10 ms·

The 99 percent

182 points by njohnw 15y ago

guimarin 15y ago
Five points for the OWS guys. 1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet, and it needs to be easily accessable. An exception can be made for classified spending in specific, but not so categorically (IE we spend X on classified stuff). Additionally, just like there is a Surgeon's General Warning on cigarette packages, there needs to be a link on every candidates webpage that lists their top 100 donors, and what industry they are in. This website URL needs to be easily visible and placed in every television and radio advert as well. 2. Investment banks cannot also be commercial (depository banks). Investment banks become partnerships where c-level owners are financially responsible for the actions of their banks. The banking system survived before things changed from this, and it will survive afterward. 3. There should be a small federal tax on the sale of any type of derivative, bond, stock, or other financial instrument every time it is sold. Say $.10 per share, every time. The financial markets are for raising capitol for companies, not for financial hackers to make money. HFT is a waste of time and energy, adds unnecessary volatility, and has yet to be shown to be anything more than tangentially related to the goals of a financial security market, established for the purpose of raising capitol. 4. The tax code needs to be simplified. There are a number of ways to do this, but the end goal should be to end loopholes that allow companies like exxon to pay no federal taxes. Or any company for that matter to realize losses in the US and gains in a foreign country. 5. Finally, there should be a 4 term limit on US Senators, and an 8 Term limit on US Representatives. Self-explanatory.
- russell 15y ago
  3. I'm not so sure about the effectiveness of the tax on financial instruments. I think it might be more effective to require reserves to be held by the issuer, maybe a few percent They are already required in some cases. A bank is required to to hold a percentage of deposits as capital. An insurance company is required to hold reserves against losses. At the time of the crash there was something like $60 trillion in Credit Default Swaps floating around. A 5% reserve requirement sure would have slowed that down. A reserve requirement would reduce the volatility of the commodities market, which would allow those who needed it a hedge, but reduce the incentive for speculators to churn.
  - guimarin 15y ago
    The point of the tax is not to regulate the derivatives market. There are valid reasons for derivatives, and arbitrarily imposing a reserve requirement on a class of instruments that is ever changing and by definition, represents different alpha and beta is a bad idea. The point of the tax is to mitigate HFT strategies. In my view they don't add anything to the system when considered from the point of view of 'why' society allows/creates such systems. Regulating crazy financial instruments will occur when what we call 'investment banks' but you could easily extend to all cooperatives that make money on financial instruments, are required to be partnerships. It's amazing how much self-regulation occurs when an actual person is personally responsible.
    - MatthewPhillips 15y ago
      You say high frequency trading is bad, others say shorting is bad, and when you try to regulate what is a "valid strategy", all you are doing is injuring the entire market. I can't invest soundly when not all viewpoints are reflected in the price. I'd rather just invest privately.
    - prostoalex 15y ago
      Who will pay for this new tax? If you're a company raising money, investors will want to be compensated for this extra cost, thus shifting the burden onto the company and raising the cost of raising capital. If you're an investor who wants to liquidate, you'll be offered a price lower than fair market value, as buyer will want you to cover the tax portion. Armed with this knowledge, the rational you will think twice before converting cash into financial equity instruments. Maybe you'll choose CDs, maybe bonds, maybe stocks of foreign companies that trade on exchanges that have no such requirements. You could probably mitigate the HFT strategies by suggesting the market stay open for just a few hours a week - enough for buyers and sellers to match outstanding bids, not worth it for HFTraders to bother.
    - brc 15y ago
      It is impossible to regulate a derivatives market. You and I can start trading derivative on anything tomorrow on the phone if we want. If you tax transactions, the transactions will just disappear off into another location. A derivatives market with modern communications could be run out of a third world country in Africa using Warlords to protect the office. And the traders could still sit in New York offices. If people want to do HFT, then let them, except where they might injure the general economy from large failures. If you think HFT is just for the pros, work out a way to bring it to the man in the street via a startup and make a fortune . The only thing that should be done with derivatives is ensure that large financial institutions are not brought down by bad trading decisions (ie Lehman), and that small firms cannot seize up market liquidity through overleveraging (ie LTCM) This can be covered off quite ably with capital and margin requirements. That's fair enough, and quite accepted throughout many other fields.
- Swizec 15y ago
  1. We have something similar in Slovenia - Supervizor (http://supervizor.kpk-rs.si/ http://supervizor.kpk-rs.si/). It's a tool that publicly displays how much government spending and of what sort goes into different corporations.
  - guimarin 15y ago
    This is really cool. I have often toyed, as a hacker that is, with making a website that tracks all the campaign contributions of every local, state, and federal candidate/delegate. The information is out there. Unfortunately, I haven't had the time, or the energy to divine the correct business model for such an endeavor. (and I don't mean one that works, I mean one that works for me ;-) )
- Toddward 15y ago
  #2 is crucial - Glass-Steagall should never have been repealed.
  - jacoblyles 15y ago
    Why? The institutions that got in trouble during 2008 had no retail banking arms (Bear, Lehman, Fannie & Freddie, Merrill, etc.). Glass Steagall is a red herring. Proprietary traders were largely not using deposits to finance their bets.
  - harryh 15y ago
    Why? Do you even know why Glass-Steagall did? The strictly investment banks (as opposed to the consolidated ones) were the ones that had the most trouble / caused the most problems in the recent recession.
    - Toddward 15y ago
      This will be a response to this parent and the one that posed essentially the same point. I don't believe I referred to anything regarding the recent recession or who was to blame. My problem with the repeal of Glass-Steagall has more to do with the overwhelming conflict of interest it could create within these institutions (i.e., using deposits to grant credit to the investment arms for making risky bets). On the flip side, you could argue that proper regulation could stymie that risk, but I'd rather just not leave it up to chance (read: politicians). That's my opinion - you may feel differently.
- michaelcampbell 15y ago
  I'm really torn on #5. My pragmatic side says "hell yes", due to the very human nature law of those that most want to govern are the ones we least want doing it. But... my rights side says all that is doing is taking away my right to vote for whom I want.
  - mc32 15y ago
    I'd change it to disallow consecutive terms --yet as many terms so long as not consecutive
    - burgerbrain 15y ago
      Then you end up with a situation like they have in Russia: 1999-2000: Prime Minister: Putin 2000-2008: President: Putin 2008-2012: Prime Minister: Putin 2012-2016 (anticipated): President: Putin
      - mc32 15y ago
        That's pretty declarative. You seem pretty sure the situation in the States would be comparable to that in Russia --I think that's a very tenuous stretch. It happens in Russia because they have collusion. Presumably we would have less chance of that happening as other candidates would be free to join in on the political race. There is non-such in Putin's Russia. In Russia, candidacies are controlled (and those two had an "understanding"), so you end up with that. Anyhow, Russia is an exception. Why do you bother bringing up an exception as in this case it would appear irrelevant? What we do have is people who, due to name establishment (incumbency) recognition and or party backing, end up stringing together many terms --this alternative, would at least break that pattern up and give other candidates a chance due to stalled momentum (of the what would have been incumbent). It's seems an obvious difference to me.
        burgerbrain 15y ago
