Friday, December 16, 2016

Wealth Transfer Version 2.0

From Laurie...

The split I recommend is that the top 1 percent of earners should take home only 10.5 percent of the total national income, and the bottom half should get 20 percent of it.

Currently the top 1 percent earn a 20 percent share and the bottom half earn only 12.5 percent.

Nine New Findings About Inequality in the United StatesDistributional National Accounts Paper

And Jerry's Response

Laurie, those are great charts, but I was impressed by one, in light of your comment. The top 1% get 20% of the income now, and pay 36% of the taxes. The bottom 50% earned 13% of the income and paid only 3% of the taxes. Somebody want to explain to me how that is the least bit fair? And why you want to make it more unfair still?

Also the conclusion of your cite says that redistribution doesn't help. Especially arbitrary taxes to limit the free market in wages. Do you want to tell the next guy with an idea like Facebook that we're going to limit how much he can make out of it, if it succeeds at all?

Finally, I always find it laughable that people talk about "increasing inequality" as if it were some terrible thing, when in reality it is simple mathematics. The least real income one can have is zero. The maximum real income is-- there isn't one, and with inflation the number always goes up. SO... every year that "gap" gets wider, but it doesn't mean a darn thing! The only "solution" that should be considered is making sure that entrepreneurs have an incentive in the tax code to take those risks and grow the economy, and that everybody else has the opportunity to work hard and improve their standard of living because of it. Biggest problem over the last decade has been government putting the brakes on economic growth. That increases income inequality, and government attempts to remedy it make it worse.


Laurie said...

my comment has little to do with wealth transfer it is about paying people fairly. I think a company could get a very well qualified CEO to work for 5 million rather than 10 million and used this cost saving to pay their employees more.

John said...

"Paying people fairly"

For better or worse I can only come up with one effective way to determine what a fair wage is, and that is the employment market. What is someone or some organization willing to pay for the services of an employee with a given skill set to do a given job?

All other methods lead to waste and inefficiency. Remember my RDale bus driver story. When the district outsourced the transportation to a market based for profit company, the district saved over $1,000,000 per year. Which meant $1,000,000 could be moved into classroom, or a tax levy could be delayed so the local citizens could keep their money.

Colluding CEOs/ mgrs/ boards, Union collective bargaining, Minimum wages, etc all drive up the costs or decrease the profits. And us citizens, investors and/or tax payers end up paying for that waste.

John said...

That said, let's remember that the money is theirs to spend on who they believe is the best value. I disagree with what the CEO of my company gets paid, but it is not my decision. It is the Board of Directors and Majority Owners who need to believe he is worth the cost. (ie value) And to fire him if he does not deliver.

And if you can hire a good mechanic for $17/hour + benefits, it would be considered irresponsible to pay them more. As the job of the Board and Mgmt is to earn a return for the owners / shareholders whose money they are using to run the company. And many of those investors are people like us who are going to rely on those profits to retire, get our pension payment, etc.

John said...

So of course it is wealth transfer, it is money arbitrarily taken from one employee or the investors and given to another employee in the name of somebody's sense of fairness.

Not much different than progressive taxation and welfare. Money is taken from wealthy people and given to non-wealthy people in the name of somebody's sense of fairness. With no regard to the efforts, behaviors, etc of either party.

jerrye92002 said...

Laurie, I'll agree with you, but you made it sound, if you will pardon my presumption, as if you wanted government to mandate such "fairness." That always ends badly. What is fair is "what the market will bear." Why else do you think that, when mandated minimum wage goes up, people lose their jobs?

Now if you are talking free market, I don't think there is much to be done at the low end, but at the CEO end I like Robert Townsend's "Up the Organization" model for CEOs. I paraphrase: "You will be the CEO for 5 years only. You get $100,000 per year and $500,000 of stock options that vest 5 years AFTER you leave the company. Run the company well, the stock goes up and you become filthy rich."

I am convinced the reason CEO pay is so high is that almost nobody wants the job. I spoke to a fellow who was offered such a job, $1M/year (today's equivalent), house, furnishings, (maid, cook, I think), chauffered 24/7 limo, unlimited first-class travel for him AND his wife, and if I recall correctly he turned it down because of the 24/7 duty and the stress involved. At the time it set me thinking what I would have asked to take the job, and it was considerably higher than that, plus I would have insisted on a 5-year limit. Not that anybody offered, of course. :-)

John said...

