The problem with conservativism in 2013.

[Direckshun]

The key problem that I believe conservativism has to face in 2013 and the near future is that it doesn't have an answer to what has become the most critical problem for the 21st century economy: inequality.

There has been a historical tendency over the past 15 years and three Presidents to concentrate more and more wealth with the wealthy, and less and less wealth with everybody else. Inequality is at all time highs on that front, and it gives the middle and lower classes less spending money, slogs down the economy, and ultimately splits the economic pie even greater into the hands of the few.

Liberalism has a whole host of solutions, bordering from the more free market tendencies of the Democratic Party and the mainstream liberal movement, to the more socialist suggestions frequently made by the party's left wing. Some of them can be argued as legitimately good ideas (raising the minimum wage, capping the multi-billion dollar tax breaks for huge corporations, any number of investments in college education), some of them are obviously more on the fringe.

Conservativism's answer seems to be singular and ineffective: get "government out of the way," undo the massive structure of government regulation, and the economy will grow. And like a rising tide that lifts all boats (think "trickle down" economics), as the economy grows, so too will the fortunes of the lower and middle classes. Honestly, if conservativism has more of a message than this right now with regards to inequality, I've missed it.

The problem with this message, and conservativism in general right now, is that it seems outdated for 2013. As the economy has grown at times throughout the past fifteen years, the middle class and working poor have seen less and a less of a return on that progress, and the upper class has soared. In other words, the absolute core conservative response to the biggest issue affecting working Americans in 2013 is no longer applicable. It had some bearing, perhaps, in previous decades, but we now reside in an era where this dynamic no longer holds water.

Economists are reportedly attempting to figure out why that is the case. A decrease in education quality seems, to me, to be the most convincing cause, although obviously this is something that deserves a holistic analysis.

But either way, I don't really see convincing analysis that growth is enough anymore. It seems that a reduction in inequality seems now to be just as important.

http://www.washingtonpost.com/busine...06b_print.html

Growth isn’t enough to help the middle class
By Jim Tankersley
Published: February 13

Two kinds of middle-class Americans are struggling today — people who can’t find any work or enough work, and full-timers who can’t seem to get ahead.

Democrats and Republicans prescribe economic growth to help both groups. There was a time that would have been enough. But not today.

In the past three recoveries from recession, U.S. growth has not produced anywhere close to the job and income gains that previous generations of workers enjoyed. The wealthy have continued to do well. But a percentage point of increased growth today simply delivers fewer jobs across the economy and less money in the pockets of middle-class families than an identical point of growth produced in the 40 years after World War II.

That has been painfully apparent in the current recovery. Even as the Obama administration touts the return of economic growth, millions of Americans are not seeing an accompanying revival of better, higher-paying jobs.

The consequences of this breakdown are only now dawning on many economists and have not gained widespread attention among policymakers in Washington. Many lawmakers have yet to even acknowledge the problem. But repairing this link is arguably the most critical policy challenge for anyone who wants to lift the middle class.

Economists are not clear how the economy got to the point where growth drives far less job creation and broadly shared prosperity than it used to. Some theorize that a major factor was globalization, which enabled companies to lay off highly paid workers in the United States during recessions and replace them with lower-paid ones overseas during recoveries.

There is even less agreement on policy prescriptions. Some liberal economists argue that the government should take more-aggressive steps to redistribute wealth. Many economists believe more education will improve the skills of American workers, helping them obtain higher-paying jobs. And still others say the government should seek to reduce the cost of businesses to create new jobs.

The problem is relatively new. From 1948 through 1982, recessions and recoveries followed a tight pattern. Growth plunged in the downturn, then spiked quickly, often thanks to aggressive interest rate cuts by the Federal Reserve. When growth returned, so did job creation, and workers generally shared in the spoils of new economic output.

You can see those patterns in comparisons of job creation and growth rates across post-World War II recoveries. Starting in 1949 and continuing for more than 30 years, once the economy started to grow after a recession, major job creation usually followed within about a year.

At the height of those recoveries, every percentage point of economic growth typically spurred about six-tenths of a percentage point of job growth, when compared with the start of the recovery. You could call that number the “job intensity” of growth.

The pattern began to break down in the 1992 recovery, which began under President George H.W. Bush. It took about three years — instead of one — for job creation to ramp up, even when the economy was growing. Even then, the “job intensity” of that recovery barely topped 0.4 percent, or about two-thirds the normal rate.

The next two recoveries were even worse. Three and a half years into the recovery that began in 2001 under President George W. Bush, job intensity was stuck at less than 0.2 percent. The recovery under President Obama is now up to an intensity of 0.3 percent, or about half the historical average.

Middle-class income growth looks even worse for those recoveries. From 1992 to 1994, and again from 2002 to 2004, real median household incomes fell — even though the economy grew more than 6 percent, after adjustments for inflation, in both cases. From 2009 to 2011 the economy grew more than 4 percent, but real median incomes grew by 0.5 percent.

In contrast, from 1982 to 1984, the economy grew by nearly 11 percent and real median incomes grew by 5 percent.

