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Redistribution of wealth has gone upward, not down, since early '80s

Jeff Kolnick

Fox News has recently unearthed a recording of President Barack Obama from 1998 where he states his belief that government can help people. He said: “I think the trick is figuring out how do we structure government systems that pool resources and hence facilitate some redistribution — because I actually believe in redistribution, at least at a certain level to make sure that everybody's got a shot."

So we are back where we began four years ago, back to “Joe the Plumber” and the idea of income redistribution. Remember, Joe the Plumber? Remember when then-candidate Barak Obama stated that we need to spread the wealth around a little bit? Well once again, the right has seized on the idea of wealth redistribution as a left-wing plot hatched to destroy America and turn the nation into some sort of European socialist experiment.

It is necessary sometimes to point out that the redistribution of wealth can move in two directions. From the those with plenty of money to those who are less fortunate (as Mitt Romney and Bill O’Reilly so deeply fear) and from those with little wealth to those with more money than they can ever spend in a lifetime (as has actually been happening in the United States since the 1980s).

Oh, how the facts are bothersome. Since 1980 the distribution of wealth in the United Sates has changed dramatically. The rich have gotten richer, and the poor have gotten poorer. A recent study from the Center on Budget and Policy Priorities indicates what is widely acknowledged to be true: that we are more unequal as a nation today than at any time since before the Great Depression. The data of The Economic Policy Institute (EPI) in its “The State of Working America” analysis shows that between 1983 and 2010 the top 5 percent of income earners increased their share of the pie by 74.2 percent, while the bottom 60 percent of us had our share of national income decrease.

In other words, the redistribution of national income went from the bottom to the top and not, as the right fears, from the top to the bottom.

Share of total wealth growth accruing to various wealth groups, 1983–2010

Source: EPI

In contrast to the last 32 years of increasing inequality, between 1935 and 1975  the United States became a more equal nation. This did not mean that the rich suffered; it just meant that they increased their riches in roughly equal proportion to the rest of us. A raft of government policies helped create this more level playing field.

During those years we had a sharply progressive income tax, and we spent that money in ways that sustained a strong middle class. We built and maintained the world’s best infrastructure, and paid the workers who did it union wages. We built and staffed the world’s greatest and most extensive public higher-education system — and then dramatically subsidized the education of millions of people with low or free tuition and a generous GI Bill. Business and corporate leaders felt some sort of compulsion to invest in America instead of where they could find the highest profits and pay the lowest wages. Indeed, in 1965, CEOs were paid only 20.1 times more than the average worker instead of today’s 231 times.

CEO-to-worker compensation ratio (options granted and options realized) 1965–2011 

CEO-to-worker compensation ratio chart
Source: EPI
Note: "Options granted" compensation series data includes salaries, bonuses, restricted stock grants, options granted, and long-term incentive payouts for CEOs at the top 350 US firms ranked by sales. "Options exercised" compensation series data include slaries, bonuses, restricted stock grants, options exercised, and long-term incentive payouts for CEOs at the top 350 firms ranked by sales. 

We also protected the right of workers to organize and bargain collectively. This last point is highly significant because collective bargaining allowed workers to reap the gains won by their increased productivity on the job. Since the full-scale assault on unions began when President Ronald Reagan fired the air traffic controllers in 1981, the share of wealth captured by workers from increased productivity halted, and that wealth has migrated to those at the very top.

Cumulative change in total economy productivity and real hourly compensation of production/nonsupervisory workers, 1948–2011

Cumulative change in total economy productivity and real hourly compensation of
Source: EPI
Note: Data are for production/nonsupervisory workers in the private sector and productivity of the total economy.

If we as a nation want to discuss income redistribution, let’s look at the facts. Since 1981 we have embarked on a national project of transferring wealth from the bottom and the middle to the very top. To accomplish this we have slashed taxes, ballooned the national debt, demonized unions and working people as greedy takers and romanticized the rich as job creators.

This project has worked well for people like Mitt Romney. It has not worked for the rest of us.

Between 1935 and 1975, we grew more equal as a nation and everyone prospered. We know how and why this happened. The only question is: Do we want to face the facts?

Jeff Kolnick is an associate professor of history at Southwest Minnesota State University.

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Comments (51)

It seems to me that our real

It seems to me that our real crisis is not that "takers" are swamping the productive capacity of "makers", or that oligarch propaganda has suppressed the political will to spend our way out of trouble, but that neither political party has much incentive to abandon its empirically boneheaded but politically convenient ideas about the way things get made.