        I see no reason it wouldn't happen in the US in areas where term limits might otherwise be needed.
- noahc 15y ago
  Can anyone with more experience and knowledge explain the effects of #3. I've read that HFT is actually a good thing because it basically acts as a market maker. This is just a back of the napkin opinion, but it seems that #3 would reduce liquidity in the markets. We know that markets aren't perfect or else Buffet and other value investors couldn't survive. Does HFT make markets more or less perfect at pricing? Does this matter for making markets more efficient in reality, not some hypothetical perfect market?
  - jacoblyles 15y ago
    I haven't seen any thoughtful reasoning behind calls for a Tobin tax. It's mostly populists who are upset that some people make money by trading.
  - thwest 15y ago
    Market liquidity is not the same as creating value. If you aren't investing on the same timeframe that it takes to create a business (3-5 years), you are simply exchanging money for money, not creating value. There is some minimum amount of liquidity needed for things to work at all, but massive amounts of liquidity is not good in and of itself. After a point market liquidity is a force for creating bubbles, not sustainable businesses.
  - jarek 15y ago
    The standard response to claiming HFT as a market maker is that it provides minute amounts of additional liquidity and its costs and drawbacks, or potential costs and drawbacks, outweigh the benefits. Of course some amount of market making is necessary, but you could claim that without HFT you'd just settle your trades in 0.1 s rather than 0.02 s and with 0.5% spread rather than 0.49% spread. I don't know enough to form a proper opinion whether or not this is the case. Of course part of the problem is defining HFT or algorithmic trading. If you build a robot to press an appropriate button at a trading terminal really fast, is that algorithmic, HFT, and should that be banned? Do you fix the tax at 10 cents, and if so how do you react if companies just create massive securities worth millions of dollars and trade those?
    - 15y ago
- jeremyarussell 15y ago
  I find myself seconding #1. I think in order for a democracy (or a republic) to work it needs to have transparency at all times. The effect that a lack of transparency has on a voters ability to pick the right candidate is too immense to continue to ignore it. Especially a candidates donors though, seeing as to how they're usually the real constituents of the elected officials. Edit: typo
- ericdykstra 15y ago
  Any candidates that actually pushed for these things would instantly get my vote. Too bad pretty much every candidate is a politician, which by definition means they oppose #1.
  - wccrawford 15y ago
    Except that one candidate.
- mynameishere 15y ago
  end loopholes that allow companies like exxon to pay no federal taxes Corporate taxes are idiotic. They should tax them at zero and replace the lost revenue with a new upper-margin tax. Reasons: 1. Corporate taxes are effectively a sales tax. 2. Corporations, unlike individuals, can hire armies of lawyers, accountants, and lobbyists to get around the taxes. 3. Those same professionals are more often deployed by large, rather than small, companies. 4. Those same professionals are intelligent people wasting their intelligence on tax avoidance. They could just as easily be useful to society. Engineers, doctors, teachers, etc.
  - guimarin 15y ago
    You cannot replace a corporate tax with a personal tax, all persons will simply become corporations.
    - harryh 15y ago
      There are already laws against that that are very strictly enforced. Try incorporating yourself and deducting the cost of your mortgage or car payment and see how long it will take for you to end up in tax court.
      - gujk 15y ago
        You gave two working-class examples. When the corporation is a REIT with milions of dollars in invested assets, or an independent contractor consulting firm, that is a different story.
    - guimarin 15y ago
      When people bring up this argument, I feel like I'm screaming in a room full of people and everyone is ignoring me. You cannot make it easy for people and corporations to be interchangeable and then have differing tax rates for each. They MUST have the SAME rate. eg. I 'own' all my rental properties through LLCs which are themselves 'owned' by a corporation of which I am the sole benefactor. Travel? expensed. Living in my house for free? No problem, house owned by LLC, rent waived by my own corporation. Any living expense whatsoever? No problem, benefits of running/owning the corporation. What then is the point of being an individual on your tax return? Oh yes, I pay my fair share on my income of $1 per year. Honestly, sometimes I think people like you who bring up these arguments are completely uneducated.
- igorlev 15y ago
  3. Something similar is actually already the case in areas like Hong Kong and other commonwealth states. It's called a stamp tax (http://en.wikipedia.org/wiki/Stamp_tax#Hong_Kong http://en.wikipedia.org/wiki/Stamp_tax#Hong_Kong) Might be an issue in the US for obvious reasons :)
  - brc 15y ago
    Stamp duty or taxes are a horrible idea. I live in a stamp duty regime, and if I want to sell my house and buy another one, then I have to pay about $30,000 to the government. First home buyers are exempt, but after that, you're in. The reason it is so high is that it was set a long time ago on a sliding scale, and bracket creep of house prices means that every house traded is on the old 'high' value. As a result, housing liquidity is low and people sit on unsuitable houses for long periods of time because they can't afford to sell and buy another. This leads to excessive commuting as people drive long distances rather than move closer to jobs, and leads to old people staying in oversized houses, tying up housing stock. With a median priced home, if you sell it, and buy another of identical value, you will have spent nearly $50,000 on agents fees, stamp duties and other costs. I would dearly love someone to explain to me how that is a good idea, fair or any other justification.
    - wiredfool 15y ago
      Sounds about like the US -- in King Co, WA anyway (a few years back), it cost about 9.1% to sell a house. There was 6% for the agents, and some handful of taxes and stuff for the other 3%. It's not that bad for the buyers though, as the seller pays most of the big stuff.
      - benmmurphy 15y ago
        just because the seller is writing the check doesn't mean they actually pay for it :) you could imagine a situation where taxes were dropped and instead of the sellers pocketing the extra money they are forced by competition to drop prices by the full amount of the tax saving.
- natrius 15y ago
  On transparency, I've come to believe that it should be the government's role to make data available and the private sector's role to compete with each other to create the most useful tools with that data. I might be biased since the latter is my job, but I think it works fairly well. The "Surgeon General's Warning" you suggest is an interesting idea that doesn't really work without the government putting a lot of the tools together themselves, though.
- mchusma 15y ago
  First, You can read this graph in many ways, including that everyone has become more wealthy in a short period of time. Second, all of guilmarin's points: 1) Transparency - Only politicians would disagree with this. Good idea. 2) As other readers pointed out, this is a red herring, and would not solve anything. 3) This has the effect of killing the messenger, and there is a lot of evidence that derivatives are extremely helpful to markets as an information tool and reducing volatility. I certainly can't come up with a compelling moral reason to limit free people from doing what they want with their property. 4) The tax code should be simplified, but because simplicity is inherently better. Removing the corporate tax, as indicated, would both decrease complexity and promote investment. 5) Do you have any evidence that junior senators and representatives are better or worse? I could see a problem with lame ducks increasing their cronyism rather than decreasing it. I don't have an intrinsic opinion on this, but certainly sounds like a reasonable goal if you can come up with a clear mechanism on how this would help and particularly data to support. Looking at incumbent stuff might be a good way to do this.
  - guimarin 15y ago
