Wealth Redistribution or Wealth Return?

[Bomb#20]

I don't really get the animosity towards "CEOs" who make obscene amounts of money. Sure, it's a bit corrupt how they are selected, and maybe their compensation is often not justified. But the number of these people is small...

It's odd, isn't it? Why would poor people give a hoot whether some rich company owner pays some rich manager a bundle versus instead shopping around for another manager who'll do the job for less, and keeping her left-over money for herself? How the richest 10% divvy up their assets among themselves isn't something it's rational for the other 90% to get bent out of shape over.

The animosity appears to be due to a combination of instinctive outgroup hostility and intuitive zero-sum-game economic thinking -- pretty much the same explanation for the animosity pre-Enlightenment Christians typically felt for Jews. If "they" are getting rich while "we" are not it must necessarily be because "they" are cheating "us". Further, people tend to undervalue any job they don't understand, and how what CEOs do contributes to production is harder to grasp than what factory workers do. Also, people tend to imagine that if the CEOs were paid less then the regular employees would be paid more, as though the shareholders were some alien life forms satisfied with making a fixed profit, and aren't trying to maximize their income just like normal humans are.

 

[Bomb#20]

As explained in the OP. There is a big difference between the corporate CEO and the entrepreneur founder who invents an idea that creates wealth. (Musk, Besos, Jobs)

As an example of the corporate overpaid CEO, Mary Bara did not invent anything nor did she have any ideas of her own. She certainty did not come up with the automobile.

What evidence do you have that Mary Barra didn't have any ideas of her own? Before she became CEO she was a successful electrical engineer; it's hard to do that if you don't have ideas. And as for entrepreneur founders, David Buick didn't come up with the automobile either. Most sophisticated products are invented by thousands of people, each thinking up a few improvements on what came before. Even Isaac Newton stood on the shoulders of giants.

What kind of successful and innovative GM cars can you think of that she can put her name on? Would you invest your savings with her or with someone like Musk, Gates, or Besos?

Dude! All three of those guys have net worths roughly a thousand times as much as Barra's!

Nobody's saying she did as much as the world's top uberbillionaires; but you claimed she didn't invent anything or have any ideas of her own at all. I'd bet dollars to donuts she's come up with more than 0.1% as many good ideas as M/G/B did. If you haven't heard of them, well, I'd bet dollars to donuts you've never heard about most of the good ideas all the other garden-variety hundred-million-aire CEOs had either. Welcome to the reality of a world where most progress is made by millions of unsung smart people each thinking up a few improvements on what came before. Economics isn't a zero-sum game, but celebrity kind of is.

 

[Rhea]

How the richest 10% divvy up their assets among themselves isn't something it's rational for the other 90% to get bent out of shape over.

The animosity appears to be due to a combination of instinctive outgroup hostility and intuitive zero-sum-game economic thinking -

It is interesting for you to assume that the 10-2%ers are not also complaining about the executives getting pay that someone else earned.

 

[Bomb#20]

... “I realize you gave me $5 in value, but if I can bully you into letting me pay only $3, I haven’t done anything wrong, yah? I haven’t harmed society and left you needing public care that you would not have needed if I paid you for the value you gave me. I mean a society where I can pressure you into giving me your lunch money is a good society, right?”

Oddly enough, I agree with at least a couple of the points made by just about everyone on this thread...but let me explain why I love the above post made by Rhea. About 10 years ago, when I was still working, one of the aides told me that she was embarrassed to be receiving SNAP. She saw it as welfare and she hated having to depend on the government. She was a hard working, full time employee and a single mom with just one son. I snapped and told her that she should not feel that way because the truth was that her receiving SNAP was welfare for her employer, who by the way, overworked and underpaid her employees. I told the aide, who was one of the few workers who stayed there for years, that if the owner had paid her a decent wage and offered her any decent benefits, she wouldn't need any help from the government, so in her case, SNAP was welfare for the owners. In fact, at least up until recently, most workers who received any government aide received it because their employers were too cheap or greedy to pay them what they deserved. ...

