Note: I am unable to quote Danivon for some reason. His paragraphs precede mine:

Danivon: Why that percentile in particular?

Only because it is one of the lowest percentiles and shows an after inflation improvement. The effect is more pronounced for higher percentiles such as 30% and 40%. If we assume that middle class is 30% to 70%, it seems overall the middle class has been having an improved standard of living over the last 30 years. If you include social security, medicare, increases in food stamps, etc., I bet the trend is even more pronounced. I agree with you and Geo that there is a lot of data that is not represented in these graphs.

Danivon: Because we are human. Studies on humans and on primates suggest that we see 'fairness' as very important. We interpret the concept in different ways, of course. Some see it as unfair that those who do less work than them get more reward. (with 'less work' and 'more work' being subjective, of course). People sometimes interpret the system as a zero-sum game, and so when others seem to win relative to them, it looks like losing (even if in absolute terms they are a little better off).

I think this is fascinating. Humans (and primates) have all sorts of imperfections. We tend to distrust the "other". We often fight when the rational approach is to walk away. At issue is whether we want to encourage people to partake of these irrationalities, or whether we want to try to improve our approaches. When a right-winger uses our distrust of the "other" to demagogue over immigration, we recognize it for what it is: Demagoguery. However, when a left-winger tells us that it is zero sum, that it is the millionaires and billionaires who are responsible for someone's poverty, isn't that also demagoguery? Do you now understand why Obama's references to billionaires and millionaires is so harmful. He's exploiting these differences for his own political gain.

Ray Jay wrote:I think this is fascinating. Humans (and primates) have all sorts of imperfections. We tend to distrust the "other". We often fight when the rational approach is to walk away. At issue is whether we want to encourage people to partake of these irrationalities, or whether we want to try to improve our approaches. When a right-winger uses our distrust of the "other" to demagogue over immigration, we recognize it for what it is: Demagoguery. However, when a left-winger tells us that it is zero sum, that it is the millionaires and billionaires who are responsible for someone's poverty, isn't that also demagoguery? Do you now understand why Obama's references to billionaires and millionaires is so harmful. He's exploiting these differences for his own political gain.

I think you're conflating issues. Sure, the rich can be used as scapegoats, as a part of demagoguery, for sure, and they are by some. But that's not really the issue here, it's about what happens to our society when there are wide discrepancies (not only income, but education and class) between citizens and when those discrepancies become so wide that they suggest we no longer have mutual interests.

Further, it's well documented in these forums and elsewhere that the rich pay much less as a percentage of their income in taxes as working people do in America. Not only are they doing better than most working people, but they aren't carrying the same share of burden that others are. That's a big deal, and I believe in America, this is a unique condition that hasn't been seen before.

geo

But that's not really the issue here, it's about what happens to our society when there are wide discrepancies (not only income, but education and class) between citizens and when those discrepancies become so wide that they suggest we no longer have mutual interests.

Historically we know what has happened. In monarchies and other undemocratic societies Rulers lost their heads, revolutions occurred.
The question of what happens in democracies has also bee answered historically in the US. The period between 1910 and 1929 saw income disparity and wealth accumulation by a few grow ...and Roosevelt was elected with a mandate to bring in things like Social security, and banking and corporate laws, that were meant to mend the effect of the disparity.
Since 1970s there has been a dismantling of some of the laws, especially in the financial industry that have served to strip these laws . Especially since Clinton.
In a democracy, people vote for those whom they believe will best advance their interests. Thats why Roosevelt was reelected twice.

ray

However, when a left-winger tells us that it is zero sum, that it is the millionaires and billionaires who are responsible for someone's poverty, isn't that also demagoguery? Do you now understand why Obama's references to billionaires and millionaires is so harmful. He's exploiting these differences for his own political gain.

In a democracy, the elected leader wants the majority of people to believe he is working in their interests. If the working poor and middle class understand what has happened to their comparative living standard as a bad thing .... they'll respond to politicians with policies intended to correct the situation.
If part of the situation is true , like it was in the roaring twenties, that a handful have most of the money , then if people do act in their self interest shouldn't they be acting to change things?

The myth is that this is envy. Its about perceived fairness. Man kind has almost always accepted that some get more ... but they also, even in monarchies have eventually revolted if they can't see their lives improving.
And really Ray, perhaps thats whats happening in the US. The poor can't get out of their circumstance, and the middle class are seeing their circumstance lowered below what they saw of their parents...and they despair for the children,. Occupy Movement was a first reaction to this ....
Perhaps a move to the left in US politics will occur, as it did under Roosevelt, as longer term reaction.
The problem is that the political and financial systems are rigged against change. That's not good, because that leads to real unrest ...and consequences like higher crime ...

