Trickle up economics? Or soak the rich?

November 16, 2011 8:09 AM

Standing up for the little guy. Robert Reich spoke last night on the steps of Sproul Hall at UC Berkeley -- the epicenter of recent violence -- as the speaker for the Mario Savio memorial lecture. Reich has been making the rounds, both within corporations, in the media, and at Occupy events, has been lecturing on the dangers of inequality well before the current income/opportunity disparity crisis. "There is going to come a time when the (inequality) trends we are seeing are going to cause something to snap... There are two kinds of snaps... one is the snap back... and the other is the snap break."
posted by markkraft (69 comments total)

I used to think Reich was developing a more centrist approach with his economic populism. Guess I was wrong. By speaking before Occupy, he come off as just a Left partisan, despite the ideas he presents.

The dangers of inequality also hurt the very Middle American voter who is bamboozled into thinking that HMOs, outsourcing and rock star CEOs are symbols of freedom.
posted by Yakuman at 8:19 AM on November 16, 2011

Every time I hear from Reich, I wonder how he got a job in the Clinton Administration. He seems to be an actual leftist!
posted by DU at 8:22 AM on November 16, 2011 [9 favorites]

The problem with "trickle-down" has always been that it's off by an order of magnitude. It's always been less like a trickle, and more like overspray or the shakey-dancey drops.
posted by notsnot at 8:23 AM on November 16, 2011 [2 favorites]

I love Robert Reich and see him around Berkeley every now and then. (Ironically, the dude stands out because he's very short.)

I think his site is powered by Tumblr, which I enjoy.

Oddly enough, it's the first time I've realized he's a dead ringer for an older Jon Benjamin. He must have gotten a haircut recently.

Watching last night's speech now ...
posted by mrgrimm at 8:24 AM on November 16, 2011

Trickle up economics?

Gravity doesn't work that way. Maybe we could put the poor people on the top and the rich people on the bottom, forming an inverted pyramid. Which would balance better if it weren't so pointy, i. e. if the rich were not so rich. (It's a metaphor. I haven't worked out the actual physics.)
posted by madcaptenor at 8:26 AM on November 16, 2011

madcaptenor, a funnel?
posted by dilettante at 8:29 AM on November 16, 2011 [1 favorite]

You know what, in most situations we describe money as behaving like a liquid (cash flows, assets can freeze, and so forth.) But when we talk about it in terms of income distribution, it starts acting like weird antigravity water. We refer to the place that most water tends to flow toward as the bottom, but we refer to the place that money tends to flow toward (and without a doubt, money flows to where money already is) as the top. It's a little daft. I think if our language for money weren't broken like this, the "trickle-down" scam would have been impossible to run.
posted by You Can't Tip a Buick at 8:36 AM on November 16, 2011 [12 favorites]

"I used to think Reich was developing a more centrist approach with his economic populism. Guess I was wrong. . . he come off as just a Left partisan, despite the ideas he presents. The dangers of inequality also hurt the very Middle American voter who is bamboozled into thinking that HMOs, outsourcing and rock star CEOs are symbols of freedom."

He would probably argue that his ideas regarding economic populism are *very* relevant in Middle America because of Middle America's deep-seated element of fairness, but that they are unfortunately pretty bamboozled at times, because of how strongly the wealthy special interests influence the debate.

"Trickle up economics?" "Gravity doesn't work that way."

Money, however, does tend to flow up...
posted by markkraft at 8:39 AM on November 16, 2011 [2 favorites]

Since 2008, inequality has improved in the US, it's better now than it was, though you would think it's worse than ever.
posted by stbalbach at 8:41 AM on November 16, 2011

Is that a trick statement?
posted by hat_eater at 8:48 AM on November 16, 2011 [1 favorite]

From your point of view, which is "better" inequality? More of it or less of it?
posted by DU at 8:49 AM on November 16, 2011 [1 favorite]

stbalbach,
OK, I'll bite. Got a cite for that?
posted by daq at 8:50 AM on November 16, 2011

The phrase "A rising tide lifts all boats" always struck me as being entirely accurate, but completely misinterpreted. The poor aren't the boats who benefit from the tide- only the rich can afford such a life of leisure. The millions of people in the bottom income brackets are the water.