Today, nearly four years after the Great Recession, 12 million Americans are actively looking for work but can’t find a job; 11 million others are stuck working part time when they would like to be full time, or they would like to work but are too discouraged to job-hunt. Meanwhile, workers’ median wages were lower at the end of 2012, after adjustments for inflation, than they were at the end of 2003. Real household income was lower in 2011 than it was in 1989.

Obama alluded to the breakdown between growth and middle-class wages and jobs in his State of the Union address. “Every day,” he said, “we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?”

But outside of some targeted help for manufacturing jobs and some new investments in skills training, the proposals Obama offered focused comparatively little on repairing the relationship between growth and jobs, or growth and income. Obama’s boldest plans included increasing the minimum wage and guaranteeing every child a preschool education. Both aim largely at boosting poorer Americans and helping their children gain a better shot at landing the higher-paying jobs.

The Republican response to Obama’s speech did not appear to nod to the new reality at all. Sen. Marco Rubio (Fla.) said that “economic growth is the best way to help the middle class” and offered few job-creation proposals that appeared materially different from what Republican politicians have pushed since the 1980s.

Economists are still trying to sort out what broke the historical links between growth and jobs/incomes.

Economists are still trying to sort out what broke the historical links between growth and jobs/incomes.

Federal Reserve Bank of New York economists Erica Groshen and Simon Potter concluded in a 2003 paper that the recoveries from the 1990 and 2001 recessions were largely “jobless” because employers had fundamentally changed how they responded to recessions. In the past, firms laid off workers during downturns but called them back when the economy picked up again. Now, they are using recessions as a trigger to lay off less-productive workers, never to hire them back.

Economists at the liberal Economic Policy Institute trace the problem to a series of policy choices that, they say, have eroded workers’ ability to secure rising incomes. Those choices include industry deregulation and the opening of global markets on unfavorable terms for U.S. workers.

In the latest edition of their book “The State of Working America,” EPI economists argue that an “increasingly well-paid financial sector and policies regarding executive compensation fueled wage growth at the top and the rise of the top 1 percent’s incomes” at the expense of average workers.

Robert Shapiro, an economist who advised Bill Clinton on the campaign trail and in the White House, traces the change to increased global competition.

“It makes it hard for firms to pass along their cost increases — for health care, energy and so on — in higher prices,” he said. “So instead they cut other costs, starting with jobs and wages.”

Shapiro said the best way to restart job creation is to help businesses cut the costs of hiring, including by reducing the employer side of the payroll tax and pushing more aggressive efforts to hold down health-care cost increases.

Obama seems to have embraced an approach pushed by Harvard University economists Claudia Goldin and Lawrence Katz: helping more Americans graduate from college and go on to high-skilled, higher-paying jobs. It’s a longer-term bet. But as senior administration officials like to say, the problem didn’t start overnight, and it’s not likely to be solved overnight, either.

[patteeu]

Originally Posted by KC native

Yes, because the key to upward mobility is clearly to let the already wealthy keep and obtain even more

A poor person making a higher income (perhaps because he's taken a second job) is not someone who is already wealthy.

[patteeu]

Originally Posted by KC native

Being above the poverty line does not equate to being middle class. Your deductions are haphazard, nonsensical, and filtered through the spooge Grover Norquist left in your eye.

We need a definition of middle class. The poverty line is a nice bright line. American poor are pretty well-off anyway. A good portion of the middle class in Nicaragua would probably be considered impoverished here in the US.

[Loneiguana]

Originally Posted by Calcountry

The Problem with the Marxist/Socialist view on income equality in 2013, is that it has been tried, and failed every time. Perhaps it is because it is a failed economic system that doesn't adequately deal with human nature, you know, sloth and shirking on the one hand, while it doesn't adequately reward innovation and productivity on the other. Ummm, I don't know, perhaps that is why most of the rest of the world is living in a shithole, and the US has more well off, well fed, well cared for poor than any other place on the environmentalists planet.

I don't think anyone is arguing that bringing about communism is the answer. Progressive tax rates and social programs do not equal socialism or communism. There is over fifty years of American Policy that proves this.

Also, America is ranked around dead last for developed countries when it come social welfare and the general welfare of the population. (I think I posted something to that affect, but the info is easy to find with google)

Another thing, I am sure you support our U.S. Military, correct?
The military is the largest socialist aspect of our Government. We pool, or collect, the resources of our country into a single entity for societies good. It is a government organization socialized for the protection of American interests. Even the way the military operates is socialism, dividing out resources and providing the basic, everyday needs of many of it's employees.

The question is not completely socialism or no socialism/completely capitalism ; the question and debate is always the variety of degrees between the ideas of socialism and capitalism that best support America.

[patteeu]

Originally Posted by Loneiguana

I don't understand your use of the word "clearly" in this statement. Who said said anything about a 100 percent income tax?(which is what your are implying) Oh wait, never mind, you are just committing a logical fallacy by taking an argument to an extreme in a attempt to easily dismiss it. I think they might call that a strawman.

You mean like this:

Originally Posted by Loneiguana

I challenge you try to become a multi-millionaire in a country lacking basic infrastructure or a country without a strong police force.

