It’s quite funny and creative, too, when you think of it.

  91. TerjeP
    July 31st, 2011 at 21:58 | #91

    @Chris Warren

    A misquote on my part. Figure should be $397,949.

  92. TerjeP
    July 31st, 2011 at 22:00 | #92

    Magpie – I didn’t make the argument you think I made. What I did was ask a question. And my hunch about the answer was not merely that the median would be lower than the average (yes that’s trivial) my hunch was that it would be “vastly” lower.

  93. TerjeP
    July 31st, 2011 at 22:13 | #93

    Chris Warren :@TerjeP
    #29 is an impenetrable jumble of nouns and verbs that makes no sense.

    It was pretty clear. However I will try again using an analogy.

    Axiom 1. We have 100 litres of water (wealth).
    Axiom 2. It is spread somehow across 100 buckets.
    Axiom 3. We have a bucket containing 1 litre of water and no other bucket is more full. We call this the richest bucket.

    How much in the other 99 buckets?

    Given those axioms my contention is that all buckets must be perfectly equal (ie you’re a communist). It isn’t hard to prove it logically.

    For all 99 buckets we know via axiom 3 that their volume is less than or equal to one litre. Otherwise they wouldn’t be one of the 99 but rather they would be the fullest (richest) bucket.

    However if any bucket has less than one litre then we have more than 98 litres split across the remaing 98 buckets. That would mean their average is more than 1 litre per bucket. Therefore one of them must have more than 1 litre. However this violates axiom 3.

    Therefore no bucket can have less than 1 litre.

    As none can have more than 1 litre and none can have less than 1 litre all buckets must have an exactly equal quantity of water.

    Conclusion: You are advocating communism.

  94. BilB
    July 31st, 2011 at 22:17 | #94

    For goodness sake, Terje. If the average holding for the top 1% isof households is $12.5 million, and they are hopeless investors and earn only 5% on their property, then their passive income will be $625,000. That is before they step out of the house in the morning. Perhaps your figure represents the “taxable” income for this misunderstood group of people. And their “taxable” income is very much the issue.

  95. Jarrah
    August 1st, 2011 at 09:58 | #95

    “Whatever x is, y is the same. So if you want to dispute some issue of definition start with the x.”

    Oh dear. Is basic algebra beyond you as well? x is whatever we want it to be, the actual number doesn’t matter. What I’m saying matters is the relationship between income and tax, and as long as the ratio is about 1:1, we’re good to go. That is a textbook example of proportional equality. In the US they get pretty close, but the richer do pay more – the top quintile earns 59.1% of total income, but pays 64.3% of total tax (including local and state). The bottom quintile earn 3.5%, pay 1.9%.

    “If the exploiters have x% of wealth they should contribute (x+y)% of total tax.”

    Since you bizarrely introduced another variable, which is “the same” as the first variable (x=y), you want someone with proportion x of total income (assuming you just made a mistake when you changed my formula about income to wealth) to pay twice that proportion (x+x) of total income tax. Why is that “meaningful equality”?

    And you still haven’t acknowledged the fact that some people having greater wealth than others does not necessarily mean they are ‘exploiters’.

  96. Chris Warren
    August 1st, 2011 at 10:19 | #96

    @Jarrah

    Just to state the obvious. If the definition of two variables are the same DOES NOT mean that the quantities represented by the variables are equal. Only Jarrah thinks this.

    Jarrah has not been digesting what has been said. No one has said that some people having greater wealth than others means they are exploiters. This is a denialist’s deliberate misrepresentation.

    Go back and read what was stated. Then get back with a logical argument.

    Jarrah obviously has read no classical political economy and has no understanding of the analysis of this precise issue found in the Writings of Karl Marx and Frederick Engels.

    Jarrah has the same qualificatioin in these issues as monkeys trying to recreate the works of Shakespeare.

  97. Chris Warren
    August 1st, 2011 at 11:49 | #97

    @TerjeP

    This is a fantasy. In real life the rich have bigger buckets than the poor. They fill them by expropriating wealth from others.

    You missed this from your so-called axioms.

  98. Jarrah
    August 1st, 2011 at 11:51 | #98

    “No one has said that some people having greater wealth than others means they are exploiters.”

    That is precisely what you have said:

    If the top 1% get much more than 1% then this indicates unfair exploitation…the 1% has vastly more wealth than the rest constructed by exploitation…Presumably a social strata of 1% of exploiters…you should compare the exploiting 1% of 17 years olds…You should also compare 1% of 70 years olds (Howard Hughes) – the exploiters…

    You seem to have descended to mere insult, rather than dealing with the substantive issues, but in keeping with this site’s rules, I won’t respond in kind. I can let the record stand for itself – it’s obvious to all that you don’t know what you’re talking about.

  99. TerjeP
    August 1st, 2011 at 12:32 | #99

    Chris – I don’t think you understand logic. My efforts are wasted.

  100. BilB
    August 1st, 2011 at 12:47 | #100

    Terje @ 33,

    As you are the party interested in the comparison of US taxation to Australian, hows about doing a summary of US taxation for us from your perspective.

    I heard the figure this morning that at present the US tax take is only 2/3rds of outgoings, So they have a massive problem and I think that marginal adjustments are not a real answer. The bottom 2/3rds of the population have no savings and exist on minimal wages from 3 jobs, so it looks like the top one third are going to have to get a second job and get part time work for the wife to pay new higher taxes. That would be fair.

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