We Have Allowed Ourselves to Be Duped

With their "divide and conquer" strategy, and a wide variety of propagandistic catch phrases related to "free market economics" (the con man and flim-flam ripoff aritst's best friend) and featuring words such as "freedom," opportunity, and "entrepreneur,"...

our "conservative" friends have diverted us from seeing how they were rearranging the economy and government policy in their favor, enriching themselves massively and impoverishing the rest of us,...

while effectively recreating our sense of reality and playing on some of the troubling assets of our human nature and common human dysfunctions and insecurities, to lead far too many of us to blame "big government" (which has actually been shrinking) and all of those who have worked hard to help us better our lot in life (teachers, government workers, unions, etc.)

for our sense of powerlessness and our continuously shrinking expectations.

If we really knew what has been going on, and who's responsible, and what they're trying so hard to do next (much much more poverty for the rest of us and much, much more wealth for themselves), what's happening in Greece today would be happening in every financial center and upper income gated community and suburb across the US.

"The only question is

Do we want to face the facts?"

Actually, the only question is, do you want to live in a free society or a government-managed collective? Because in a free society what someone else earns or what they own is none of our business.

And when only half of us are paying for the cost to run the federal government, the national common good, maybe it's time for those riding in the wagon to start paying something for the privilege. Because we all know how that half would answer the question.

Collective

Dennis, you can be as Howard Roarke as you want, but you still need collective action to build your skyscraper. The Big Lie in our society is that capitalism is an individualistic system. It is most emphatically not. It is a collectivist system that has effected the largest and most incredible concentration of productive forces and resources in human history, but the economic benefits of the collective are largely funneled upwards, to a diminishing number of elite owners.

Your question about whether we want to live in a free society or a government-managed collective is a false dichotomy. The question is whether you want to live in a collective managed by a wealthy elite, or a democratic collective. The data in this article demonstrate how the present form of government has leaned increasingly towards the former over the past thirty to forty years. But it also hints at the fact that the public must take greater action (such as that taken by unions in decades past) than simply voting one way or the other and letting "someone else" take care of it in order to ensure the latter.

Actually, the only question is, do you want to live in a free so

Dennis,

Am I correct in assuming that your "free society" also extends to keeping government out of our social llves as well as our financial lives and therefore you will be voting NO to defeat the Marriage Amendment? If not, please help me understand the rational supporting your division of the two?

Free society?

Dennis is ignoring the fact that in a capitalist economy real freedom is dependent on wealth... the poorer you are, the less freedom you enjoy. This is why a certain amount of economic equity is necessary for any truly free society. The Randian fantasy that Tester promotes is not a free society.

It's also funny that Republicans tout the 50's as ideal decade in American but reject it's economic reality as if you could have the 50s without having the tax rates and wealth compression or economy of the 50s.

In a capitalist economy

wealth is determined by the purchasing decisions of free people. Funny how that works.

And it was a democrat who argued that "a rising tide lifts all boats" when he explained why he was slashing marginal rates from the 90% of the 50s.

Them that has, gets…

My thanks to Professor Kolnick.

It was a common Depression-era cliché: “Them that has, gets. Them that don’t, don’t.” When “them that has” control the media and access to information, “facing the facts” becomes more problematic than perhaps it was a couple of generations ago. It’s a truism that when people gain political power, they make rules to benefit themselves. As long as representation works, and the society really IS relatively democratic (with a small “d”), James Monroe’s suggestion in the Federalist Papers that “factions” will tend to counterbalance each other more or less holds true. Recently, however, the wealthy have been able to put a collective thumb on the scale to tilt most discussions (and most rule-making) in their favor. Hence, as Kolnick points out, we’ve adopted as a society numerous policies that benefit the upper few percent at the expense of everyone else.

That doesn’t make Mitt Romney evil incarnate, or even the infamous Koch brothers. It simply means that they – like the rest of us – are self-serving. Since, as the cliché suggests, “money talks,” they have more influence on policy-making than most of us do, especially in recent years, and those policies essentially are for their benefit. A few crumbs get scattered around for the masses – a mortgage deduction here, a tax rebate there – but the rules themselves invariably benefit those who don’t really need the benefit. Thus, a healthy skepticism and critical eye ought to be directed toward policy proposals coming from those that already "have," especially when those proposals affect the economic sphere.

Numerous articles and books that substantially agree with Kolnick’s analysis, especially the point about wealth redistribution upward, have appeared in recent years, but those facts and those stories rarely show up, if ever, on the 6 o’clock news. It’s more entertaining to show the video of the house fire, or interview the guy who saved someone’s kitten, or to have what ought to be embarrassing, gushing “interviews” with celebrities and athletes, who are often themselves beneficiaries of rules that benefit the “haves” at the expense of the “have-nots.”

What the future holds

This is not suprising. Reagen got the ball rolling at speed, and these are this is the natural consequence of what started then. What this means for our furture is violence like we have not seen in this nation, that will make the civil rights riots and the outrage over Vietnam look like picnics. But this is what comes of attempting to replace human values with corporate ones.