    I disagree with your second point. I think that making banks which do more than lending money to businesses/individuals into partnerships will do a lot of good. They won't stiff the US tax-payer with the bill by saying that they are too big to fail and that they risked US tax-payer deposits, as is the case of BofA. If a partnership wants to take big risks that's their decision. I'm suggesting to remove the moral hazard, by using the threat of financial system collapse as a stick to get the US gov't to foot the risk bill. 3. I do not say kill derivatives, you read that wrong. I'm more concerned with HFT. That is trades that are decided on by computers and executed in the single digit milliseconds, contribute to the hollowing out of buildings downtown for data-centers, etc. 4. removing the corporate tax is probably too much of a shock to the system, I think aligning it with the personal tax, eliminating loopholes in both, and lowering both is a much better idea. 5. I think that about 20 years is a long enough time to build relationships and get things that you want done. I think that there is cultural and idea turnover each generation that needs to be reflected in the bodies that represent it. Cleaning out the old gives way to the new and the like. I also think that since we limit terms for Presidents that we should do the same in other places. I think that long-standing senators can be every bit as much a tyrant as a permanent president, albeit on a lesser scale.
- yummyfajitas 15y ago
  Regarding 3, why do you want to raise the bid/ask spread to $0.10? Regarding 4, specifically "to realize losses in the US and gains in a foreign country", how do you propose companies avoid this situation? Should they deliberately lose money overseas as well? What would this accomplish?
  - guimarin 15y ago
    to answer 3. I don't want to raise the bid/ask spread. Only that there is a tally of the number of instruments you traded and the number of times. and you pay $.10 for trades*times. to answer 4. The point of this is to stop companies from making subsidiaries in another country to realize gains, and then wait for a tax holiday for repatriation.
    - flourpower 15y ago
      3 would necessarily raise the bid/ask. If you charge everyone 10 cents to transact, then nobody will act as a market maker at a bid/ask narrower than 20 cents.
      - maigret 15y ago
        And that would be good in two points. People will sell less on short term, because the cost of selling will be higher. So stocks will be held longer, which will diminish volatility even more and improve the situation for small investors. What disadvantage will it have for the 99%? I see none.
        baltcode 15y ago
        Increasing the bid/ask spread will increase volatility, rather than decrease it. With a low spread, if you think the prices are going to rise tomorrow, a lot of people will buy today, thus smoothing out tomorrows peak.
    - yummyfajitas 15y ago
      Regarding 4 (see other's reply to 3), I still don't understand why companies should be required to deliberately lose money in overseas subsidiaries. Why not just not give out tax holidays, and allow foreign companies owned by US companies to leave profits overseas forever? Granted, this will reduce investment in the US, but we don't care about unintended consequences.
- rmrm 15y ago
  2. Change that to "limit leverage, everywhere". 30-1 and up leverage never has been and never will be safe, necessary, or a good idea. Not for Fannie and Freddie, not for investment banks, not for Citi and Wamu, not for LTCM, not for the Euro banks, not for individual mortgage borrowers. Never, for anyone, ever, a good idea. Far, far, far more destabilizing than something like HFT. 1 rule and you can pretty much put a cap on how badly things can get blown up. Limit everyone everywhere to 10-1 leverage. We can live with a slightly lower, more consistent growth rate.
- brc 15y ago
  I agree with most of your points except for 3. As long as the income from the transactions are conducted legally, then you'll get the tax money for them. If you try and tax each transaction, you'll just move the transactions offshore. Communications technology means that a derivative market can be conducted anywhere. I think what you want is for derivatives to not have the chance to bring down entire sectors of the economy. That's fine, and your point in (2) would acheive this. There is also a case to be made for larger capital and margin requirements for trading firms above a certain size - ie, anyone who trades over X,000 contracts per year. Derivatives traders can fail as much as they want as long as the failure doesn't threaten stability. It's when they bet too large, and use depositors money, that the problems start. Introducing capital and margin requirements keeps the size of the bets down and isolating trading from banking keeps them from using depositors money.
- othermaciej 15y ago
  A financial transaction tax is not that great in the first place, but making it $.10 per share instead of a percentage of the price paid is a bad idea. Let's do some math: Activision-Blizzard Share Price (ATVI): 13.50 Tax on a $100,000 trade: ~$7407.40 Google share price (GOOG): $586.31 Tax on a $100,000 trade: ~$170.55 Berkshire Hathaway Class A share price (BRK.A): 117,100.000 Tax on a $100,000 trade: ~$.10 Creating this massive disparity in the tax payable based on share price would cause massive market distortions in the short term. It would also lead institutional investors to pressure corporations to do massive reverse splits to drive up the per-unit share price to minimize the tax per transaction, which would lock small-scale retail investors out of the market in addition to being a huge waste of resources. This idea is clearly half-baked. I think a number of your other ideas are as well. You need to think through what actual benefits you expect from your proposed changes, as well as what the unintended consequences would be. Your post does not explain this very well at all. To cite another example: forcing a split between retail and investment banking is a common talking point from people who want "more regulation". But most folks advocating for this do not have a coherent explanation for why this would actually be helpful. It's often claimed that deregulation contributed to the crisis, therefore we need to bring back this regulation. But the institutions that precipitated the crisis were all pure investment banks, so this regulation would have done absolutely nothing to prevent the financial crisis. This post does a great job of explaining why this particular policy proposal is poorly thought out, as well as covering the general issue of advocating policies without actually understanding what they would do or why they might be worthwhile: <http://www.theatlantic.com/business/archive/2011/10/if-you-favor-a-policy-please-first-figure-out-what-it-is/247092/> http://www.theatlantic.com/business/archive/2011/10/if-you-f....
  - jholman 15y ago
    Excellent link. Regarding splitting retail/investment banking, the following is a completely ignorant question, phrased in the form of a rambling incoherent hypothesis. I don't understand why it was a good idea for the U.S. to bail out the banks, but I can see how retail banking is essential to the month-to-month life of Main St, and so I can see why the government might be willing to spend taxpayer money to save it (to save taxpayers). It seems like maybe if retail banks weren't all playing the investment-bank game, maybe the suicidal investment banks could have been allowed to fail?
- deleted 15y ago
  [deleted]
- rmc 15y ago
  1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet Every item bought, even if it costs $1.50 should be recorded? That will cause a massive increase in paperwork (how much will that cost? Will it be in paper? Or an online service that employees fill in when they buy something? What happens when their internet/computer in their office goes down? Should they not buy the thing or buy the thing and fill it in later? Do you want to turn up to your office, find no paper there and hear 'Sorry we can't go across the street to get paper cause we have to wait for the person from $FAR_AWAY to come here and fix our computer's browser?')
  - epscylonb 15y ago
    In the UK the government bought in a system where all purchases over £25,000 are recorded and publicly available on the internet. I was pleased about this but I would say it is not a perfect solution, payments could be split up to go under the limit for example. Ideally we would have a system where this is all automated, every invoice goes through a system and the results are collected. I admit this is a very tricky one though.
- danssig 15y ago
  You have some good points here, but I tend to disagree with term limits. Things take time to fix. Terms are 2 to 4 years. That's not enough time for the effects of big changes to really show up.
dgallagher 15y ago
The graph is a bit hard to read since it's labeled poorly. The X-axis is the year. The Y-axis is the percentage of income relative to 1979, after-tax. They do not mention if these numbers were adjusted for inflation, but the report linked to on the page says the numbers are adjusted for inflation: Income is adjusted for inflation using the Bureau of Labor Statistics’ research series of the consumer price index for all urban consumers (CPI-U-RS). -http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.... That report is much more detailed than the Economist's summary. So, in 2007 the top 1% made ~375% of what they did in 1979 (~275% gain). In 2007 the bottom 20% made ~120% of what they did in 1979 (~20% gain).