Geo: Further, it's well documented in these forums and elsewhere that the rich pay much less as a percentage of their income in taxes as working people do in America. Not only are they doing better than most working people, but they aren't carrying the same share of burden that others are. That's a big deal, and I believe in America, this is a unique condition that hasn't been seen before.

I just don't agree with your premise. Although there are some problems with preferential rates in the U.S., as a share of total taxes, the rich pay more than their share. There's a lot of complexity here as it relates to social security taxes (do we include it in the calculation), definition of income (do we include transfer payments), how to consider corporate taxes, estate taxes, property taxes, etc., but on balance you haven't proven to me that the "rich pay much less as a percentage". (And I'm a CPA with a tax specialty.)

Ray Jay wrote:Danivon: Why that percentile in particular?

Only because it is one of the lowest percentiles and shows an after inflation improvement. The effect is more pronounced for higher percentiles such as 30% and 40%. If we assume that middle class is 30% to 70%, it seems overall the middle class has been having an improved standard of living over the last 30 years. If you include social security, medicare, increases in food stamps, etc., I bet the trend is even more pronounced. I agree with you and Geo that there is a lot of data that is not represented in these graphs.

Are you sure that the middle class are getting more from social security, medicare and food stamps? Would it not be worrying if they were - especially the last of those three.

Yes, the middle 50% are getting better off. But still, are they getting better off as quickly as the economy is expanding? And are they more or less productive than they used to be?

Danivon: Because we are human. Studies on humans and on primates suggest that we see 'fairness' as very important. We interpret the concept in different ways, of course. Some see it as unfair that those who do less work than them get more reward. (with 'less work' and 'more work' being subjective, of course). People sometimes interpret the system as a zero-sum game, and so when others seem to win relative to them, it looks like losing (even if in absolute terms they are a little better off).

I think this is fascinating. Humans (and primates) have all sorts of imperfections. We tend to distrust the "other". We often fight when the rational approach is to walk away. At issue is whether we want to encourage people to partake of these irrationalities, or whether we want to try to improve our approaches. When a right-winger uses our distrust of the "other" to demagogue over immigration, we recognize it for what it is: Demagoguery. However, when a left-winger tells us that it is zero sum, that it is the millionaires and billionaires who are responsible for someone's poverty, isn't that also demagoguery? Do you now understand why Obama's references to billionaires and millionaires is so harmful. He's exploiting these differences for his own political gain.

Hmm. I was talking about how people actually view things, and that's regardless of 'demagoguery' (and no, frankly I don't think it is harmful to point out that the rich are getting richer, that some of them caused the actual economic crash and while they lost, are still very rich while millions of others lost their jobs).

By the way, is it really an 'imperfection' for us to have a sense of fairness? I think far less so than violence or xenophobia. It may not seem 'rational' to you, but in many ways it is very much so:

How is it rational to accept a situation where one person works harder than they used to for no gain, while another works no harder than before for massive gain?

For example, I saw a study where monkeys were given food, in view of each other. When all got give the same, all was fine. When one was given less food, or something less desirable, not only did they get upset, but so did some of the other monkeys - refusing to eat theirs until they saw that their fellow got what was 'fair'.

And there is a rational reason for that. Ok, so the other monkeys are not losing out, so why complain? Because they perhaps fear that if one of them can be disadvantaged, so can they. Is that fear rational? Well, they are monkeys being experimented on, so it turns out yes, it is.

I think that is the right question--are the rich, through our current economic policies, essentially taking wealth from the poor and middle-class or are our current economic policies creating wealth for everyone but just more for the rich? There are two ways to prevent concentration of wealth: (1) high marginal tax rates , and (2) empower workers so that they negotiate better pay and benefits.
From the New Deal era to 1980 there were very high marginal tax rates on high incomes. Unions still were powerful enough to get good wages and benefits. (union members are estimated on average to make 10-30% on average than non-union members)Many workers had good pensions and health care; the minimum wage was relatively high. The number of unionized workers in the U.S was a little over 26% in the late 1970s but about 13 percent now. (see the following argument about the relationship between the decline in unions and wages. http://www.epi.org/publication/ib342-un ... dle-class/)
If our current policies, based on the theories of Friedman/Hayek, are not good for the middle-class, why should the middle-class continue to support them? Employers have the upper-hand when it comes to negotiating with workers (due to the decline of unions, non-enforcement of anti-trust laws allowing the creation of monopolies and oligopolies, globalization creating a vast increase in the worker pool with no steps taken to protect US wages...)and this creates high returns on investment. This in return creates a great deal of wealth for the rich (and the creation of a financial services class which is also getting rich due to much higher returns on investment). And of course marginal tax rates have come down (and if you're really rich and your wealth is based on investment you won't pay more than 15% of your income in taxes, though maybe that has changed a bit and you pay 21% under the new capital gains tax rules)
So, explain to me how this new economic system is good for the middle class and working poor, RJ? ( by the way, most people don't like assistance from the government--they would much rather they had a good job with adequate pay with benefits resulting from having adequate bargaining power vis-a-vis employers rather than having a crummy job and getting by with help from the government)
It's not demagoguery to attack the rich if it turns out that by changing the economic rules, yes they are playing a zero sum game and taking from the middle-class and poor.

ray

There's a lot of complexity here as it relates to social security taxes (do we include it in the calculation), definition of income (do we include transfer payments), how to consider corporate taxes, estate taxes, property taxes, etc., but on balance you haven't proven to me that the "rich pay much less as a percentage". (And I'm a CPA with a tax specialty.)

