Pretty Much Proves Progressives Right

I suppose it's unsurprising that Wall Street would prefer Trump to Warren, but it's hard to read this article about it without coming to a couple pretty simple conclusions:

1. The people who are "Wall Street" are stupid and greedy.
2. We really need someone like Elizabeth Warren to crack down on them.

There's really a lot to unpack in the first one, but an oversimplification is that a stable economy that helps everyone, even one with higher taxes on rich people is better than an unstable economy that primarily benefits rich people and this is true EVEN FOR RICH PEOPLE.  Yes, rich people may not make quite as much in said stable economy but on the other hand, they don't need to worry about torches and pitchforks, which is where we're headed. 

There were lots of stupid things there too: Warren is not a socialist and is actually more of a capitalist than many of the other Democratic contenders.  Pro-Wall Street isn't actually capitalist.  The economy we have with Wall Street as some form of center is pretty severely distorted from capitalism.  If it were actually capitalist there probably wouldn't be a single surviving [major] Wall Street institution following the financial crisis.  Gains going private and losses being eaten by the public is not capitalism. 

The fact that those people belive the crap they're spewing and the fact that they would prefer Trump speaks pretty strongly for how corrupt and vile they are.  They need far more regulation than they have been subject to. 

Yea, but...No

This is such a poor article that I would expect the by line to have been one of Vox's frequent contributors rather than their core staff (and Dylan Matthews at that).  I certainly believe that that the studies countering the original study are valid, and that the original study is likely flawed but the conclusion drawn is not really pushed back on by the rebuttals.

First off, in straight numbers: if 10% of the population is winning 50% of the time (when there is a difference) then that is direct evidence that their share of influence is greater than their position, and it validates the other study, does not counter it. (Yes, the 0 influence of the other is countered, but winning 50% of the time when you make up a much larger fraction of the electorate is losing badly.)

Second, the methodology is questionable (possibly of the original as well, but certainly of the rebuttals).  There are lots of bills that go through congress, and there may be differences of opinion on any of them, but you really want to isolate the ones that one group or another particularly cares about.  Next, the top 10% probably isn't really the most relevant group here, since a big fraction are professionals who may have some issues that really focus on them, but when discussing the oligarchy you really want to focus on a much smaller subset, and it is most likely the top 0.01% that is of the most relevance.  That is a group that is much more impacted by legislation pertaining to how the economy works.  Finally, it is legislation pertaining to how the economy works, not even mainstream issues like taxes and social security that are the problematic issues.  Focusing on "economic issues" is not really telling as the category is so broad as to be irrelevant.  The way the extremely wealthy influence policy is not the big bill but the little amendment, or exclusion to law.  The Trans Pacific Partnership is actually a fair thing to look at, but not as a free trade issue as much as how it is a bill to enforce US Copyright/Patent protections abroad (more than just that but good example).

There is also a bit of a point in there regarding interest groups and how they do get more of what they want, but while the original study separated interest groups into pro-business and pro-public, the rebuttals don't.  Since it is through interest groups that wealthy can influence it seems odd for the rebuttal studies to group all of them together and say that the wealthy don't have much influence because influence groups do...which groups do and who controls/supports them is very relevant.

Finally, Dylan is very oddly dismissive of the points made by the original authors.  Their points were along the lines above and are quite relevant.  Perhaps there is an issue with their original study, but the conclusion is hardly countered by the three rebuttal studies referenced here.  Statistics can tell important stores, but they can also be used to hide important truths.  If the very wealthy only care deeply about 1% of issues that come up, though they will certainly have opinions on the rest, and that 1% all goes their way, then they got everything they wanted.  The rest is noise that hides the important aspect of who dictates legislation.

Poor vs. Wealthier, College Degree Edition

I have a feeling this is a network effect.  Basically: wealthier people who get college degrees have a better network to plug into via family/family friends than do poorer people.  This makes it easier to get jobs straight out of college, and that makes a big difference down the road (promotions, experience...).  A college degree is nice, but it doesn't by itself get you a job.  Having better connections helps a lot when it comes to finding work.  The degree is just a check-mark on the resumé (more often required now).

Housing for the Stupid Rich

a.k.a. McMansions...

I have a pretty visceral negative response to most McMansions that is neatly summed up near the end of the linked article:

But what I discovered is that the form doesn’t really change. Yes, the houses get bigger every year, gables and gazebos come and go, but what is really striking about the McMansion is its vapid consistency as the decades pass.

What stays the same, and what always gets me when I walk through one of these houses, are the vacuous spaces. The vast stretches of painted sheet-rock. The gaping rooms that are simply too tall to decorate. The billowing industrial roof. The windowless walls. 