Some of Us Seem to Be Unable to Differentiate

Between government-managed, and government-CONTROLLED.

The old U.S.S.R. attempted government CONTROL of a very large economy and failed miserably (which has generally been the case whenever it's been tried).

The US has NEVER come close to attempting government CONTROL of our economy (although, with the public's support, the war effort during WWII moved in that direction), but some level of economic management, including a collection of legal limitations and prohibitions, is necessary to compensate for the most destructive tendencies of so many of us humans,...

specifically to protect the unwise, the unwary, the unaware, and the overly-trusting from being economically (and, thereby, usually personally) destroyed by those who are empowered in a "free" economy to enrich themselves by ripping others off.

Let us cease from confusing a relatively "free" but gently managed economy, with what so many of our "conservative," "free market" friends seem so earnestly to desire: economy anarchy sufficient to enable them to rip the rest of us off with complete impunity.

Never be fooled: "free market" as it's currently sought by "conservatives" is nothing short of economic ANARCHY. Such anarchy is a path to destruction for us all as individuals and for our nation just as surely as total government control would be.

Redistribution is an essential purpose of government

It should be pointed out, also, that the argument for capitalism rests on its productive force. A society's choice of an economic system with a strong capitalist element rests on its ability to deploy resources efficiently. But there is no innate moral claim for the distribution of wealth that results and, as Mr Schoch notes, once there are wealth disparities in a capitalist system, without correction they naturally will reproduce and magnify (i.e., "them that has, will get"). Government has three essential roles: make investments and provide current services where these are most efficiently done collectively; provide social insurance in its various forms; and keep a private capital-based economic system within a realm of social and political equilibrium by correcting its problematic distributive effects. There is of course no easy answer to how redistribution should work, so as to correct inequities without creating unhelpful incentives, but figuring that out should be one of the civic tasks of a thoughtful society.

Or as Ed Coen use to say...

"The rich get richer and the poor have children"

Which I always thought was an interesting mix between an economic strategy and perhaps a recreation strategy.

That is a fascinating observation, Chuck.

"Government has three essential roles: make investments and provide current services where these are most efficiently done collectively; provide social insurance in its various forms; and keep a private capital-based economic system within a realm of social and political equilibrium by correcting its problematic distributive effects."

The first role can be applied to the military, and so has a constitutional warrant that could be stretched to what it has become, but I'll be darned if I can reconsile either of the last two. Can you provide some guidance, for instance, on where the founders signaled their intent on endowing government with the power to correct "problematic distributive effects?"

Thanks!

General welfare, taxation,

General welfare, taxation, property, commerce, bankruptcy, general welfare and necessary & proper clauses, to name a few. I presume you and Mr Tester are aware that the Constitution dictates absolutely nothing about the details of the nation's economic system, which elements will be left more to private prerogative and which will be undertaken more collectively. Did the founders want an economic system that best supports the life, liberty and pursuit of happiness of the nation's citizens under the conditions of a given historical moment, or did they wish to forever enshrine some dogmatic, rigid, simplistic, wholly abstract concept of an economic system like yours and Mr Tester's even if its result would be tyranny and unfreedom?

Perhaps, Chuck

I have gotten ahead of myself. Can we agree that the US Constitution is the framework by which our government is created and endowed with it's resonsibilities and powers?

If so, we must also then agree that the means by which the founders cleverly structured the tenth amendment carefully limits the federal government by first denying *any* authority at all ("The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people), then follows up with a miserly and thoughtfully limited set of warrants with which it is to operate.

So it is by deliberate design that the constitution says nothing about bankruptcy, for instance. The mechanics of that vehicle is left to the states; right where it should be.

Our founders were profoundly far seeing, Chuck. They left wiggle room, but ensured that the government would have to go to great lengths to make use of it. It was once neceessary to pass an amendment to grant the federal government new powers, not any longer.

Our sin Chuck, is the careless and distainful manner with which we have misused and neglected our own power to limit those who would rule us.

.

Mr Swift - I'm glad you're enjoying yourself, but your comment is a non sequitur. The question is whether social insurance or redistribution is a legitimate function of "government." Not federal government, not state government, not even the U.S. government. Government as in the sorts of things that a thoughtful populace should approach collectively. If you want to disputate about the federal structure as the framers intended it, knock yourself out. But it doesn't have anything to do with the article or the comment thread.

PS The bankruptcy clause is in Article I, Section 8. The bankruptcy courts are a part of the federal court system.

