This AM’s Thought Experiment

February 14th, 2014 at 11:14 am

I pay very little attention to the zillionaires who publically complain that they’re being unfairly singled out in the inequality debate.  On the other hand, I pay a lot of attention to the impact of money in general and concentrated wealth in particular on elections, voting rights, and public policy.  In fact, I put that function in the heart of my model of how inequality affects growth, especially regarding bubbles and financial oversight (more on that later today, maybe).

I doubt the very rich are reading this but if so, do the following thought experiment.  If you’re in the top 1% of the wealth scale, before you complain about being picked on, ask yourself whether you’d switch places with someone at the 35th percentile.  I’m quite certain they’d be willing to make the trade, but if you’re not, then better to hold your tongue.

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10 comments in reply to "This AM’s Thought Experiment"

  1. Robert Buttons says:

    Love to swap. My brother in law lives at the beach and cleans pools for 20 hrs/wk under the table. He fishes about 3-4 times a week. Was on unemployment for close to two years. He used to flip the occasional house for extra money—when the bottom fell out, the govt backstopped his losses. He is very excited because when he signed up for free Obamacare, he got FOOD STAMPS. Myself, I work 60+ hours/wk. Nights, weekends, holidays included. For that the government takes 50% of my income (NOT including consumption taxes). Sure I belong to a country club, when can I play golf? One politician told me I didn’t build my business, if that is true, when is he going to work the weekend for me?

    So the swap sounds pretty good. My BIL would want no part of it.

    • PP says:

      Are you in the 1% though?

    • Sergio Lopez-Luna says:

      BTW, if you pay 50% of your income in taxes, you should fire your accountant

    • Perplexed says:

      Apparently you’ve mixed up your blog comment with your creative writing assignment.

      -“when the bottom fell out, the govt backstopped his losses.”

      If there’s still time before the assignment is due, you might want to drop that phrase, everyone knows that only the losses of the 1%’ers and their banker friends were “backstopped” by the government. Its a dead giveaway.

  2. Jonas says:

    These people have never suitably countered Rawls’ similar argument.

  3. Perplexed says:

    “We the people” have the power to tax and spend pretty much any way we choose, there is no defensible reason whatsoever to sell political access for money. We can spend the same amount on political campaigns without any private money and tax whomever we choose to fund the expenditures. The voters can choose the distribution of funds to candidates and thereby help insure that the representatives they choose are representing them instead of whoever bought the rights to be represented by them out from under those entitled to that right to be fully represented.

    We have completely lost sight of how long it took and how many fought and died for this very unique “experiment” in self rule by “We the People.” While we have been spending $billions protecting against the fear of outside military threats our “democracy” has been thoroughly undermined from within through our acquiescence (and actual assistance) in allowing those with money to displace the power vested by our Constitution in “We the People” and vesting it instead in themselves. While we argue endlessly over the effects and symptoms we ignore completely the bigger picture. When we stopped studying world history because it just wasn’t as important as “STEM” and U.S. “History,” we lost the perspective of “Our” place in the bigger picture and voluntarily relinquished an opportunity that took longer to get than many times the entire existence of “U.S. History”; without even a serious argument let alone a significant battle. (We used to quip that U.S. History was an oxymoron, that, relatively speaking, it could only be considered “current events”). I don’t say this a prediction or fear of something that might happen in the future, but as an observation of was has already occurred.

    What we should probably be talking about instead is just how entrenched is this power? What would the likely reaction be if we tried to put “We the People” back in power? How difficult might that be to do in reality at this point?

  4. Joe says:

    Wealth or income? Not sure why anyone who earned their income would want to switch to a lower income. Easy to see why someone not earning a 1% level of income would want to switch.

    I’m probably missing the point of your exercise here but whether you complain about being picked on or not I still don’t see why someone earning a lot would want to (presumably) work just as hard at what they do but make less.

