Comments on: Inequality, the Middle Class, and Growth

By: Richard

Richard — Fri, 08 Jun 2012 12:48:38 +0000

I agree with your statement David, but I would only add that there will always be people along the entire IQ-scale; we can’t just say “you’re dumb and thus blame yourself”, can we? I’m sure there are many millionaires with low IQs, and many poor people with high IQs, thus I think assuming wealth/standard of living is simply the result of IQs, is simplifying the problem a little too broadly (though I would never argue that there isn’t a correlation).

By: John J

John J — Thu, 02 Feb 2012 18:29:38 +0000

You are right, I have not read much of Mr Bernstein’s blog. I had a friend post this article from Huffington Post and began to read it. I am familiar with Mr. Berstein from his appearances on Kudlow and other business programs.

I guess we will have to just agree to disagree. I have read Friedrich Hayek and believe in his prescription. It seems to me that you believe in John Keynes. Maybe I am just ignorant.

I do believe that allowing people to fulfill what is in their own best interest is the best prescription for America. I understand that some people will fail and remain poor. It happens and there is nothing that anyone can do about. The weak and inefficient die off.

I think attacking the successful (i.e. rich, 1%, etc.) is not helpful. I work to hopefully achieve that status. I believe anyone in America can as well. However, I continue to run into challenging regulatory road blocks and thousands of taxes and fees that slow me down. Maybe I am not meant for entrepreneurship, but I am going to keep going even if I fail. I want to be a 1%.

By: Jared Bernstein

Jared Bernstein — Thu, 02 Feb 2012 03:46:08 +0000

Exactly–equal opportunity not outcomes. I’ve actually yet to hear anyone of any note in this debate raise “equal outcomes” except smoke blowers accusing phantom bogie men.

By: Chigliakus

Chigliakus — Thu, 02 Feb 2012 01:08:06 +0000

Regarding the 1990′s, if you get acquainted with more of Dr. Bernstein’s blog and previous articles you’ll see that his problem is that historically the benefits of productivity were shared across society. In more recent times the share of the profits from productivity gains have gone mostly to the ultra rich and not to the poor and middle class. See http://jaredbernsteinblog.com/slack-attack/

He has also covered your point about the differences between the collapse post real estate bubble vs the collapse post dotcom bubble. The painful deleveraging after the loss of asset values for the middle class’ primary asset (their homes) takes longer then when a bunch of rich investors get bilked on crazy investments in internet businesses. This should not be used as an excuse to do nothing, quite the opposite really.

Your claims on mobility have been debunked thoroughly in previous posts. Class mobility is an important fig leaf for a society with such wealth and income inequality, the problem is that inequality and (lack of) mobility are linked. See http://jaredbernsteinblog.com/a-more-complete-look-at-inequality-and-immobility/ among other posts, he has written a lot on this subject and backed it with solid data.

You are simply wrong in your accusation that Dr. Bernstein is promoting equal outcomes, it’s pretty obvious you haven’t read any of his previous blog entries on inequality. Show some solidarity with your class, accusing someone who is obivously looking for equality of opportunity of promoting equal outcomes is shilling for the 1%.

By: Derryl Hermanutz

Derryl Hermanutz — Thu, 02 Feb 2012 01:01:23 +0000

Exactly! Because our money is created as bank deposits which are loaned into existence as the ‘property’ of the private for profit banking system, we face the absurdity of “running out of numbers”. Banks, and people with large holdings of money who want to live off their ‘capital’ rather than earn a living at productive work, have saddled us with a monetary system that deliberately creates an artificial scarcity of money numbers in order to preserve the value of money. Every other kind of economic good that is “saved” rather than quickly consumed, LOSES value as it rots and rusts and becomes obsolete. Gold never loses its luster, but you have to suffer costs to store and guard it or risk having it stolen. Economic goods lose value over time, but ‘capitalists’ expect their money to miraculously GAIN in value over time, which they achieve by gaining ownership of the money system and brainwashing people into believing that saving should be “rewarded” with interest payments, rather than “punished” with loss of value. Only restoration of public issuance of money will create a system where money is used to serve the needs of the real economy. With private ownership of the money issuing power, our economies serve the needs of finance, exactly the reverse of how a rational, non-tyrannical money system would be structured.