- msbarnett 15y ago
  > They do not mention if these numbers were adjusted for inflation... The graph is labelled "US real average after-tax income" (emphasis mine). Real income is, by definition, income that has been adjusted for inflation.
  - dgallagher 15y ago
    Ah, I missed that. Nice catch! :)
mhartl 15y ago
Second, that the people at the top have made out like bandits over the past few decades, and that now everyone else must pick up the bill. I have no idea what The Economist could possibly mean by "pick up the bill" in this context. They know as well as anyone that wealth isn't conserved. If my company makes twice as much money next year as this one, I've added to the world's wealth, not subtracted from it.
- rapind 15y ago
  I assume it's a reference to bailouts.
  - mhartl 15y ago
    You're probably right. In that case, I think it's absurd to equate "the 1%" with "the recipients of bailouts". The latter is more like "the epsilon%", with the understanding those aren't the top epsilon percent but rather merely bankers who are recipients of government largesse.
- rmc 15y ago
  A lot people think there is only a fixed amount of wealth around.
  - paganel 15y ago
    > A lot people think there is only a fixed amount of wealth around. A lot of people also think that the economy/creation of wealth can only go up, by only focusing on the last 200 years or so of economic history. I call it "blind faith in economic progress", which was fine to believe in around the 1880s or so, but anymore.
- danssig 15y ago
  I think everyone understands that companies are creating wealth. The question is: who is capturing that created wealth? Right now the scales are heavily skewed toward the 1% capturing a lot more than they traditionally did.
suivix 15y ago
Perhaps it is necessary for the 1% to have huge sums of money and income compared to the rest in a flourishing economy. For one, it means they can spearhead the direction of capital. If you look at the graphs, everyone is doing better. It also leaves out many products that you can get now for less money or with more features. Everyone uses the same iPhones, college students and the rich. There is not an inherent problem in income inequality if everyone has an acceptable standard of living. The problem is when the poor go without health care, food, shelter, education, Internet, and heating. Unemployment can be a large part of this.
- rapind 15y ago
  The problem is that the staples are rising in cost (healthcare, housing, food), while middle class salaries aren't keeping pace. It's called the middle class squeeze. It's real and has been happening in North America for a while now. I don't use an iPhone myself by the way. The smartphone plans are ridiculously expensive here in Canada. Any middle class family bearing iPhones are making other non-trivial sacrifices to do so... like education or retirement savings.
  - nandemo 15y ago
    The graph in the article says otherwise: inflation-adjusted income for all groups has been rising.
- nandemo 15y ago
  I'm a libertarian and also tend to think that economic inequality is not necessarily bad as long as no one is getting actively screwed, and everyone's economic situation is getting better. But there's data indicating that economic inequality is correlated with a lot of bad things: http://www.ted.com/talks/richard_wilkinson.html http://www.ted.com/talks/richard_wilkinson.html
sgman 15y ago
The number missing from all these articles is how much taxable income is generated from the activities of the top 1% (including business tax, employment tax, sales tax from purchases, etc).
colanderman 15y ago
Here's why the rich get richer: because the 99% produce too damn much. Consumerism worked for a while to keep things even, but we've reached a plateau. People can only buy so much crap. But we're more productive now than ever [1]. So where does all that extra money go? The people at the top take it. CEOs don't give their employees raises, and pocket the rest. Bankers play games with your excess money you've dumped into the market and "lose" it. etc. No-one's missed that extra money until now, because there's always been enough work to go around. Now there's not. Maybe people aren't buying because their "confidence" is shaken. Maybe the Chinese are "taking our jobs". Maybe people don't need more crap. Guess what, it doesn't matter. Everyone's stuck on debating why there's not enough work to go around. But really, the solution's simple. Everyone should do less work. The only way to simultaneously (a) reduce the income gap, (b) lower unemployment, and (c) not return to wasteful excessive consumerism is to shorten the work week and raise the minimum wage. Those at the top will be forced to pay more per hour worked due to decrease in supply. This will fix the income gap. The unemployed will suddenly find work, now that more workers are required to perform the same amount of work. And no-one needs to find any arcane means of "increasing consumer confidence". I propose a mandatory maximum of 35-hour non-overtime weeks, coupled with a 20% (or greater) increase in minimum wage. Necessarily will likely be a short-term (5-year or less) exemption from these policies for small business owners (defined as those whose executives take home in salary + bonuses less than some threshold, say $200k). There once came a day when humans were productive enough that a two-day weekend was warranted. As we continue our march down the road of automation, it is only natural that we give ourselves more time to enjoy the fruits of our labors, and not devote our time to serve those more fortunate than us. [1] http://research.stlouisfed.org/fred2/series/USARGDPH http://research.stlouisfed.org/fred2/series/USARGDPH
- usaar333 15y ago
  Empirical evidence suggest a reduction of work hours will NOT increase employment. See when France went from 39 hour workweeks to 35. http://www.cepr.org/meets/wkcn/9/973/papers/estevao_sa.pdf http://www.cepr.org/meets/wkcn/9/973/papers/estevao_sa.pdf As a founder, this seems intuitively obvious. I have problems finding the correct people. There simply aren't enough skilled people who can do work (that is where the overhead of managing them + their cost < my time loss). Consequently, it makes economic sense for everyone to just work longer hours. If we had to limit hours, we'd simply produce less. And because our product provides time-savings for our customers, all of society suffers. I also completely disagree that people can buy so much stuff. Sure, physical items, yes. But 77% of the US economy is services. From a personal perspective, I don't need more trinkets. But if I had the money, I'd never do my own laundry, shopping, driving, etc. -- that is I would spend a lot of money to gain time. Whether that time goes toward pleasure or working harder, it doesn't matter -- society still wins.
nazgulnarsil 15y ago
Spending years and tens of thousands of dollars studying things no one is interested in isn't normal, but in the American middle class it is. the top 1% of earners pay 38% of all income tax while earning 27% of all income. The top 50% pay 97% of all income tax. Broken windows fallacy, broken window fallacy and zero-sum thinking everywhere in this whole debate.
- nazgulnarsil 15y ago
  if you downvote me enough maybe it won't be true!
  - CJefferson 15y ago
    Your comment is a commonly claimed statement, which hides many points. How much of the income does the top 50% get? Without that, your figures are useless. Just concentrating on income tax hides the fact lower earners tend to spend a higher proportion of their income on other taxes (such as sales tax). ycombinator is not the place to repeat poorly researched, often quoted and misleading statistics, without a proper discussion of how they effect the current discussion. Sorry.
jeswin 15y ago
Graph looks a little suspect. 1. Choosing 1979. If you started from 1999 all the graphs would look nearly the same. So, does that mean in the last 12 years the 1% is no better off? 2. Notice that the 1%'s advantage drops down significantly in a recession. They seem to have ignored the last one though, and stopped right at the height of the bubble. That's what I can read.
kb101 15y ago
That graph doesn't really pack any punch. Leaving politics to one side, this graph http://www.lcurve.org/ http://www.lcurve.org/ and this article http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105 http://www.vanityfair.com/society/features/2011/05/top-one-p... have more interesting numbers that better highlight how stark the disparity in income (and wealth) distribution is in the US.