The Constitution and Rising Tides

You will find it in the same section of the Constitution where the Founders ordained "capitalism" as the economic system for these United States. As a favor, I will save you some time: neither "problematic distrbutive effects" nor "capitalism" are in the Constitution. We are living in an evolved, mixed economy with parts of it carefully managed and other parts loosely managed and some completely unmanaged.

Those who defend capitalism must start addressing the issues raised in this commentary or soon enough, there will be no capitalism to defend. A capitalist economy that functions primarily to facilitate and protect the transfer of wealth from many to a few will fail.

Another poster noted that "a rising tide lifts all boats" but to make that theory operative, it requires that most of people have boats. Otherwise, they drown. I think that Mr. Romney and most Republicans are quite comfortable in an economy where as long as they have boats they don't have to care if anyone does.

And I will save you some time:

"Democracy" doesn't appear in the Constitution either.

Nonsense

The argument for capitalism is consumer choice. Wealth is created or not created based on the purchasing decisions of the people ... the ultimate example of why captialism and democracy are cut from the same cloth.

And those "three essential roles" you suggest for government are not supported by the Constitution. The role of government is to protect your constitutional rights. That's it. And if you don't believe me read what the president takes an oath to do when he is sworn in. It's to preserve, protect and defend the constitution, not attempt to control the economy.

Because when governments attempt to control the economy for the good of the people, they end up controlling the people for the good of the economy.

Consumer choice does not equal democracy

In a market your power is proportional to how much you own (supply, purchasing power, whatever you want to call it) and in a democracy your power is exactly the same as anyone else. Some people arbitrarily having more power and others having less is exactly opposed to the fundamental equality posited by democracy. They are not cut from the same cloth.

Democracy simply means

you have a right to participate in the choosing of your leaders.

Using your purchasing power to participate in deciding which product or service of many survives in the marketplace, has the same affect in our society as voting for one of many candidates for leadership.

I always thought it ironic that those who fancy themselves as democrats, who allegedly believe in choosing leadership from among a choice of candidates, seem least likely to embrace capitalism, the ultimate exercise in consumer/citizen choice.

Put it this way ...

If political decisions were made the same way as market decisions (and maybe they are ...), then, according to the data in this article, the "average worker" would get one vote while each CEO would get 231 votes. While in such a system you would be participating in decision-making, you'd be hard-pressed to find any political scientist to call that democratic. The market is a plutocratic system, not a democracy. And the degree to which the choices of the elite are favored increases with the degree of disparity in ownership.

capitalism and democracy

"capitalism and democracy are cut from the same cloth." Western European socialist democracies, especially those in Scandinavia, are considered the most honest in the world. Many people in those nations are very happy with their systems and don't feel dominated by government, while they see the USA as a plutocracy.

A big clue to what is going

A big clue to what is going on is contained in the productivity/wages graph.

The old economic model of increased productivity leading to increased wages broke down in the late 70's. After that, increases in productivity did not lead to increased wages.

What happened at that point?

Computerization, automation, off-shoring, internet, rapid shipping.

Fewer people were needed to make the same amount of goods or provide the same services. People far away could make the same goods or perform the same services and efficiently supply buyers. Tools, machines and computers became more complex. able to do complicated things formerly done by highly skilled worker.

A surplus of labor developed. Not just in the US, but virtually everywhere in the world. That surplus remains today. It is found in China, the US, Europe, the Middle East. The current methods of providing goods and services exceeds demand with less than full production.

That is the only way you can have 3 decades of productivity growth and virtually no wage gains.

And what about the people who control the money and the businesses? How has a labor glut affected them?

You buy a machine, a computer, a tool. it works for quite a while on that initial purchase price. Maintenance and servicing may be required, but generally these are low compared to cost and certainly lower than the cost of wages of people to do the similar work. Machines don't have vacations, illnesses, insurance issues, or any of the other human worker issues.

As a result, the fewer human workers a business has, the more predictably profitable the business becomes. The money that was split between management and labor goes more to the management when there is less labor. Less labor required means less wage-related pressure from workers. Less skilled labor required means lower wages can be offered.

At the end of multiple runs of that cycle, is it any wonder we end up with flat wages, high unemployment, and a concentration of wealth in the management and owner segments?

That is the process of how we got to where we are.

The question is where do we go from here, because the economic mechanism of how we got here is still in effect.

The Democratic policies have been directed at preserving a much of the worker gains and the private and governmental benefits brought in during better times as possible. The Republican position is that those restraints are unsustainable and need to be removed.

The problem is that the US that everyone knows is based upon the model of a relatively wealthy worker with low unemployment and benefits suited to their needs. if there is no real economic impetus for the "wealthy worker" model to be sustained, what will America become?

In this instance, the Republicans are trying to "speed the plow" and somehow, magically, the "wealthy-worker" will return. It's a dubious proposition. The only certain part of their policy is that the "wealthy-wealthy" will prosper because there is no contradiction of their part in the current process.

