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  1. #21
    nee andante bechimo's Avatar
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    Quote Originally Posted by freeeekyyy View Post
    Wealth disparity isn't good, but it isn't necessarily bad either. It just is.
    Distinction resides in how great the wealth disparity. At present gini in the U.S. is around 45. Too high. It suggests that the top tier are vampiring off the rest which eventually leads to a non-sustainable economy. Supply and demand interconnect. No demand created by a middle class with disposable income, no need for supply. The U.S. is a major net consumer with a global trade deficit of over 33%.

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    Quote Originally Posted by freeeekyyy View Post
    Wealth disparity isn't good, but it isn't necessarily bad either. It just is.
    Too much wealth disparity is bad.

    I'm a libertarian, and I'm able to realize this.

    Alan Greenspan has been freaking out about it for years.

    For a number of reasons, since 1974, income and wealth disparity has consistently increased in the US.

    There are many problems associated with high levels of wealth disparity, and, if we do not reverse this trend, we will bear the brunt of many of them. In fact, we're already starting to see the ramifications of it; this whole crisis itself can be seen through a very poignant Marxist critique. I wrote out this critique to an email list of friends back in May, and a few months later Nouriel Roubini said the same thing in an interview with the WSJ: VIDEO (watch this! trust me!).

    It's a simple argument really, the basis behind Marx's thought: excessive inequality leads to over-investment and under-consumption.

    Eventually, due to under-consumption, the return on investments becomes so low, that speculation replaces investment.

    This then leads to volatility in financial markets and financial bubbles, which eventually collapse.

    Now you've got under-consumption, under-investment, and asset price collapse.

    And that's what you call a global economic catastrophe, children.

    Last edited by Zarathustra; 12-02-2011 at 11:29 AM.

  3. #23
    Cheeseburgers freeeekyyy's Avatar
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    Quote Originally Posted by Zarathustra View Post
    Too much wealth disparity is bad.

    I'm a libertarian, and I'm able to realize this.

    Alan Greenspan has been freaking out about it for years.

    For a number of reasons, since 1974, income and wealth disparity has consistently increased in the US.

    There are many problems associated with high levels of wealth disparity, and, if we do not reverse this trend, we will bear the brunt of many of them.

    In fact, we're already starting to see the ramifications of it; this whole crisis itself can be soon through a very poignant Marxist critique.

    I wrote out this critique to an email list of friends, and about a month or two later Nouriel Roubini said the same thing in an interview with the WSJ.

    It's a simple argument really, and it was the basis behind Marx's thought: excessive inequality leads to over-investment and under-consumption.

    Eventually, due to under-consumption, the return on new investments becomes so low, that speculation replaces genuine investment.

    This then leads to volatility in financial markets and financial bubbles, which eventually collapse.

    Now you've got under-consumption, under-investment, and asset price collapse.

    And that's what you call a global economic catastrophe, children.

    I'm not sure I understand how inequality in itself leads to underconsumption. Overinvestment is only overinvestment if consumption doesn't keep up. If the majority are insufficiently wealthy to maintain a certain level of consumption, that could be a problem. But wealth inequality is relative, not absolute. You could have a middle class made up of millionaires, and if the upper class is sufficiently rich, you'd still have high inequality. But I can hardly see how that would matter. Could you explain? (Note: I'm not intending to be facetious, and am genuinely seeking an explanation)
    You lose.

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  4. #24
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    Quote Originally Posted by freeeekyyy View Post
    I'm not sure I understand how inequality in itself leads to underconsumption. Overinvestment is only overinvestment if consumption doesn't keep up. If the majority are insufficiently wealthy to maintain a certain level of consumption, that could be a problem. But wealth inequality is relative, not absolute. You could have a middle class made up of millionaires, and if the upper class is sufficiently rich, you'd still have high inequality. But I can hardly see how that would matter. Could you explain? (Note: I'm not intending to be facetious, and am genuinely seeking an explanation)
    The issue is that the bolded is not the reality.