182 points by njohnw 15y ago

Five points for the OWS guys. 1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet, and it needs to be easily accessable. An exception can be made for classified spending in specific, but not so categorically (IE we spend X on classified stuff). Additionally, just like there is a Surgeon's General Warning on cigarette packages, there needs to be a link on every candidates webpage that lists their top 100 donors, and what industry they are in. This website URL needs to be easily visible and placed in every television and radio advert as well. 2. Investment banks cannot also be commercial (depository banks). Investment banks become partnerships where c-level owners are financially responsible for the actions of their banks. The banking system survived before things changed from this, and it will survive afterward. 3. There should be a small federal tax on the sale of any type of derivative, bond, stock, or other financial instrument every time it is sold. Say $.10 per share, every time. The financial markets are for raising capitol for companies, not for financial hackers to make money. HFT is a waste of time and energy, adds unnecessary volatility, and has yet to be shown to be anything more than tangentially related to the goals of a financial security market, established for the purpose of raising capitol. 4. The tax code needs to be simplified. There are a number of ways to do this, but the end goal should be to end loopholes that allow companies like exxon to pay no federal taxes. Or any company for that matter to realize losses in the US and gains in a foreign country. 5. Finally, there should be a 4 term limit on US Senators, and an 8 Term limit on US Representatives. Self-explanatory.

