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REAL WORLD EVENT DISCUSSIONS
Income inequality: Does wider gap between rich and poor threaten capitalism?
Monday, January 6, 2014 12:11 PM
NIKI2
Gettin' old, but still a hippie at heart...
Quote:Income inequality seems an unlikely focus for Bill Gross, the most powerful bond manager of his generation and co-head of a $2 trillion investment management firm. But he rankled a few of his peers and clients in the fall when he joined a growing chorus that is raising caution flags about America's widening disparities in income and wealth – as well as the current state of the capitalist system producing them. As he surveys the past 30 years of the system that made him one of the world's richest people – and the 55th most powerful person on the planet, according to Forbes – the glaring income gaps are approaching a breaking point, he says. "We're not just experiencing a new Gilded Age, but a Bitcoin Age," says Mr. Gross, referring to the digital currency. "Artificial money, corporate K Street, and Wall Street interests are producing one world for the rich and an entirely different world for the working class," says the founder and co-chief investment officer of PIMCO in Newport Beach, Calif. "It can't go on like this, either from the standpoint of the health of the capitalist system itself or the health of individuals and the family," he adds. Such a standpoint may be rare for a so-called 1 percenter, but the subject of income inequality and the health of the American financial system has burst into the larger national conversation in a new way over the past two months. A widespread and robust national debate has brought difficult questions to the fore, with a host of economists and political writers joining the fray. At issue are a number of short- and long-term trends that are starting to startle a number of observers, even beyond the progressive activists who have been focusing on such things for years. For many economists, a shrinking middle class, as well as low employment, has profound implications. A majority of economists polled by The Associated Press in mid-December said they worry that with most stock market gains flowing upward to the top 10 percent of Americans, the consumer spending base has become too narrow. They also said that a middle class with more cash to spend would be able to stimulate a broad-based climate of economic growth and job creation better than a smaller, über-rich base could. "For the past 10, 20, 30 years, capital has moved away from labor and towards corporations and investors," Gross says. "I'm not sure capitalism can thrive in a system in which ... [labor] has a declining interest, in terms of percentage of the pie. Then ultimately the pie itself can't grow, because consumption can't be supported." 95 percent of income gains go to top 1 percent Indeed, Wall Street has been on a record-smashing binge. The Dow has been setting all-time highs since March 2013, closing with its 52nd on New Year's Eve, with a 26 percent gain for the year. The S&P 500 set its 45th record, also on New Year's Eve, with a yearly profit of nearly 30 percent – its largest increase in 16 years. And the Nasdaq has outperformed both, with a 38 percent gain in 2013. Corporate profits, fueled by the easy cash flowing into Wall Street, have been setting all-time records as well. In the third quarter of 2013, profits after taxes accounted for more than 11 percent of US gross domestic product, the sum of all goods and services. That's the highest such percentage of GDP ever recorded, although record highs have been set in each of the past three years. As a result, since the official end of the Great Recession in mid-2009, 95 percent of all income gains have flowed up to America's top 1 percent, who also now accrue 20 percent of the nation's total pretax income, doubling their 10 percent share from the 1970s. Main Street, too, has been setting records – albeit of a different kind. Only a little more than half of Americans own stock today, continuing the record lows since the start of the recession. Income from wages and salaries, the essence of middle- and working-class wealth, has shrunk from more than 50 percent of the GDP pie in 1970 to 42.6 percent in 2012 – the smallest piece ever measured. And job gains have been decidedly tepid for the past three years. Many of the jobs are low-wage, low-skill work in retail and personal service, and many are part time. Moreover, only 63 percent of adults are participating in the job market – the lowest percentage since 1978. "If people are dropping out of the labor force without a gainful use of their time, I worry about the social problems that come from that," says Douglas Holtz-Eakin, former chief economist of the president's Council of Economic Advisers under George W. Bush, and now president of American Action Forum, a conservative policy institute in Washington. "That'll become a cohesion issue over time." When Gross highlighted many of these trends and others in an investment outlook piece posted on his company's website in late October, he told his peers that maybe they should be willing to pay higher taxes. More provocatively, he challenged the orthodoxy on capital gains taxes, saying they should