    A large portion of the country lives paycheck-to-paycheck.

    You could always blame them and their supposedly excessive spending habits.

    Likewise, you could consider how the division of the pie has changed over the last several decades.

    The Economist had a great issue titled 'Inequality in America' about five years back (LINK).

    Over the last several decades, the division of the pie has continually skewed toward the top 1%, 0.1%, 0.01%.



    I mean, just look at the difference in how much of the income was garnered by the very top percentiles between the middle part of last century, and the last 30-40 years: it's ridiculous. And that middle part of last century, that is known as "the Golden Age of Economic Growth" amongst economists. Now, I'm not one to mix up correlation with causation, but, when you consider that this was the time of the development of the middle class, and income inequality was far lower than it is now (and before that time, which was known as *ahem* "the Gilded Age" and was the time right before the *ahem* [first] Great Depression), and that it's known as "the Golden Age of Economic Growth", it does make you consider the notion that a thriving middle class, and lower income equality, lead to less of the problem of under-consumption and over-investment that was Marx's explanation for why volatility would increase in a capitalistic economy until the point that it became so volatile it collapsed (i.e., a Great Depression).

    It's very easy for us to wave an ideological wand over the inequality problem, and say that it does not matter, but when you drop your ideological pretenses, look at the data, and consider the possible ramifications, even someone who has identified as a libertarian since high school should be able to admit that, at some point, inequality in a society can hit a level that it becomes seriously problematic.

    The question, then, is: what do we do about it?

    I've got a number of ideas, but I'm still fleshing them out.

  5. #25
    Cheeseburgers freeeekyyy's Avatar
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    Quote Originally Posted by Zarathustra View Post
    The issue is that the bolded is not the reality.
    Well then it's an issue of total wealth, not distribution.


    Edit: Okay, I see you added some info. I don't think redistributing wealth really gets to the source, regardless of whether there's a problem with wealth distribution or not. I'm not going to even say it's wrong to do so, but ineffective. Education costs go up because there is no incentive for them to be lowered. There is high demand for education and scholarships to cover it without condition. Even jobs which should require little formal education choose to do so anyway. The reason they do this is because they can; there are many unemployed workers seeking a limited number of jobs. Increasing costs mean effectively lower wealth. Moving money around isn't the answer. The answer is to free up the system and allow it to respond to changing conditions.
    You lose.

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  6. #26
    Nerd King Usurper Edgar's Avatar
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    Quote Originally Posted by Jenaphor View Post
    Agreed. While I'm far from anti-corporation or anti-capitalism, the current situation is frightening.

    Consider:
    There's an entire generation of relatively well educated young people who can't find jobs or suitable jobs, with substantial debt from student loans. The reason for this glut, I lay at the doorstep of global conglomerates who've not only outsourced manufacturing jobs but also have outsourced white collar jobs.
    I disagree with you on your last point.

    Corporations main purpose is to generate maximum profits within the bounds of the law. It is the politicians job to serve the people's interest, yet they passed laws where it is profitable for corporations to hollow out American industries.
    Listen to me, baby, you got to understand, you're old enough to learn the makings of a man.

  7. #27
    Cheeseburgers freeeekyyy's Avatar
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    Quote Originally Posted by Edgar View Post
    I disagree with you on your last point.

    Corporations main purpose is to generate maximum profits within the bounds of the law. It is the politicians job to serve the people's interest, yet they passed laws where it is profitable for corporations to hollow out American industries.
    Basically this. There's a reason companies go overseas, and it's not always because they're evil, america-haters. There's a pretty strong incentive to move overseas when you have a ridiculously high corporate income tax, very burdensome regulations, etc. There are business leaders out there who will tell you upfront, they'd rather stay in the US. They can keep better control over production, respond faster to changing demands, and can take advantage of a more productive, educated workforce than what is found in many of the countries they move to. But the cost is too great. As a business, you may get more buying american labor, but the value is less; the per-dollar, return on investment is less. The conditions that make that the case are what need to be changed.
    You lose.

