An example of why the wealth gap will continue to widen

Middle class wealth and incomes have stagnated while the wealth at the top has consolidated. Since the economic system has not created new net wealth, the only logical conclusion is that wealth has migrated from the middle and lower classes to the top. Some of these could be because of policies that have been undertaken to, essentially, shelter the rich from economic crises by coddling them with significant tax loopholes and subsidies, providing them with bailouts that pass their risks and losses onto the government, and inaction around more stringent tax evasion measures.

 

The bold part above is the fallacy of your argument. There is far more wealth today than before, and the amount of wealth grows steadily.

 

There's a certain level of income that is not taxed when earned abroad. I'm not sure what the level is now. Once one gets beyond that, it begins to make more sense to leave.

Tariffs would be a cost of doing business. If it's not worth doing business because the tariff makes it more expensive, then that is wealth lost. "Qualms" are not part of the economic decision. I'm also certain that he had to grease a few palms to get business done, should I hold that to mean that corruption doesn't cause global trade to suffer?

 

This is actually false. People move up and down income brackets all the time.

This is also false considering how price have been decreasing in real prices and increase in GDP. Income mobility has been very rapid.

Tax loopholes exist because the tax code contradicts itself. It's fairly easy to find tax loopholes to the point of where anyone can find them.

If I remember we had to bail them out of the world was going to end.

 

And yet, how often do they move from the middle class to the very top, where all the wealth is going? Not often.

 

Actually it happens very often. It all depends.

There really is no such thing as Top Class or Lower Class because people move up and down income brackets all the time. It depends on their productivity of the person during a specific year.

 

Proof please.

As it stands, social mobility in the US is lower then other countries in Europe, which also happen to have much smaller wealth gaps, with the exception of the UK which has had similar socioeconomic policies as the US.

 

Household net worth in the US went from $64.3 Trillion in 2006 to $58.5 Trillion last quarter...

Meanwhile, the distribution of wealth has shifted further to the rich as the middle class lost value in their main asset (their homes) while their liabilities remained unchanged (credit cards and mortgages don't get refinanced as easily as corporate debt).

 

Since when is a 216% increase anything "negligible"? If we had a 216% increase in the rate of a rare genetic disorder in one year, would you consider that "negligible" just because it affected a relatively small percentage of the overall population?

I see. So, if a rare genetic disorder increased in prevalence by 216% in one year, it wouldn't be worth addressing until hundreds of thousands of people became afflicted by it. Interesting "logic" you have there. Tell me, did you study statistics under a bridge somewhere?

 

I'm talking about income mobility. Social mobility has nothing to do with income. Everything to do with hereditary factors. I only outlines the movement of offspring social status from their parents social status when they started having children. It's all about social hierarchy, not income.

http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

People move up and down income brackets all the time. There really is no rich or poor. It all depends on how productive one is during a specific year.

 

Yes as a matter of fact. If it was 1 person and in one year 3 were infected its hardly something to worry about.

 

Paper took a hit, which primarily affected the wealthy, not the poor or middle class. The overall amount of wealth has grown steadily even with the market corrections.

 

Just because they HAVE moved up and down income brackets doesn't mean they ARE moving up and down brackets. Further, my point was SPECIFICALLY referring to the last five years or so. The situation of the last few years and the policies that created that mess is where my critique is aimed.

Once again, I am speaking about the last five years. I've already posted numbers suggesting that networth in the economy has DECREASED. As such, wealth was destroyed, Are you seriously suggesting that the GFC had no net impact on household wealth in the US? LOL

Tax loopholes are simply vestigal tax incentives that made sense at some point that aren't removed from the code because there are far too many loyal constituents of the right power broker to prevent it from taking effect. Its not an insideous conspiracy... its simply a situation where there isn't enough inertia within the legislative branch to root out a problem.

Right... and the bailout, inevitably, helped the rich more than it helped the poor (whose homes still lost significant value while the risk on their mortgages was taken on by the government instead of the private enterprises who profited from the cash flow payouts of the mortgages)

 

If a man is stabbed and killed in a spork fight and no spork fight deaths were reported in the previous year, then spork fight deaths increased INFINITELY this year. Someone should ban sporks.

 

I've long said that globalization means at least a quasi-leveling of living standards around the globe, for exactly the reasons you describe.

But it's only quasi, for several reasons:

1. There are more ways to compete than price. There's quality, design, etc.

2. There are different levels of labor that go into a product. I don't mind outsourcing the $2-a-day sewing jobs while retaining the higher-paid design, engineering, marketing and management jobs.

3. There are geography-related obstacles that limit the ability of other countries to compete on price. Not so much in the scenario you lay out, but consider the far more common scenario of Chinese companies selling into the U.S. market. They have to keep their labor costs low enough to make up for the cost of shipping things halfway around the world (both raw materials to China and finished products to the U.S.), tariffs, taxes, etc. An American company can be less efficient than a Chinese one and still compete in the American market due to those obstacles.

4. Growing demand will raise prices in China, too. As incomes and standards of living rise in China, so will prices and wages.

So eventually we'll reach a new equilibrium, where Chinese wages have risen enough (and American wages have fallen enough) that the labor-cost playing field is more or less level in many situations. And the more we capture and keep the high-value jobs, the less our standard of living has to fall to establish that equilibrium.

I generally support free-trade agreements, and think more-or-less unfettered global trade is good for everyone. But tariffs do indeed have their usefulness. They both make up for unfair advantages in other countries (government subsidies, for example, or externalized costs like lax environmental laws) and helps reduce the labor advantage of low-wage countries. It's not a long-term solution for the latter, but it can reduce the disruption and manage the decline in those industries ravaged by foreign competition.

 

The stock market has actually INCREASED in value since Jan 06. Corporate profits have too... the only thing that hasnt is housing prices and household income. Summary: you're wrong.