Meanwhile, the Democrats suffer from the lack of ideas of how to produce "wealthy-workers".

This is the issue of the next few decades.

Redistribution of Opportunity

If we think about it this way then people don't get so defensive about the government deciding what is fair and not fair. Who will government take from and then who will they give to? It means the government is making value judgments about you.
What we need is to redistribute opportunity. This starts with education. It always has been the great equalizer. Society and personal responsibility can meet half way. You do your half and I'll do mine. Half is a metric everyone understands. Wealth = opportunity.

Education and skills.

From my viewpoint in the trenches, the explaination of this redistribution is clear.

In 1976, men were making $26 dollars an hour in exchange for bolting fenders on cars all day long. For the past 20 years, I've used my education to build machines that can to that job 10 times faster, and with 100% more accuracy.

I like to think that my work provides value to both the customer that buys my machines, *and* the worker that is freed from the de-humanizing, mindlessly repetitive labor he was enslaved to.

The problem is, as I see it, that my customers have made full use of the products they purchased, while too many people have traded the opportunity to improve their skills for a seat in front of the television and a substantially reduced salary at another de-humanizing, mindlessly repetitive job.

The days of the $26 hour fender bolter job are long gone, and good riddance. It's a pity that the mindset of the displaced bolter has not followed his job to a better, more profitable future.

The problem was that America

The problem was that America that most people know and love was built in the age of the wealthy-worker.

The America being built with minimum wage, part-time, dispensable, interchangeable workers will be significantly different than that America.

That is the problem that the entire country faces.

No Neal.

The problem is that the paradigm of the "wealthy worker" you ascribe to was built upon a lie. Yesterday's workers believed that applying their unskilled labor, however marginally, entitled them to become rich because they were irreplacable.

The truth is that it was heretofore not financially viable to bring their work to their replacements, and they were too busy striking and picketing to notice how small the world was becoming...if they'd have looked past their noses, they'd have seen the smiling faces of their replacements in Korea, China, Vietnam and Mexico patiently waiting to recieve their jobs.

The problem the country faces is that in the 1990's, the world economy caught the present generation of unskilled workers in mid-point wealth gathering. Now, too many are expecting the ghost of Jimmy Hoffa to appear and start producing miracles to save them....ain't gonna happen.

What kind of country do you

What kind of country do you want Mr. Swift?

My point is that the America that is all around you was built on the basis of a wealthy-worker You have absolutely no grasp of history if you think that the pre-WW2.America was a good place for ordinary citizens, and certainly as you go further back in history, it becomes worse.

The remaking of the country on the basis of a temporary, part-time, underpaid citizenry WILL result in a different country. You have to be pretty illogical to believe that we will end up with the country we had by dismantling all of the things that made it what it was.

Opportunity to improve your skills

You need more than just spare time to improve skills. Ever increasing credentials are required by employers with ever increasing costs attached to those credentials. The cost of higher education is rising much faster than the rate of inflation, partly because it isn't able to produce the same productivity gains with automation. That may change in the future but we aren't there yet.

Taking some of the productivity gains from our economy (wealth) and applying them toward continuing education (opportunity) would be a good investment for the society that provided those productivity gains.

Understatement of the year?

"The cost of higher education is rising much faster than the rate of inflation, partly because it isn't able to produce the same productivity gains with automation."

Judging from the evidence I've seen from some of the teaching staff of our very own UofM, we'd be happy as clams if academia could reach the productivity levels of one-armed olive pickers. We are paying professors very generously when any 1st year co-ed can tell you graduate students and PhD candidates are doing the lion's share of the heavy lifting in the classroom.

In fact, I've spoken to department chairs that willingly admit as much, while bemoaning the lack of authority to make needed reforms.

Personally, I'll be badgering my elected representatives to expand K-12 reforms such as putting an end to LIFO and no-strings tenure to higher ed as soon as they pass it next year. Our kids deserve better.

Anecdotes are not data, Mr. Swift.

And tenure has strings, at least for the small proportion of those at universities that still have it.

And there has been a salary freeze as well as an actual salary reduction at the U of M in the last few years.

Do your research, please.

What happened to the new comment policy where cheap shots unrelated to the main article were no longer to be tolerated?

A logical conclusion

When 80% of mass production is being done by robots, where will the consumers of those products be?

So let me see, Mr. Swift...

The income redistribution problem has been created by the mindset of the displaced bolter who has not followed his or her job to a better, more profitable future, by further education.

Is it his or her fault for not following your example in getting a "higher education" ? Where exactly did you get this, and in what field ?