If you improve the fortunes of those at the base, everyone above them gains.
posted by Orange Pamplemousse at 8:51 AM on November 16, 2011 [6 favorites]

I realize thus may seek like nit-picking, but using phrases like "little guy" is kinda ideologically slanted, no? There are far more "little" guys than "big" ones, and in conflating wealth with stature while discounting all other socio-economic variables, one subtly (I think) legitimates the dismissive attitude of the "big".
posted by clockzero at 8:54 AM on November 16, 2011 [1 favorite]

This may seem, rather.
posted by clockzero at 8:54 AM on November 16, 2011

But if my fortunes improve, isn't that a gain for me?

I'm learning a lot in this thread about how some people rob you with a gun, some with a fountain pen, and the rest with a really fucked up metaphor.
posted by stupidsexyFlanders at 8:56 AM on November 16, 2011 [5 favorites]

Since 2008, inequality has improved in the US, it's better now than it was, though you would think it's worse than ever.

stbalbach,
OK, I'll bite. Got a cite for that?

1) If you look at 2008's income data the 1% took a massive hit. Layoffs in the tech industry who form the very bottom rung of the 1% will do that. Also the massive hit in equities didn't help either. But if history is any indicator the 1% quickly claw back gains in recoveries (having all those equities tied up with record corporate profits helps) but we won't know that for sure until they release 2009's aggregated tax data at the end of the year.

2) You have nothing to lose when you're already working at minimum wage.

It's a half truth but one that can't be disproven with anything other than anecdotal data for another few months.
posted by Talez at 8:56 AM on November 16, 2011

Talez: " It's a half truth but one that can't be disproven with anything other than anecdotal data for another few months."

Actually, one can disprove it by looking at Gini index data from the US Census bureau.

2008 4.66
2009 4.68
2010 4.69

Talez: " 2) You have nothing to lose when you're already working at minimum wage."

Sure you do. Your job.
posted by tonycpsu at 9:02 AM on November 16, 2011 [10 favorites]

Sure you do. Your job.

And then your health...
posted by -harlequin- at 9:07 AM on November 16, 2011 [7 favorites]

-harlequin-: "Sure you do. Your job.

And then your health..."

Right, but letting all the leechespoor die lowers income inequality, so... win-win!
posted by tonycpsu at 9:10 AM on November 16, 2011

Talez, your assertions aren't supported by data. Income inequality is quantified using the Gini coefficient; yearly data for the US show an increase toward greater inequality in both the Census bureau's analysis and in an alternative method of computation.
posted by Westringia F. at 9:11 AM on November 16, 2011 [2 favorites]

Ie, what tonycpsu said.
posted by Westringia F. at 9:13 AM on November 16, 2011

Thanks guys for proving my point.

Census indicates the Gini index going up constantly. It's a survey.

Aggregate of IRS tax returns for Westringia F's link:

2006 0.594
2007 0.601
2008 0.584
2009 0.563

Peaked out in 2007 It's going down with the great recession. It'll probably start going up again in 2010.

2001-2003?

2000 0.584
2001 0.561
2002 0.550
2003 0.555
2004 0.571

Same thing happens again.

Not sure what the point is here but like I said, the 1% take a hit, they recover quickly. The number still trends upwards. It's a half-truth that inequality got every so slightly better after 2008 but it's just going to trend back upwards shortly. We just can't prove it conculsively until IRS tax return data starts showing it.
posted by Talez at 9:18 AM on November 16, 2011

Wow. That video of police violence on the Berkeley Campus makes me LIVID. Kudos to the students for not fetching bricks and bats and defending themselves. I'm not sure I could be so stoic in resisting my instinct for self defense and smashing some cops right back.
posted by dazed_one at 9:29 AM on November 16, 2011 [3 favorites]

"I realize thus may seek like nit-picking, but using phrases like "little guy" is kinda ideologically slanted, no?"

Not when Robert Reich is 4'10 1/2". At that point, it becomes something approximating a joke.

"If you look at 2008's income data the 1% took a massive hit."

Yes, the economy shrunk, temporarily reducing income disparity slightly, in that sense. The people with the most money obviously had the most to lose.

