Bill Gates reviews a book on inequality
October 16, 2014 12:24 PM   Subscribe

Bill Gates pens a review on Thomas Piketty’s Capital in the Twenty-First Century (multiple previously). He agrees with the book's central thesis on the problem of high levels of inequality and the need for government role that the market alone cannot solve, and calls upon the imposition of a progressive consumption tax, rather than a tax on capital as Piketty proposes.
posted by Apocryphon (153 comments total) 30 users marked this as a favorite
 
I'm only like 40 pages in. Does this review have spoilers?
posted by postcommunism at 12:26 PM on October 16, 2014 [9 favorites]


In this area, he comes from good stock:
Gates [Sr., father of the Microsoft founder] is co-author, with Chuck Collins, of the book Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes, a defense of the policies promoted by the estate tax.
posted by benito.strauss at 12:28 PM on October 16, 2014 [8 favorites]


Yet another "consumption tax" proposed by someone who could never "consume" a significant fraction of his fortune by living normally. Not to mention, Piketty's rentier hypothesis dismissed by someone who I would say is the premiere rentier of the modern era.
posted by sonic meat machine at 12:29 PM on October 16, 2014 [85 favorites]


I'm looking forward to this weekend's WSJ.
posted by ChurchHatesTucker at 12:33 PM on October 16, 2014 [1 favorite]


Yet another "consumption tax" proposed by someone who could never "consume" a significant fraction of his fortune by living normally.

In Gates' defense, he also enthusiastically supports an estate tax.
posted by mr_roboto at 12:34 PM on October 16, 2014 [28 favorites]


Contrary to Piketty’s rentier hypothesis, I don’t see anyone on the list whose ancestors bought a great parcel of land in 1780 and have been accumulating family wealth by collecting rents ever since. In America, that old money is long gone—through instability, inflation, taxes, philanthropy, and spending.

For fuck's sake, Piketty’s directly addresses this very point. He shows how wealth did accumulate throughout the 19th and early 20th centuries but the massive devastation wrought by WWI, the Great Depression, and WWII shattered that. The period from 1950-1970 was a fluke in which inequality dropped, but once the system reordered itself inequality and wealth accumulation has steadily risen again.
posted by Sangermaine at 12:36 PM on October 16, 2014 [41 favorites]


"Guillotines Impractical, Divisively Partisan, Opines Illustrious Monarch"
posted by RogerB at 12:37 PM on October 16, 2014 [86 favorites]


Estates can be gamed. Taxing capital is the way to go, otherwise it gets hoarded rather than invested. Also, you can't hide it in a shell corporation.
posted by Slap*Happy at 12:37 PM on October 16, 2014 [21 favorites]


Yet another "consumption tax" proposed by someone who could never "consume" a significant fraction of his fortune by living normally.

Couldn't you peg it to income/capital levels, the types of goods/services consumed, etc.?
posted by Apocryphon at 12:38 PM on October 16, 2014


Dean Baker responds:
Gates gives us a textbook example of the problems. While he is undoubtedly smart and hardworking, the key to his incredible wealth was the decision by the Justice Department largely to ignore antitrust law. Gates used classic anti-competitive practices to gain and protect a near monopoly in the market for personal computer operating systems.

When the Justice Department finally brought suit in 1998, Bill Gates and the Microsoft team were so arrogant and dishonest that they managed to turn the presiding judge, an appointee of President Ronald Reagan, into an enemy. An appellate court later removed him from the case for bias.

While Gates wants us to believe that his software innovations were a great service to the world, most users of his software would probably not agree. His efforts to corner the market may have made him rich, but they slowed down the process of software development.
posted by ennui.bz at 12:38 PM on October 16, 2014 [60 favorites]


The thing is, if some billionaire wants to spend all their money that's probably a good thing. At least a good fraction of it will make it into the hands of people who make whatever they're buying.
posted by Zalzidrax at 12:40 PM on October 16, 2014 [1 favorite]


While I was joking about spoilers, this seems to be a fairly telling paragraph:
Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane. While it’s true that the wealth of all three people is contributing to inequality, I would argue that the first two are delivering more value to society than the third.
Delivering value in this case is still excusing inequality in that power and autonomy remain concentrated in the hands of private actors who are not beholden to a constituency in the same way a public actor is.