Why do you believe any of that? Why do you believe there's any such a thing as "$5 in value"? Why do you believe anything besides five dollars can have an objective value of $5, as opposed to it simultaneously being subjectively worth $3 to Alice and $5 to Bob and $7 to Cameron? Why do you believe if you decide something's "value" is $5 then that makes offering someone $3 "bullying" her? And why do you believe SNAP is welfare for her employer rather than for her? Your claim looks like magical thinking -- like labor supposedly has some mystical property that makes other people's labor arrangements subordinate to your system of valuations. Would you apply that sort of reasoning to anything people sell besides labor?

Let's consider an imaginary alternate universe where Jo can't work, because she never met that nice Professor Bhaer who told her how she needed to write what she knew and write about people with real problems and write from her heart, so instead of writing her great American novel she just got more and more practice writing her trademark penny-dreadful melodramas, right up until the market for them dried up when ChatGPT started churning out better penny-dreadfuls than hers, a hundred a day, leaving Jo with no marketable skills. Now she tries to make ends meet by growing her hair out and selling it to the wigmaker for $1000 every year. But she can't live on $1000 a year, so she collects $6000 a year in SNAP benefits. Would you claim the wigmaker is "bullying" her to accept only $1000? Would you claim her hair has "$7000 in value"? Would you claim that if the wigmaker had paid Jo a "decent price" she wouldn't need help from the government, and therefore in her case the government is paying that $6000 subsidy to the wigmaker, not to Jo? Would you claim Jo "deserves" $7000 for growing her hair out? Would you claim other people ought to decide what to charge and offer for hair by considering what you think is "decent" rather than by matching supply to demand? Do you think how much food Jo needs has any bearing on how much her hair is worth to wigmakers?

If you reason about labor differently from how you reason about hair, why do you apply different logics to them?

 

[Loren Pechtel]

Taxes are a cost. It's passed through to the consumer.

I'm calling it a derail because it's trying to bring up an irrelevant point while avoiding answering the actual point.

Taxes ARE the point, or one of them. Our tax structure is supposed to ensure that those who benefit the most ( the wealthy) pay the most. Tax structure is seen by some as redistributing the wealth by taxing wealthy people to provide programs and support for those who lack sufficient means to provide for themselves.

Yes, you tax wealthy people to support those who can't support themselves.

The problem here is that corporations are effectively pass-through entities. You can't tax them, you actually tax the consumers--and that's a regressive tax.

 

[Loren Pechtel]

So it was "even close". 17 is almost half of 42; 21 - 17 = 4 < sqrt(42). I.e., the discrepancy is well within the expected noise level. I.e., dice could perfectly well make a curve shaped like that. You can't expect a process with random effects to come out exactly 50-50. There's no indication that workers systematically lose ground more of the time than they gain ground.

(* You wrote "at least the minimum wage of 1979"; I take it you meant the median wage, from the chart. In 1979 the minimum wage was about $11/hr adjusting for inflation; the figures in the chart are all higher than that.)

And it's deceptive, anyway--they keep comparing hourly workers. In today's economy few hourly jobs pay well, good jobs are salaried.

Bingo. The relevant figure is the partial derivative of production with respect to the quantity of some particular input; but partial derivatives are difficult to measure. So people engaging in this sort of rhetoric typically use total output per hour of labor as a proxy for productivity. But it should be painfully obvious that adopting this computational procedure amounts to giving labor 100% of the credit for production. I.e., it's just another way to repeat the Labor Theory of Value's metaphysical premise that the source of all value is labor. A partisan can pick any input he pleases, declare it solely responsible for production, and thereby "prove" the providers of that input are exploited.

Marx even recognized that his system can't produce capital--because he said societies should wait for industrialization before going communist. That only makes sense if he understood the workers couldn't build the means of production.

And it utterly neglects the fact that building isn't a one-time thing but an ongoing process that by now consumes a meaningful percent of the pie.

 

[Loren Pechtel]

In my limited real world experience, it turns out that when you (we) hired someone, the cost over the first year is going to be about 1.25 x the sum of all known and calculable costs. It does come down after that but is still… i don’t know the term - nonlinear?

I think this varies considerably between positions. My former employer allowed installers to work as employees or subcontractors. IIRC the difference was about 1.5x--and at that those working as employees were required to provide their own tools. (We found that that attracted a better quality of worker and when they owned their own tools the theft rate was far lower.)