Well, fairness would be a tax code that it easily understood. Transparent. The lack of transparency and the so called complexity is a screen for the well off and powerful who enjoy rules that save them money. Sometime a very great deal.
And really Is it really all that complex? A bucks a buck. Why social security taxes stop after about $109,000 in income is the biggest mystery...

Roughly 25 percent of American millionaires pay a lower tax rate than millions of middle class earners, according to a new study by the nonpartisan Congressional Research Service.

The study points out that the while, on average, millionaires do pay more in taxes than middle-class earners (about 30 percent compared to about 19 percent), the use of average tax rates in discussions surrounding the issue "hides a great deal of variation in the tax rates that taxpayers actually face."
"The primary reason for this is the higher-income taxpayers with low tax rates receive a very high proportion of the income from long-term capital gains and qualified dividends, which are taxed at low tax rates and not subject to payroll taxes," Hungerford says.
Lower-income taxpayers, however, earn most of their income from wages - which are subject to payroll taxes.

http://www.cbsnews.com/news/25-of-milli ... tudy-says/

The crash of 08, and the subsequent bail out should have been a clear signal to society that the game was and remains rigged. And a system that defines money as free speech, continues to provide those with most of the money with a political advantage .

Danivon: Are you sure that the middle class are getting more from social security, medicare and food stamps? Would it not be worrying if they were - especially the last of those three.

[I'm still unable to use the quote function; I have no idea why]

I'm assuming that there are higher payouts for social security and Medicare because of demographics. There are more elderly than ever, and they tend to receive social security and Medicare. I would think that any stats on real inequality should include this fact because it results in some equalization.

Regarding food stamps, here's a chart on people receiving food stamps http://www.trivisonno.com/wp-content/up ... Yearly.jpg it's the first thing that came up when I Googled. Some of that increase may be worrying; however, there have been changes to eligibility over the last several years, so I don't know how much of it is law changes and how much of it is a reflection of the income inequality that concerns us.

Danivon: How is it rational to accept a situation where one person works harder than they used to for no gain,...

Except my point is that you haven't proven that people work harder for no gain. I'm saying that the 20 percentile -- and certainly the 30 percentile and up -- are working for absolute gain.

Freeman: If our current policies, based on the theories of Friedman/Hayek, are not good for the middle-class, why should the middle-class continue to support them?

Again, that's your assumption ,but I don't think it is proven by the data. The middle class is improving, although less so than we would all like.

We also haven't defined "current policies". My view is that Obama's policies are NOT good for the middle class. We are a very long way off from what Friedman/Hayek have advocated. This is closer to the policies espoused by Obama/Keynes than to anything recommended by Friedman/Hayek.

Ricky: http://www.cbsnews.com/news/25-of-milli ... tudy-says/

I always prefer when Ricky disagrees with me. First, he quotes an article that is using 2006 data. Second, in his own words he quotes support for my point vis-à-vis Geo. "The study points out that the while, on average, millionaires do pay more in taxes than middle-class earners..." Of course it is even more so now after the Obama tax increases.

As to the lack of transparency in the tax code, on balance I would blame that more on Democrats than Republicans. What has Obama proposed let alone enacted that would make the tax code less complex?

Ray Jay wrote:
[I'm still unable to use the quote function; I have no idea why]

If you are, you can manually do it. <quote="person"> and </quote> is all you need.

RayJay wrote:Danivon: Are you sure that the middle class are getting more from social security, medicare and food stamps? Would it not be worrying if they were - especially the last of those three.

I'm assuming that there are higher payouts for social security and Medicare because of demographics. There are more elderly than ever, and they tend to receive social security and Medicare. I would think that any stats on real inequality should include this fact because it results in some equalization.

But why would their social security income not be counted as Income? Surely it is, as it is money going into the it is included in the figures.

Regarding food stamps, here's a chart on people receiving food stamps http://www.trivisonno.com/wp-content/up ... Yearly.jpg it's the first thing that came up when I Googled. Some of that increase may be worrying; however, there have been changes to eligibility over the last several years, so I don't know how much of it is law changes and how much of it is a reflection of the income inequality that concerns us.

47.67 million is still under the 20th percentile, given the US population is over 300 million.