I think people believe that these folks just get promoted in place like any normal employee. When the reality is that often they and their families usually move cities every 2 years for their whole career. And usually a couple of those stints have to be global in nature. Sounds glamorous, until you have to break it to your kids for the 5th time.

Remember that I looked at the upper management track when I finished my MBA, and very quickly decided that my marriage and family was worth more to me than a big pay check.

Laurie said...

so the way I see it is maybe it is wealth transfer, as compared to 40 years ago the $ has been arbitrarily taken from employees and shifted to top management. I just think the money should be shifted back. The economy of 40 years ago performed much more fairly. Are the CEOs of today that much smarter than in the past? I just think they are much more greedier. (the bad grammar being used for emphasis)

the market does not work perfectly, at my school we need more super teachers but we are unable to pay what it would take to get them. Maybe we should be funded so we can pay what the market requires to get really good teachers.

jerrye92002 said...

I do not believe "fairness" ever was or should be the mark of a thriving economy. One of the big complaints about socialism, which is supposed to be very fair, is that those at the top seem to get a lot more than those at the bottom. No, the correct measure of an economy is whether or not everybody has at least the opportunity to move up in standard of living, and to do that those at the top have to be paid more to incentivize them to produce that growth.

But the market does not work perfectly in your case because it isn't a free market. Public schools are essentially a monopoly, and your "management" does not have to hire the best employees or produce a better product to "stay in business." I often think the only reason it succeeds at all is because teachers enter the profession to help the kids, and they do as best they can. I hear complaints all the time about teachers not being treated as professionals (as they should be). My response is always to tell them to complain to their union leaders.

Laurie said...

Obama administration takes steps to make market economy work more fairly:

FACT SHEET: The Obama Administration Announces New Steps to Spur Competition in the Labor Market and Accelerate Wage Growth

I miss Obama already. What will trump and the GOP do, a huge tax cut for the rich that will increase income equality significantly.

jerrye92002 said...

Laurie, that's hilarious. The White House, aka The Imperium, trying to tell the free market how to avoid monopolistic practices. Government is a monopoly. And their brags of job growth and income growth are just more examples of "figures never lie but sometimes liars figure."

If Trump gives out a large tax cut, even if the most dollars go to the "rich," it will not increase income inequality because those folks already EARNED that income; it is just that the government might take less of it. But what it WILL do, if it is as you say and I doubt it very much, is to increase tax fairness. What's wrong with that? Remember the last time we gave out "tax cuts for the rich" the poor got the biggest percentage cut, and the rich ended up paying a greater total percentage of the taxes.

John said...

Jerry, Please provide a source...

Laurie said...

ERP Blogstorm Part 1: Income Inequality

Trump and the GOP will reverse this trend. This is an example of Trump voters getting screwed that I mentioned previously.

John said...

You are obsessed with how much the well off make, and I am saying it does not matter.

All that really matters is how are the American people doing in general?

And based on the following we are doing GREAT.
Pew How Americans Compare

John said...

Now let's say that the Rich start paying less in taxes and make more money. And the country starts hiring and paying everyone more... Are you going to be upset that "they" got richer or are you going to be thankful that "we" are all employed?

If we raise taxes on the rich and unemployment goes up and wages drop, will you be happy because "they" are less rich?

jerrye92002 said...

There's an old joke applicable here: "Didja ever try and get a job from a poor guy?"

As for sources, the Bush tax cuts took millions off the bottom of the tax rolls, so they got a 100% tax cut. And the rich paid a higher total percentage of the taxes is common knowledge.

Laurie, I read your link. More misinformation and libel of Republicans. Sorry.

Laurie said...

I think the obsession that can be noted on this blog is the one that you so frequently spout off about re the govt spending equals 37% of GDP. It's funny I don't think I have seen this particular fact mentioned in any of the hundreds of political articles and opinion pieces that I read as my hobby. Maybe you could find one that complains about this and post a link.

