Economic Incest

As surely as rape is about power, not sex, income inequality is about power, not money. Forcing women to have babies against their will is about power, not babies. Forcing women to have babies even if it endangers the mother is about absolute power. Controlling who can vote and who cannot is about power, not political ideals. And forcing hungry people to starve is about about power, not tax dollars. Perhaps that was the allure and the ongoing attraction from  racists regarding African Americans. Whites had power, and even the most down-trodden, poor white racist in 1860 “thought” he was better than the best black man. The KKK continued this abomination for power, nothing else.  Power over someone else…to do as you please, when you please, regardless of the pain it causes someone else. But for today at least, I’ll stick to the economic aspect of income inequality if for no other reason but to keep my blood from boiling over at the inane stupidity, hatred and fear that drives the Tbagger faithful to be blind to the fact that a handful of the economic elite are using them as human shields in the same way cowardly dictators use civilians in times of war.  The Koch Brothers and ALEC already have more money than they could ever spend in ten lifetimes, but what they want is power, because if you can buy anything you want material things lose their allure and the only thrill left is obtaining ever more power. They are economic terrorists using the hatred and a few choice causes that they could actually care less about (see 2nd Amendment “rights”) to effectuate their obsession with power. A new Census Bureau report released recently showed that since 2009 economic gains have accumulated to only the top 5 percent of households in the U.S.; the other 95 percent have gained virtually nothing; poverty remains high and income  inequality has worsened. Yet libertarians still don’t understand that they’re next, or if they do, they simply don’t see light through that haze of hate that clouds their judgement and magnifies their inability to see the big picture. So, the meaningful question remains, does inequality matter in the overall economics of the United States or is it simply another liberal whining point? Is our desire for equality good economics or does it stand in the way of creativity, hard work and overall economic rewards for the entire population? Economists have debated, written and proselytized about this for more than 200 years. Adam Smith, that premier proponent of the free market meme, saw the political danger of inequality, and expressed it succinctly: “Wealth is power, as Mr. Hobbes says.” John Maynard Keynes, the bane of every libertarian’s xenophobic existence, wrote of the Victorian era: “It was precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others.” Even Thomas Jefferson, the darling of so-called libertarians (often referred to as“Lazy Marxists”)and Tea Party “Patriots” alike, had this to say regarding income inequality: “Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation.  If we do not, the fundamental right to labor the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment, but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state.” On the other hand, the Austrian economist Joseph Schumpeter argued that inequality is the force behind technical advance. According to Schumpeter, progress is a lottery. And if the prizes are really big, more people will try to win them.  Of course, many will try and fail, but many new advances will be the result. So tell me succinctly, so that I can understand, “Why have there been no libertarian countries…..EVER?” The Effects of Increasing Inequality faded during most of the 20th century, to Schumpeter’s extreme discomfort. But by 1958, even John Kenneth Galbraith could write, “few things are more evident in modern social history than the decline of interest in inequality as an economic issue.” In the 1980s and 1990s, though, inequality shot up and renewed interest in the condition revitalized. The political atmosphere leading up to the 2008 Bush Economic Meltdown was the result of deregulation, foolish unfunded wars, the assumption that the banking industry could regulate itself–despite the catastrophic failures of Enron, WorldCom, The Savings and Loan meltdown, and countless other indicators that business could NOT regulate itself any better than Congress can regulate itself–and rising income inequality causing the debate and enmity to escalate. Of course, market outcomes have always been unequal. And to liberals’ irritation, inequality is intensified in good times. In the late 1990s, under President Bill Clinton, the U.S. had four years of full employment, and income inequality hit levels not seen since 1929. The reason is simple: Inequality is driven mainly by capital gains–essentially, the income derived from owning something rather than producing something–stock options and the proceeds of venture capital and initial public offerings, all of which exploded during the information-technology boom. But do more unequal countries, generally, work better? In Europe, “labor market flexibility” has been the mantra of conservative reformers for years. According to them, skilled workers were paid too little and unskilled workers too much. The hypothetical tonic was to weaken unions, cut pensions and reduce state benefits for working people. Recently Greece, Portugal, Ireland, Italy and Spain carried out such “reforms.” To the conservatives dismay and denial, competitiveness didn’t return and unemployment rose. Here are two facts:

1. First, rich countries are usually more equal than poor ones. For a country to be opulent and technically developed, it must — by definition — have a large and thriving middle class.
2. Second, inequality and unemployment rise and fall together. If pay gaps are outsized, people will quit low-paying jobs (on farms, for example) and move to factory towns (or technology centers) where the jobs are better — but also more scarce. Those who can’t get the good jobs stay unemployed.

It’s really fairly pretty simple stuff. Also, if wage laws discourage low pay, then businesses innovate more rapidly and productivity increases. Decades ago the Scandinavians grasped this relationship, and since then, those countries have become some of the richest on earth. In short, economics is analogous to human’s blood sugar levels. There’s a healthy range. Within that range, lower is better but too low can be dangerous as well and zero puts you in the morgue with a toe tag as your only accouterment. When inequality rises, the symptoms aren’t necessarily immediate but they are just a deadly. It may not notice it until your brain—or the economy–panics; credit booms feel great. But rising inequality is a sign of a crisis on the horizon. Ignore it at your own, as well as those directly affected, peril. We saw this dynamic in 1930, in 2000 and again in 2008. You can’t eliminate inequality, and we don’t want to. But it should be kept within the “safe” range for everyone’s benefit. The Role of Minimum Wages on the Overall Economy I’ve established that on one hand, we want the lure of large rewards to help drive innovation through investment and entrepreneurial enticement. On the other hand, we need a stable and secure middle class. Are they mutually exclusive or can we have our pie and eat it too? Would raising the minimum hourly wage — let’s say to $12– threaten innovation? Of course it wouldn’t. More money in the middle class means more goods being purchased and less government assistance for those out of work. Neither would a more generous Social Security system, easier terms on student loans or a vigorous public jobs program. Quite the opposite has been proven time and time again. The lure of big rewards isn’t diminished by having to pay a little more in taxes. Realistically, it’s as significant as a gnat on a boar’s butt. Another key, though, is that innovation’s big rewards not fund family empires. The second and third generations never replicate the genius  of the first(see Wal-Mart’s stark deterioration after the passing of Sam Walton). Instead, the descendants go into politics, or become speculators or tax evaders. An effective estate-and-gift tax works to prevent this. With a high rate and a generous exemption or even a full deduction for qualified altruism, those who have won great fortunes will give most of them away to promote themselves or their cause de jeur. We can stomach inequality, in other words, as long as we meet two conditions.

1. First, there must be a strong, stable foundation for middle-class life with protection from poverty to keep profits and money circulating rather than stagnating in the hands of the few.
2. Second, great fortunes can pile up but they must have an avenue to be circulated.

In a democracy, no one should rule by inherited wealth — or it’s really not a democracy at all is it?.  – Harvey Gold

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