There’s something else, too. Stand in the street when the sun hits the McMansion from the right angle and its glare obliterates the fake muntins in the windows and suddenly you grasp the truth about this form: It is staring at you with those blank featureless eyes, those empty holes in that vast, unadorned wall, demanding to be fed. This house doesn’t serve humans, we serve it.

I live in a neighborhood with plenty of large houses (not mine), most of which date to the late 19th, early 20th century.  Houses that were well built, functional and served to house people well.  They are, I still think, too large by half for most families, but they are not the insanity that is the McMansion.  It's the useless space in so many newer large homes that I really don't like.  Space that needs to be heated, cooled, adorned, cleaned, but that doesn't provide any functionality.  In the older houses, even the large ones, you find that most of the space is somehow useful (yes, there are true mansions that have useless space, but at least those are well made and really look great).  The McMansion equivalents around me have relatively small bedrooms, in which a queen sized bed often feels cramped.  The closets range from small to smaller, and bathrooms and kitchens are utility rooms, not designed to be living spaces themselves.  There may be too many rooms, but each room is serviceable.

Other than very large families or frequent hosting of parties there isn't much use to space beyond a certain point.

What is "Self-Made"

A lot of the income inequality/mobility discussion has, as part of its background the fact that most of the really wealthy are "self-made" which, as far as I can tell, means they didn't inherit their great wealth.  But there's a problem with that fact: it doesn't count leg-up wealth.  Mitt Romney is a good example.  Everyone knows he was born to wealth and opportunity, but his current wealth is "self-made".  Sure he inherited (or would have, not sure on the timing) lots of $$, but he has made quite a bit more.

Even Bill Gates, who most people see as an innovator and self made man, had pretty well off parents.  The children of wealthy people have advantages that others don't, even without looking at some big inheritance/gift.  They can afford to take more risks and chances than most people, because if they fail, they won't be destitute.  Bush Jr. failed at every enterprise he ever attempted and he was gifted the presidency thanks to daddy's little supreme court justices!

That America has lots of "self-made" extraordinarily wealthy individuals is not a testament to America as a land of extraordinary opportunity unless rich, middle class, and poor alike all have the same chance of making it.

Income Mobility

Since the news came out that income mobility in this country, while crappy, has actually been pretty bad for a while, there's been some changing to the inequality debate.  Mostly not in a good direction.  It shouldn't need to be pointed out that mobility and inequality are very different issues.  It is possible to have very high mobility with simply insane inequality.  Imagine a country where the .01% owned 99% of the wealth, and everyone else was pretty much equal.  There could be a lot of mobility (it could be very easy for someone to move from the 10th to the 85th percentile if it only took an extra 20% of income to get there), but that level of inequality is still a major problem.

So these are two different issues and should be addressed as such.  It's great if people have the same chance as ever of making it to the top tier in this country, but it is pretty disgusting for that top tier to be so far separated from normal people (even upper middle class) as they are.  Two separate issues.  Not really even linked.

Asked and Answered...Well, Kinda

Also, preemptively.  So I admitted some confusion regarding people (anyone, really) purchasing luxury goods.  I still think that it is a broadly stupid thing to do--even for wealthy people--but there is a logic presented in this piece to poor people buying expensive [designer] goods that makes sense.  I don't really like that it makes sense.

Ok, I Don't Get It

Maybe I'm misunderstanding the minimum guaranteed income, but I don't get Tyler Cowen's "problems" at all.  All of them stem from:

Must a guaranteed income truly be unconditional?  Might there be circumstances when we would want to pay some individuals more than others?

and my answers are simple: "yes" and "no".  My understanding is that the minimum income is just paid out to everyone [who files a tax return].  So everyone gets, say $1000/month check to do with as they please, and that doesn't go down if they happen to work so work = more money!  Depending on the level it was set at it may be able to replace food stamps and/or cash welfare and/or housing assistance but there is no good reason to drop medicare/medicaid/social security, as those are highly efficient, targeted programs that both do good and are very popular.

(Yes, I suspect that "getting Republicans to go along with this" would probably mean cutting or eliminating those programs, but that certainly shouldn't be considered a problem with min income itself, rather a politics problem.)

I would think a bigger issue is that it would likely push up inflation at the bottom end of things (particularly low end rents and eating out would be likely to go up), though that means an even greater incentive to work for low income individuals.  In the middle it would serve as extra savings or allow a bit of extra extravagance, and at the top it would be pretty much useless, particularly as it would be way more than offset with the higher taxes required to afford it.

Luxury Goods

I don't really get pretty much any luxury goods.  I'm willing to spend more on a good quality suitcase, and whenever I get around to updating/renovating my kitchen I will likely buy a refrigerator that is both of good quality and that looks good. Still, there's a world of difference between a high quality carry-on suitcase and this or even this.  (Also, while I'll admit to having spent way too much going out to dinner on occasion, it was nothing like these burgers.)

