…a four-year study of a government-run program in northern Uganda that gave cash to groups of young people so they could learn a trade and start their own businesses. The results surprised him and convinced him that outright grants are the best way to give aid.
“I was very skeptical. I thought the money was bound to be wasted,” Blattman recalled in a recent interview on campus. “But most people used the money responsibly and there were huge economic effects.”
The data showed that after four years, most of those who received a cash grant were practicing a skilled trade, their income was up nearly 40 percent on average, and business assets increased 57 percent….
…Where did the productivity go?
The answer is, it’s two-thirds the inequality, stupid. One third of the difference is due to a technical issue involving price indexes. The rest, however, reflects a shift of income from labor to capital and, within that, a shift of labor income to the top and away from the middle.
What this says is that widening inequality makes a huge difference. Income stagnation does not reflect overall economic stagnation; the incomes of typical workers would be 30 or 40 percent higher than they are if inequality hadn’t soared.
|—||Two Points on the Bloomberg Article on Wall Street Bonuses: Rentiers and Bonus Culture | Rortybomb|
From the comments:
"And why would that be a good idea?"
"Well… I’ll make a more money that way"
"And why is that good?
"Well…I can use that money to invest in more businesses."
"And what amazing advice do you tell these new businesses?"
"Mainly… cut staff and wages and do whatever you can to boost their stock price"
"And why is that good?"
"Because if I time it just right, I can cash out right before everyone realizes how gutted the place is"
"And why… is that good?"
"Well… as I said before, I make a lot more money that way"
"… which you can invest in more bus-"
"Which I can invest in more businesses, exactly"
"Isn’t that a bit circuitous?"
"What… oh… oh no. Yes, I see your problem. You don’t fully understand. You see, I don’t fully invest the cashout money. I keep some as well… a lot actually. I can always get money from your fathers pension fund for the actual acquisition. So while it may seem circuitous, my pile of money actually keeps going up."
"Hey, don’t pull that face. That’s just capitalism. It’s not my fault I was blessed with the innate ability and massive inheritance to take advantage of it. You’re just envious. Anyway, can I count on your vote this November?"
|—||Stephen Colbert wants his super PAC back. What if Jon Stewart won’t give it to him? - CSMonitor.com|
Here are the stages of inequality rationalization:
1. Rising inequality? What rise in inequality?
2. OK, inequality has been rising, but it doesn’t matter, because we have lots of social mobility.
3. OK, we don’t have lots of social mobility. But that’s a good thing….
From the comments:
"The creaming off of most of the wealth generated in the US since the 1970’s by the wealthy and powerful is clearly attributable to concentrated and sustained political efforts, from Reagan onward, to attain this end. There may be some impact of technological change and globalization of markets, but it was largely a triumph of propaganda engineering that persuaded millions of Americans to vote against their own economic interests. This process continues today."
I’m not sure why charging higher taxes on those who benefit more from shared social expenses (education, physical infrastructure, etc) is such a hard concept to grasp. Or why it’s not obvious how problematic it is to let the ‘winners’ in the system get a cheap ride on everyone else’s backs . …
…Let’s take the top 1% first. Between 1979 and 2007 income for this group grew by 275 percent, and the share of income doubled from around 10 percent to around 20 percent of total income. However, the share of taxes for this group less than doubled. Thus, a doubling of income resulted in less than a doubling of taxes. Given that income growth outpaced tax growth, it’s hard to see how we can describe this as an increase in the tax burden for the top 1%.
What about the middle of the distribution? As noted above, the share of total federal tax paid by middle income taxpayers dropped from 21 percent in 1979 to 16.5 percent in 2007. However, over the same time period the share of income for this group went from 51.1 percent to 43.5 percent. When the fact that the share of income for the middle income group has fallen is accounted for, it’s no surprise that the share of taxes has fallen as well. On net, the two roughly cancel — the fall in income and the fall in taxes are roughly proportional. Thus, the notion that the rich are paying more, and middle income families are paying less — that income is being redistributed from the rich to the middle — does not hold up to further scrutiny. The rich are doing better than ever, tax rates are at historic lows for this group, and their share of taxes has not risen by as much as their share of income.
What about the bottom of the income distribution? First, it’s highly misleading to just look at federal taxes for this group. The federal tax burden is relatively low for this group, but when state taxes, sales taxes, and the like are factored in the burden is relatively high. For example:
Data from the Institute on Taxation and Economic Policy show that the poorest fifth of households paid a stunning 12.3 percent of their incomes in state and local taxes in 2010 When all federal, state, and local taxes are taken into account, the bottom fifth of households paid 16.3 percent of their incomes in taxes, on average, in 2010….