The wealth gap

[bobblehead]

I had a sort of epiphany on explaining why the wealth gap doesn't matter, or actually is inevitable (hope hoosier comes around to read this)

If society in general is getting wealthier (and it is by any reasonable measure), it means simply that more people can afford more things. When someone starts their own company it only stands to reason that more and more people can afford their product, or at a minimum the same amount of people can afford to pay more for the product. Also factor in population increases and it only stands to reason that the wealthy will earn an ever increasing amount of money. At the same time, most employers will pay what they have to, sometimes more, but never an unreasonable amount more.

If a company with 20 employees doubles its revenues due to economic prosperity they are not going to double the wages of employees...why would they? Said company might pay more than before, but not double, it stands to reason that the owner will get a bigger return and thus an expanding wealth gap. Even if his expanding business requires hiring 20 more employees again, his return per unit is the same, but his total revenue doubles.

In times of economic prosperity the gap will widen....I guess if its too big of a problem we could just avoid that nasty prosperity thing so those rich bastards can't make more money off of us.

[the_idle_threat]

Re: The wealth gap

In times of economic prosperity the gap will widen....I guess if its too big of a problem we could just avoid that nasty prosperity thing so those rich bastards can't make more money off of us.

That was my conclusion in another thread. Economic prosperity widens the gap, mainly because the wealthy get a much larger proportion of their income from ownership and investment in capital, rather than from wages, and capital investments grow at a greater rate over time than wages do.

But the flip side of the coin is that the gap narrows in bad economic times, as owned items like stock and homes and capital goods decrease in value by a lot larger amount than wages do (in fact many wages are unable to decrease due to floors such as minimum wage or union agreements).

This is why, in another thread, I strongly disputed an economic report that reported the income gap in America was widening based upon data that conveniently left out capital gains/losses as part of income AND only looked at time periods of economic expansion (late 1990s and 2004-06, skipping the period of down markets from 2001-03).

The report uses gerrymandered data to make a false case that the income gap only widens, and never narrows. Of course, Harlan argued that I lack sufficient knowledge to make this claim, because he chooses to defer to the think tank that produced the report---an economic think tank that has declared the income gap a huge problem for America, and surely is a disinterested party.

[PackerPro42]

That's how it worked in the great depression. 5% of the nation's population controlled 95% of the nations wealth.

[the_idle_threat]

That's how it worked in the great depression. 5% of the nation's population controlled 95% of the nations wealth.

Source?

And in any case, there were many contributing causes to the great depression. There was massive fraud and incompetence in the financial sector that led to bank failures and the stock market crash, there was drought and crop faiilure (the dust bowl), there was massive unemployment.

None of those were caused by an income gap. In fact, the income gap might have been caused by the confluence of these problems.

[PackerPro42]

I didn't say that the income gap was the cause of the great depression, I was just backing his point that stated that during times of recession the income gap increases.

My source is my U.S history class last year.

[PackerPro42]

Just read the arcticle again, that statment doesn't back his theory, but it does bring up an interesting point.

[BallHawk]

That's how it worked in the great depression. 5% of the nation's population controlled 95% of the nations wealth.

In 1950 the richest 20% controlled 43% of the wealth. I'm no economics major, but that seems like a big jump to go through in a 20 year period.

[texaspackerbacker]

Would somebody (if indeed anybody believes it) like to explain how increasing the wealth gap is harmful to people of lower income levels if--as obviously is the case in present-day America--those people on lower income levels are also achieving higher levels of income. An answer might be inflation. However, there has been no significant inflation in recent years in this country. So how--other than class envy promoted by demagogues?

[Harlan Huckleby]

Re: The wealth gap

conveniently left out capital gains/losses as part of income AND only looked at time periods of economic expansion (late 1990s and 2004-06, skipping the period of down markets from 2001-03).

The report uses gerrymandered data to make a false case that the income gap only widens, and never narrows.

