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Income Inequality

What should be done to battle income inequality in the USA?

  • Do not intervene

    Votes: 39 53.4%
  • Yes, do intervene

    Votes: 34 46.6%

  • Total voters
    73

Peter Grimm

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It's indisputable fact that income inequality in the United States has grown substantially in the past few decades.

Median nominal incomes, adjusted for inflation, have not gone up in the USA since the 50's. (Median is the halfway point, so we are talking about the middle-earner). In contrast, the per capita GDP has risen quite dramatically, due to the increased purchasing power of the upper echelon.


I pose three questions to you:

1.) What has caused this phenomenon
2.) What are the long term implications if the trend is allowed to continue
3.) What, if anything, should be done to adjust our course


Thanks
 
Nothing should be done, that isn't already being done. Income equality is a reality, because people aren't all equal in intelligence, drive, ingenuity, and just plain old luck. I strongly support reward for efforts, education, and industriousness, and I strongly dislike paying people for doing nothing.
 
Nothing should be done, that isn't already being done. Income equality is a reality, because people aren't all equal in intelligence, drive, ingenuity, and just plain old luck. I strongly support reward for efforts, education, and industriousness, and I strongly dislike paying people for doing nothing.

What role does China play in this?

For instance.... part of the reason for the stagnation of the middle class in America is that, in the past, the middle class were defined by manufacturing jobs. Today, in the interest of higher profits and lower costs, many American corporations look to China to produce the goods they sell in to the United States.

While this strategy is good for their corporate bottom lines, and while it certainly benefits the investor class who have seen their stock portfolios blossom, it does in fact harm the job and earnings prospects of the middle class.

One could argue that if Americans were more competitive, jobs would not need to be moved to China. To that, I would respond that while I do agree we need to be doing more to increase our competitiveness (which, by the way, is a form of "intervention"), I would also point out the role played by currency valuation and would submit that by pegging their Yuan to the US Dollar at an artificially low level, Chinese goods receive an unfair price advantage in the US market compared to domestically produced goods.

Thus, another form of intervention I would suggest would be to work with the IMF and the world bank to put pressure on China to stop manipulating their currency.
 
Increased unionization and other worker protections.
 
What role does China play in this?

For instance.... part of the reason for the stagnation of the middle class in America is that, in the past, the middle class were defined by manufacturing jobs. Today, in the interest of higher profits and lower costs, many American corporations look to China to produce the goods they sell in to the United States.

.

China has a huge role, but we are the actual cause. People in this country want cheap Chinese crap, which has put many of our manufacturing jobs out on the curb. If Americans were willing to pay what it costs, for Americans to make our stuff, we'd have a much more true and accurate picture of economic viability.
 
What role does China play in this?

For instance.... part of the reason for the stagnation of the middle class in America is that, in the past, the middle class were defined by manufacturing jobs. Today, in the interest of higher profits and lower costs, many American corporations look to China to produce the goods they sell in to the United States.

While this strategy is good for their corporate bottom lines, and while it certainly benefits the investor class who have seen their stock portfolios blossom, it does in fact harm the job and earnings prospects of the middle class.

One could argue that if Americans were more competitive, jobs would not need to be moved to China. To that, I would respond that while I do agree we need to be doing more to increase our competitiveness (which, by the way, is a form of "intervention"), I would also point out the role played by currency valuation and would submit that by pegging their Yuan to the US Dollar at an artificially low level, Chinese goods receive an unfair price advantage in the US market compared to domestically produced goods.

Thus, another form of intervention I would suggest would be to work with the IMF and the world bank to put pressure on China to stop manipulating their currency.

It's difficult for wages to rise when illegals are allowed (encouraged) to compete for jobs with our citizens and we insist on the taxation of activities that employ people....
 
China has a huge role, but we are the actual cause. People in this country want cheap Chinese crap, which has put many of our manufacturing jobs out on the curb. If Americans were willing to pay what it costs, for Americans to make our stuff, we'd have a much more true and accurate picture of economic viability.

Not very patriotic, then, to shop at WalMart....huh?
 
I think the most important thing policy makers need to do is identify government policies that have created inequality, and then change or abolish them so that they no longer cause it. Others would say we need to go down the Marxist path of mass redistribution of wealth, but that would not only be incredibly destructive (economically and ethically), it would also ignore real things we should do to eliminate special advantages which have been establishment by government force.

I also think it is important to recognize that income inequality as a concept is not a problem. It's the stagnation of a group of people economically that is the problem. If everyone's standard of living increases amid inequality, then there is no problem unless you give the concept of absolute equality moral credence (I don't).
 
Not very patriotic, then, to shop at WalMart....huh?

