Not Good Enough

I don’t find the data on wealth inequality in the U. S. quite as encouraging as the editors of the Wall Street Journal do:

In the 40 to 59 age group that is the paper’s focus, the top 5% of households control 63.5% of “market wealth”—liquid assets, housing, and accounts like 401(k)s. But include future pension and Social Security income, and the top 5% share is a more modest 45.4%, the authors find.

Under this measure of wealth, the increase in inequality over time has also been less steep. While the share of “market wealth” held by the top 5% of households age 40 to 59 increased 15% over the last 30 years, their share increased only 10.2% with Social Security and defined-benefit pensions included.

Graphs explain the source of my concern:

I wasn’t able to locate the graph I was actually looking for quickly. Hard as it may be to believe 50 years ago 50% of the population held 50% of the wealth. We’re now getting back to Gilded Age, pre-industrial levels of inequality.

It’s easier to illustrate income:

In my view three things are necessary

  1. Reduce the growth in income and wealth subsidies for the top 10% of income earners. Over the last 20 years those subsidies, largely from the Federal Reserve, have been prodigious.
  2. Restrict immigration. As I’ve said before there is no way to reduce wealth and income inequality when we’re importing poor people as quickly as we have been for the last 40 years.
  3. Revitalize the U. S. industrial sector. We can’t remain a great nation on the basis of retail sales and services.
28 comments… add one
  • Drew Link

    The three proposals are fine, as far as they go. But it seems to me that all these discussions are very incomplete. The Journal makes a very important point. To not include the PV of 401K’s and pensions is fraudulent analysis. And for 401K’s for sure the trend will be up.

    Just a sampling of complicating issues:

    1. Every time a non-5%er buys Nike shoes, an Apple Iphone or an entertainer’s CD/movie ticket/concert ticket etc they are willfully contributing to wealth inequality. The things I cite are luxury goods, not staples or needs. Please spare us, critics, the usual argument about being forced to choose between buying medicine or food crappola.

    2. As I always point out, trade and immigration issues do not get a full accounting of winners and losers. Cheap goods through trade benefit consumers. They harm workers. Often those two overlap. Immigration is easier. We only need immigrants right now because (and those who don’t believe it are just naive) we provide subsidies to US citizens not to work in icky jobs. If we didn’t, markets would sort out wage structures. Right now wages are depressed through immigration for the benefit of the top 80%, not just the top 5%. Talk to Uncle Joe and Nancy Pelosi, or Mitch McConnell, if you really care about income inequality.

    3. Does the Fed really need more bashing? Every Chair after Volker was/is an asshole. Friedman was right. Set a rule. The concerns about “what if” crises seem pretty silly given the harm the Fed has done with its latitude.

    4. A large part of income and then wealth inequality derives from the increasing “return to capability” that comes with an advancing society. Pulling a lever on the assembly line just doesn’t have as much value as it did in 1955. The usual proposed nostrums are self defeating: steal it from those who can and give it to those who can’t, or steal it from them when they die. Neither have, or will, work.

    4a. Misguided or corrupt attempts by government to intercede in major consumer expenditures (education, medicine, agriculture, housing) have done nothing but promote wealth inequality.

    5. Globalism in general. Who has benefitted more from this scam, Joe and Hunter or the Clintons, or Joe Q Sixpack.

    My conclusion is that very few really care about income inequality, except that they are told by politicians that if voted for they will steal the neighbors money and give it to them.

    The guy who came closest to having the opposite point of view on these issues was the hated one, at least by the establishment. Funny that.

    1.

  • 1. 85% of American adults own smartphones as of February 2021.
    2. I have previously documented that consumers are only capturing a small proportion of the benefits of trade. Yes, they are benefiting. Not as much as producers and resellers are.
    3. IMO the Taylor Rule would be better than a Fed board of governors.
    4. I simply think it’s a social and economic necessity that we produce more of what we consume.
    5. Answer to your question: the Walton family.

  • steve Link

    5) You somehow managed to forget Trump who is much richer than the others you named and has benefited from globalism. Besides the Walton family I would say the investor class in general.