I do understand paying more for quality and style, and I understand paying for something a bit different/unique, but with the variety of options out there I don't understand anyone spending outrageous sums of money for, really, anything (worst: people who spend tons to get the exact same stuff as other rich people...what a weird mindset).

I suppose that this is the reason I drive a 10 year old compact station wagon (albeit a kinda sporty one: Mazda5), and why I got a house that is less than 1500 sq ft.  I could be given millions of dollars and I still wouldn't see much need to get a new car or a new house (though, yes, I would renovate, but I'm planning on doing that anyway).

So a $6000 smart phone?  Sure, why not?  I'm not their target any more than I am Bentley's.  While I may think it a pretty stupid thing to do, the people who would buy that, buy plenty of other things I consider very stupid...and someone needs to take their money away from them since the government won't.

Minimum Wage vs. Minimum Guaranteed Income

I used to be very much on the side of raising the minimum wage to something "livable", at least $10 and maybe as much as $15/hr ($20k - $30k/year).  I still think we would be better off as a nation (and with many much better off than now) if we doubled it, but I am starting to come around to minimum guaranteed income (this has come up again regarding the civil rights movement, radical socialists that they were).

Minimum guaranteed income does a lot of lifting on a lot of issues--it would have to be set appropriately, but it could be used to eliminate most welfare programs, from cash payments to snap to housing (section 8), and would make useless some of our tax code complexity (we would need to seriously overhaul the tax code to do this anyway).  It also takes a lot of the perceived burden off employers, where we could let the free market reign: if people are willing to work for an extra $2.50/hr, then employers could pay that, but if, as I suspect, people who had more freedom to pick and chose, decided that their time and effort was worth more than it is when they have to take some job, any job, to survive, then employers would be forced by teh markets to pay higher salaries. 

People at the bottom of the income ladder would be far more free, and have greater opportunities.  At the top end: no bitching because they get that money too (well, less, all taxes would need to go up in this scenario).
On top of that, if you look to discussion about the hollowing out of the middle (automation now taking middle class jobs away) as a phenomenon that is likely to continue and expand, then this becomes the best solution.  Technology and enhanced productivity make us wealthier as a society, but the distribution becomes more unequal and the price to pay is that we must transfer some of those benefits down to the people who lost out because of them.  Having a minimum income does just that. 

As for the level...$16k is a fair starting point: it covers bare basics (well, not health care but so long as we're fixing things, we have single payer here) but there is still lots of incentive to work and pull that up.  Probably it would be something along the lines of [GDP/total population/x] where x is some age dependent scaling factor, maybe in the in the 3-5 range for 18+, and 10-20 for under 18 (money to parent/guardian). 

Buffett Repeating Himself

The only issue I want to raise with this is where Warren says: "However, I prefer a cutoff point somewhat above $250,000 — maybe $500,000 or so."  There was something in the Fiscal Times furthering this by pointing out that $250k in 1993 is about the same as $400k today. 

Here's the thing: $250k is a crap-load of money.  It is infuriating each and every time anyone (though particularly very rich people) try and argue that it isn't.  The median income in this country is one fifth of that, and well over 90% of families must make do on less than half.  Even very wealthy Manhattan's median income is less than $100k.  People (individuals and families) just don't make nearly as much money as [rich] people think we make, and it makes a huge difference in terms of how we discuss things, like, say retirement.

If we think that lots of families are pulling in $200k/year then it's pretty easy to say that people are irresponsible who don't save enough for retirement, and it's therefore easy to argue that making SS less generous is not that bad: people just need to save a little more.  But families are not pulling in that kind of money.  Most families are living on $66k/year, and after taxes and necessities there isn't a whole lot left over.  If they are forced to save more, then it means a real drop in their standard of living.

Any family getting $250k/year is very well off, at the very least.

Money and Happiness

A new paper comparing income to happiness, mostly as national GDP.

Wealthier countries having happier people makes sense: a wealthy country can afford to have a well fed, clothed, housed, and entertained populous. 

But at the same time the US serves as a counter example, and this also makes sense.  While GDP gains in many other advanced nations (e.g. most of Europe) have also lead to increases in social insurance (i.e. "welfare") programs, in the US the opposite has occurred.  We have had a big jump in GDP, but most programs for the poor have gotten less generous, and social security, medicare, and medicaid are constantly in danger of cuts by politicians [on the right...including Obama]. 

Our social safety net is getting weaker as our country has gotten wealthier.  That is a recipe for unhappy people, even when people in general have more money.  Someone making $30k/year who doesn't have to worry about losing health care, her house, and having problems getting food for her child is going to be more content than someone making twice as much that has to concern herself with those things.  Even someone making $100k a year in the US can quickly find herself in dire straits if she looses his job.  Mortgage/rent can eat through savings fast, and a single visit to the ER can be thousands of dollars (and COBRA is not cheap). 