Here is another link that you will surely see negatively in terms of wealth transfer where to me it sounds like good policy.

Free Cash in Finland.
Must Be Jobless.

Lastly, I have an unrelated link that I found interesting and in line with what I see as the very real dangers of a Trump presidency:

Is Donald Trump a Threat to Democracy?

John said...

Actually this is the one that helped me see how the Frog is being Cooked.

What is Driving Growth

And tons of articles are written regarding how expensive government / taxes are getting. However they usually focus on only the States or the Federal, whereas I think the Total spend is much more pertinent. It helps us to better compare ourselves to those European countries that you like.

Decades Long Growth

Laurie said...

so is your solution to reduce spending to cut health care for people, as this has contributed the most to the growth in spending which you despise? I think continued or greater access to health care is a good reason for increased spending.

John said...

Let's try this a different way. You seem to support the concept that every person standing on American soil has a right to food, housing, healthcare, a base income, education, etc.

What do you think the base responsibilities for this person should be?

What do you think the consequence should be if a person fails to perform?

If you had an adult son living at home, eating food you paid for, paying their health insurance bill, taking spending cash from your wallet, etc... What would you expect of them?

Would you be okay if he got a woman pregnant, had you pay for the delivery, then they all moved in? What would you expect of them? What would you do if they chose to sit at home and play video games?

jerrye92002 said...

PMFBI, but I would like to offer some intermediate, perhaps, perspective. My objection to the level of spending is because so much of it is spent ineffectively and even foolishly. Medicare and Medicaid are two different things. Medicare is "paid for" through the payroll tax and through premiums paid by seniors, while Medicaid comes out of general revenues. Social Security should not count either, since it is supported by taxes, but of course it isn't even now, the "trust fund" doesn't really exist as a real asset, and it really needs to be privatized. So Medicare and SS are supposedly "neutral" or at least offset by dedicated taxes and Medicaid is not-- pure spend. The problem is that both of them should be reformed so they don't cost nearly what they do now. That is, public support but private choice and delivery. The same should be said of public education. It may not cost less, but I believe it could perform better, and start to fulfill the mission set out for it, to give opportunity to everybody. It MUST be so. Welfare needs reform to serve ITS original purpose, as well, that of getting people OFF of it. That is difficult when the welfare workers like the job security and the politicians like being Santa Claus. Environmental regulation, among others, is cost-benefit challenged, imposing costs on the country that do NOT show up in the spending numbers, but cutting them would let the economy grow and the % of GDP could decline without any spending reduction. Article in the Star Tribune today bemoans how Trump's cabinet picks might "disrupt" Washington by cutting unnecessary spending and regulation. Some of us, Mrs. Obama, are greatly hopeful now.

laurie said...

so I condensed your answer for you, John, "Yes, I favor reducing health care spending."
as for lazy people collecting welfare...

Working, but Needing Public Assistance Anyway

jerrye92002 said...

"As a result, taxpayers are providing not only support to the poor but also, in effect, a huge subsidy for employers of low-wage workers, from giants like McDonald’s and Walmart to mom-and-pop businesses."

One question: WHY? Why are taxpayers "subsidizing" low-wage workers, or anybody? Why is it the responsibility of employers to pay any wage beyond that for which people are willing to work?

John said...

You are avoiding answering my questions.

Please note that it seems that all the "families" in your article are single moms and their kid(s)... The problem is not necessarily their income or laziness... It is the fact that raising kids well and affording it takes 2 adults.

So what if your son after getting Baby Momma #1 pregnant and leaving the baby and her in your care. He went out and found another Baby Momma who did not take good responsibility for her birth control?

How many things are wrong with the following ?

"Adriana Alvarez, a cashier at a McDonald’s in Chicago, is among the people pushing for higher wages. After five years with the fast-food giant, Ms. Alvarez, 22, earns $10.50 an hour, well above the federal minimum wage of $7.25. Still, she depends on food stamps, Medicaid and a child-care subsidy to help get through the week.

“He eats a lot,” Ms. Alvarez said of her 3-year-old son, Manny, with a laugh. He also drinks a lot of milk, she said — “a half-gallon every two days” — and because he is lactose intolerant, he requires a more expensive brand, using up most of her $80 allotment of food stamps.