russell 15y ago
3. I'm not so sure about the effectiveness of the tax on financial instruments. I think it might be more effective to require reserves to be held by the issuer, maybe a few percent They are already required in some cases. A bank is required to to hold a percentage of deposits as capital. An insurance company is required to hold reserves against losses. At the time of the crash there was something like $60 trillion in Credit Default Swaps floating around. A 5% reserve requirement sure would have slowed that down. A reserve requirement would reduce the volatility of the commodities market, which would allow those who needed it a hedge, but reduce the incentive for speculators to churn.
- guimarin 15y ago
  The point of the tax is not to regulate the derivatives market. There are valid reasons for derivatives, and arbitrarily imposing a reserve requirement on a class of instruments that is ever changing and by definition, represents different alpha and beta is a bad idea. The point of the tax is to mitigate HFT strategies. In my view they don't add anything to the system when considered from the point of view of 'why' society allows/creates such systems. Regulating crazy financial instruments will occur when what we call 'investment banks' but you could easily extend to all cooperatives that make money on financial instruments, are required to be partnerships. It's amazing how much self-regulation occurs when an actual person is personally responsible.
  - MatthewPhillips 15y ago
    You say high frequency trading is bad, others say shorting is bad, and when you try to regulate what is a "valid strategy", all you are doing is injuring the entire market. I can't invest soundly when not all viewpoints are reflected in the price. I'd rather just invest privately.
  - prostoalex 15y ago
    Who will pay for this new tax? If you're a company raising money, investors will want to be compensated for this extra cost, thus shifting the burden onto the company and raising the cost of raising capital. If you're an investor who wants to liquidate, you'll be offered a price lower than fair market value, as buyer will want you to cover the tax portion. Armed with this knowledge, the rational you will think twice before converting cash into financial equity instruments. Maybe you'll choose CDs, maybe bonds, maybe stocks of foreign companies that trade on exchanges that have no such requirements. You could probably mitigate the HFT strategies by suggesting the market stay open for just a few hours a week - enough for buyers and sellers to match outstanding bids, not worth it for HFTraders to bother.
  - brc 15y ago
    It is impossible to regulate a derivatives market. You and I can start trading derivative on anything tomorrow on the phone if we want. If you tax transactions, the transactions will just disappear off into another location. A derivatives market with modern communications could be run out of a third world country in Africa using Warlords to protect the office. And the traders could still sit in New York offices. If people want to do HFT, then let them, except where they might injure the general economy from large failures. If you think HFT is just for the pros, work out a way to bring it to the man in the street via a startup and make a fortune . The only thing that should be done with derivatives is ensure that large financial institutions are not brought down by bad trading decisions (ie Lehman), and that small firms cannot seize up market liquidity through overleveraging (ie LTCM) This can be covered off quite ably with capital and margin requirements. That's fair enough, and quite accepted throughout many other fields.
Swizec 15y ago
1. We have something similar in Slovenia - Supervizor (http://supervizor.kpk-rs.si/ http://supervizor.kpk-rs.si/). It's a tool that publicly displays how much government spending and of what sort goes into different corporations.
- guimarin 15y ago
  This is really cool. I have often toyed, as a hacker that is, with making a website that tracks all the campaign contributions of every local, state, and federal candidate/delegate. The information is out there. Unfortunately, I haven't had the time, or the energy to divine the correct business model for such an endeavor. (and I don't mean one that works, I mean one that works for me ;-) )
Toddward 15y ago
#2 is crucial - Glass-Steagall should never have been repealed.
- jacoblyles 15y ago
  Why? The institutions that got in trouble during 2008 had no retail banking arms (Bear, Lehman, Fannie & Freddie, Merrill, etc.). Glass Steagall is a red herring. Proprietary traders were largely not using deposits to finance their bets.
- harryh 15y ago
  Why? Do you even know why Glass-Steagall did? The strictly investment banks (as opposed to the consolidated ones) were the ones that had the most trouble / caused the most problems in the recent recession.
  - Toddward 15y ago
    This will be a response to this parent and the one that posed essentially the same point. I don't believe I referred to anything regarding the recent recession or who was to blame. My problem with the repeal of Glass-Steagall has more to do with the overwhelming conflict of interest it could create within these institutions (i.e., using deposits to grant credit to the investment arms for making risky bets). On the flip side, you could argue that proper regulation could stymie that risk, but I'd rather just not leave it up to chance (read: politicians). That's my opinion - you may feel differently.
michaelcampbell 15y ago
I'm really torn on #5. My pragmatic side says "hell yes", due to the very human nature law of those that most want to govern are the ones we least want doing it. But... my rights side says all that is doing is taking away my right to vote for whom I want.
- mc32 15y ago
  I'd change it to disallow consecutive terms --yet as many terms so long as not consecutive
  - burgerbrain 15y ago
    Then you end up with a situation like they have in Russia: 1999-2000: Prime Minister: Putin 2000-2008: President: Putin 2008-2012: Prime Minister: Putin 2012-2016 (anticipated): President: Putin
    - mc32 15y ago
      That's pretty declarative. You seem pretty sure the situation in the States would be comparable to that in Russia --I think that's a very tenuous stretch. It happens in Russia because they have collusion. Presumably we would have less chance of that happening as other candidates would be free to join in on the political race. There is non-such in Putin's Russia. In Russia, candidacies are controlled (and those two had an "understanding"), so you end up with that. Anyhow, Russia is an exception. Why do you bother bringing up an exception as in this case it would appear irrelevant? What we do have is people who, due to name establishment (incumbency) recognition and or party backing, end up stringing together many terms --this alternative, would at least break that pattern up and give other candidates a chance due to stalled momentum (of the what would have been incumbent). It's seems an obvious difference to me.
      - burgerbrain 15y ago
        I see no reason it wouldn't happen in the US in areas where term limits might otherwise be needed.
noahc 15y ago
Can anyone with more experience and knowledge explain the effects of #3. I've read that HFT is actually a good thing because it basically acts as a market maker. This is just a back of the napkin opinion, but it seems that #3 would reduce liquidity in the markets. We know that markets aren't perfect or else Buffet and other value investors couldn't survive. Does HFT make markets more or less perfect at pricing? Does this matter for making markets more efficient in reality, not some hypothetical perfect market?
- jacoblyles 15y ago
  I haven't seen any thoughtful reasoning behind calls for a Tobin tax. It's mostly populists who are upset that some people make money by trading.
- thwest 15y ago
  Market liquidity is not the same as creating value. If you aren't investing on the same timeframe that it takes to create a business (3-5 years), you are simply exchanging money for money, not creating value. There is some minimum amount of liquidity needed for things to work at all, but massive amounts of liquidity is not good in and of itself. After a point market liquidity is a force for creating bubbles, not sustainable businesses.
- jarek 15y ago
  The standard response to claiming HFT as a market maker is that it provides minute amounts of additional liquidity and its costs and drawbacks, or potential costs and drawbacks, outweigh the benefits. Of course some amount of market making is necessary, but you could claim that without HFT you'd just settle your trades in 0.1 s rather than 0.02 s and with 0.5% spread rather than 0.49% spread. I don't know enough to form a proper opinion whether or not this is the case. Of course part of the problem is defining HFT or algorithmic trading. If you build a robot to press an appropriate button at a trading terminal really fast, is that algorithmic, HFT, and should that be banned? Do you fix the tax at 10 cents, and if so how do you react if companies just create massive securities worth millions of dollars and trade those?
  - 15y ago
jeremyarussell 15y ago
I find myself seconding #1. I think in order for a democracy (or a republic) to work it needs to have transparency at all times. The effect that a lack of transparency has on a voters ability to pick the right candidate is too immense to continue to ignore it. Especially a candidates donors though, seeing as to how they're usually the real constituents of the elected officials. Edit: typo
ericdykstra 15y ago
Any candidates that actually pushed for these things would instantly get my vote. Too bad pretty much every candidate is a politician, which by definition means they oppose #1.
- wccrawford 15y ago
  Except that one candidate.
mynameishere 15y ago
end loopholes that allow companies like exxon to pay no federal taxes Corporate taxes are idiotic. They should tax them at zero and replace the lost revenue with a new upper-margin tax. Reasons: 1. Corporate taxes are effectively a sales tax. 2. Corporations, unlike individuals, can hire armies of lawyers, accountants, and lobbyists to get around the taxes. 3. Those same professionals are more often deployed by large, rather than small, companies. 4. Those same professionals are intelligent people wasting their intelligence on tax avoidance. They could just as easily be useful to society. Engineers, doctors, teachers, etc.
- guimarin 15y ago
  You cannot replace a corporate tax with a personal tax, all persons will simply become corporations.
  - harryh 15y ago
    There are already laws against that that are very strictly enforced. Try incorporating yourself and deducting the cost of your mortgage or car payment and see how long it will take for you to end up in tax court.
    - gujk 15y ago
      You gave two working-class examples. When the corporation is a REIT with milions of dollars in invested assets, or an independent contractor consulting firm, that is a different story.
  - guimarin 15y ago
    When people bring up this argument, I feel like I'm screaming in a room full of people and everyone is ignoring me. You cannot make it easy for people and corporations to be interchangeable and then have differing tax rates for each. They MUST have the SAME rate. eg. I 'own' all my rental properties through LLCs which are themselves 'owned' by a corporation of which I am the sole benefactor. Travel? expensed. Living in my house for free? No problem, house owned by LLC, rent waived by my own corporation. Any living expense whatsoever? No problem, benefits of running/owning the corporation. What then is the point of being an individual on your tax return? Oh yes, I pay my fair share on my income of $1 per year. Honestly, sometimes I think people like you who bring up these arguments are completely uneducated.
igorlev 15y ago
3. Something similar is actually already the case in areas like Hong Kong and other commonwealth states. It's called a stamp tax (http://en.wikipedia.org/wiki/Stamp_tax#Hong_Kong http://en.wikipedia.org/wiki/Stamp_tax#Hong_Kong) Might be an issue in the US for obvious reasons :)