In real terms though, those on the bottom have lost their jobs, their homes, seen their unemployment benefits and live savings run out, etc... while the very, very wealthy have seen their millions in investments contract 20ish%. But as you say, they are turning around, their investments are stabilizing / have been shifted to lower-risk investments, and they are still employed / earning money, unlike those on the bottom of the rung. They're going up now, while the poor now include huge numbers of those who used to be middle class, who are struggling just to stay afloat.

Obviously, that kind of income disparity is *still* a huge problem to the person on the bottom of the totem pole, who is spending a *MUCH* higher percent of their total income on basic things such as food, rent, gas, etc.... all of which have been increasing in cost far faster than the rate of inflation would suggest. (Decreasing home prices -- the leading reason for inflation not seeming that bad right now -- don't benefit them because they can't afford homes and can't get home loans, nor do they see any benefits in lower rental costs as a result. Quite the opposite, really. They've been going up, due to higher demand for rentals in a bad economic climate.

Millions are unemployed, while big businesses and the most affluent are sitting on trillions of dollars, being used to fuel the next round of investment-driven economic bubbles.

The "safe money" is flowing -- and bubbling -- well away from investments that could create jobs, rebuild the economy, and benefit the poorest Americans. But when those bubbles collapse too, much of the cost will no doubt be paid by everyone else... again.
posted by markkraft at 9:40 AM on November 16, 2011 [5 favorites]

Interestingly, Volschot's data puts the US Gini much higher than the census data. So it's a kind of mixed bag; on the one hand, Volschot registers a dip that doesn't show up in the census, and on the other hand, the full tax return data shows income inequality at about 13% worse than the census.

A methodological question I have, though, is that people who make below a certain threshold aren't required to file tax returns. I wonder what effect this has on Volschot's data. There isn't any methodology discussed at the link, though...
posted by kaibutsu at 9:45 AM on November 16, 2011

"I realize thus may seek like nit-picking, but using phrases like "little guy" is kinda ideologically slanted, no?"

Not when Robert Reich is 4'10 1/2". At that point, it becomes something approximating a joke.

Ah, right. I missed the bit about his height.

So it's a double entrendre. I still think that using the phrase in general is problematic, but of course that's just my opinion.
posted by clockzero at 9:52 AM on November 16, 2011

double entendre. What is wrong with me today.
posted by clockzero at 9:54 AM on November 16, 2011

The 1% take a hit, they recover quickly is the point, though. And they don't just ``recover,'' they come back stronger: those hits/recoveries are fluctuations about an upward trend, and (as you suspect) there is little to suggest that the most recent fluctuation will be any different. Expecting monotonicity by saying ``we just can't prove it conculsively until IRS tax return data starts showing it'' is a little like pointing to a local downward fluctuation in temperature as evidence against climate change.

I'm not going to test it now (anyone? data's out there), but my guess is that the trend is statistically significant despite not being monotonic, and even without the bounce-back that you're expecting to see. In fact, my intuition -- again leaving it as an exercise for the reader ;) -- is that it would take quite a drop to reverse (or even nullify) this trend, and likely a fairly large drop to render this period of ``improvement'' significantly different from the overall history (i.e., to make it so that the period of improvement is not likely to have been drawn from the same distribution as the historical data). That's not a half-truth; assuming my intuition is borne out in calculations, we actually have no evidence that this blip of ``improvement'' is any different from the previous fluctuations, and we don't have to wait for the new data to say so; rather, we would have to wait for new data NOT to say so.
posted by Westringia F. at 10:01 AM on November 16, 2011 [1 favorite]

Here's a photo of the crowd at Sproul Plaza last night, estimated at well over 3,500 people.
posted by markkraft at 10:06 AM on November 16, 2011 [1 favorite]

For all the writing by liberals and others who care about economic matters, R.R. is by far the foremost person to focus over and over on income disparity and what it engenders over time.
posted by Postroad at 10:16 AM on November 16, 2011

Robert Reich is a renaissance man.

Live long, friend of labor.
posted by hal_c_on at 10:19 AM on November 16, 2011

Here's a great example of how the current round of "safe bet" investments for the very, very wealthy is hurting those Americans who are most economically vulnerable right now.

Farmland prices surge to record; investors grow wary

Basically, higher, investor/speculator bubble-driven farmland prices -- combined with higher fuel prices -- are driving up food prices... especially grain prices. This not only costs Americans billions, in a way that is disproportionately paid by the poor and middle-class, but it also increases grain shortages / famine / political instability worldwide.