And a consumption tax seems like it would more significantly impact those with already fewer resources, who must spend a much larger (sometimes near 100%) of their available resources on the consumption basics Gates mentions: "food, clothing, housing, education, and health."

Basically, it's easy for me to read that paragraph as something of an apologia for inequality in that the first two people are understood to "deserve" their elevated status (and, perhaps, should keep it even in the face of complaints about inequality), while the third person is (morally?) frivolous and can be safely taxed without endangering the first two.

But I really am only about 40 pages into Capital, so...
posted by postcommunism at 12:40 PM on October 16, 2014 [8 favorites]


Yet another "consumption tax" proposed by someone who could never "consume" a significant fraction of his fortune by living normally. Not to mention, Piketty's rentier hypothesis dismissed by someone who I would say is the premiere rentier of the modern era.

I suppose it's the modern way, but it's really tiresome always to jump to a speaker's motivations rather than the idea espoused by the speaker.
posted by resurrexit at 12:41 PM on October 16, 2014 [29 favorites]


Yeah I mean Dean Baker's critique makes some good points but it sounds like an ad hominem.
posted by Apocryphon at 12:43 PM on October 16, 2014 [3 favorites]


I suppose it's the modern way, but it's really tiresome always to jump to a speaker's motivations rather than the idea espoused by the speaker.

Do you honestly accept every statement made by anyone at face value without regard to their motivations? You must be very susceptible to advertising.
posted by showbiz_liz at 12:43 PM on October 16, 2014 [15 favorites]


Regardless of Gates's motives, Sangermaine is right that Gates obviously didn't read the whole book or he would never have written that paragraph on Forbes and the continuation of wealth.

I guess he thought Skyping with Piketty was a sufficient substitute?
posted by ropeladder at 12:44 PM on October 16, 2014 [2 favorites]


Of course not, showbiz liz. A consumption-based tax will have many flaws and I think it's a worse model than the others (all of which are bad!), but its truth or falsity or public policy value changes not one whit whether it's supported by a single mom who spends her whole paycheck raising her family or a software tycoon.
posted by resurrexit at 12:45 PM on October 16, 2014 [5 favorites]


I mean, it's not even necessarily a bad thing to have the right people be hyper-empowered (in this case by wealth) if they really do feel the weight of it as a responsibility to society at large. But that doesn't seem to be how it works in reality, and I don't see how Gate's proposal actually addresses social inequality due to wealth.
posted by postcommunism at 12:45 PM on October 16, 2014 [1 favorite]


Capitalists gonna Capital.
posted by symbioid at 12:47 PM on October 16, 2014 [3 favorites]


As far as insanely wealthy people go, Bill Gates is pretty alright, but the consumption tax idea is silly. I cannot conceive of a universe in which it would address even those points of Piketty's which Gates even accepts.
posted by Sticherbeast at 12:49 PM on October 16, 2014


Because if we taxed consumption progressively, honest businessmen would never mask personal spending as business expense, right?
posted by Esteemed Offendi at 12:50 PM on October 16, 2014 [6 favorites]


Robber Baron declares his economic power gives him the inherent right to shape the future of the Proletariat. Film at 11.
posted by charlie don't surf at 12:51 PM on October 16, 2014 [11 favorites]


And a consumption tax seems like it would more significantly impact those with already fewer resources, who must spend a much larger (sometimes near 100%) of their available resources on the consumption basics Gates mentions: "food, clothing, housing, education, and health."

Again in Gates' defense, he does call for a "progressive" consumption tax. There are a bunch of ways to engineer this (tax refund based on income, different tax tiers for "luxury" goods, the X tax). Implementation is tricky, but this is the case for just about any taxation system, especially a progressive one.
posted by mr_roboto at 12:52 PM on October 16, 2014 [5 favorites]


Inequality is not a pure evil.