Instead of doing likewise, lazy workers have traded the opportunity to improve their skills for a seat in front of the television? This argument is the same one that will lose Mr. Romney the election, i.e.:

"There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims... My job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives." Candidate Romney

Good luck with this argument.

Actually, Bill

I did not, in fact, make Romney's argument. I'm talking about people that are underemployed due to lack of education, not because they are receiving a government check. I didn't say they were lazy, either. What I see is a profound lack of motivation that I can oftentimes attribute to a unionist mentality.

I'm also going to take issue with your apparant elitist attitude that where someone gets an education is more imortant than the education itself. An Ivy League sheepskin might be a make or break issue for a lawyer, or politician, but I can assure you that there are many of us making very nice salaries that have never seen the inside of a Harvard classroom.

Maybe electrical engineers are more practical than other professions, but somehow I don't think that's true. In any case, we certainly are not prone to looking down our noses at the venues our collegues were educated at.

I'll let our readers judge, Mr. Swift,

whether you were making the same argument as Romney. It certainly appears to be the case to me.

And your statements about elitism are a straw man. I have never claimed that where someone was educated was more important than what that education was. As you are perfectly well aware, my education is far from Ivy League.

I asked where, and when, you received your "higher education" for a reason. You have not responded.

Am I to take it that you are now claiming to be an electrical engineer? From what institution and with what degree did you graduate? Clearly you are making a claim that the bolt tighteners have not pursued a higher education as you have and thus their unemployment is their own fault. I'd like to know exactly what your education is and from what institution(s).

I've been "claiming" to be an electrical engineer for 20 years

...but more importantly to me, and relevent to the topic, I've been very successfully employed as such for as long.

Unless your interest in the details of my academic record include a lucrative offer of employment not only is it irrelevent to the topic at hand, it is, with all due respect, none of your business.

Social Justice

A very timely article. It is critical to know what we are actually accomplishing. It is also important to know what we want to accomplish, where we want to go, for, as the aphorism explains, 'if you don't know where you're going, any road will do.' We should know what outcome we ultimately want, our ideal, and how close to it our current programs bring us. A sense of progress toward ideals gives life meaning and makes choice significant.

The following article may facilitate our discussion of what our ideal society might be and how to get there: "Social Justice and the Three Worlds of Welfare Capitalism" by Wolfgang Merkel. http://www.dritte-wege.uni-hd.de/texte/SocialJustice.pdf

Free market fallacy

The well to do have what are called lobbyists, and bought and paid for politicians. They are then able to skew tax and finance laws to do their bidding, an undeniable fact in our imperfect government. (If you deny it then you suggest the government runs as perfect as our so called Free Market, they both operate in the same environment

Perfect example: Mitt pays ~ 1/3 the effective tax rate that I pay (with S/S and medicare etc)
To all those free market work hard and you will succeed folks. Evidently you believe that "Morally speaking" money made off money deserves better tax treatment than money made off the sweat and blood of a man's or woman's brow? You also apparently believe that all people have all knowledge of all products at the same time, "That is the first corollary that supports free market theory, the second corollary is that no player in the market can control the market, and the 3rd is that market players do not collude to set prices and markets!
Reality Free market is an ideal, not a reality. Finally its interesting to see some of the same posters: Harold free market economy today, and 2 weeks ago blame Obama for the high price of oil in this so called Free Market Economy!

I've never met true a

I've never met true a free-market conservative.

Free market fallacy

The well to do have what are called lobbyists, and bought and paid for politicians. They are then able to skew tax and finance laws to do their bidding, an undeniable fact in our imperfect government. (If you deny it then you suggest the government runs as perfect as our so called Free Market, they both operate in the same environment

Perfect example: Mitt pays ~ 1/3 the effective tax rate that I pay (with S/S and medicare etc)
To all those free market work hard and you will succeed folks. Evidently you believe that "Morally speaking" money made off money deserves better tax treatment than money made off the sweat and blood of a man's or woman's brow? You also apparently believe that all people have all knowledge of all products at the same time, "That is the first corollary that supports free market theory, the second corollary is that no player in the market can control the market, and the 3rd is that market players do not collude to set prices and markets!
Reality Free market is an ideal, not a reality. Finally its interesting to see some of the same posters: Harold free market economy today, and 2 weeks ago blame Obama for the high price of oil in this so called Free Market Economy!

The real interesting point of all the posters is : No one is disputing the data that the class warfare strategy that the top has waged against everyone else has been successful and their goal of redistribution of wealth up from down has been a successful war for them.

Even Greg Mankiw knows that

Even Greg Mankiw knows that incentives and opportunity costs are economic super-powers. The trick is to understand what is being incentivized and what the opportunity costs are among alternative choices. This has been the key to our failures, so it really needs to be corrected to be the key to success.