be taxed at rates as high as that for income. "The feedback wasn't so good. Some clients got [irritated], and we may have lost a few, but that's the breaks," Gross says. "I've always felt that being honest, to the extent that one knows one's being honest – it's the right thing to do from a personal and business standpoint." Josh Strauss, a portfolio manager for the Appleseed Fund at Pekin Singer Strauss Asset Management in Chicago, voices similar views. "Tax policies over the last 30 years have exacerbated the preexisting disparity between ... the rich and the poor and middle class," he says. "Low capital gains taxes disproportionately benefit people who have assets." Mr. Strauss points to the striking disparities that appear when the stock performance of high-end luxury stores is compared with that of other retailers. Since March 2009, the height of the recession, the stock value for Tiffany & Co. has jumped more than 425 percent. Estée Lauder's has jumped more than 600 percent, and the luxury sporting goods store Lululemon Athletica has gained more than 2,500 percent. By contrast, Wal-Mart's stock has gained 61 percent, Kohl's has gained 64 percent, and JCPenney has lost more than 36 percent of its value during the same period. Much of the current debate over income inequality sprang from a speech President Obama delivered in early December. He identified "a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America's basic bargain – that if you work hard, you have a chance to get ahead." It's "the defining challenge of our time," he said at the Town Hall Education Arts Recreation Campus, a community center in Washington. Even so, there's a sense that these issues are nothing new. Indeed, almost exactly two years earlier, Mr. Obama gave another major speech on income inequality, saying in Osawatomie, Kan., that it was "the defining issue of our time." And for years, it has been one of the most passionate issues galvanizing progressive activists. Just over two years ago, growing inequality was the rallying cry of the "Occupy" movement. Its "we are the 99 percent" slogan has since become part of the cultural lexicon, and many of its members have moved on to fast-food strikes and protests calling for a higher minimum wage. After something of a lull, the pace for such activists has appeared to pick up. Fourteen states are raising their minimum-wage requirements this year, and 11 states have tied future increases to inflation – the heart of a Democratic proposal also before Congress. But the battle to raise the federal minimum wage is likely to stall, as Republicans appear to instead be homing in on "Obamacare" for the 2014 midterm elections. In addition, last year New York City elected, in a stunning 73.3 percent landslide, the Occupy-friendly and unabashed liberal Bill de Blasio, who ran on a tax-the-rich platform with the suggestive slogan, "A tale of two cities." "We've seen a new vibrancy among labor, community organizing, and clergy," says Deborah Axt, co-executive director of Make the Road New York, a community organizing group in Brooklyn. "Other folks are engaged in the streets, in protest politics and organizing, and simultaneously in electoral work as well, to really reshape what our government looks like for us." Even Pope Francis jumped in. Delivering his first lengthy apostolic exhortation in late November, he targeted "trickle-down theories." These express, he wrote, "a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting." Much more at http://www.csmonitor.com/USA/2014/0105/Income-inequality-Does-wider-gap-between-rich-and-poor-threaten-capitalism
Monday, January 6, 2014 1:09 PM
SECOND
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at https://www.mediafire.com/two
Quote: Consider three arguments one might make against 21st-century populism: 1. Inequality isn’t increasing. 2. OK, inequality is increasing, but it’s not a problem. 3. OK, it would be nice to have lower inequality, but any proposed solutions would do more harm than good. Which of these arguments does the right choose, when making its stand? The answer is, all three. Argument 1 faded away briefly when the CBO published its landmark study www.cbo.gov/publication/42729 documenting the rise of the one percent, but as we’ve just seen, it’s back (this is an illustration of the concept of cockroach ideas.) Argument 2 doesn’t stand up under scrutiny, but it just keeps being made anyway — it’s a zombie. But meanwhile, argument 3 is made against anyone like, say, the new mayor of New York who proposes even the slightest effort to equalize opportunity. This kind of thing flummoxes many people, who imagine that we’re having a real debate. It makes perfect sense, however, once you realize that the other side here isn’t engaged in good-faith argument, just looking for anything that comes to hand, with no regard for consistency.
Monday, January 6, 2014 8:41 PM
Quote: But we can’t have that kind of debate if the anti-populist side won’t acknowledge basic facts – and it won’t.
Quote:It makes perfect sense, however, once you realize that the other side here isn’t engaged in good-faith argument, just looking for anything that comes to hand, with no regard for consistency.
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