    Also–1) Most people have given up their landlines and have only smartphones. Long distance calls are cheaper. People conduct a lot of business on those phones. I sign a dozen documents a day on mine and I am far from a sophisticated phone user.

    2) It is the business class that keeps pulling in illegal immigrants. They come for the jobs here. As long as business owners can get cheaper labor that way ti will keep happening.

    “My conclusion is that very few really care about income inequality”

    An awful lot care about its effects.

    Steve

  • bob sykes Link

    The single most important fact about illegal immigration is that the dirt-poor peasants coming over the border cannot afford the coyotes’ fees. They can’t even afford the food required for a trip of 1,000 to 2,000 miles.

    So who pays for the trips. It has to be American individuals and businesses. The immigrants are being sold into chattel slavery. This year we may get 2 million illegal immigrants. The vast majority of them will be slaves.

    The US is once again a slave society with an active slave market. We had 4 million slaves on the eve of the Civil War. How many do we have now? If there are 20 million illegal aliens in the country, what fraction are slaves? Half? Do we have 10 million slaves?

    Who are the slave owners? A black market that large must be traceable.

  • Drew Link

    Dave

    1. Not sure what the point is there. It just makes my point, illustrating how many people have chosen to purchase a luxury item rather than a staple item. And, by the way, many choose to buy each time a new version comes out. This simply is not necessary; its a wonder we survived without smart phones for 60-70 years. But Apple sure does thank them. Its willful wealth transfer.

    The same can be said of entertainment purchases or luxury gadgets. In 5 months large numbers of Christmas holiday people will get on airplanes and head for Disney World, luxury hotels or rent condos in Florida for $10-$15K for two weeks. Think SC, AZ, CO etc as well. When I was young we drove 4 hours over the river and through the woods to grandmas house. We and our cousins bunked military style in their basement. Again, people are making wealth transferring purchase decisions. It their right, but its a real factor in the disparity statistics.

    2. I don’t know how that can really be accurately measured. But let’s just stipulate its true. It doesn’t change the fact that consumers are benefitting. Nowhere has it been more evident than in consumer electronics and clothing. I’m sure you recall when you had one TV – black and white. Today many families have 2, 3, 4 hi-def smart TV’s in their home.

    One thing I know for sure: if you want to reduce wealth disparity or tip the consumer/producer balance, stop buying.

    3. Any rule would be better than discretionary policy. The damage done has been incalculable.

    4,5 I think that’s correct. To relate it to the topic of wealth disparities, producers may be capturing more value than consumers, but I can guarantee they are capturing more than US workers. Go ahead and grouse about the Waltons. But the Waltons are seizing on what has been allowed. And again, you simply can’t argue that consumers don’t benefit. They aren’t forced to go to Wal-Mart at gun point.

    My firm, for 30 years, has done what it could to further the prosperity of US manufacturers as best it could. Washington politicians wash it away in the stroke of a pen for their own benefit. The Waltons etc own the politicians, and the politicians take their grift along the way. That is the system that has been set up. My suspicions wrt government and the people in it are well earned. As for Trump, he attacked the establishment way, and the establishment noticed that large swaths of the population were tired of being taken advantage of and were willing to vote their wishes. So he had to be destroyed.

  • It’s not just those here illegally who are slaves, bob. The situation is nearly the same for those here legally. They remain here at the pleasure of their H1-B sponsors. If they ask for higher wages or better conditions they risk losing their visas.

  • Drew Link

    “You somehow managed to forget Trump who is much richer than the others you named and has benefited from globalism.”

    You would have been better off to cite tax policy. He was a NY real estate guy, not an outsourcer of low value add unit operations or environmentally disfavored industries to China.

    “Besides the Walton family I would say the investor class in general.”

    All you have to do is look at the equity indexes and you know the investor classes have benefitted. The indexes mirror the rise of Asian economies, especially China. But there is no insight there, and no policy prescription. Just bitching.