[Loneiguana]

Originally Posted by patteeu

The graph in post 77 seems to indicate that the poverty level goes down after the Reagan tax cuts, up after the Bush I tax increase, down after the Clinton tax increase, and then up after the Bush II tax decrease. What that tells me is that tax cuts and increases aren't the driving factor for poverty levels (and by implication, the size of the middle class).

But for the purpose of answering your original question, during the period between 1982 and 1989, in the aftermath of the Reagan tax cuts, income inequality was growing but there was a pretty steady decline in the poverty rate (and by implication, an increase in the size of the middle class).

You completely rewrite history to ignore Reagan raising taxes and closer look shows that all that happened only after he did.

[Loneiguana]

Originally Posted by patteeu

You mean like this:

I still don't see a connection between those two. How does suggesting a basic infrastructure increases the wealth of a society equal 100 percent income tax?

[KC native]

Originally Posted by patteeu

It seems like if it's so obvious, someone would be able to explain it in their own words. OTOH, if it's just a gut instinct to go after the rich, I can understand that. Liberal pied pipers have been playing that tune for a long long time.

It's not obvious which is why google is your friend. Willful ignorance is your schtick though so I don't expect you to attempt to learn anything that challenges your talking points.

[patteeu]

Originally Posted by Loneiguana

I posted a that I believe the top earners should pay more then their current tax rate. I' and others have pointed out from articles that we have had a higher top rate tax in the past, which also happen to be times when the economy did well. I support raising top tax rates closer to previous levels.

No where did I mention that I support 100 percent income tax.

This argument is not one extreme or the other. You construct straw man arguments by jumping to an extreme that no one has supported. I agree, there is obviously a limit to how much they can pay.

Hey, great thing our tax system is progressive then, right? Your first twenty thousand is taxed just the same as mine. Your first fifty thousand is taxed just the same as Trumps.

In the progressive tax system everyone is taxed basically same amount for the first couple hundred thousand. (not counting everything that affects an individuality tax code).

That is a fairly strong non-limit.

Are you also in favor of recreating the tax shelters from those historical high rate tax codes?

[KC native]

Originally Posted by patteeu

What about Hong Kong levels?

Yea because China is what we should aspire to be /sarcasm

[KC native]

Originally Posted by patteeu

We need a definition of middle class. The poverty line is a nice bright line. American poor are pretty well-off anyway. A good portion of the middle class in Nicaragua would probably be considered impoverished here in the US.

Another absurd measuring stick from patty. HOORAY FOR INTELLECTUAL DISHONESTY.

[patteeu]

Originally Posted by Loneiguana

I still don't see a connection between those two. How does suggesting a basic infrastructure increases the wealth of a society equal 100 percent income tax?

It was a strawman. No where did I (or anyone I know of) ever suggest that the wealthy get wealthy without the benefit of public resources.

[Loneiguana]

Originally Posted by patteeu

We've tried radical equality before too.

So after all of that, you completely missed the point of my "theory". It's really math, more than theory. If you're poor and you want to move up in terms of class, how do you do it? You have to have more income. Progressive income tax schemes will tax that additional income harder than a flatter income tax scheme will. Which guy is going to be more upwardly mobile? The guy whose additional income is getting diverted to the state or the guy whose additional income is going to his pocket? The answer is pretty obvious.

Your sense of fairness (which I don't agree with, btw) doesn't trump math.

What radical equality have we tried before?

A progressive tax rate does not hamper someone wanting to make more money because, gasp, even after tax the individual is still making more money. If you make 50,000 dollars one year and a million the next, even though you pay a high tax rate a portion of that income(i'm not sure on the cut offs) you still net a lot more money than the guy who only made fifty thousand.

Are you really making a toddlers argument that if you can't have all you don't want any?

Would you think its fair if you paid the exact same entrance fee for a service as everyone else, but some people benefit more, others less?
Or, is it fair if a person benefits the most from a service, their rate of pay should be proportional to that?

[Loneiguana]

Originally Posted by patteeu

It was a strawman. No where did I (or anyone I know of) ever suggest that the wealthy get wealthy without the benefit of public resources.

Then why shouldn't their tax rate be based on the increased benefit they receive from the societies infrastructure?

[Loneiguana]

Originally Posted by patteeu

Are you also in favor of recreating the tax shelters from those historical high rate tax codes?

Whats changed? Seriously? tax shelters aren't a problem now?

[patteeu]

Originally Posted by Loneiguana

You completely rewrite history to ignore Reagan raising taxes and closer look shows that all that happened only after he did.

No, I didn't rewrite history, you are getting lost in the argument. We are talking about tax rates. My position was that we should flatten the rate structure (i.e. reducing top end marginal rates). You prefer a more progressive system. Reagan NEVER increased marginal rates. He decreased them substantially at least twice during his 8 years in office (top rate went from 70% to 50% early in his first term and then down to 28%* in 1986).

*I think there were some circumstances where your marginal rate could be a little higher than 28%, but off the top of my head I don't remember what they were.