Both our misplaced incentives and our accumulated opportunity costs sit waiting to be turned around into transformative opportunity. Every old unsolved problem is tomorrow's opportunity.

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Mr Swift - I'm glad you're enjoying yourself, but your comment is a non sequitur. The question is whether social insurance or redistribution is a legitimate function of "government." Not federal government, not state government, not even the U.S. government. Government as in the sorts of things that a thoughtful populace should approach collectively. If you want to disputate about the federal structure as the framers intended it, knock yourself out. But it doesn't have anything to do with the article or the comment thread.

PS The bankruptcy clause is in Article I, Section 8. The bankruptcy courts are a part of the federal court system.

One thing is clear

Not to launch a personal attack or anything but if you look at the posts here from Tester and Swift the most obvious fact that jumps out is economic ignorance pretending to expertise. Were this limited to a handful of commentors it would be irrelevant but the fact the entire Republican economic plan is built around this ignorance.

The claim that Obama want to re-distribute wealth is not only a mundane observation pretending to be an alarm, it's also an ignorant denial of economic reality. All economies redistribute wealth, the only question is to whom, and by what means. Modern democracies were born out of the realization that political, social, and economic equity are preferable to oligarchy despite Ayn Rand's fantasies. It's intellectually dishonest to argue that highly disparate concentrations of wealth are good for a nation, and economy, or a society. Even free market champions don't make that argument; trickle down economic theories promise the elevation of ALL boats as the tide of increases, what is that if not a form of wealth redistribution? The idea that some people support redistributive economies and other don't is simply obtuse. It's the equity of redistribution on the existence of it that we're arguing about. The convoluted nature free market economics is a result of the required mental gymnastics involved in denying they believe in oligarchies. No one wants to admit believe in disparity and oligarchy.

Equally ignorant is the notion that consumerism is a unique feature of capitalism and economic outcomes in a capitalist society. All economies are based on consumption, and all economies have consumers. The idea that consumer choice represents "freedom" or some form of democracy is little more than a contemporary illusion that displaces the responsibilities off citizenship with the egocentrism of consumerism.

Perhaps the most absurd display of economic ignorance is the constant insistence that the public and the private sectors are two different economies in competition with one another. This neo-conservative fantasy took hold during Reagan's presidency and is one of the most bizarre features of Republican economics. I'm not sure how one re-defines the term "sector" to mean separate and distinct, instead of part of the whole, but that's exactly what Republican economics have done.

In fact the public and private "sectors" are part of the same economy, not different economies in competition. All economies have these components, sectors that deal with collective and communal issues, and sectors that are more privately organized, they don not compete with each other, they compliment each other albeit to differing extents. No economy can have one without the other. Any economic plan that claims to have an objective of eliminating government is a prescription for economic collapse because all economic systems require some form of government involvement. The only exception to this is Anarchist utopias, but even there, they don't eliminate government, they re-define it. So unless Republican's are advocating Anarchism their economic plans designed around a myth of public-private competition are simply incoherent. And in fact, if you look at the comments here representing that vision, that's exactly what you see.

The funny thing is that these would-be Anarchists constantly pretend to be economic experts and realists.

Congratulations to Professor Kolnick

for an outstanding and lucid article.

As another commenter has mentioned, the pièce de résistance is the third figure which shows increases in productivity of the American worker that have not been matched by increases in compensation.

As someone who grew up in Pittsburgh during the employment collapse of the mills and the mines during the fifties and sixties, I have personal experience with this kind of massive unemployment. I don't take kindly to the suggestion by Romney or other commenters here, that a large fraction of the population is unwilling to take "personal responsibility and care for their lives."

The attitude of people like Romney toward the working class is palpable. This is why voters are not buying the pig-in-a-poke economic solutions provided by Romney. They know who saved the auto industry and who is more likely to take steps to staunch the bleeding from America's working people.

Do we want to face the facts?

I think there may be a misinterpretation of the data here. I don't think it is taking into account what else happened in 1975, which is the introduction of the microprocessor, which led to the proliferation of personal computers after 1975. Productivity increased, because technology made it easier to be more productive. Just consider what it would take to produce these very graphs with and without a PC. Skills required have changed, but they have become less difficult through the use of technology. Just ask anyone in your office to produce a pie chart with pencil and paper as quickly as do on their PC. Investment has gone to technology not wages, because the goal of technology is to make it easier requiring less skill and increase productivity. What I think is being missed is that those who have embraced this boom in technology to its maximum potential are the ones who benefited financially and those who have floated along have not.

The poor from 50 years ago are the mostly rich now.