Most everyone else she works with — including many 10-year-plus veterans of the franchise — receives food stamps, said Ms. Alvarez, who started working at McDonald’s full time when she was in high school.

She depends on Medicaid for her family’s health care, and receives a subsidy for the day care center where she drops off Manny on her way to work."

John said...

So this girl apparently had a baby at 19, and is unwilling or unable to live with her Grand Parents, Parents, the Father or a room mate. So the tax payers are helping to pay for their food, healthcare, childcare, etc.

And you have the nerve to think that we are subsidizing McDonalds? Give me a break...

John said...

What would you do if your son or daughter did this stuff?

Just keep sending them checks?

After the second kid?

Just keep sending them checks?

What is your rationale that Tax Payers should just: "keep sending them checks"?

Remember that this co-dependence has contributed to 72% of Black babies being born to single women? And I think we both agree that single parenting is not great for kids...

Raising the minimum wages and writing them checks isn't going to stop this irresponsible behavior.

jerrye92002 said...

Interesting outlook. Seems to me like McDonald's is the innocent bystander in all this, yet some seem to think McD's should be punished by having their profits (if any) grabbed by government decree? And you are correct that there are other alternatives for this woman-- living with Baby Daddy, or Grams, or another in similar straits. They could trade off on child care. She could pick up another job, or find cheaper day care (though soon she should be able to drop the kid off at the public schools most of the day). Kudos to her for working hard and apparently keeping the kid fed and cared for. I don't mind paying a few taxes to subsidize that degree of effort while we work to get her to where she can get by without it.

John said...

By my rough numbers... I assume those benefits add up to $15,000+/year. I mean family health insurance by itself is ~$10,000/yr.

jerrye92002 said...

I'm not going to quibble numbers, because even in this one woman's case, there are simply too many variables. Does she have the option to live with Gramma, for example, who would provide day care? Does she have access to a garden? Can she pick up spare change in a home business of some kind? Will Baby Daddy help out? Could the State find a cheaper or better health care assistance system? On and on. It's why I believe that welfare reform should go back to the dedicated social worker model, where somebody works with each individual and sorts out all these options while giving them assistance to improve their own situation-- education, cheaper meal prep, birth control and approval of financial aid.

John said...

Hey aren't you the guy who fears qualified Teachers giving Parents "assistance"?

What authority should the qualified Social Worker have if the "citizen" says they know better... Just give me the money?

jerrye92002 said...

Hmmm. Interesting point. I do know it worked well for many years, until people starting asking more or less that same question. Of course that let those wanting to be irresponsible off the hook, while denying help to those who DID want to be responsible but needed help to do so. I guess the thinking at the time was that if you want the government check, you need to follow a few rules and make some kind of effort.

It's quite the opposite situation from teachers "grading" parents, really. Those parents that want to be responsible but do not know how aren't helped by being "graded" poorly by a teacher, nor are the irresponsible deprived of anything, unless you want to take away the sub-standard education they are getting when they were guaranteed something better.

And I am still of the opinion that the vast majority of the poor will welcome the help, and want to be responsible for themselves and their kids. I cannot bring myself to believe so little of my fellow human beings, as you seem to.

John said...

When did it "work well"?

" I cannot bring myself to believe so little of my fellow human beings, as you seem to."

Don't kid yourself, you are the distrusting one who argues against free birth control, against abortion rights, for voter suppression, against welfare as it is, against LBGT rights, etc. Of course you think most of the unfortunates are irresponsible and can not be trusted with the important decisions.

In fact vouchers seem to be the only place where you want to help them exercise their personal control. And that seems only because you distrust the Public School Teachers and Administrators even more than the Baby Makers.

Your inconsistencies remind me a lot of my Parents.

jerrye92002 said...