  5. smith says:

    The right and the 1% are forceful advocates of their position. Mostly they are on the offense promoting their own program and attacking the ideas of the left. Thus they even attack the idea of their being attacked (“singled out” “being picked on”) Responding to their message is exactly what they want. The left and progressives are on defense. The feeble Democratic response is due party to them also being bought and paid for by wealthy contributors. They give token opposition to ensure their position to the left of the right, however far right that position becomes. The rights progressively rightward movement is enabled by the Democrats following them trying to capture centrist independent voters.

    “Switch places” is a poor argument even for defenders of equality, says nothing about why the 1% do or don’t deserve their position and/or being picked on.

    Please keep in mind that currently there is no simple 3 point or 5 point program to counter inequality, advocated by the left. It wasn’t needed in 2012, and the 2014 strategy is also to let the blue dog Democrats slide by advocating center right policies, trying to retain control of the Senate. If Clinton controls the 2016 debate, again the strategy is centrist, move slightly left to the Republican ever more extreme right.

    Obviously a constitutional amendment is needed to overturn Citizen’s United. Although congress would block it, the rallying cry in it’s favor would be a very useful tool to attract voters and put the right on defense. Union contributions at least have identifiable sources, but I’d gladly give up union money in elections in exchange for corporations. Unions wouldn’t like this not because it wouldn’t be a net win, but because they would cede power to control those dependent on them.

    • Perplexed says:

      Here’s a good place to start:

      1. Outlaw selling political representation. Public only financing of campaigns. Tax whoever we choose to fund it, voters direct where the money goes with their votes.

      2. Outlaw monopolies, cartels, and price discrimination; it worked before, it likely will again too. Provide “reward” system for new innovations instead of multiple decades of “monopoly taxes” that drive up prices and profits to many multiples of what might be helpful to encourage innovation. Society is hurt just as much by prices not falling to marginal costs as it is by price increases. Any monopoly profits beyond what can shown empirically are absolutely necessary to encourage innovation and benefit society are merely redistribution of income from all buyers to monopoly holders. They also preclude the competition that would bring efficiency and drive prices further down that is the entire reason for choosing capitalism over other economic systems. Monopolies and capitalism are a paradox, its one or the other.

      3. Eliminate laws that undermine the power of workers and support coercion of labor by employers like “labor” restrictions from the Clayton Act and At – Will employment laws. This would allow workers to “pool the risk” of unemployment and create a more level playing field from which they can negotiate wages and insure that they are in a position to capture “their share” of productivity gains. This will also allow the political coalitions to form that will insure that politicians are responsive to the rights of workers to sell their labor in an “open” market where no party to the transaction is entitled to “legalized” and entrenched superior level of power in the transaction.

      4. Eliminate “tax preferences,” show the full amount of revenue that tax laws would generate on the revenue side and then show all “expenditures” in the budget where they can be evaluated in context with all others. The obfuscation only serves those who’s objective is to “cheat” the system and hide the expenses from the public. When its communicated honestly, the political system can decide the trade-offs, and those representing private monied interests over public benefits can be easily identified and “shown the door.”

      5. Eliminate access by lobbyists to representatives and their staffs outside of written communications of their “clients” positions. Outlaw the practice of lobbyists “assisting” with or writing legislation or even consuming the time of the representatives of “We the People.” We pay our representatives to write this legislation in the interest of the people, not in the interests of those that can afford lobbyists but getting (or blocking) the legislation that generates the profits to pay for the lobbyists.

      That should take care of most of it. We can see if what’s left afterward needs further measures to eliminate “legislated” and “politically generated” inequality. As it is with most banana republics, the most destructive inequality is that driven by the political and legal systems, and used to redistribute money from the public (usually the poorest and least politically powerful strata of the “public”) to those in power. This is not a new story, its has been played out hundreds, if not thousands, of times throughout history, many just want to pretend otherwise as if that would make the reality of it go away.

  6. Oliver Sherouse says:

    So the theory we’re working on here is that it’s right to treat people unfairly until the injury caused by the unfairness is equivalent to the difference in income?

    Rather reminds me of Eleanor of Aquitaine in “The Lion in Winter”: “I could peel you like a pear, and God Himself would call it justice.” A moving moment, to be sure, but rather an unworthy way to do public dialogue, don’t you think?