But what happens when, inevitably, the bubble bursts? Farmers find themselves in the same situation as subprime owners, with mortgages higher than property valuations. Some of those who shifted their life savings into "safe bet" real estate investments lose everything, and politicians feel compelled to pass expensive bail-out/anti-foreclosure legislation, which, due to political pressure from wealthy special interests, protects both the small farmer, the large financial institutions who underwrite the mortgages, and the real estate speculators.

There are *lots* of bubbles right now, from farmland to metals to oil, where disproportionate investment are driving up consumer costs while likely socializing the inevitable losses, when they inevitably come.

Redirecting more of that investment towards job creation won't fix income disparity by itself, but it would at least go some way towards rebuilding a middle class capable of actually providing the demand that all businesses would like to see.
posted by markkraft at 10:48 AM on November 16, 2011 [3 favorites]

There's also the point that the 1% could literally lose 99% of their wealth and would still be considered extraordinarily wealthy, even in the United States.
posted by Bora Horza Gobuchul at 10:48 AM on November 16, 2011 [1 favorite]

So it's a double entrendre. I still think that using the phrase in general is problematic, but of course that's just my opinion.

Regardless of how you spell it, I don't think that's a double entendre. I think a double entendre needs a sexual, or "blue," factor.

A double entendre would be something like "Boy, Rex Ryan always seems to have a foot in his mouth."

I think "standing up for the little guy" is just a plain old joke.
posted by mrgrimm at 10:50 AM on November 16, 2011

You know what next time I'm not going to bother trying to add clarity, context and data to a statement.

Seriously. This is why liberals can't have nice things.
posted by Talez at 10:55 AM on November 16, 2011

Talez: " Seriously. This is why liberals can't have nice things."

Bcause they worry about silly things like making sure even so-called half-truths are at least half truthful? I call that due diligence.

"Let's roll the tape" is not a personal attack.
posted by tonycpsu at 11:02 AM on November 16, 2011 [1 favorite]

MSNBC PhotoBlog: 'The days of apathy are over': Robert Reich speaks to Occupy Berkeley protesters. The blog post also includes 17 minutes from Rachel Maddow's show last night, covering the Berkeley protests, the Occupy movement, and interviewing Robert Reich live from Berkeley, shortly before he gave his speech.
posted by markkraft at 11:13 AM on November 16, 2011

Back to that fluid money metaphor: liquids do rise when they evaporate. Maybe a better image than that boat-floating one would be that when it rains we all get wet. Unfortunately, the weather recently has been (to quote Sting [I'm sorry! I'm sorry! ow!]) heavy clouds, no rain.
posted by tspae at 11:19 AM on November 16, 2011

"Let's roll the tape" is not a personal attack.

That wasn't "roll the tape". It was the debate equivalent of a liberal lynch mob pissed because a conservative talking point could be technically correct.

I'm not your messenger to be shot. Next time I'll just let you hoist yourself on your own petard.
posted by Talez at 11:19 AM on November 16, 2011

As Occupy Enters Third Month, a Look at How Protesters Are Building a Global Movement
posted by homunculus at 11:25 AM on November 16, 2011

OK, I'll bite. Got a cite for that?

Yeah sorry. Federal Reserve report Tossed and Turned: Wealth Dynamics of U.S. Households 2007-2009, found that a third of the people in the 1% in 2007 were no longer in the 1% in 2009. Of course a new third moved in, but it shows how dynamic the 1% is. The report also found the share of the nation’s wealth held by the top 1% was 33.3% in 2009 – below the 33.8% in 2007, and below its post-war peak of 34.6% in 1995. The inequality of the 1% has declined in recent years, not grown.
posted by stbalbach at 11:54 AM on November 16, 2011

I think capillary action might be a better analogy for how money flows to the top in our system.

Although, really, I think it's simply skimming. Rich people make their money off of profit, whether directly or through investments. Profit is what's left over when you subtract the cost of productive activity from the price you can charge for it -- it isn't productive in itself, it doesn't drive anything or provide any sort of benefit aside from its value to whoever gets to take it home.