It isn't Walmart. Go find me some AMerican made products to buy ANYWHERE. It's not easy to do. The finest clothing stores are selling Chinese crap.
 
Globalization and international trade is not a contributing factor, IMO. What is lost in manufacturing wages is made up by the low prices, so it evens out in terms of cost of living. Comparative advantage allows for a diversification of what is produced, thus more wealth overall is produced.
 
It's indisputable fact that income inequality in the United States has grown substantially in the past few decades.

Median nominal incomes, adjusted for inflation, have not gone up in the USA since the 50's. (Median is the halfway point, so we are talking about the middle-earner). In contrast, the per capita GDP has risen quite dramatically, due to the increased purchasing power of the upper echelon.


I pose three questions to you:

1.) What has caused this phenomenon
2.) What are the long term implications if the trend is allowed to continue
3.) What, if anything, should be done to adjust our course


Thanks

We live and work in a global economy. People without unique, limited or desired skills are going to be paid whatever their particular market will afford them. Without full employment, there will always be someone willing to work for less in jobs that require little skill and minimal intelligence. Simple fact of life. If you want to be paid well either start your own business and be damn good at it or get a good education in a field that needs more employees than candidates qualified and available.
 
Globalization and international trade is not a contributing factor, IMO. What is lost in manufacturing wages is made up by the low prices, so it evens out in terms of cost of living. Comparative advantage allows for a diversification of what is produced, thus more wealth overall is produced.

International trade is a factor when factors such as taxes, business regulations, environmental regulations, taxes, government subsistence, etc... are taken into account...
 
International trade is a factor when factors such as taxes, business regulations, environmental regulations, taxes, government subsistence, etc... are taken into account...

Not sure what you are getting at. I'm saying international trade is not causing income inequality. In fact, it is dramatically raising the living standards of less wealthy nations as we speak. It is bridging the gap.
 
I think the most important thing policy makers need to do is identify government policies that have created inequality, and then change or abolish them so that they no longer cause it. Others would say we need to go down the Marxist path of mass redistribution of wealth, but that would not only be incredibly destructive (economically and ethically), it would also ignore real things we should do to eliminate special advantages which have been establishment by government force.

I also think it is important to recognize that income inequality as a concept is not a problem. It's the stagnation of a group of people economically that is the problem. If everyone's standard of living increases amid inequality, then there is no problem unless you give the concept of absolute equality moral credence (I don't).

Another thing to consider is the bubbles such a system creates. On the one hand, you have the corporate/investor class who are constantly pressing for higher and higher returns.

In practice, this means they are actively trying to get the American Consumer to buy more and more stuff.

On the other hand, the American Consumer is stagnant in his earnings.

The answer to this enigma has been, wrongly, to extend more and more credit to the stagnant middle class.... such that they're living in massive amounts of debts.

We saw this crash in 2008 with the housing bubble - the lower and middle earners bought more house than they could afford, and when it became apparent they couldn't pay their mortgages, the housing bubble popped.

Today, we're seeing a consumer credit bubble growing - an increase in home equity loans, an increase in credit card spending. The debt to earnings ratio in the US is not healthy.... hence we're creating another bubble.

On the one hand, the American Public needs to learn to live within their means. On the other hand, banks need to put more realistic limits on people's credit. Finally, we need to do more to grow the actual income of the consumer class, and not have it continue to stagnate.
 
Not sure what you are getting at. I'm saying international trade is not causing income inequality. In fact, it is dramatically raising the living standards of less wealthy nations as we speak. It is bridging the gap.

When all players are competing under different rules, there will be a class of individuals who will be left out, thus enhancing inequalities, especially when the government tries to make up for this with direct payments...
 
We live and work in a global economy. People without unique, limited or desired skills are going to be paid whatever their particular market will afford them. Without full employment, there will always be someone willing to work for less in jobs that require little skill and minimal intelligence. Simple fact of life. If you want to be paid well either start your own business and be damn good at it or get a good education in a field that needs more employees than candidates qualified and available.

That's fine and good, as long as we're working in a vacuum with a single currency, no trade agreements that favor one country over another, and a single set of labor rules and taxation.

As that isn't the case, we have to deal with the reality at hand which is that geopolitics, tax law, labor law, and currency valuation do play a large role in defining the supply and demand for labor within a given country.
 
Globalization and international trade is not a contributing factor, IMO. What is lost in manufacturing wages is made up by the low prices, so it evens out in terms of cost of living. Comparative advantage allows for a diversification of what is produced, thus more wealth overall is produced.

Except that lower/middle class Americans are buying their Chinese goods at Walmart with their Visa cards, not with their savings.

Also, prices have not really dropped as much as you think.
 