By: Jerome Bigge

Jerome Bigge — Wed, 01 Feb 2012 22:44:37 +0000

If we stopped taxing business as we do, we’d have more business and more employment. Business could afford to make the investments needed instead of borrowing money. Governor Rick Snyder here in Michigan understands this and has seriously cut taxes on business. Resulting in a quite visible economic boost.

By: David

David — Wed, 01 Feb 2012 14:20:18 +0000

Another way that increasing inequality results in lower mobility is simply IQ. Those at the bottom of the income scale are much less likely to have good prenatal care, are much more likely to be born prematurely or with low birth weight, and have much poorer nutrition in early childhood. All of these factors cause overall intelligence to be lower, averaged over a group. And if you aren’t as smart, you don’t do as well in school, even in good schools.

By: DHFabian

DHFabian — Wed, 01 Feb 2012 14:05:08 +0000

“Middle class” is the leading marketing term today. We’re all for the middle class, life revolves around the middle class, and the middle class is the alpha and omega. Problem is, there isn’t much left of it. Another problem is, while focusing on the middle class exclusively is what sells today, it won’t resolve our problems. Reasons: You need to think of the US economy like an old house. The rich are the top floor, the poor are the basement. You can spruce up everything in between, give it a fine paint job, new windows with decorative shutters, but if you keep neglecting the crumbling basement, that whole house is going to collapse. America has a very large basement, which has been neglected as it has crumbled for the past four decades. This old house is going down.

By: readerOfTeaLeaves

readerOfTeaLeaves — Wed, 01 Feb 2012 03:25:49 +0000

Powerful forces prefer YOYO and outdated economic ideologies. Unfortunately, that economic model is too simplistic and rigid to explain networked businesses like UPS or eCommerce operations, which use logistics and constantly adapt to feedback.

I associate YOYO with the era of “Donna Reed” and “Father Knows Best” (1960s) up through “Mork and Mindy” (1978 – 1982) when America had three major television networks. If you wanted to watch a program, then you sat down in front of the telly at a specified time in the week.
That was an era when things were centralized, top-down. You conformed to television’s time schedule. (Yeah, ancient history – my kids roll their eyeballs….)

However, these days I stream Netflix and C-SPAN on demand. Unfortunately, YOYO doesn’t do an adequate job of explaining an ‘on demand’ technology, nor the business models they require.

Hanauer’s economic model, on the other hand, with its emphasis on flexibility, adaptability, feedback loops, and building relationships over time — is a better fit for our YouTube-iPod-latte-filled world than anything YOYO can manage.

The YOYO model, upon which specious views of capital tax rates are based, seems to be acting like a huge economic anchor. This conversation, and others like it give me some optimism that we may yet escape the yoke of bogus economic thinking and outdated economic ideologies.

By: John J

John J — Wed, 01 Feb 2012 02:58:02 +0000

I think the article is well written, but I do not know what is the call to action. I understand that the 1990s was a period of economic success; better than the 1980s or 2000s. However, people forget that this was the result ofe a once in a generation productivity boom. The proliferation of the computer and technology that occurred during the 1990s resulted in an productivity cycle boom that occurs about once every 30 to 45 years.

I also believe that most people just do not understand economics fundamentally or historically. If you look at recession that were preceded by a credit crisis, those recoveries were more sluggish and took longer than other recoveries. The psychological shock of deeper, sharper credit recessions lasts much longer than traditional recessions.

As far as mobility, a PEW research study looked at mobility between 1980 and 2010. Of those born into the bottom quintile, 67% moved up. Of those born into the top quintile, 61% moved down. I think this is positive.

If you read “Outliers” by Malcolm Gladwell he discussing the achievement gap. By looking at the work ethic of Americans vs Chinese and the education system. We are falling behind, not because we have inequality of opportunity, but because we have nearly 40 days fewer school than most other developed countries. Wealthier kids have more active parents than poorer kids. The lack of activity during summer months accounts for all of the achievement gap. How are we supposed to change the attitude of parents?

So what is the point of the article? Should we raise taxes back to 1990 levels? Okay, but will that solve the problem. I live in California. I believe that Sacramento and Washington have enough of my money already. I do not make a lot of money (<50k) but I paid an aggregate of 52% of my income to various levels of government through fees, taxes, and expenses. This is just demoralizing.

I believe in a society that allows for equal opportunity, not promotes equal outcome. I am afraid that Mr Bernstein is promoting the latter.