    The most fundamental mistake that was made was not dealing with the existent wage disparities of then Chinese peasants and, say, a Detroit auto worker. First, low value add, high labor content (manual assembly) operations went overseas. Later, more sophisticated operations went there. Between the illusion of free trade and these wage disparities the American worker was disenfranchised. As a nation we should have been managing this issue. It was not possible to deny economic reality; but it could have been managed. But politicians were bought off, or the academics from Reich to Thurow to Krugman all had similar prescriptions: tax the value add, throw a few dollars at the workers and let government call the shots. Trump saw this an got bellicose with China. For that the establishment had to paint him as anti-free trade, reckless and a racist. He was going to upset the apple cart.

    “It is the business class that keeps pulling in illegal immigrants. They come for the jobs here. As long as business owners can get cheaper labor that way ti will keep happening.”

    Nonsense. Its a convenient and unholy alliance between government and certain, generally big, businesses. When was the last time Uncle Joe or Nancy did or proposed anything to stop immigration? I reflexively disagree with Dave’s notion of forcing business to police the immigration issue. Its a government function, and could be accomplished if government wanted to. What do we get for our taxes anyway?

    People say they care about a lot of things, steve. That’s not enough. I rail about the politicians, but ultimately its the voters who must pull the lever to break the politicians. Nothing gets their attention faster than voters at the polls. Something was stirring during the Trump years. I don’t know if the momentum will be sustained.

  • Drew Link

    Bob –

    The financing is a legitimate question. However, I have never heard of a business paying a bounty to coyotes to have immigrant workers delivered. I’d suggest two alternatives.

    The Central American and Mexican governments, exporting their economic problem to the US. Second, drug traffickers, co-packing drugs and people. Drug traffickers have used people moving across the border since at least the 70’s.

  • Andy Link

    Interesting that the inflection point is the late 1970’s.

  • I reflexively disagree with Dave’s notion of forcing business to police the immigration issue

    IMO it’s a sad necessity. We must deal both the push and pull factors. As steve has documented, border enforcement has always been a flop. We’ve never handled it seriously for any number of reasons.

    A robust eVerify system helps deal with the pull factors. Better economies and governments in Mexico and Central America would help with the push factors but are difficult to accomplish and will require consistent, persistent attention.

  • CuriousOnlooker Link

    Interestingly, I’ve read multiple experts link the timeline (mid-to late 1970’s) to the demise of Bretton Woods — and its replacement with the current system where the dollar is the reserve currency.

    Their argument is that the dollar as reserve currency drives demand internationally for dollars beyond what’s needed domestically — and that drives other countries to run trade surpluses vis a vis the US.

    That’s forces a US trade deficit (with the ills of offshoring). And that in turn incentivizes other policies that widen inequality.

  • steve Link

    Trump had a number of products made in China and elsewhere. Has been documented before. He stopped being just a corrupt NY real estate guy years ago. Trump pretty much admitted that he had benefitted from sending stuff overseas. He then made the claim that since he had done it successfully in the past he was the right guy to stop it now. Some people actually believed him. It was Trump and the billionaires like him the have made sure US public policy meets their needs, not that of everyone else.

    https://www.washingtonpost.com/news/fact-checker/wp/2016/08/26/how-many-trump-products-were-made-overseas-heres-the-complete-list/

    “But there is no insight there, and no policy prescription. Just bitching.”

    Disagree. We dont have to make it so easy for them. Companies get tax advantages to taking business overseas. Companies hand over intellectual property to the Chinese without any penalties. You seem quite willing now to put tariffs on stuff from China, or at least IIRC you supported it when Trump did it. Why so willing to make it easy for business to leave here?

    So what did Trump really change? Yes, he learned (not the first politician to figure ethics out) that if you give people enemies it will make you popular. He made China an enemy. He made liberals the enemy. The latter solidified his base and further entrenched tribalism. The latter pulled over a few independents and some conservative democrats. Some of the ones who were social conservatives. However, he didnt really do that much about China and he did almost nothing about the broader issue of businesses leaving the US. If they leave China and move to Thailand what do we really gain. He did cut taxes for the rich people again.