Hmm, perhaps this is actually the best analogy.
posted by bjrubble at 11:55 AM on November 16, 2011 [1 favorite]

Keep in mind there will always be a 1%, even in Soviet Russia, it's just math. The debate is how far apart the 1% is from the rest, the inequality gap. As I posted above, inequality peaked in 1995 and has dropped since. One can make a case it's still too high of course, and point out the trend is basically the same now as 1995, but popular wisdom would have us believe inequality is worse now than ever and getting worse, that doesn't appear to be the case. Things are getting worse in other ways, but not in wealth inequality, just chronically bad at a stable level.
posted by stbalbach at 12:07 PM on November 16, 2011

Keep in mind there will always be a 1%, even in Soviet Russia, it's just math. The debate is how far apart the 1% is from the rest, the inequality gap.

This is not untrue, but it's also important to note that there exists a level of income below which nobody can live. Income disparity is not simply a question of what proportion the 1% control, it's also about how many people are hovering just over, at, or below the poverty line, properly defined with reference not only to income but also debt, health care costs and other metrics.
posted by clockzero at 12:13 PM on November 16, 2011 [2 favorites]

The fact that a third of the people in the 1% in 2007 were no longer in the 1% in 2009 says nothing about wealth inequality, which isn't concerned about who holds the wealth but rather how that wealth is distributed. If the top 1% own/earn more now than they did previously, or if the bottom have less, that's an increase in inequality regardless of the internal mixing. You can see this in Fig 2 of the paper stbalbach links, which shows that the percentage of wealth lost from 2007-2009 is greater for those at the bottom than those at the top -- i.e., the rich got richer poorer but less than the poor got poorer; similarly, Table 5 shows that the bottom 50% (50%!) went from owning 2.5% of the wealth to 1.5%.

As to the dynamics, comparing specific households is a little bit tricky when combined with placing them in quantiles. That is, we can say that 1/3 of the top 1% group slipped out of that group, but we cannot assume that they are now spread out over the entire distribution, or that households from across the distribution came in to replace them. We would expect that the percentiles from 2007 and 2009 will be highly correlated; this is measured in Table 4, where the correlation coefs for 2007 v 2009 are 0.87 (wealth) and 0.82 (income), respectively. That's a pretty tight correlation, and what it means is that folks in the top 1% might slip into the top 2% or 3%, but those dynamics aren't causing any real mixing.
posted by Westringia F. at 12:39 PM on November 16, 2011 [7 favorites]

stbalbach: As I posted above, inequality peaked in 1995 and has dropped since.

Actually looking at that table (Table 5), it looks like what's happening is that some of that wealth slid into the 90-99 %ile group; the bottom 50% and the 50-90%iles have been dropping pretty consistently, while the top 10% go from holding 67% of the wealth to 72% over the timeframe you're discussing. (Also, notice that the std errs for the top 1% group are very high -- with so few people in it, it's prone to random fluctuations in a way that the more populous categories aren't, and the "noisiness" of it is roughly the same size as the changes in their wealth.)
posted by Westringia F. at 1:02 PM on November 16, 2011 [3 favorites]

Thank you Westringia F. for saying what I was going to come point out.

The fact that a third of the people in the 1% in 2007 were no longer in the 1% in 2009 says nothing about wealth inequality
posted by mbatch at 1:17 PM on November 16, 2011

I think Dick Morris was also caught with a foot in his mouth.

Money is a symbol of labor. If you have it and you didn't receive it as wages, you didn't earn it. You can call it investment return or profit. It's still work someone else did and you got paid for.

We don't need metaphors to understand the alienation of labor. You just need Marx.
posted by spitbull at 2:18 PM on November 16, 2011 [1 favorite]

Watch Reich's longer video; at the start he talks about "relative" poverty, and how we have lost the sense of that, over years. He's claiming (and reminding us) that we are forgetting the increase in the GAP of opportunity, and how that impacts everything from health care, to education, to job growth, and a psychological of hope and optimism.

Also, with capital flows unconstrained by national borders, we now have confluent forces - international forces - impacting a trend that is going to hit America hard, because relative to poor nations we have the most to lose!.

What I'm saying is that we have two challenges:
1) Working (without violence) toward fundamental restructuring of our Democracy, starting with the removal of private money from all levels of politics (ending our current) Plutocracy.