Another thing to consider is the bubbles such a system creates. On the one hand, you have the corporate/investor class who are constantly pressing for higher and higher returns.

In practice, this means they are actively trying to get the American Consumer to buy more and more stuff.

On the other hand, the American Consumer is stagnant in his earnings.

The answer to this enigma has been, wrongly, to extend more and more credit to the stagnant middle class.... such that they're living in massive amounts of debts.

We saw this crash in 2008 with the housing bubble - the lower and middle earners bought more house than they could afford, and when it became apparent they couldn't pay their mortgages, the housing bubble popped.

Today, we're seeing a consumer credit bubble growing - an increase in home equity loans, an increase in credit card spending. The debt to earnings ratio in the US is not healthy.... hence we're creating another bubble.

On the one hand, the American Public needs to learn to live within their means. On the other hand, banks need to put more realistic limits on people's credit. Finally, we need to do more to grow the actual income of the consumer class, and not have it continue to stagnate.

I believe a lot of this (if not most) ties into monetary policy. Our monetary policy exacerbates the boom and bust cycle. Everyone gets wiped out during recessions, but then the investor class gets bailed out. This creates a huge gap. Low interest rates cut into the savings of people and promote debt, so there is no way people will growing their wealth exponentially. The money not being pumped into consumer credit is propping up the financial industry, creating massively inflated asset prices not in conjunction with realistic evaluations. And finally, inflation erodes at the wages and wealth of most people over time, whereas the investor class has ways to avoid losing wealth to inflation.
 
Except that lower/middle class Americans are buying their Chinese goods at Walmart with their Visa cards, not with their savings.

Also, prices have not really dropped as much as you think.

I agree that living off credit is a problem. Prices are much lower due to international trade than they would be if we manufactured everything here.

On another note, some people believe it is wrong to pay foreign workers low prices. I don't see it that way. Their standard of living is lower, so they are actually receiving an upgrade to what they had before. We had to go through industrialization before we became a tech society, and that applies to other countries too.
 
That's the sad truth.

Yes it is, and it says more about us as a people, than about China, Walmart, or any other participant in the retail or manufacturing business. People don't want to pay their fellow Americans a decent wage to make our stuff. They want to get a lot for nothing, and when they bitch about American jobs not paying well, they sure as hell don't want to pay Americans to manufacture.
 
When all players are competing under different rules, there will be a class of individuals who will be left out, thus enhancing inequalities, especially when the government tries to make up for this with direct payments...

Well, the U.S. would have more industry if it attempted to compete with nations like China, but nobody seems to be on board with that.

I would abolish the corporate income tax tomorrow, for example. Not only is not very complicated (another cause of inequality), it puts us at a world disadvantage overall. People believe takes money from the rich-not really, it essentially is a hidden tax on sales that hurts consumers as well as our competitiveness.
 
Raise the cap on Social Security,
Encourage unionization of workers.
Get rid of minimum wage and welfare benefits. Substitute the government as the employer of last resort.
Quit just playing lip service to ending illegal immigration,
Get the cost of health insurance off of the backs of the employers.
Treat all income as equal for tax purposes. No special rates for capital gains.
Don't bail out entities "too big to fail" then let them pay their chiefs multi billion dollar "bonuses."

That would be a good start.
 
Well, the U.S. would have more industry if it attempted to compete with nations like China, but nobody seems to be on board with that.

I would abolish the corporate income tax tomorrow, for example. Not only is not very complicated (another cause of inequality), it puts us at a world disadvantage overall. People believe takes money from the rich-not really, it essentially is a hidden tax on sales that hurts consumers as well as our competitiveness.

Well, this is a point of agreement...
 
I believe a lot of this (if not most) ties into monetary policy. Our monetary policy exacerbates the boom and bust cycle. Everyone gets wiped out during recessions, but then the investor class gets bailed out. This creates a huge gap. Low interest rates cut into the savings of people and promote debt, so there is no way people will growing their wealth exponentially. The money not being pumped into consumer credit is propping up the financial industry, creating massively inflated asset prices not in conjunction with realistic evaluations. And finally, inflation erodes at the wages and wealth of most people over time, whereas the investor class has ways to avoid losing wealth to inflation.

I actually don't have a problem with our monetary policy, I think the Fed does a good job given the current economic climate and that the current money supply/interest rates are appropriate.

I do think we need better fiscal policy - politicians need to do a better job of balancing the budget for the overall health of our economy.

But I think what's most sorely lacking is some kind of a plan, politically. Whether that's taking another look at our banking laws, re-examining our trade policies with China, or investing in ways that we can manufacture goods more efficiently here at home (robotics, for example), I don't see any real leadership from Washington on these matters.... and that concerns me.
 
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