    “Nonsense. ”

    Really? You think they come here so they can just hang out because the US govt invites them in? Its only big business? Look at all of those landscape crews. Awful lot of Hispanics. Is that just because they have an aptitude for it. Look at the construction crews. Nannies? Ever wonder why so many are Hispanic. Restaurants? I guess Hispanics are just naturally drawn to wash dishes and bus tables. It is widespread. It is more than big business. When the demand is so high the govt is not going to stop it. We saw it with Prohibition. With the War on Drugs and now with immigration. The claim is that they are coming here to take our jobs. The reality is that they are coming to access the jobs that businesses are handing out to them.

    To be clear I believe that you and your people arent doing this stuff, at least as far as you can tell. I think that most business people are not doing this since most people are decent and honest for the mom tpart. However, a sizable number of business, large and small are using illegals. You are helping to protect them.

    Steve

  • Grey Shambler Link

    Sickening:
    Hospital’s robust growth using contractors who use immigrant labor avoiding work-comp costs and SSI retirement, disability, and health benefits.
    High end medical professionals paying landscaping services doing the same. Do you , have you ever pulled your own weeds?
    Are your spics getting the benefits you claim as as your woke bona fides?
    Then complain that the poor are complaining about immigrant competition.
    What the view from the street shows me is that the plumber can’t afford to hire the roofer and the roofer can’t afford to hire the mechanic and on and on.

  • jan Link

    Everything about Trump is phony, corrupt – basically an unwashed contemptible man, through and through! That is what some here have repeatedly alluded to, when talking about POTUS 45, in either past or present terms.

    Despite such fanatical condemnation of the man there continue to be people who saw his policies as positive, life affirming, family oriented, freedom- loving, giving employment opportunities (especially to minorities, the trades, small business, those without college educations etc). This Trump constituency was early on cast under the pejorative grouping of “deplorables,” by the one and only Hillary Clinton. Now, such a grouping embraces that labeling, furthering the definition to be akin to the “French Resistance,” during WWII.

    I don’t know how many of the supposed 75 million who voted for Trump remain attached to the principles he espoused. However, I would think it is a large figure. Furthermore, such loyalty is not for the man himself, but rather how he formulated policies and confronted political dishonesty, disingenuous politicians and countries like China and Iran on a scale not seen before. From the improvement of the VA, family income, getting out of unpopular agreements like the Paris Accord and Iran Agreement, justice and health reforms, beginning to decrease income inequalities, drug usage, human trafficking, stabilizing illegal border crossings, pulling back on stifling regulations, encouraging energy independence – these policies were received well by working people. And, the fact Biden has incinerated most of them is why there is so much discontent out there from the same working class.

    While I have no idea where the next elections will take us, I do believe there is a growing number who are fed up with all the establishment types from both parties. There is definitely a quiet but steady swell of people, identifying with sentiments of retaining freedom rather than giving it away, under the repressive tactics of progressive ideology. I only hope more and more people will see the road hazards ahead, so the sordid Biden way of doing business doesn’t stand.

  • What the view from the street shows me is that the plumber can’t afford to hire the roofer and the roofer can’t afford to hire the mechanic and on and on.

    That’s what’s called a “Fordist” argument, an allusion to Henry Ford’s paying higher than the prevailing wage to the workers in his factories. His response was that it enabled them to buy Ford automobiles.

  • I don’t know how many of the supposed 75 million who voted for Trump remain attached to the principles he espoused.

    Please forgive me if I sound argumentative, jan. That is not my intention. What principles did he espouse? I think he’s associated with some principles both by his supporters and his opponents but I don’t believe he espoused any. I think he was completely transactional in his approach and thought that principles interfered with that.

    I’ll give an example. I think we can agree that he supported building a wall on our southern border. What was the principle involved? If your answer is that he opposed illegal immigration, how do you reconcile that with his opposition to a robust eVerify system on the grounds that it would hurt employers?

  • Drew Link

    “IMO it’s a sad necessity. We must deal both the push and pull factors.”