2) Finding ways to help Americans understand that the "American Dream" - as realized in consumerism, along with our concomitant loss of empathy - must morph to a more "relative" sense of inequality, as explained by Reich. This is not going to be easy, because Americans are habituated to almost automatic expectations of material progress.

In all, I'm optimistic, but we are going to require leadership that "tells it like it is" - and, a leadership that has (as Reich says) the "courage of its convictions" (exactly why Obama has failed to fulfill his promise).

That leadership will eventually come, but we are going to have to encourage it, from the bottom, up. Reich's advice (in the longer video, near the end) is apropos - i.e "talk to your friends and relatives in the "Red" states, etc. We have got to do this together, and somehow find ways around the demagoguery that is bubbling up, and will continue to bubble up (from the left, and right), until we realize that ALL American are going to have to adapt to new realities.

We can do it, but there is going to be a lot of ferment along the way.
posted by Vibrissae at 2:20 PM on November 16, 2011 [2 favorites]

> soak the rich?

Try to drown something in the bathtub, and stuff happens.
posted by hank at 3:27 PM on November 16, 2011 [1 favorite]

bjrubble: Although, really, I think it's simply skimming. Rich people make their money off of profit, whether directly or through investments. Profit is what's left over when you subtract the cost of productive activity from the price you can charge for it -- it isn't productive in itself, it doesn't drive anything or provide any sort of benefit aside from its value to whoever gets to take it home.

As Reich said:

“The fact that political ideologies are tangible realities is not a proof of their vitally necessary character. The bubonic plague was an extraordinarily powerful social reality, but no one would have regarded it as vitally necessary. ”

posted by titus-g at 3:31 PM on November 16, 2011

I listened to this speech from an iPhone on a pillow on a couch, 2 miles from Sproul and 30 minutes after he finished. #OWS has benefited so much from the internet but I think we're only getting started.

I want to see a thousand speeches given at Occupations across the globe. I want them spoken, uploaded, and spread. And I want the internet to watch and like and share and the best of the best to rise to the top. This is the human microphone writ large—this is what's going to allow the movement to keep building itself.

The future. We are it.
posted by wemayfreeze at 3:50 PM on November 16, 2011 [1 favorite]

Westringia F., the federal reserve report says on pg. 11:

"the share of the wealthiest one percent of households has shown no significant change since 1995"

Pretty clear. If you want to change the target from the 1% to the 10% or whatever, table 5 shows similar trends of peaking in years earlier and lower today (or at least between 1962-2009).
posted by stbalbach at 8:17 PM on November 16, 2011

Actually looking at that table (Table 5), it looks like what's happening is that some of that wealth slid into the 90-99 %ile group

How did you arrive at that? You might also say some of those people moved into the bottom 50%, or some of the bottom 50% moved up into the top 1%. Income mobility is an important related discussion, which I tried to raise, but which you said "says nothing about wealth inequality".. but then you went on to discuss income mobility in relation to income inequality! It's a complex topic that even the experts have trouble with. The best we can do is link to vetted reports that are trustworthy and quote some of the results they found. If you want to spin your own conclusions from the data, go for it, but I'll stick with what the experts say.
posted by stbalbach at 8:29 PM on November 16, 2011

Robert Reich is a really interesting and informed guy. Years ago I read his book on his days in the Clinton administration. If nothing else, it's a very absorbing look behind the scenes in Washington at what actually happens when a presidential administration changes and new people are switched around. (spoiler: no one really knows what they're doing).
posted by zardoz at 9:23 PM on November 16, 2011

stbalbach, I actually said nothing about income mobility in that comment; I was talking about where wealth appeared to be concentrated and how it changed over time. The way I arrived at it is quite simple: the 99-100%ile (top 1%) drops slightly but not significantly ("no significant change," means it's not distinguishable from random fluctuations); 90-99%ile grows (significantly!); and the 0-50%ile and 50-90%ile drop (significantly!). The table shows clearly that wealth has moved from the bottom 90% (where it has dropped) and into the 90-99% (where it has risen), while the data show the top 1% not changing significantly^*. That is, the wealth is still concentrated in the top of the distribution, and it is more concentrated there than before.