Well, to recap the last debate: everything Idle claims here was shown to be bunk. A thoughtful attack on Idle's part, but a misfire. The "gaps in the data" were simply due to the fact that census data isn't taken every year, no gerrymandering. And the authors of the report addressed the issue of capital gains - no reliable data - and showed with the available data that capital gains supported their argument.

Mr. Idle is a bad man. Very bad man.

[bobblehead]

That's how it worked in the great depression. 5% of the nation's population controlled 95% of the nations wealth.

In 1950 the richest 20% controlled 43% of the wealth. I'm no economics major, but that seems like a big jump to go through in a 20 year period.

I would guess that in 1950 peoples houses were a MUCH higher percentage of the nations wealth. Now, a casino owner in las vegas controls the equivalent of around 2500 houses (spitballing numbers). I'm only guessing here mind you.

If in 1951 someone created a business and grew it immensely benefitting many many americans he would probably create a billion in wealth....all his....thus widening the gap. Is this a bad thing?

It is no surprise that those that create the wealth would actually control it. But bottom line is, he is creating something people desire/need/use.

The problem is people automatically assume that this widening gap means the SAME amount of wealth is getting redistributed...thats simply not the case. I don't have to cost ballhawk a dollar to earn a dollar, I can do things that make both of us money, ballhawk might earn a dollar and I earn ten.

The guy who invests dollars to build a business paid a bunch of people money in wages. He brought something to the market that people want. As such his "wealth" goes up, but so does everyone elses as a result of his actions.

[bobblehead]

That's how it worked in the great depression. 5% of the nation's population controlled 95% of the nations wealth.

In 1950 the richest 20% controlled 43% of the wealth. I'm no economics major, but that seems like a big jump to go through in a 20 year period.

One other thing I would be interested to know. How does the wealth of the bottom 20% TODAY compare to the wealth of the top 20% in 1950?

[the_idle_threat]

Re: The wealth gap

conveniently left out capital gains/losses as part of income AND only looked at time periods of economic expansion (late 1990s and 2004-06, skipping the period of down markets from 2001-03).

The report uses gerrymandered data to make a false case that the income gap only widens, and never narrows.

Well, to recap the last debate: everything Idle claims here was shown to be bunk. A thoughtful attack on Idle's part, but a misfire. The "gaps in the data" were simply due to the fact that census data isn't taken every year, no gerrymandering. And the authors of the report addressed the issue of capital gains - no reliable data - and showed with the available data that capital gains supported their argument.

Mr. Idle is a bad man. Very bad man.

There was no evidence that the gaps came from gaps in census data---that was speculation on your part. The main gap I refer to does conveniently leave out the years where there were down markets due to the tech dot bomb, but includes the robust markets of the late '90s and the market recovery after the dot bomb time period. Gerrymandering is speculation on my part; incomplete census data is speculation on yours. I suspect we'll both believe what we want to.

The authors of the report made a lame excuse for leaving out capital gains (they could have used estimates), and they made a misleading remark about what capital gains would show if included that you fell for hook line and sinker. Including capital gains (and losses) in annual income would NOT show the income gap increasing over time, and would therefore weaken the argument. Much more convenient for the authors of the report to leave capital gains out, which is what they did.

[Scott Campbell]

Re: The wealth gap

I suspect we'll both believe what we want to.

I believe you.

[Partial]

You know what is bullshit? That my family who works hard constantly gets fucked. My grandma has a few mil right, and the gov takes 50% when she moves to heaven, and then they take another 50% from my parents for their tax bracket. They get to keep 25%. Where the F does the rest go?

Our government is some shady business.

[Harlan Huckleby]

I believe the silence from the conservative media is deafening. That study was reported in every media outlet, it was widely discussed in newspaper and TV commentary. It's unthinkable that it was as crudely falsified as Idle claims, there would be a response from the conservative think tanks.

A widening income gap is a bad thing in a country that fails to provide health care for so many of its working poor. Something is broken. If you want to look at a country that is dangerously threatened by a widening gap, see China. That country may yet fall apart. One of the secrets to our longterm stability and high morale has been a robust middle class.