 

[Politesse]

That only makes sense if he understood the workers couldn't build the means of production.

So, what, the CEO goes out and does the digging? Sure...

 

[Swammerdami]

I’m reading an article that mentions “Wealth Redistribition” as an outcome of progressive policies and it got me wondering; Is it a redistribution of wealth from its “rightful” owners, or is it really a return of the wealth TO the “rightful” owners?

In my opinion, it's wrong to think about moral rights when prescribing economic policies. Instead we want policies which maximize happiness, prosperity and stability. It happens that 1945-1980 was an exceptional period of relative happiness, prosperity and stability -- in the U.S.A. and around the world -- in part BECAUSE of historically low levels of wealth inequality and income inequality. Not too low: we don't want to stifle entrepreneurship. But not too high: We don't want resentment against the elite. A "goldilocks" level of inequality leads to a strong middle class, and a strong middle class has been a key attribute of the greatest societies.

We tax the rich and feed the poor NOT because one group does or does not have a "right" to the wealth. We do it to optimize society's efficacy. Society should be happy to reward inventors and other entrepreneurs with wealth NOT because they "deserve" the wealth -- whatever that means -- but because their creations promote progress and make the society's people happier.

There is a clause in the U.S. Constitution which makes this point explicitly:

[The Congress shall have Power] To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Should we raise taxes on the rich or lower them? There is no constant yes/no answer; we seek the Goldilocks parameter. At present the rich are, in fact, too rich. You don't have to ask me: Bill Gates and Warren Buffett, among others, say so themselves.

 

[Toni]

Taxes are a cost. It's passed through to the consumer.

I'm calling it a derail because it's trying to bring up an irrelevant point while avoiding answering the actual point.

Taxes ARE the point, or one of them. Our tax structure is supposed to ensure that those who benefit the most ( the wealthy) pay the most. Tax structure is seen by some as redistributing the wealth by taxing wealthy people to provide programs and support for those who lack sufficient means to provide for themselves.

Yes, you tax wealthy people to support those who can't support themselves.

The problem here is that corporations are effectively pass-through entities. You can't tax them, you actually tax the consumers--and that's a regressive tax.

That is true in the same way that taxing me harms the merchants I frequent, because I have less money to spend.

I totally understand your point, Loren. I disagree that your view is particularly useful or valid. It certainly is no more true of taxes than the cost of utilities, labor or materials. Each is a business expense. We expect corporations to pay for the costs they incur. Tax is the way that corporations ( and people) pay for their share of roads, schools, environmental and societal needs, business needs!

 

[Loren Pechtel]

Dude! All three of those guys have net worths roughly a thousand times as much as Barra's!

Nobody's saying she did as much as the world's top uberbillionaires; but you claimed she didn't invent anything or have any ideas of her own at all. I'd bet dollars to donuts she's come up with more than 0.1% as many good ideas as M/G/B did. If you haven't heard of them, well, I'd bet dollars to donuts you've never heard about most of the good ideas all the other garden-variety hundred-million-aire CEOs had either. Welcome to the reality of a world where most progress is made by millions of unsung smart people each thinking up a few improvements on what came before. Economics isn't a zero-sum game, but celebrity kind of is.

And note that leaders who come in and try to put their mark on things usually aren't good for whatever they are leading. Most sharp turns end up being bad.

 

[Loren Pechtel]

That only makes sense if he understood the workers couldn't build the means of production.

So, what, the CEO goes out and does the digging? Sure...

The problem is things too big for one person to build.

 

[Loren Pechtel]

In my opinion, it's wrong to think about moral rights when prescribing economic policies. Instead we want policies which maximize happiness, prosperity and stability. It happens that 1945-1980 was an exceptional period of relative happiness, prosperity and stability -- in the U.S.A. and around the world -- in part BECAUSE of historically low levels of wealth inequality and income inequality. Not too low: we don't want to stifle entrepreneurship. But not too high: We don't want resentment against the elite. A "goldilocks" level of inequality leads to a strong middle class, and a strong middle class has been a key attribute of the greatest societies.

Except that's not a fair picture.