Moreover, we know from computations of the Gini coefficient that the inequality is increasing when computed as a continuous measure. One could rightly quibble that the top 1%/top 10% are arbitrary cuts (since clearly if the top 1% and the second 1% got together and say "hey, let's redistribute our wealth amongst us a little" it would make the share owned by the top 1% smaller but wouldn't make a damn bit of difference to the bottom 98%), and perhaps one could even accuse me or you of cherry-picking a threshold that supports our positions (as you in fact did, by saying I was "changing the target"), but the Gini index involves no such thresholding and shows an increase in inequality. The binned data from the Fed and the Gini index from the Census Bureau show the same trend, and they do not support the assertion (and neither does the Fed say) that "inequality peaked in 1995" -- they only show that the top 1%'s wealth hasn't significantly changed, but the top 1%'s wealth is not an adequate measure of the skewness of the distribution.

In regard to mobility, as I pointed out before (in the comment immediately above the one you quoted), the correlation coeffs tell us that we in fact CANNOT say that "some of those people moved into the bottom 50%, or some of the bottom 50% moved up into the top 1%" -- the correlation coefs tell us that the quantile (they are rank corls) of one's income/wealth in 2009 is very, very close to one's quantile in 2007. [And this is the same thing that Reich was getting at when he said that the well-educated and well-connected are moving up, whilst the bottom is getting compressed in his "snap" speech; there is no meaningful mixing.]

This is not "spinning conclusions;" I am reading the actual stats the Fed presents (though I will freely admit that I am stats faculty, not an economist). If you wish to ignore the correlation coefficients and imagine, contra data, that there is mobility between the bottom 50% and top 1%, be my guest. But the idea that "some of the bottom 50% move into the top 1%" is a fantasy -- the American Dream! -- and it has the toxic byproduct of discouraging its adherents from enacting economic reforms that might help them today because someday (someday!) they might be one of the 1%.

---
* re significance: this is determined by the size of the change vis a vis the SE's, but if you don't want to do the math, you can just look at the year-by-year significance that's shown as bold in the years since 1995. It's not the same as the trend test, but the only groups with any significant year-to-year changes since 1995 are the bottom three, whose bolded vals show drop/drop/rise. I pick since-1995 b/c that's relevant to the quote, but if one looks at the bolded changes 1995 and earlier, one also will note that any significant rises in the bottom two categories are later reversed by significant drops, & vice-versa for the top two.

posted by Westringia F. at 6:59 AM on November 17, 2011 [3 favorites]

Where is that Written/Kitten thread again?
posted by Westringia F. at 7:00 AM on November 17, 2011

Some recap of what was posted earlier:

Since 2008, inequality has improved in the US, it's better now than it was, though you would think it's worse than ever.
--posted by stbalbach

OK, I'll bite. Got a cite for that?
--posted by daq

The [Federal Reserve report] .. found the share of the nation’s wealth held by the top 1% was 33.3% in 2009 – below the 33.8% in 2007, and below its post-war peak of 34.6% in 1995. The inequality of the 1% has declined in recent years, not grown.
--posted by stbalbach

"the share of the wealthiest one percent of households has shown no significant change since 1995" (quote from US Federal Reserve)
--posted by stbalbach

------

Here is some more information from the Fed Report:

[Between 2007 and 2009], the wealth share of the group that had included the wealthiest one percent of households had seen about a four percentage point decline in their share, while the shares of all the other groups rose. The wealthiest one percent in 2007 experienced nearly half of the net losses in wealth over this period; the group also experienced, on net, about two-thirds of the losses in total household income. Overall, households in the least wealthy half of the distribution in 2007 saw gains in both wealth and income shares by 2009

Westringia F., this seems to contradict what your saying above about the 1% not changing and things getting worse for the bottom 50%. It supports my initial claim above that inequality is better now than it was 2 years ago, or even in 1995.
posted by stbalbach at 11:04 AM on November 17, 2011

No, it doesn't -- you have misunderstood what that section is saying. It's not a statement about inequality or what the bottom 50% have; it's a statement about mobility/dynamics. Here's what's happening in Table 6 and in that statement:

In 2007, we tag everyone in the bottom 50%. Then we wait. Some get poorer, some get richer. Then we ask: on average, did those folks who were tagged as bottom 50% in 2007 get richer? Yes, they did, per the Fed report. Importantly, though, they're not necessarily all in the bottom 50% any more: some folks got richer enough that they crossed the boundary we set at the median (although still in keeping with the corls I talked about -- popping from 45th %ile to 55th, say, but not from 10th to 90th -- they're staying close to the boundary^*).