I like to pride myself on clear communication, but either I have failed or you have somehow "mis-translated" my positions from what I thought was simple English. I do not see how you can possibly lump all of those things together as opposing personal responsibility. Free birth control assumes the woman incapable (irresponsible) for making the decision, and abortion "rights" take away the right to life from the child and remove the responsibility from the mother AND father. Voter suppression is a mis-characterization of the belief that citizens have a right to vote that should not be diluted by cheaters, which is a government responsibility. I am against welfare as it is because it [doesn't work,] encourages irresponsibility and offers no help to those who WANT to be responsible. It's the opposite of the way school vouchers work. As for LGBT rights, there is no such thing. There is no more right to a marriage license than to a driving license: you should have to meet the qualifications and follow the rules. And let's not start THAT debate again.

jerrye92002 said...

So explain to me how what you propose is actually respecting the humanity of these poor folks. On the one hand you resent their "irresponsible decisions" but object to giving them any help that would let them exercise responsibility-- school vouchers among many. On the other hand you want to punish them by, I assume, withholding that assistance because they have been irresponsible. Seems to me you are not only punishing the victims, but assuming they are irredeemable.

John said...

There goes that flip flopping again...

"punishing the victims,"

One minute you say the Baby Makers are irresponsible and need to be held accountable for getting pregnant. Next you say they are victims who should be allowed to make huge decisions long lasting decisions for the child....

jerrye92002 said...

Where is the inconsistency? They and everybody else should make their own decisions and be responsible for them. Unfortunately the government programs (since private charity "can't do the job" according to liberals) that would help them make those decisions responsibly or live responsibly and correct those bad decisions, is completely absent. You are correct, however, when you say (even on my behalf) "they are victims who should be allowed to make huge decisions..." Yes, they ARE victims because they are NOT being allowed, encouraged and guided to make those decisions. They're given a pat on the head, a nice check, and =told= they are victims but that Democrats "care for you." That sounds like telling them they cannot care for themselves and I do not believe that.

Back on topic, "wealth transfer" is theft on the one end and ingratitude on the other. It is humanity-denying on both ends and the only people feeling better about it are the middleman liberals who can be Santa Claus on the one end while the IRS is the bad guy on the other. This Robin Hood is still just a Robbin' Hood.

John said...

Rationalize all you want...

"Yes, they ARE victims because they are NOT being allowed, encouraged and guided to make those decisions."

Of course they are allowed to do as they wish... No one forces them to:
- fail K-12 / have a bad job
- have poorly protected sex
- have child out of wedlock
- separate from the other parent
- take welfare
- live in a certain school district
- attend a certain school

The challenge is that you want "school vouchers" so bad that it forces you to vacillate between "they are too irresponsible", "they need to be held accountable", "they are the victims"... Of course the only victims I see here are the unlucky kids...

John said...

I think I will write a post on this when I get a chance.

jerrye92002 said...

I think I see your problem: Consider alternate explanations.

--They ARE forced to fail K-12 because the schools do not educate. As a result, they cannot get a good job and the welfare rules work against them if they do, forcing them to stay put or even stay idle.

--You are correct, that casual sex is their responsibility and nobody forces them. But nobody tells them not to, either. Sex ed in the schools is often predicated on the idea "they're going to do it anyway." Society encourages it and (at least perceived-as)generous welfare enables it. Idle hands and all that.

--Having a child out of wedlock is not forced on them, either, thanks to "pro-choice" fanatics, but NOT aborting the child is a sign of taking responsibility, is it not? Why are we so down on this poor girl and unwilling to help her straighten out her life?

--forced to separate from the parent is again something "enabled" by our system and our liberal society. Now if fathers were required to be named and to support their kids, that might change, but then you would complain we are "forcing" the father to take responsibility.

--Yes, people ARE forced to take welfare, because in the example you cite, they cannot put food on the table otherwise, or at least don't know HOW. They are indeed victims of a system that wants to warehouse them as a class rather than actually treat them and help them as individuals.

--And you are wrong on the last one. You ARE forced by law to send your kid to school, and it doesn't matter how bad it is. Unless you get a voucher to do something better.

jerrye92002 said...

Not sure what you are going to post about, but consider this. We have a complex societal problem of government bureaucracy replacing moral and ethical standards with soulless, one-size-fits-all rules, leading to a failed welfare state that in turn fails to offer opportunities for the poor to escape it through work or through a good public education, thus perpetuating the cycle. Something like that.

John said...

You sure are good at making excuses for the poor choices irresponsible people make. You have a totally different version of holding people accountable than I am used to.