The tax situation favored leaving money in corporations, the computers weren't good enough to catch most diversion of said funds to personal use. Thus we have no idea of how much unreported income there was and thus we don't know the wealth inequality.

Should we raise taxes on the rich or lower them? There is no constant yes/no answer; we seek the Goldilocks parameter. At present the rich are, in fact, too rich. You don't have to ask me: Bill Gates and Warren Buffett, among others, say so themselves.

I will agree with that, but I don't see taxing corporations as being the answer.

 

[Politesse]

That only makes sense if he understood the workers couldn't build the means of production.

So, what, the CEO goes out and does the digging? Sure...

The problem is things too big for one person to build.

Which is why we have....

a working class.

That produces all the things the wealthy dipshit class has neither the capacity nor the knowledge to produce.

 

[Elixir]

The tax situation favored leaving money in corporations,

Wut? Not unless you were knocking down huge bucks. In 1968 the corporate tax rate was 52.8%.
I find the rest of your assertion specious as well.

 

[Bomb#20]

In my limited real world experience, it turns out that when you (we) hired someone, the cost over the first year is going to be about 1.25 x the sum of all known and calculable costs. It does come down after that but is still… i don’t know the term - nonlinear?

Maybe that's why they call it a learning "curve".

 

[Bomb#20]

I’m reading an article that mentions “Wealth Redistribition” as an outcome of progressive policies and it got me wondering; Is it a redistribution of wealth from its “rightful” owners, or is it really a return of the wealth TO the “rightful” owners?

In my opinion, it's wrong to think about moral rights when prescribing economic policies. Instead we want policies which maximize happiness, prosperity and stability. ...

What does it mean to maximize happiness and prosperity? Whose happiness and prosperity?

The reason Utilitarianism has never scored a convincing victory over competing ethical theories in the marketplace of ideas is that nobody cares about totals. People care who gets the happiness.

The Ones Who Walk Away from Omelas - Wikipedia

en.wikipedia.org

 

[ZiprHead]

Why are so many Americans poor? Because we allow it, two books argue.

How can the richest nation on Earth have so much poverty? It isn’t a new question. “The enormous increase in productive power which has marked the present century,” the social reformer Henry George complained in his 1879 bestseller, “,” “has no tendency to extirpate poverty.”

George’s riddle resurfaces in two new books by eminent American sociologists: “” by Washington University’s Mark Robert Rank and “” by Princeton’s Matthew Desmond. Like George, both authors start from the premise that industrial capitalism generates more than enough profit to eliminate poverty. So why doesn’t it? Because, Rank argues, we don’t understand poverty’s causes. Desmond takes a darker view: because we’re complicit in poverty’s creation.

Large, rich corporations typically evade accountability for the low wages and generally shabby treatment endured by the working poor by keeping them off their payrolls. Instead, they designate low-wage workers as independent contractors who require neither benefits nor wage minimums; adopt a franchise model that makes low-wage workers the franchisee’s problem; or (most commonly) contract out low-wage work to other businesses and staffing agencies that get the job done more cheaply, never mind how. “OnContracting, a staffing agency, estimates that U.S. tech companies like Google and Apple can save an average of $100,000 each year per job by using their services,” Desmond writes.

“Anyone who has ever struggled with poverty,” James Baldwin wrote in 1960, “knows how extremely expensive it is to be poor.” Baldwin was writing at a time when racially restrictive covenants and other types of housing segregation so limited the geographic areas where African Americans could live that, for example, in Detroit, median rent was higher for Blacks than for Whites.

Government benefits like the EITC and food stamps are available to the poor, of course. Indeed, the War on Poverty declared by Lyndon Johnson in 1964 was in many respects a success. Thanks to its programs, the poverty rate fell 27 percentage points for Blacks and 24 points for Latinos between 1970 and 2017, according to the nonprofit Center on Budget and Policy Priorities. Since 1993, according to a study by the nonprofit Child Trends, government assistance has reduced child poverty by 59 percent.

Still, most government benefits go to the nonpoor, mostly in the form of tax deductions and credits. Of the $1.8 trillion in tax breaks handed out by the Treasury in 2021, about half went to families in the top 20 percent of the income distribution: mortgage interest deductions, tax-free 529 plans for college and, yes, tax-free retirement accounts. “The American government gives the most help,” Desmond concludes, “to those who need it least.”