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  8. #28
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    Quote Originally Posted by freeeekyyy View Post
    Well then it's an issue of total wealth, not distribution.
    Not if there is enough total wealth, but it's not being distributed evenly enough.

    Also, go back and look at my post; I added a lot of information.

  9. #29
    nee andante bechimo's Avatar
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    Quote Originally Posted by Edgar View Post
    I disagree with you on your last point.

    Corporations main purpose is to generate maximum profits within the bounds of the law. It is the politicians job to serve the people's interest, yet they passed laws where it is profitable for corporations to hollow out American industries.
    I don't disagree with this. That said, politicians can be bought, especially considering the nickel and dime salaries they get for running their country. So who in their right mind would want to be a politician when they can quadruple or greater, their income through the private sector? You either have a personal agenda or are too stupid to make it in the private sector.

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    Default Zarathustra's 'Plan for a New America' - Policy Proposal #1

    Quote Originally Posted by freeeekyyy View Post
    Basically this. There's a reason companies go overseas, and it's not always because they're evil, america-haters. There's a pretty strong incentive to move overseas when you have a ridiculously high corporate income tax, very burdensome regulations, etc. There are business leaders out there who will tell you upfront, they'd rather stay in the US. They can keep better control over production, respond faster to changing demands, and can take advantage of a more productive, educated workforce than what is found in many of the countries they move to. But the cost is too great. As a business, you may get more buying american labor, but the value is less; the per-dollar, return on investment is less. The conditions that make that the case are what need to be changed.
    One of my ideas is that the US corporate tax rate needs to be slammed to zero.

    One of the arguments against raising taxes on capital gains and the rich (for whom capital gains and dividend income is often the majority of their income) is that this income is essentially double-taxed, as the income from the shareholders' shares was already taxed when the corporation paid income taxes. Frankly, I think this argument actually holds weight.

    As such, we should slam the corporate tax rate to zero, thereby incentivizing companies to keep production here (this is one of the parts where I'm still a little sketchy about the details, cuz I'm not familiar enough with tax law to be sure how to make this effective only for production that occurs within the US -- I'm familiar with corporations' desire to have the repatratiation tax holiday, and that we already did this for them back in the mid-2000s [which was a huge mistake, basic making the whole purpose of that tax law inept], so I assume there's some way to make it work, so long as we make repatriation tax holidays impossible), and recoup the lost revenue by increasing taxes on the wealthy (since now the income from their shares won't be being double-taxed), preferably via a progressive tax on capital gains and dividend income (i.e., if you make $30,000 on capital gains and dividends in a given year, you pay a lower tax than someone who makes $30 million on capital gains and dividends in a given year). Preferably, I think the capital gains, dividend, and income tax should all be the same (topping out somewhere around 40%). Cutting the corporate tax rate to zero would also cause the stock market to increase ~50%, as stock prices are based on after-tax net income, and the avg. corporate tax rate is ~33%, so you'd be increasing their after-tax net income by ~50% (and the increase in price should be roughly equivalent -- i.e., assuming the P/E ratio stays the same, which, all other things being equal, it should). The rich can't bitch about the tax increases on capital gains and dividends, cuz you just boosted their stock portfolios by 50%, and those who have 401ks and other forms of equity investments, but who aren't rich, will also share in the increase in their portfolio values.

    This will also lead to a nice boost in the wealth effect (i.e., the idea in economics that when people's net worth increases, they spend more money), thus stimulating the economy from the consumption side, and, due to this increase in consumption, combined with the lower tax rate on corporate income, the return on investment should also increase, thereby incentivizing increased investment.

    I know this all sounds too good to be true, but I'm pretty versed in economics, and this is the way it flows in my head.

    I really think it is a no-brainer.

    / Zarathustra's 'Plan for a New America', Policy Proposal #1

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