A good friend* of mine asked me in a response to another (typically over the top) post of mine by questioning why I was defending the rich. Why couldn't I make my point while acknowledging that there is room for concern about the trends of wealth and income distribution in the US?
I have two answers to this very legitimate challenge from my very serious friend, one philosophical and the other empirical.
The philosophical answer is you are demanding that I accept your premise as the basis for any discussion going forward: "of course the rich have got richer faster than everyone else in a specific period of time and this is a problem" and it's necessary but unstated First Corollary "and of course this increased wealth is due to predatory behavior of the rich because if it has been achieved due to noble or brilliant behavior that has benefited mankind then we would be insane to disincent them from doing more brilliant, noble things" or in short "the rich are rich and getting richer because they're selfish bastards who need to be taken down a peg or ten".
And then you demand that I implicitly subscribe to the unstated Second Corollary which is also absolutely essential: "Not only are the rich predatory bastards but only the central state can make them mind. So the key to reducing the power of a plutocratic 3.5 million Americans is concentrating more power and wealth in the hands of a few dozen aging incumbent lawyers who live in DC."
Once you get me to agree to your (questionable to say the least) premise then the discussion is simply when and how much more swag gets passed to our Federal gerontocrats to dispose of as they see fit (usually by passing it back in box car lots to the types of people who are demanding that I accept their premise, a whole lot of whom are well connected rich people). This is how it used to be done before "the Reagan darkness" fell upon the land. Lefties proposed, righties kicked a bit at the price and caved for 80% and then spent their days looking for loose change under the national couch cushions to pay for it all.
Not surprisingly I reject that premise. And not surprisingly having their couch cleaning dogsbody replaced by a bitching libertarian ideologue pisses the left off so much that they want to read me and the rest of the right out of polite society. By disagreeing with the 'eat the rich' premise I am proving that I am in descending order a: "Koch Stooge", "greedy", "hate filled", "racist", "sexist", "ableist" and most scathingly "For Profit". And anything I say is obviously self serving. By the way: the same thing happens with catastrophic global warming where institutions like the BBC and LA Times have announced that they won't even report arguments questioning the claims of people predicting catastrophe unless we immediately blow trillions on.....their projects. Hmmm.
So back to the empirical:
Oddly enough, there is a very quiet (muffled by the partisan press, that is) but persuasive argument that much of the gains in income the rich have experienced are spurious artifacts of tax law changes. For example, the tax boffins will tell you that at the start of the "dark times" say 1980, marginal rates es on regular income, cap gains and dividends were much higher than today and small and mid sized businesses were C corps who accumulated lots of cash to avoid personal taxation. With lower rates on both gains and dividends this accumulated wealth gushed out of these privately held companies - and a lot of publicly held companies. Indeed, the "Icahn/Boesky/Pickens/Leveraged buyout boom" was a response to changing investor incentives: no longer did they want to retain earnings in a tax advantaged vehicle, they now wanted their gosh darn cash while rates were low and were happy to sell their shares to any Wall Street cracker who would give it to them. So managers who had grown fat and stupid under the old system got the hard thwack of market discipline. And boy did it leave a mark.
In addition, since the beginning of "the Reagan evil" most small and mid sized businesses have incorporated first as S Corps and now LLCs which pass all earnings straight to the owners on a pro rata basis - thus income that used to be retained and not reported now gushes forth. The big and remarkably dishonest flaw of Piketty, Saenz and company (other than being irretrievably French) is their total reliance on Income Tax returns for their US data. Which given the many radical changes in the law makes their data crap. And since they've been the only one producing this kind of data for the US, it makes all those income inequality charts that everyone passes back and forth to each other crap as well. Of course our politics are filled with crummy data infused arguments: catastrophic global warming is another area where the data is a crap sandwich of manipulation, half truths and statistical legerdemain. But I digress.
One way to test the veracity of the phenomenon of falling marginal tax rates driving recognition of locked up income is to look at the rest of the developed world: falling marginal tax rates are associated with more reported income inequality everywhere that they've been tried (effing Laffer, effing Rich). The few places that haven't cut top marginal rates (France) remain statistically speaking equal. Although anyone that spends any time in La Belle France knows that is a screaming howling lie. Here's a nice piece from the Financial Times about how Liberté, Égalité, Fraternité is playing out in Paris these days and boy is the gang at the faculty club pissé about it
Anyone paying the least bit of attention should also be aware that a large proportion of the 'gains' not explained by tax changes can be attributed to the fact that the data is reported on a household basis rather than on an individual basis. As a brilliant blogger pointed out:
It turns out that pretax and transfer individual income inequality as measured by GINI has not changed since 1960. Household and family inequality have soared as more and more people live alone or in one parent households while the cognitive elite, ever more efficiently sorted by the oh so egalitarian Ivies increasingly marry each other.
There are lots of things the plutocrats can be held accountable for - really ugly large yachts for example - but the fact that Joe six pack can get Janey six pack in the sack without the benefits of holy matrimony or a functioning condom is not one of them. Unless you're a church lady blaming it all on Hollywood. Which is fun but still....
I guess the plutocrats can be partly blamed for the third factor: massive increases in low skill immigration. Aussies and Canucks stupidly import only the highly skilled and the rich. We cleverly import the global poor and then proceed to blame the worsening income distribution that it brings on the rich. Which is rich.
There are other factors which the brave class warriors conveniently ignore that have a major impact on inequality and that can't be pinned on the plutocracy such as increasing social and ethnic diversity and an immense variance in cost of living across the United States - factors which our French Inequality-crats utterly fail to take into account in their 'analysis'.
So I would argue that most of the growth in the Rich's share of income story is bullshit. It may be that the Rich took too much of the swag back in the "days before the capitalist darkness fell on the world" but that's not the argument that the left chaps are making. They're saying that it's all a Reaganite, Bushite and even Clintonite neocon conspiracy. That changing mores, mass immigration and massive, unprecedented tax law changes are irrelevant. That it's greed and hate and racism and sexism and nasty badism that has run amuck and made rich people richer and poor people richer too and it just has to gosh darn stop before all of the prime beach and skiing spots that tenured faculty go to are filled up by the crass nouveau riche.
So they argue that the single largest, richest and most powerful institution in the world needs to concentrate even more wealth (and it's concomitant power) from millions of individuals and organizations in its enormous, grasping hands. Because a world where even more of the swag will be parceled out by a few handfuls of old incumbent lawyers from DC will be infinitely more equal, free and diverse than letting millions of blacks, browns, greens, Mormons, queers, Texans, Idahoans, Jeraboams and other bizarre categories spend, invest and donate it as they see fit.
Which seems profoundly insane to me even if the Feds weren't utterly self serving and incompetent. But hey, you guys worship your God, I'll worship mine.
*This good friend suffers mightily by being a principal foil for this blog. He asks a simple question and rather than giving him a simple answer I dump the whole damned load on him here. He deserves better but of course he knows that, he's my friend. I would dump loads on other leftish friends but any time I bring anything fun up they retreat into their barricaded homes and I'm left standing in the street shouting I'll fight anyone to no one except a dog who bites me
. Not that I'm blaming them. Or the dog for that matter.
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