But the bottom 50% in 2009 have less than bottom 50% in 2007 did: the share of wealth for the bottom 50% drops (per Table 5, significantly) from 2.5% to 1.5%, making the distribution more skew (as I explained above). How can this occur? Well, every person who got rich enough to pop above the median is necessarily (definitionally!) replaced by someone who lost enough to fall below the median. They only way for the wealth held by the bottom 50% to decline is if the people falling into the bottom 50% lost more than the people climbing out gained. [We can see this in the lower half of Table 6, too: if we tag the folks who wind up in the lower half in 2009, we see that they've gone from holding 4.4% of the wealth in 2007 to holding 1.5% in 2009, which is a bigger shift than the 2.5% to 3.3% gain for folks going the other way.] Table 5 shows that the new bottom-50%-ers have less than the old bottom-50%-ers they're replacing had. They're not necessarily the same folks, as illustrated by Table 6, but the folks unlucky enough to be bottom 50% in 2009 have less than the similarly-unlucky folks did in 2007. It sucks harder now to be a bottom 50%er than it did before -- i.e., inequality has gotten worse.

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* How close? Well, let's go back to the rank corl coef of 0.87 and refer to the 2nd equation in the definition. Noting that rank=n*quantile=n*percentile/100, we can substitute n*p_i/100 for d_i, where p_i denotes the change in percentile for household i. Then we can do a bit of algebra to solve for the root-mean-square change in the percentile, defined as RMS(p_i)=sqrt(sum(p_i^2)/n). The RMS gives us a sense of the typical magnitude change (up OR down) in percentiles that we'd see across all households [NB: it's not the average change; rather, it is related to both the average and the variance via sqrt(var(p_i)-mean(p_i)^2)]. Noting that for large n (here, 10^8 households in the US), we can cancel the (n^2-1)/n^2, we obtain RMS(p_i) = 100*sqrt((1-rho)/(6)) = 14.7 percentile point fluctuation (up or down), which means generally that the people crossing boundaries were within 7.4 percentiles of it to start with.
posted by Westringia F. at 3:03 PM on November 17, 2011

Oh for hell: mean(p_i)=0, obviously, since ranks are ranks. So that's just the SD in the footnote above. *headdesk* Too damn long a day.
posted by Westringia F. at 3:13 PM on November 17, 2011

All these unnecessary statistical debates are really unnecessary and really miss the point.

Simple fact: More people are hurting. More people are on the verge of really hurting. And the people at the top are still making record profits and paying a lower share of their income for taxes, while corporations are being rapaciously greedy.

Income disparity is more of a problem than ever before, because how corporations, the rich, and government respond when things are bad matters far more than when the economy is booming.
posted by markkraft at 4:52 PM on November 18, 2011 [1 favorite]

Robert Reich: Austerity will sink the economy
posted by homunculus at 7:33 PM on November 18, 2011

Meanwhile:

Police pepper-spray non-violent UC Davis students sitting on pavement in the middle of the quad at point-blank range.

The school's chancellor has been called to resign by members of the faculty, for alumni to end their support of the school until she does, and there is a petition online for her resignation that is growing rapidly.
posted by markkraft at 3:55 AM on November 19, 2011 [1 favorite]

The Guardian has released video of the brutal beating of a peaceful Iraq War veteran by Oakland police.
posted by markkraft at 4:31 AM on November 19, 2011

Meanwhile, in Portland yesterday...
posted by markkraft at 7:19 AM on November 19, 2011

Holy fuck, markkraft, the the events at UC Davis following UC Berkley... unbelievable. Wish it weren't buried in this thread. FPP?
posted by Westringia F. at 8:54 AM on November 19, 2011

@westringia I am all for a FPP for this issue, but I do not believe I am the one to make it, as I previously made this one, and the staff of MeFi have problems with it when I make posts that are controversial in nature.
posted by markkraft at 2:22 PM on November 19, 2011

We need to reclaim the First Amendment: The horrific treatment of protesters shows how "free speech" is now reserved for corporations and the wealthy
posted by homunculus at 2:19 PM on November 22, 2011