 

[Bomb#20]

Because, Rank argues, we don’t understand poverty’s causes. Desmond takes a darker view: because we’re complicit in poverty’s creation.

"Poverty's creation" isn't a thing -- it's just a fictional character from some religion's mythology, much like The Fall of Man. Poverty wasn't created. Poverty is the natural default state of the human race, and of the apemen we evolved from. It's nonpoverty that takes creating.

Government benefits like the EITC and food stamps are available to the poor, of course. Indeed, the War on Poverty declared by Lyndon Johnson in 1964 was in many respects a success. Thanks to its programs, the poverty rate fell 27 percentage points for Blacks and 24 points for Latinos between 1970 and 2017, according to the nonprofit Center on Budget and Policy Priorities. Since 1993, according to a study by the nonprofit Child Trends, government assistance has reduced child poverty by 59 percent.

Still, most government benefits go to the nonpoor, mostly in the form of tax deductions and credits. Of the $1.8 trillion in tax breaks handed out by the Treasury in 2021, about half went to families in the top 20 percent of the income distribution: mortgage interest deductions, tax-free 529 plans for college and, yes, tax-free retirement accounts. “The American government gives the most help,” Desmond concludes, “to those who need it least.”

That's pure tribal ingroup favoritism, trying to pass itself off as an objective mathematical analysis by the expedient of sneaking in a redefinition fallacy. Relabeling a tax deduction "handed out by the Treasury" doesn't make it true. You can tell who is handing what to whom by observing who is writing the check and who is depositing it. A taxpayer who deducts her mortgage interest from her taxable income has not thereby received a "government benefit"; rather, the government has received a taxpayer benefit from her. She is paying the tax that the tax law assigns to her, same as everybody else does. The deductability of mortgage interest is every bit as much a part of the tax code as the tax brackets are -- and the hypothetical alternative tax code in Desmond's imagination having the same tax brackets but no mortgage interest deduction enjoys no special ontological status as the origin of the system of axes, the origin which "tax breaks handed out by the Treasury" must be calculated by comparing to. Anyone can obviously make up any alternative tax law he pleases and on that basis "prove" whomever he designates to consequently be the so-called "recipient" of any sized "government benefit" he feels like.

In particular, if Desmond's procedure is a valid procedure for measuring "tax breaks", then so is comparing actual tax charges to a hypothetical flat tax where everybody pays the same 37% of her income to the feds, and thereby deducing that all the working poor in the 10% tax bracket are receiving "tax breaks handed out by the Treasury" to the tune of 27% of their own incomes. Since the tax system, for all its complexity and exceptions, is still a progressive tax system overall, if you redefine "handed out by the Treasury" by comparing to a flat fantasy tax law instead of to Desmond's favorite fantasy tax law you'll equally validly deduce that most government benefits go to the poor. Desmond chooses to count the mortgage interest deduction as a "government benefit", but chooses not to count the 27% lower tax rate the poor have to pay than the rich as a "government benefit". He makes those choices because counting the latter doesn't support his preferred narrative -- a narrative he prefers not because it's any more objectively correct, but simply because the poor are his ingroup and the rich are his outgroup.

 

[laughing dog]

So it was "even close". 17 is almost half of 42; 21 - 17 = 4 < sqrt(42). I.e., the discrepancy is well within the expected noise level. I.e., dice could perfectly well make a curve shaped like that. You can't expect a process with random effects to come out exactly 50-50. There's no indication that workers systematically lose ground more of the time than they gain ground.

(* You wrote "at least the minimum wage of 1979"; I take it you meant the median wage, from the chart. In 1979 the minimum wage was about $11/hr adjusting for inflation; the figures in the chart are all higher than that.)

And it's deceptive, anyway--they keep comparing hourly workers. In today's economy few hourly jobs pay well, good jobs are salaried.

Not only is that irrelevant to the issue of wages ( or salaries) keeping pace with inflation, plenty of good paying jobs in the trades pay well. Finally, it ignores the reality that poor jobs count as well.