    Progress perhaps. That’s a particularly damning statement. There are rather few legitimate functions of government. But two surely are enforcement of the law and protection of the border. The pull could be handled by enforcing the law. It could also be addressed by not having government de facto buying up the labor supply with its transfer payments to US citizens. Neither of those are reflected in current policy, and look at what is happening. If government could function, markets would rather quickly sort out wage structures, return to capital and the associated expansion or contraction of productive capital. Push could be handled by acknowledging that free trade works in textbooks, but not in real world situations with government misbehavior. Policy could be directed that way, and shouldn’t be simplistically characterized as “reckless trade wars” just because it was the stance of the current White House. See: almost weekly OTB diatribes.

    On that note, Curious raises an interesting point. However, I would note that foreign exchange markets exist, in part, to find the appropriate goods vs currency equilibrium.

  • steve Link

    ” VA, family income, getting out of unpopular agreements like the Paris Accord and Iran Agreement, justice and health reforms, beginning to decrease income inequalities, drug usage, human trafficking, stabilizing illegal border crossings, pulling back on stifling regulations, encouraging energy independence”

    Few of those things actually changed. Trump said they did and you believed him. Half of the country thinks the Iran agreement and the Paris Accord was OK. Lets take three examples. Border crossings. They went down for a while, but they peaked agin in 2019. Down again then startec climbing again. He didnt actually do much to change things. Income inequalities. He barely talked about that. He did nothing to address it. The VA. I am a vet and practice medicine. I have an interest here. Trump did not pass the Choice Act like he claimed, but he did pass an act in 2018 that COULD have made things better. Instead he kept putting people in charge of the VA who created chaos. Then when hit by the pandemic a lot of veterans could not see the private practice doctors they were told they could see. The VA did nothing to resolve it. They didn’t have the leadership skills to address it. So overall vets have not seen the improvements you seem to think they did.

    https://thehill.com/opinion/white-house/529210-trump-leaves-mixed-legacy-on-veterans-affairs

    Steve

  • jan Link

    Dave,

    E-Verify has been a program logging in both pros and cons as to it’s overall effectiveness. In theory, it appears to provide a quick, painless solution to weeding out illegal workers in the workforce. However, pragmatically, employers have not been that thrilled with it due to contending with another layer of bureaucracy, the added personnel, and costs to process the paperwork entailed to file the requisite I-9 forms into a government data base. Only 3 working days are given to do this, or a fine is levied against the employer. Much of the so-called “checking” also comes from documentation provided by the worker, which is often stolen or given over to them by a legal relative/friend. The system itself also renders “false positives,” where people are wrongly labeled undocumented. This then opens up a whole new can of worms, for both the employer and employee, in proving otherwise. Such “mistakes” then can lead into legal issues, privacy and discrimination violations etc.

    People like Trump seemed to think government, not the employers, were more responsible to solve immigration issues. Many agree, saying the entire immigration system needs reform, such as allowing more temporary visas issued for low skilled labor. I personally think legal immigration should be easier to attain as well, with speedier processing times, making people more inclined to get into this country legally, rather than the just slipping across the border and disappearing into the countryside.

  • jan Link

    The Choice Act was flawed and only had short term goals. It also did little to correct the innate problems in the VA system. The Mission Act, replacing the Choice Act, was passed in 2018, and the scheduling of appointments and time management improvements were immediately noticed by those who used the VA.

    My husband, for example, has been going to the VA for over a decade. When he first was a patient there, the wait times were horrendous. They bused people in from everywhere to the WLA facility, even from the Central Valley in CA. Consequently, there was not even enough seating to accommodate the mob of people! It was a discouraging experience to say the least. After Trump’s push to fire incompetent doctors, give out vouchers for vets to seek alternative means for medical assistance, and tighten up overbooked patient appointments there was a noticeable upgrade in service and VA accessibility. Another friend of mine also dismissed Trump’s involvement, like Steve just did, in improving the VA, giving all the credit to Obama. My husband was incensed how misinformed people are, and how easily they’re misled because of their own personal distaste for the former president.

  • steve Link

    The problem here is that you believe your feelings and Trump. The numbers tell a different story. Note that I said he passed an act that COULD have made things better. What times for VA community care are now at 41.9 days. There is a huge backlog of pts waiting to be seen. Trump did not put in place people competent enough or who cared enough to make the programs actually work. So any individual VA might or might not be better but overall things have not improved.