So Lots of Inequality is Bad, But What About a Little?

At some level it seems largely self-evident that large inequality (and for that matter widening inequality) is bad for the broader economy.  But that doesn't mean that no inequality is good.  It seems like there should be an optimum, though I've no idea where it would be or whether it would correlate to any other factors.

I'm pretty liberal in a lot of ways, but if we lived in a society where everyone was perfectly equal (like in The Dispossessed) then we would have little incentive for anyone to do their best.  I don't begrudge success, I just don't think that anyone can possibly be worth $1 billion while others starve.

As I see it the solution is pretty simple: much more progressive taxation, especially for very high income individuals, combined with more generous social insurance programs that improve the baseline living conditions for the poorest among us.  People that can't or simply don't want to work shouldn't own mansions but they shouldn't starve on the streets either.

We are wealthy enough as a nation that we should be able to provide shelter with basic amenities, food, clothing, (public) transportation, and medical care to everyone.  A little work can afford a few low end luxuries (TV, alcohol, PS3, nicer furniture, car), and major innovation/development would still allow someone to buy a redicu-house and a few Ferrari/Hummers.

Inter-Generational Mobility is Confusing

When I read through posts and then comments on [wealth/income] mobility in society I get the feeling that lots of people don't understand that inter-generational aspect of it.  Mobility in society is less about me making a bit more or less over time and more about where I am compared to where my parents are.

If we really believe that wealth/income relate to achievement and ability then a high mobility is a defining characteristic of that.  Low mobility doesn't mean better off individuals are pushed down by up and comers, it means that the children of better off individuals do better than the children of less well off individuals.  Think of high mobility as a generational reset.  Each new baby will end up as successful as their talents allow, no more no less.

There is no reason to believe that the children in the Walton family are any more capable than the children of school teachers or janitors.  The reason the Walton children do well is because their parents have wealth, and the reason that the Walton parents have wealth is because Sam Walton had a lot of success.  Someone could be born to the Walton family without the mental facilities to tie shoelaces and that person will be a incredulously wealthy individual for his/her entire life.

On the other hand if a genius is born in inner city Baltimore to a way below the poverty line black family then that child will have to struggle to survive and even if he/she does "get out" and find success that success is most likely to mean a college degree and $60k/year.  Pretty good and remarkable considering the outlook, but in a "fair" society that strives for greatness then the Walton child would end up a janitor and the Baltimorian [?] would be a rocket scientist or CEO.

Now we can't have the level of mobility that resets everything...mostly because more successful people would never (nor should they ever) allow their children to be subject to such a system.  Society may have been better off if W had ended up failing out of state school and living the rest of his life as a drunk in a trailer park working as carnival operator, but George and Barbara would never have stood for such.

This is why people use the term "upwardly mobile".  We don't want to prevent parents from doing well by their children, but we do want to give children opportunities when their parents cannot afford to do so.

High mobility means that ability and drive can create success (and that sloth and idiocy can destroy it) even when mom and/or dad can't foot the bill.

Mystifying...

In reading a pretty crappy piece (not linking it, bad reading) on how people earning $500k/year are suffering, there was another note about this guy (the original article was deleted, but a cached version was copied and pasted there), along with a link to his self-pitying farewell piece.

I hadn't read the farewell before and...Wow. Nevermind his lack of awareness about the internet and blogging in 2010, and let's ignore his utter delusion that he is something other than an upper middle class (or higher) ass hole. In the last paragraph he seems to suffer from a peculiar delusion that what he had said before was somehow correct and that it was all these personal attacks that give him a sad face. ...But he was wrong! Very, very wrong.

I suppose that if the personal attacks prevent this individual from spreading the garbage he was then the internet has become a better place? I really want to know what it would take to penetrate the thick skull as effectively as the internet did his apparently thin skin.

Wealth Allocation

As kind of a follow up to the "If I had $1,000,000..." post, I should say that personal security and investment are two different sides of wealth.

Having debt is a risk to security but a benefit to investment. If I am buying a house I will be living in, it is best to have it paid off because it is not generating income, so interest on debt is a net loss. If I am buying properties to rent out...with the caveat that I wouldn't buy them if the expected return was less than the interest on the debt, then I would be better served to have debt, because I could purchase more, and have more resulting income.

The leverage provided by going into debt to make a large purchase/investment is a huge advantage. But that does not really apply to purchases of items for personal use...even items that may appreciate in value (like houses and art). Mostly this is because working investments (like rental properties or starting small business) have better returns and can offset the debt service costs (interest). If they didn't, well, they wouldn't be good investments.