- brc 15y ago
  Stamp duty or taxes are a horrible idea. I live in a stamp duty regime, and if I want to sell my house and buy another one, then I have to pay about $30,000 to the government. First home buyers are exempt, but after that, you're in. The reason it is so high is that it was set a long time ago on a sliding scale, and bracket creep of house prices means that every house traded is on the old 'high' value. As a result, housing liquidity is low and people sit on unsuitable houses for long periods of time because they can't afford to sell and buy another. This leads to excessive commuting as people drive long distances rather than move closer to jobs, and leads to old people staying in oversized houses, tying up housing stock. With a median priced home, if you sell it, and buy another of identical value, you will have spent nearly $50,000 on agents fees, stamp duties and other costs. I would dearly love someone to explain to me how that is a good idea, fair or any other justification.
  - wiredfool 15y ago
    Sounds about like the US -- in King Co, WA anyway (a few years back), it cost about 9.1% to sell a house. There was 6% for the agents, and some handful of taxes and stuff for the other 3%. It's not that bad for the buyers though, as the seller pays most of the big stuff.
    - benmmurphy 15y ago
      just because the seller is writing the check doesn't mean they actually pay for it :) you could imagine a situation where taxes were dropped and instead of the sellers pocketing the extra money they are forced by competition to drop prices by the full amount of the tax saving.
natrius 15y ago
On transparency, I've come to believe that it should be the government's role to make data available and the private sector's role to compete with each other to create the most useful tools with that data. I might be biased since the latter is my job, but I think it works fairly well. The "Surgeon General's Warning" you suggest is an interesting idea that doesn't really work without the government putting a lot of the tools together themselves, though.
mchusma 15y ago
First, You can read this graph in many ways, including that everyone has become more wealthy in a short period of time. Second, all of guilmarin's points: 1) Transparency - Only politicians would disagree with this. Good idea. 2) As other readers pointed out, this is a red herring, and would not solve anything. 3) This has the effect of killing the messenger, and there is a lot of evidence that derivatives are extremely helpful to markets as an information tool and reducing volatility. I certainly can't come up with a compelling moral reason to limit free people from doing what they want with their property. 4) The tax code should be simplified, but because simplicity is inherently better. Removing the corporate tax, as indicated, would both decrease complexity and promote investment. 5) Do you have any evidence that junior senators and representatives are better or worse? I could see a problem with lame ducks increasing their cronyism rather than decreasing it. I don't have an intrinsic opinion on this, but certainly sounds like a reasonable goal if you can come up with a clear mechanism on how this would help and particularly data to support. Looking at incumbent stuff might be a good way to do this.
- guimarin 15y ago
  I disagree with your second point. I think that making banks which do more than lending money to businesses/individuals into partnerships will do a lot of good. They won't stiff the US tax-payer with the bill by saying that they are too big to fail and that they risked US tax-payer deposits, as is the case of BofA. If a partnership wants to take big risks that's their decision. I'm suggesting to remove the moral hazard, by using the threat of financial system collapse as a stick to get the US gov't to foot the risk bill. 3. I do not say kill derivatives, you read that wrong. I'm more concerned with HFT. That is trades that are decided on by computers and executed in the single digit milliseconds, contribute to the hollowing out of buildings downtown for data-centers, etc. 4. removing the corporate tax is probably too much of a shock to the system, I think aligning it with the personal tax, eliminating loopholes in both, and lowering both is a much better idea. 5. I think that about 20 years is a long enough time to build relationships and get things that you want done. I think that there is cultural and idea turnover each generation that needs to be reflected in the bodies that represent it. Cleaning out the old gives way to the new and the like. I also think that since we limit terms for Presidents that we should do the same in other places. I think that long-standing senators can be every bit as much a tyrant as a permanent president, albeit on a lesser scale.
yummyfajitas 15y ago
Regarding 3, why do you want to raise the bid/ask spread to $0.10? Regarding 4, specifically "to realize losses in the US and gains in a foreign country", how do you propose companies avoid this situation? Should they deliberately lose money overseas as well? What would this accomplish?
- guimarin 15y ago
  to answer 3. I don't want to raise the bid/ask spread. Only that there is a tally of the number of instruments you traded and the number of times. and you pay $.10 for trades*times. to answer 4. The point of this is to stop companies from making subsidiaries in another country to realize gains, and then wait for a tax holiday for repatriation.
  - flourpower 15y ago
    3 would necessarily raise the bid/ask. If you charge everyone 10 cents to transact, then nobody will act as a market maker at a bid/ask narrower than 20 cents.
    - maigret 15y ago
      And that would be good in two points. People will sell less on short term, because the cost of selling will be higher. So stocks will be held longer, which will diminish volatility even more and improve the situation for small investors. What disadvantage will it have for the 99%? I see none.
      - baltcode 15y ago
        Increasing the bid/ask spread will increase volatility, rather than decrease it. With a low spread, if you think the prices are going to rise tomorrow, a lot of people will buy today, thus smoothing out tomorrows peak.
  - yummyfajitas 15y ago
    Regarding 4 (see other's reply to 3), I still don't understand why companies should be required to deliberately lose money in overseas subsidiaries. Why not just not give out tax holidays, and allow foreign companies owned by US companies to leave profits overseas forever? Granted, this will reduce investment in the US, but we don't care about unintended consequences.
rmrm 15y ago
2. Change that to "limit leverage, everywhere". 30-1 and up leverage never has been and never will be safe, necessary, or a good idea. Not for Fannie and Freddie, not for investment banks, not for Citi and Wamu, not for LTCM, not for the Euro banks, not for individual mortgage borrowers. Never, for anyone, ever, a good idea. Far, far, far more destabilizing than something like HFT. 1 rule and you can pretty much put a cap on how badly things can get blown up. Limit everyone everywhere to 10-1 leverage. We can live with a slightly lower, more consistent growth rate.
brc 15y ago
I agree with most of your points except for 3. As long as the income from the transactions are conducted legally, then you'll get the tax money for them. If you try and tax each transaction, you'll just move the transactions offshore. Communications technology means that a derivative market can be conducted anywhere. I think what you want is for derivatives to not have the chance to bring down entire sectors of the economy. That's fine, and your point in (2) would acheive this. There is also a case to be made for larger capital and margin requirements for trading firms above a certain size - ie, anyone who trades over X,000 contracts per year. Derivatives traders can fail as much as they want as long as the failure doesn't threaten stability. It's when they bet too large, and use depositors money, that the problems start. Introducing capital and margin requirements keeps the size of the bets down and isolating trading from banking keeps them from using depositors money.
othermaciej 15y ago
A financial transaction tax is not that great in the first place, but making it $.10 per share instead of a percentage of the price paid is a bad idea. Let's do some math: Activision-Blizzard Share Price (ATVI): 13.50 Tax on a $100,000 trade: ~$7407.40 Google share price (GOOG): $586.31 Tax on a $100,000 trade: ~$170.55 Berkshire Hathaway Class A share price (BRK.A): 117,100.000 Tax on a $100,000 trade: ~$.10 Creating this massive disparity in the tax payable based on share price would cause massive market distortions in the short term. It would also lead institutional investors to pressure corporations to do massive reverse splits to drive up the per-unit share price to minimize the tax per transaction, which would lock small-scale retail investors out of the market in addition to being a huge waste of resources. This idea is clearly half-baked. I think a number of your other ideas are as well. You need to think through what actual benefits you expect from your proposed changes, as well as what the unintended consequences would be. Your post does not explain this very well at all. To cite another example: forcing a split between retail and investment banking is a common talking point from people who want "more regulation". But most folks advocating for this do not have a coherent explanation for why this would actually be helpful. It's often claimed that deregulation contributed to the crisis, therefore we need to bring back this regulation. But the institutions that precipitated the crisis were all pure investment banks, so this regulation would have done absolutely nothing to prevent the financial crisis. This post does a great job of explaining why this particular policy proposal is poorly thought out, as well as covering the general issue of advocating policies without actually understanding what they would do or why they might be worthwhile: <http://www.theatlantic.com/business/archive/2011/10/if-you-favor-a-policy-please-first-figure-out-what-it-is/247092/> http://www.theatlantic.com/business/archive/2011/10/if-you-f....
- jholman 15y ago
  Excellent link. Regarding splitting retail/investment banking, the following is a completely ignorant question, phrased in the form of a rambling incoherent hypothesis. I don't understand why it was a good idea for the U.S. to bail out the banks, but I can see how retail banking is essential to the month-to-month life of Main St, and so I can see why the government might be willing to spend taxpayer money to save it (to save taxpayers). It seems like maybe if retail banks weren't all playing the investment-bank game, maybe the suicidal investment banks could have been allowed to fail?
deleted 15y ago
[deleted]
rmc 15y ago
1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet Every item bought, even if it costs $1.50 should be recorded? That will cause a massive increase in paperwork (how much will that cost? Will it be in paper? Or an online service that employees fill in when they buy something? What happens when their internet/computer in their office goes down? Should they not buy the thing or buy the thing and fill it in later? Do you want to turn up to your office, find no paper there and hear 'Sorry we can't go across the street to get paper cause we have to wait for the person from $FAR_AWAY to come here and fix our computer's browser?')
- epscylonb 15y ago
  In the UK the government bought in a system where all purchases over £25,000 are recorded and publicly available on the internet. I was pleased about this but I would say it is not a perfect solution, payments could be split up to go under the limit for example. Ideally we would have a system where this is all automated, every invoice goes through a system and the results are collected. I admit this is a very tricky one though.
danssig 15y ago
You have some good points here, but I tend to disagree with term limits. Things take time to fix. Terms are 2 to 4 years. That's not enough time for the effects of big changes to really show up.