Danivon: How is it rational to accept a situation where one person works harder than they used to for no gain,...

Except my point is that you haven't proven that people work harder for no gain. I'm saying that the 20 percentile -- and certainly the 30 percentile and up -- are working for absolute gain.

Except that when I looked at the unsmoothed data, I noticed that the 20th percentile only really saw improvement in the late 90s, with decline or stasis at every other period. I even pointed it out here, but perhaps you missed it. In the same 30 year period, US productivity climbed smoothly, with a pause in the early 90s. So all through the 1980s, and then from the 00s onwards, productivity rose but incomes for your magic 20th percentile fell relatively, if not absolutely.

A good few years out of 30 does not really cut it, I'm afraid. especialy when it was more than a decade ago that it ended.

(oh, and Obama's economics are not really Keynesian, any more than Bush's was)

danivon wrote:

Ray Jay wrote:
[I'm still unable to use the quote function; I have no idea why]

If you are, you can manually do it. <quote="person"> and </quote> is all you need.

Thanks

danivon wrote:

RayJay wrote:Danivon: Are you sure that the middle class are getting more from social security, medicare and food stamps? Would it not be worrying if they were - especially the last of those three.

I'm assuming that there are higher payouts for social security and Medicare because of demographics. There are more elderly than ever, and they tend to receive social security and Medicare. I would think that any stats on real inequality should include this fact because it results in some equalization.

But why would their social security income not be counted as Income? Surely it is, as it is money going into the it is included in the figures.

Regarding food stamps, here's a chart on people receiving food stamps http://www.trivisonno.com/wp-content/up ... Yearly.jpg it's the first thing that came up when I Googled. Some of that increase may be worrying; however, there have been changes to eligibility over the last several years, so I don't know how much of it is law changes and how much of it is a reflection of the income inequality that concerns us.

47.67 million is still under the 20th percentile, given the US population is over 300 million.

Nice try; but keep in mind that 60 million Americans are on social security; most of these individuals do not receive food stamps. Food stamps are covering more than the lowest 20 percentile of earners.

danivon wrote:

Danivon: How is it rational to accept a situation where one person works harder than they used to for no gain,...

Except my point is that you haven't proven that people work harder for no gain. I'm saying that the 20 percentile -- and certainly the 30 percentile and up -- are working for absolute gain.

Except that when I looked at the unsmoothed data, I noticed that the 20th percentile only really saw improvement in the late 90s, with decline or stasis at every other period. I even pointed it out here, but perhaps you missed it. In the same 30 year period, US productivity climbed smoothly, with a pause in the early 90s. So all through the 1980s, and then from the 00s onwards, productivity rose but incomes for your magic 20th percentile fell relatively, if not absolutely.

A good few years out of 30 does not really cut it, I'm afraid. especialy when it was more than a decade ago that it ended.

If our concern is the middle class, we should focus on the 30th to 70th percentile. if our concern is the poor, then looking at the 20th percentile makes sense. It's not ideal, but their situation has improved on an absolute basis. I suspect that most of this population is on some form of public assistance. [/quote]

danivon wrote:[(oh, and Obama's economics are not really Keynesian, any more than Bush's was)

Agreed. Because of the hodge podge of the political process we really don't seem to follow any economic theorist when it comes to government policy.

If your concern is the poor, you should look at more than the 20th percentile, surely?

And you still seem to be missing my point about the difference between the smoothed 30 year trend and the actual figures over the period.

It would be interesting to get real data, rather than supposition, on the distribution of food stamps (which may be counted as income) and SS payments (which will be).

The fact that so many Americans require food stamps, that is direct assistance to feed their families is evidence of an economic system that isn't working. Not fairness or unfairness.
In a working economy those working make enough money to provide themselves the basic necessities without direct intervention from state or charities.
Where taxation is working, a state can provide the services required of it by its citizens, without constant deficit financing. In the countries where the literature suggests the middle classes now earn more than American middle class this usually means a taxation rate that is more progressive than the US.
It also means that some requirements for security and social mobility are socialized (Medicine and education) .
Moreover, the IMF, a famous socialist organization, has come out against pronounced income inequality because its bad for business...

Recent research from the International Monetary Fund found that lower inequality is "robustly" linked with "faster and more durable growth".

http://redproteccionsocial.org/sites/de ... growth.pdf

First, more unequal societies tend to redistribute more. It is thus important in understanding
the growth-inequality relationship to distinguish between market and net inequality.

Second, lower net inequality is robustly correlated with faster and more durable growth, for a
given level of redistribution. These results are highly supportive of our earlier work.

And third, redistribution appears generally benign in terms of its impact on growth; only in
extreme cases is there some evidence that it may have direct negative effects on growth. Thus
the combined direct and indirect effects of redistribution—including the growth effects of the
resulting lower inequality—are on average pro-growth.