Reform or Revolution?

[JOEBIALEK]

I had the opportunity the other day to watch a most enlightening program broadcast by UCTV.  The one-hour program was called "How Unequal Can America Get Before We Snap?" presented by President Clinton's former labor secretary Robert Reich.
 
"Inequality of income, wealth, and opportunity in America is wider now than it's been since the 1920s, and by some measures since the late 19th century. Yet the nation seems unable or unwilling to do much of anything to reverse these trends. What happens if we allow the trends to continue? Will they "naturally" reverse themselves? Or will we get to a point where disparities are so wide that we finally find the political will to take action? Alternatively, will the disparities themselves grow so wide as to discourage action, by fostering resignation among the losers and indifference among the winners? And if the latter, where will it all lead?"  SOURCE: Goldman School of Public Policy UC, Berkley
 
The presentation made excellent use of economic graphs to demonstrate how large of a gap has developed between the upper class and the middle class (not to mention the lower class) with regards to income, wealth, and opportunity in the United States between the years 1962 to the present.   The trends are alarming to say the least.   The speaker correctly points to birthright as the beginning of the disparity that allows for advantages in everything from diet and healthcare to education and connections.  Being born into a middle-class family myself, I have truly benefited from my birthright in terms of these advantages right from the starting gate.  Some people would argue that many a poor person has risen up by their "own boot straps" but I would argue that in today's society, most (not all) poor people can only rise up with a good pair of athletic shoes or a willingness to sell drugs.   Otherwise they have to remain content with working in the service industry for comparatively lower wages than their upper-class counterparts.  Mr. Reich further points out that one of the elements keeping our society glued together is the belief or perception by the lower class that opportunity in this country still exists and that if one is willing to work hard, they can be successful.
 
The speaker talks of two potential outcomes for this growing disparity.  He uses the metaphor of the rubber band to illustrate his point.  Our society will either "snap back" with a series of reforms supported by all three classes and the government to regain a sense of fairness when it comes to income, wealth, and opportunity in the United States.  This has occurred at least once before in the history of our country during a time referred to as the progressive movement.   The other potential outcome is for our society to "snap break" whereby this country exists with two entirely different societies.   The problem with the latter outcome is that it often leads to the arrival of a demagogue who plays upon the emotions of the middle and lower classes all for the hidden intention of personal gain.  We have seen this all too often in history with the likes of Napoleon, Mussolini, Hitler, Lenin etcetera.  Mr. Reich suggests somehow that the upper class are not a group with malicious intent but rather are nothing more than a naive self-indulgent class of people who don't know any better.  Here I beg to differ.  I believe the upper class is guilty of a careless disregard for their fellow countrymen.   They have the arrogance to believe they are superior and deserving of extravagance regardless of how they attained it and regardless of how it affects the rest of society.   Once again, history shows us what happened to those monarchs who behaved the same way.   Do I think there will be a violent revolution in this country?  I hope not.  Do I prefer a new progressive movement over even a peaceful revolution?  Absolutely.   My fear however, is that we are already rapidly approaching the point of "critical mass" beyond which there is no turning back.   The question today before the American people is what are YOU prepared to do?
 

[John Dibble]

I don't feel like going on a rant, so

[Jake]

I stopped after the first paragraph. Robert Reich is Krugman-lite and the title is just total bs

[A18]

http://www.heritage.org/Research/Taxes/bg1791.cfm

[Erc]

Yes, please, revolt, divorce yourself from the political system, and may Jaurès rot in his grave.

[○∙◄☻¥tπ[╪AV┼cVê└]

Why the hell isn't there 20% of the population in each quintile? WTF?

[opebo]

Why the hell isn't there 20% of the population in each quintile? WTF?

I suspect that may have something to do with numbers of dependents?  But that raises the question - are the income quintiles based only on those people who do work and have an income?  If so inequality must be even worse, as the many poor unemployed are not even put in the quintile system.

In any case, great post Joebialek.  America has become an almost unbelievably miserable place for  the majority at the bottom.  However a revolt seems unlikely - we have merely become like, say, Brazil, and there has never been a socialist revolution in Brazil..

No, I suspect the poor will stay ground under the heel, and the rich will stay on top.  That's the way it works forever and ever.