Jeff misses the main point of the debate and thus demonstrates Ronald Reagan's greatest gift to humanity. Reagan could communicate the truth and exposed liberal insanity. Liberals leave out the fact that 30,000,000 uneducated immigrants and their children have swelled the ranks of the poor. Plus, include the refugies from foreign wars and the generations sex, drugs and Rock-in-roll reprobates that are now to insane, depressed, sick or angry to be employable. Then consider how the liberals and environmentalists have regulated 20-40,000,000 manufacturing and mining jobs out the country in the past 50 years. Plus, liberals keep writing these propaganda articles and advocating we make it easier to drop out of the work force and live off the welfare state. What % of citizens that went to school before 1970 do not have a car, wide screen TV, refrigerator, hot and cold running water and fight overweight issues. I
rest my case. Go conservative and stop making things worse.

Poor to rich, comparing standards

The poor have not become rich by American standards. If we are to compare our poor to the rest of the world, our poor would still be poor as compared to other first world countries. Our poor would only be rich as compared to second and third world countries. I, for one, do not want to aspire toward being a second or third world. So, claiming that having transportation and running water is a sign of wealth in a first world country is ridiculous.

Nor are the poor generally immigrants. As a matter of fact, immigrants are several times more likely than the naturally born American citizen to create their own business and new jobs. No...for all practical purposes, the poor are Americans. Not something to be proud of. And not something that any Republican politician has successfully addressed. Or any other politician, for that matter. You can't blame "liberals" for that.

Finally, claiming that regulations took our jobs away is ridiculous. One must again look at standards between first and third world countries. You can get a job in India, only to still die in poverty of a disease we've eradicated in first world countries. In order to remain a viable first world country, we must respect our resources enough so that they still exist in the future. Environmental regulations do that by limiting the damage pure profit will do to them. I preserves the value of the country as a whole so that we can remain a truly first world country. Economic regulations separate us from third world countries by limiting the power of economies over the freedoms of individuals. Otherwise, the richest would be free to kill the poor by negligence (at best) or willfulness (at worst) as long as it's done indirectly.

I'd rather live in a first world America under the oversight of "liberals" than a third world America that the Republican party dreams of.

Reagan's gift?

Reagan's policies, whether implemented by democrats or republicans have increased wealth disparity and poverty in the US. Since 1980 poverty rates have increased, along with the severity of poverty, and the income levels of 90% of Americans have stagnated or decreased while the top 5% have seen their income increase several hundred percent.

We're talking about Americans falling into poverty by the way. The idea that uneducated immigrants have swelled the ranks of the poor is simply a racists stereotype. The business of basing public policy on stereotypes instead of reality is largely responsible for most of our current problems.

R. Reagan's Greatest Gift??

Exactly - one really has to wonder what sort of socialist, big government loving politician would think that allowing the working poor to avoid paying income taxes is in the best interest of our country. Only the most ardent believer in expanding government dependence would dare portray such a policy “pro-family” and a “job-creation program.”

But wait – this is from President Ronald Reagan’s 10/22/1986 speech just before signing the Tax Reform Act of 1986: “For all these reasons, this tax bill is less a freedom -- or a reform, I should say, than a revolution. Millions of working poor will be dropped from the tax rolls altogether, and families will get a long-overdue break with lower rates and an almost doubled personal exemption. We're going to make it economical to raise children again. Flatter rates will mean more reward for that extra effort, and vanishing loopholes and a minimum tax will mean that everybody and every corporation pay their fair share. And that's why I'm certain that the bill I'm signing today is not only an historic overhaul of our tax code and a sweeping victory for fairness, it's also the best antipoverty bill, the best profamily measure, and the best job-creation program ever to come out of the Congress of the United States.”

By the way, this legislation set the top marginal rate for individuals with taxable income over $54,000 and for married couples over $90,000 at 38.5%, and long-term capital gains were taxed at 28%.
It's quite clear that Ronald Reagan wouldn't even get a second look by today's so-called conservatives. He'd be far too liberal for them - might even be called a "Rock-in-roll reprobate."

Productivity and computers

Ethan raises the issue of the role of technology in productivity. It's important to remember that this is nothing new, it didn't start in the 70s. Computers are simply one of the latest in a long line of technological innovations going back hundreds of years. I know it's hard for some people to comprehend the fact that steam power was a more radical development than computers but it was.

At any rate, the technology behind productivity doesn't devalue that productivity. If a computer makes you more productive that doesn't change the fact that you are more productive and should be compensated accordingly. American are NOT working fewer hours and living the life of leisure since computers came along, if you're producing more, your work product is worth more. Your increased productivity is earning more for the owners of production, remember corporate profits and executive earnings have been skyrocketing due to that productivity. Why are you not entitled to share the wealth your increased productivity is creating? Is this your role in the universe, to make other people wealthy?