 

Good point. nothing new to me, but you made a good observation.

 

You just changed the measurement and are trying to compare apples to oranges.

Your first statement was:

What did the market do during that quarter?

Or we can work on the second statement:

What was the change in household net worth during that period?

Pick one timeframe and stick to it, don't change it randomly to try to prove your point.

 

That's exactly what it means.

Funny. I was specifically talking about all the time. People move up and down income brackets all the time. Each year 50 percent of the bottom income earners move up to the 2nd bottom quintile or the middle quintile.

No because wealth has been increasing overtime very rapidly through increased income relative to the value of the dollar falling. If you want to talk about households a lot of things factor into the decrease in household wealth like property value. You're not tracking individuals, you're tracking households so you are already more wrong than I assumed you would be.

They aren't removed because no one understand the tax code. No one knows where all of them are. If you think you do, you're lying to yourself.

It's not a simply situation. You're not smart enough to understand the tax code. Which isn't saying much to be honest. No one understands it. There's an entire industry of accountants. All they do is file and prepare tax returns. They have a Judicial system dedicated entirely for taxes. They have tax Attorneys. This is not a simple problem because you will not find one person on this Earth who understands it.

And who's fault is that?

 

How can you not follow that?

Both those measures are from 2006. I'm guessing you read the "moved goalposts" retort somewhere and thought it would be clever to use it here. It doesn't apply.

Secondly, I listed the two components of household net worth that define the top 1% - corporate profits and equity holdings. The fact that those two have actually INCREASED where as home values have decreased EXPLAINS WHY there has been a net transfer of wealth.

 

Sure it does. If your parents are middle class in the US, you're more likely to stay in that class throughout your life then in other countries.http://www.oecd.org/dataoecd/2/7/45002641.pdf

That was an interesting study. However, it doesn't tell me that mobility is that high where it counts (middle and lower classes going to the top 1%) It says that the top 1% is very fluid and unchanging, however, it would appear that it's more of the next highest quintiles taking it's place rather then a lot of "rags to riches" stories. Also, it only compares the income mobility of 1996 to 2005 to the previous decade, when it should be comparing it to the income mobility of America from around 1950 to 1979, when income distribution was much more equal. Otherwise, we can't say if income mobility has decreased or not.

 

In other countries people are more often to live with their parents or family than not. That factors in as well. Even if they didn't claim you as a dependent, you were still consider in the same class. Social mobility doesn't track individual income. It only tracks economic capital, human capital, social capital and physical capital.

Also that study doesn't compare OECD countries with the US. Someone showed me that study already and the US was barely even mentioned in that study.

20 percent each year is high.

I can already tell you didn't read it.

Roughly have of income earners move up to the middle income bracket each year.

As for the unchanging Top 1 percent, a third of the people that filed their income had a 26 percent drop in their income over time.

It has. People move up and down the brackets all the time and it referenced time periods in the 80s as well.

 

Hey, I spent a lot of time reading that and this is what I get in return?

Living with their families longer somehow makes them less likely to have the same wealth as their parents?

That....Seems extremely hard to believe.

What? The US is part of the OECD. Look at the bar graphs.

Relative to the rest of the population, excluding the 4th quintile, only 12.5% of the middle tax filers went to the first quintile. Compare that to 30% for the second-highest quintile, and you'll see where much of the "mobility" is coming from.

Indeed, but I am looking at moving to the very top, because that is where all the wealth has been going to for the past 30 or so years.

That isn't very much for people who make that much money and it ignores a host of other factors including how it changed for the lower classes. What matters in this case is the relatives.

That is what I was referring to. However, income inequality was already on the way up in the 1980's. In fact, that's just when it began to spike. So using that as an example to "prove" that income mobility has not lessened is not correct.

 

Lies.

No it more likely makes them the same class as their parents because they are living under their parents. All it does is track social status not individual income.

If you live with your parents and they are middle class, you are middle class too. If you live with your spouse and your spouse is the only one who works you're the same class he or she is. That's pretty much how it works.

Only one graph and it wasn't really about social mobility. Just education.

What is your point.

That's a fallacy. That's not where all the wealth has been going. That is merely all the income made at that time period. You can do many things to bring you to the Top 1. That's not where the wealth is that's just how much was acquired during a specific time period.

An 11 million to 4 million dollar decrease is a lot of money. And the drop for the higher income earners wouldn't change for lower classes at all.

Income inequality hasn't been going up. income inequality is just snapshot data which tracks quintiles in one year and quintiles in another year. It doesn't tell you the absolute conditions of any particular class. People move up and down income brackets all the time. There is no rich or poor because all income inequality does is take into account of people who made it into a certain bracket one year but ignores changes since then.

 

That the majority of the movement into and out of the top 1% is mostly the very rich and the slightly rich moving around, not the middle class or poor moving all the way to the top.

Here, I think you should read this:
http://www.slate.com/id/2266025/entry/2266026
Gives a good in depth look at how most of the wealth is indeed going to the top 1%. I also encourage you to look at the historical gini coefficients for the US. (The gini coefficient measures the concentration of wealth, a measure of one would mean complete concentration, zero would mean perfect equality)
http://www.census.gov/hhes/www/income/data/historical/families/2010/F04_2010.xls
And there's plenty of other sources that document the trend, including the book The Spirit Level.

Yes, they are all is "just" a snapshot, but when you add up all these snap shots with an abundance of different measures, it paints a pretty clear picture. And as said before, It appears most of the moving up and down different quintiles at the very top has mostly just been between the rich and the very rich, not the middle class and poor going all the way to the top. And without a comparable report for the Post-World War II era to around 1980 (when the wealth was more equally distributed) we can't say for sure whether or not income mobility has decreased or increased since then.