An interesting point... Even the schools you label as failing are passing a lot of good students... But it must be inconsistency within the school... It couldn't be a failure by the parents / students...

As for your last comment... That is one answer... Usually if something seems that black and white, it isn't... More later.

jerrye92002 said...

Also interesting. When I suggest an explanation, it is "making excuses" and when you do it it's "identifying root causes." You have already identified the time when the Great Society, Civil Rights, and Free Love as the point at which all these social pathologies began their rise. It just doesn't make sense to me that you can blame such massive societal shifts on individual "irresponsible" choices without some overall driving force-- a nationwide incentive or disincentive. And $1 Trillion in "welfare" and $620 billion in education spending would seem a sizable incentive or disincentive.

jerrye92002 said...

" Even the schools you label as failing are passing a lot of good students.." Yes, and my car starts 2 days out of five. Do I need to see about getting that fixed? And if it cannot be fixed, won't I need to find alternate transportation?

"Usually if something seems that black and white, it isn't." Pareto's law applies, though, right? Do I need to wait until my car only starts one day out of five-- 20%-- before I start looking for solutions?

John said...

Remember my theory of contributing factors.

I have no doubt that people are subject to incentives and disincentives from many directions. However when everything is said and done, they are responsible for what they choose to do or not do, and should experience the consequences of that action.

With your car, just like the schools... Both the machine and/or the operator can contribute to the problem. If you put gas laden with water in the fuel tank, the car will not start on cold days. Or if the operator leaves the dome light on... This does not mean that there is anything that needs to be fixed in the car.

Please remember I apportion the academic achievement gap causes.
- 30% Public School issues (ie ineffective use of resources)
- 70% Parent Issues allowed by society

John said...

From the Teacher post...

So assuming the Wayzata funding model is about correct for their student body given their great results...

What do you think teaching the Mpls student body should cost given these incredibly challenging demographics? And the fact the class roster is constantly changing due to high mobility?

Can you even imagine trying to teach the basics when 25% of the students don't speak English, and 25% of the students suffer from aspergers, Emotional Behavior Disorder, ADHD, etc, etc, etc.

Funding/Student: $22,000
English Learners: 27%
Special Education: 25%
Free & Red Lunch: 85%
Homeless: 10%

Funding/Student: $15,000
English Learners: 0%
Special Education: 8%
Free & Red Lunch: 10%
Homeless: 0%

jerrye92002 said...

From the Teacher post...

I have no idea what an inner city school should cost, given the various pathologies that seem rampant there, and the vastly differing degrees to which they do or should affect academics. What I will say is that I think we make a mistake with Special Ed in that there is no cost-effectiveness consideration. Some kids (like mine), get a year of extra help and off they go to graduate in the upper strata of their class. Others are not going to be fully educated regardless of the amount spent to educate them. And I must admit I have no idea what to do about the "mobility" problem, but it is at this point that I think we need a more holistic solution involving not just education reform, but major reform of the welfare system if we are going to solve the whole problem.

My solution here, and long has been that, with or without welfare reform, public schools need to get state aid based not on some incomprehensible state aid formula, but on some simple average number that everybody gets, plus some amount of equalization aid to local effort (districts with small tax bases with high taxes get more aid than large tax-base districts with lower taxes) and most importantly, a specific request-- a "performance contract"-- to the State DOE for an amount of funding needed to produce X result.

In simple terms, making the schools responsible and accountable for their "share" of the problem.

John said...

Well the schools just do the best they can with who shows up at their door, per all the legal rulings that constrain them.

Star Tribune Special Ed

RDale contracts with District 287 for their most intense special needs students and the funding comes out of our budget. In fact 287 just built this specialized building to improve the cost and quality. It has smaller rooms and better facilities than the old middle school that Rdale used to rent to 287.

jerrye92002 said...

John, thanks for that. I am very pleased to see that RDale contracts out for its Special Ed. It makes sense to put this into a specialized facility geared to do that particular job. What makes even MORE sense is the notion that public education can be done on a contract, pay-for-performance way. The question is why this would not work on a grand scale, with every student bringing their fee-for-service with them to their contractor of choice.