[A18]

Why the hell isn't there 20% of the population in each quintile? WTF?

I don't know, but people like using it for propaganda purposes. That's why I posted the correct version with it.

Each quintile counts workers, obviously.

[Gabu]

I don't feel like going on a rant, so

I don't feel like reading it, so I'll take your word for it.

[muon2]

Why the hell isn't there 20% of the population in each quintile? WTF?

The Census defines its quintiles on income per household. The lower two quintiles have a larger proportion of single member households, so they have less than 20% of the population in each of them.

[muon2]

These graphs are easier to interpret if you consider a simple model for income-based quintiles. If the country had households evenly spread in income from zero up to a fixed maximum there would be the following percentages in each quintile:

4.0%, 12.0%, 20.0%, 28.0%, and 36.0%

Compare that to the first graph, but keep in mind there are some fraction of incomes many times above the median of the highest quintile. That increases the total income in that quintile at the expense of the others.

If I make the assumption that 20% of the 50% in the top quintile is due to very high incomes, then the redistributed percentages of the quintiles would be predicted as:

3.2%, 9.6%, 16.0%,  22.4%,  48.8%.

This is quite close to the actual distribution below.




If I now assume that there is a safety net of benefits equal to the bottom income for the second quintile, and there is still an extra 20% in the top quintile, the expected distribution is:

6.9%, 11.4%, 16.0%,  20.6%, 45.1%. 

This is also surprisingly close to the actual distributions, given the simple assumptions about an even distribution of incomes.



So, other than the 20% of income which falls to very high income households, the rest of the country looks very much like a uniform spread of incomes with a safety net at about the break between the lowest and next lowest quintiles.

[opebo]

So, other than the 20% of income which falls to very high income households, the rest of the country looks very much like a uniform spread of incomes with a safety net at about the break between the lowest and next lowest quintiles.

Yes, the 'two-class' society we all can easily observe around us.  Of course the remnants of the safety net are under attack and will soon be out of the way.

[A18]

Uh, I started in the bottom 80%, and trust me, we got along just fine.

[opebo]

Uh, I started in the bottom 80%, and trust me, we got along just fine.

You did?  Or your parents did?

Actually this calls to mind the questionable nature of the quintiles method - in reality only the top 1 or 2% of people matter at all, and mere local somewhat rich types like your parents or mine, Philip, are not part of the elite.

[A18]

I mean I was born into the bottom 80%, and we did just fine. My family has moved up since then.

The median income for married couple families is $62,405.

[A18]

[○∙◄☻¥tπ[╪AV┼cVê└]

Probably cherry picked. That time period is 17-26 years ago.

[A18]

No, actually I was just reading another article that had nothing to do with this, and I saw the chart, so I decided to post it.

[opebo]

Oh!  That explains why right here in St. Louis, the wealthy suburbs are full to the brim with blacks who grew up in the ghetto. 

Oh wait a minute...

[Alcon]

Which means...rich people became poor?

[muon2]

Which means...rich people became poor?

Young workers make up a lot of the change in this graph. I was a taxpayer in 1979, and I was in the bottom quintile having spent half the year in college and 4 months in graduate school on an assistantship. In 1988 I had my first full year as a post-doc, and was newly married to someone who made considerably more than a post-doc. Clearly I was one of the stats who moved up to a higher quintile.

People can also move down upon retirement, but they can also move off the chart entirely by death.

[Alcon]

So this proves that...people who are young are more likely to accumulate wealth and increase their income than older ones?

I'm not exactly sure that says much about the ability to increase your standing in a free market system as much as natural career progression.

[muon2]

So this proves that...people who are young are more likely to accumulate wealth and increase their income than older ones?

I'm not exactly sure that says much about the ability to increase your standing in a free market system as much as natural career progression.

It proves that quintiles don't tell you much about anything. My earlier post showed that I could fit the data to a uniform distribution if I lop off the top 20% of income earned. This post shoed that mobility can be due to factors unrelated to poor people moving up. I just don't think they are a useful characterization of economic status, except perhaps as a snapshot.

[Bono]

People can also move down upon retirement, but they can also move off the chart entirely by death.

LOL

[JOEBIALEK]

good points...