    Lets remember that between 2014-2017 wait times had improved and were (probably) better than int he private sector. 41.9 is pretty bad. Links follow. More than one means it wont publish so will add in follow up links. (Of course I know this is wasted time. You still wont believe the numbers. Trump is the only true source for you guys.)

    https://cv4a.org/appointment-wait-times-dramatically-increase-vets-stand-by-for-answers-community-care/

    Steve

  • steve Link
  • steve Link
  • Drew Link

    “Much of the so-called “checking” also comes from documentation provided by the worker, which is often stolen or given over to them by a legal relative/friend.”

    This is a huge problem.

    “The system itself also renders “false positives,” where people are wrongly labeled undocumented.”

    File this under the lawyers or authoritarian government agency Full Employment Act.

  • Drew Link

    An article illustrating the complexity, and numerous tradeoffs, in the trade issue:

    https://mishtalk.com/economics/biden-has-a-solar-panel-climate-change-dilemma-will-hypocrisy-rule

  • jan Link

    Steve, you are a numbers guy. Government numbers, in particular, are a frequent source of what you consider to be indisputable truth. However, as have oftentimes shown, statistics and numbers can be manipulated and certainly are not infallible in accurately depicting a full, true picture of a law, disease, war, economy ….and so on.

    As for your snarky comment about “Trump being the true source” …I’ve always been a hands-on, actions speak louder than words kind of person. My references to the Trump presidency have little to do with his tweets, sometimes outlandish comments, or party affiliation, and more to do with the results of the policy decisions made during his presidency. Businesses thrived, borders were more manageable, China was put back on it’s heels, people were more optimistic about the future, NK stepped back, Iran’s terrorism was slowed, people were allowed to take experimental drugs to save their lives, blue collar working people felt they had an advocate who heard and responded to their needs. None of this is happening now, with Biden’s leadership. That is a fact!

    Growing inflation and decreasing worker wages are erasing many of the gains made during the last administration. Optimism over the future is edging to 20 points lower, just in the last few months. Unknown numbers of people are indiscriminately coming unchecked, not vetted for disease, and being quietly bussed across the county. IMO, we are in constant turmoil and uncertainly about the future because of the Biden agenda. His words are more polite than Trump’s, but his actions suck!

  • steve Link

    To be specific, I am a multi-source numbers guy. So in this case I cited a veterans group, JAMA and a government news source. Given that we are talking about a branch of government I dont know how you avoid govt sources entirely, but I have made the effort to find outside of government sources to provide confirmation. And…………….

    Just as I predicted you reject all of that. There is no source of data. numbers that is acceptable to you or other conservatives. We are back to you relying upon your feelings and Trump. This has nothing to do with actions. This is looking at whether services, specifically wait times, improved. You figure that out by looking at the actual wait times and the number of people waiting to even get on the wait list. As a bonus, one of the articles even went into detail about why the wait times are so long for community services. (They wait almost the full 20 days to see if they can get a VA appointment and when they dont they then refer to the community plan.)

    “policy decisions made during his presidency. Businesses thrived, borders were more manageable, China was put back on it’s heels, people were more optimistic about the future, NK stepped back, Iran’s terrorism was slowed, people were allowed to take experimental drugs to save their lives, blue collar working people felt they had an advocate who heard and responded to their needs. None of this is happening now, with Biden’s leadership. That is a fact!”

    Those are not facts, those are your feelings. Half of the country, a little over half actually , was less optimistic about the future. NK actually did not step back and re started its short range ballistic missile testing in 2019. AS has been noted here multiple times we had a large peak of illegal immigration in 2019. Dave just didnt want to talk about it and you wouldnt hear about it in the right wing media. People could already take experimental drugs to save their lives. Now, drug companies can give out those drugs without have to report or monitor effects, which to their credit they largely do not. I can go through these piece by piece and show you the numbers but why bother? You reject any evidence other than your feelings and Trump’s claims.

    Or maybe I am wrong. What does constitute evidence? If you need to look up data to support a contention where do you go?

    Steve

  • steve Link

    Trade article is good. Thanks. Reminds me that Mish can make sense when he wants.

    Steve

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