dgallagher 15y ago

The graph is a bit hard to read since it's labeled poorly. The X-axis is the year. The Y-axis is the percentage of income relative to 1979, after-tax. They do not mention if these numbers were adjusted for inflation, but the report linked to on the page says the numbers are adjusted for inflation: Income is adjusted for inflation using the Bureau of Labor Statistics’ research series of the consumer price index for all urban consumers (CPI-U-RS). -http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.... That report is much more detailed than the Economist's summary. So, in 2007 the top 1% made ~375% of what they did in 1979 (~275% gain). In 2007 the bottom 20% made ~120% of what they did in 1979 (~20% gain).

msbarnett 15y ago
> They do not mention if these numbers were adjusted for inflation... The graph is labelled "US real average after-tax income" (emphasis mine). Real income is, by definition, income that has been adjusted for inflation.
- dgallagher 15y ago
  Ah, I missed that. Nice catch! :)

mhartl 15y ago

Second, that the people at the top have made out like bandits over the past few decades, and that now everyone else must pick up the bill. I have no idea what The Economist could possibly mean by "pick up the bill" in this context. They know as well as anyone that wealth isn't conserved. If my company makes twice as much money next year as this one, I've added to the world's wealth, not subtracted from it.

rapind 15y ago
I assume it's a reference to bailouts.
- mhartl 15y ago
  You're probably right. In that case, I think it's absurd to equate "the 1%" with "the recipients of bailouts". The latter is more like "the epsilon%", with the understanding those aren't the top epsilon percent but rather merely bankers who are recipients of government largesse.
rmc 15y ago
A lot people think there is only a fixed amount of wealth around.
- paganel 15y ago
  > A lot people think there is only a fixed amount of wealth around. A lot of people also think that the economy/creation of wealth can only go up, by only focusing on the last 200 years or so of economic history. I call it "blind faith in economic progress", which was fine to believe in around the 1880s or so, but anymore.
danssig 15y ago
I think everyone understands that companies are creating wealth. The question is: who is capturing that created wealth? Right now the scales are heavily skewed toward the 1% capturing a lot more than they traditionally did.

suivix 15y ago

Perhaps it is necessary for the 1% to have huge sums of money and income compared to the rest in a flourishing economy. For one, it means they can spearhead the direction of capital. If you look at the graphs, everyone is doing better. It also leaves out many products that you can get now for less money or with more features. Everyone uses the same iPhones, college students and the rich. There is not an inherent problem in income inequality if everyone has an acceptable standard of living. The problem is when the poor go without health care, food, shelter, education, Internet, and heating. Unemployment can be a large part of this.

rapind 15y ago
The problem is that the staples are rising in cost (healthcare, housing, food), while middle class salaries aren't keeping pace. It's called the middle class squeeze. It's real and has been happening in North America for a while now. I don't use an iPhone myself by the way. The smartphone plans are ridiculously expensive here in Canada. Any middle class family bearing iPhones are making other non-trivial sacrifices to do so... like education or retirement savings.
- nandemo 15y ago
  The graph in the article says otherwise: inflation-adjusted income for all groups has been rising.
nandemo 15y ago
I'm a libertarian and also tend to think that economic inequality is not necessarily bad as long as no one is getting actively screwed, and everyone's economic situation is getting better. But there's data indicating that economic inequality is correlated with a lot of bad things: http://www.ted.com/talks/richard_wilkinson.html http://www.ted.com/talks/richard_wilkinson.html

sgman 15y ago

The number missing from all these articles is how much taxable income is generated from the activities of the top 1% (including business tax, employment tax, sales tax from purchases, etc).

colanderman 15y ago

Here's why the rich get richer: because the 99% produce too damn much. Consumerism worked for a while to keep things even, but we've reached a plateau. People can only buy so much crap. But we're more productive now than ever [1]. So where does all that extra money go? The people at the top take it. CEOs don't give their employees raises, and pocket the rest. Bankers play games with your excess money you've dumped into the market and "lose" it. etc. No-one's missed that extra money until now, because there's always been enough work to go around. Now there's not. Maybe people aren't buying because their "confidence" is shaken. Maybe the Chinese are "taking our jobs". Maybe people don't need more crap. Guess what, it doesn't matter. Everyone's stuck on debating why there's not enough work to go around. But really, the solution's simple. Everyone should do less work. The only way to simultaneously (a) reduce the income gap, (b) lower unemployment, and (c) not return to wasteful excessive consumerism is to shorten the work week and raise the minimum wage. Those at the top will be forced to pay more per hour worked due to decrease in supply. This will fix the income gap. The unemployed will suddenly find work, now that more workers are required to perform the same amount of work. And no-one needs to find any arcane means of "increasing consumer confidence". I propose a mandatory maximum of 35-hour non-overtime weeks, coupled with a 20% (or greater) increase in minimum wage. Necessarily will likely be a short-term (5-year or less) exemption from these policies for small business owners (defined as those whose executives take home in salary + bonuses less than some threshold, say $200k). There once came a day when humans were productive enough that a two-day weekend was warranted. As we continue our march down the road of automation, it is only natural that we give ourselves more time to enjoy the fruits of our labors, and not devote our time to serve those more fortunate than us. [1] http://research.stlouisfed.org/fred2/series/USARGDPH http://research.stlouisfed.org/fred2/series/USARGDPH

usaar333 15y ago
Empirical evidence suggest a reduction of work hours will NOT increase employment. See when France went from 39 hour workweeks to 35. http://www.cepr.org/meets/wkcn/9/973/papers/estevao_sa.pdf http://www.cepr.org/meets/wkcn/9/973/papers/estevao_sa.pdf As a founder, this seems intuitively obvious. I have problems finding the correct people. There simply aren't enough skilled people who can do work (that is where the overhead of managing them + their cost < my time loss). Consequently, it makes economic sense for everyone to just work longer hours. If we had to limit hours, we'd simply produce less. And because our product provides time-savings for our customers, all of society suffers. I also completely disagree that people can buy so much stuff. Sure, physical items, yes. But 77% of the US economy is services. From a personal perspective, I don't need more trinkets. But if I had the money, I'd never do my own laundry, shopping, driving, etc. -- that is I would spend a lot of money to gain time. Whether that time goes toward pleasure or working harder, it doesn't matter -- society still wins.

nazgulnarsil 15y ago

Spending years and tens of thousands of dollars studying things no one is interested in isn't normal, but in the American middle class it is. the top 1% of earners pay 38% of all income tax while earning 27% of all income. The top 50% pay 97% of all income tax. Broken windows fallacy, broken window fallacy and zero-sum thinking everywhere in this whole debate.

nazgulnarsil 15y ago
if you downvote me enough maybe it won't be true!
- CJefferson 15y ago
  Your comment is a commonly claimed statement, which hides many points. How much of the income does the top 50% get? Without that, your figures are useless. Just concentrating on income tax hides the fact lower earners tend to spend a higher proportion of their income on other taxes (such as sales tax). ycombinator is not the place to repeat poorly researched, often quoted and misleading statistics, without a proper discussion of how they effect the current discussion. Sorry.

jeswin 15y ago

Graph looks a little suspect. 1. Choosing 1979. If you started from 1999 all the graphs would look nearly the same. So, does that mean in the last 12 years the 1% is no better off? 2. Notice that the 1%'s advantage drops down significantly in a recession. They seem to have ignored the last one though, and stopped right at the height of the bubble. That's what I can read.

kb101 15y ago

That graph doesn't really pack any punch. Leaving politics to one side, this graph http://www.lcurve.org/ http://www.lcurve.org/ and this article http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105 http://www.vanityfair.com/society/features/2011/05/top-one-p... have more interesting numbers that better highlight how stark the disparity in income (and wealth) distribution is in the US.