History has shown that extreme inequality is socially destructive. But it has also shown that the means needed to achieve extreme equality are also destructive. The goal is to find a balance where capitalism can still be a great motivator while making the middle of the income bell curve as large as possible.
posted by the jam at 12:54 PM on October 16, 2014 [27 favorites]


Engineer's disease claims yet another victim. Tragic.
posted by entropicamericana at 12:54 PM on October 16, 2014 [6 favorites]


Yeah I mean Dean Baker's critique makes some good points but it sounds like an ad hominem.

How so? He acknowledges that Gates has been a hard "worker," but the point is that the enormous value of MS stock has everything to do with anti-competitive practices by Gates' company. That may be disputable but has nothing to do with his character.

Baker is responding very specifically to this line by Gates:
Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane.
The value of MS stock is both a function of monopoly and the complete lack of enforcement of anti-trust law in the US. If you believe that than there is an enormous part of Gates's $53 billion which is the result totally misallocated capital... no less than the female philanthropist or the playboy billionaire.

But the ironic thing is that software companies would be given unique advantages by a capital tax... assuming it was applied to corporations. MS has little in the way of fixed assets (other than an enormous pile of cash and securities)... essentially the land value of it's corporate campus. This is compared to capital intensive industries like aerospace or steel.
posted by ennui.bz at 12:57 PM on October 16, 2014 [2 favorites]


I mean, it's not even necessarily a bad thing to have the right people be hyper-empowered (in this case by wealth) if they really do feel the weight of it as a responsibility to society at large.

Except that when they are generous they tend to be incredibly generous to institutions that serve their class. This is why Harvard et al get so many donations - often without any significant restrictions beyond naming and area - and community colleges do not. And when they get money it is frequently tied to strategies that are the dear child of the giver, whether or not they make any sense in that context.
posted by lesbiassparrow at 12:59 PM on October 16, 2014 [9 favorites]


I see. It's like if financiers who accumulated massive amounts of capital through rent-seeking or other socially-negative actions had their wealth protected by a consumption tax. Baker's critique makes more sense that way.

This review is ultimately short and rather fluffy, but I still think it should at least spark a discussion on possible approaches to taxation. I don't see why we should rule out consumption tax all on its own- the devil is in the details, after all. And why can't we use various types of taxes? Gates already is in support of a strong estate tax in addition to the consumption tax.
posted by Apocryphon at 1:01 PM on October 16, 2014


I suppose it's the modern way, but it's really tiresome always to jump to a speaker's motivations rather than the idea espoused by the speaker.

Well, I evaluate what people say in the context of their vested interests, yes. I also think consumption taxes are pretty horrible, because people who are as rich as Gates are completely immune to them. Think of it like this: as the amount of money you have goes up, the utility of each dollar goes down. Taking $100 from a guy with $1000 is worse than taking $1000 from a guy with $100000.

Furthermore, even if you tax Gates' helicopter ($13 million) at a luxury tax rate of 200% (so he pays $39 million), that's still 0.05% of his net worth. That's akin to me buying a video game.
posted by sonic meat machine at 1:01 PM on October 16, 2014 [6 favorites]


Sangermaine: The period from 1950-1970 was a fluke in which inequality dropped, but once the system reordered itself inequality and wealth accumulation has steadily risen again.

Gates: Piketty is right that there are forces that can lead to snowballing wealth (including the fact that the children of wealthy people often get access to networks that can help them land internships, jobs, etc.). However, there are also forces that contribute to the decay of wealth, and Capital doesn’t give enough weight to them.

It seems like Gates isn't ignoring Piketty, he's just disagreeing and argues that the forces that lead to redistribution are important. He may be incorrect in that assertion, but I don't see that as a direct misreading of Piketty.
posted by Apocryphon at 1:03 PM on October 16, 2014


Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane. While it’s true that the wealth of all three people is contributing to inequality, I would argue that the first two are delivering more value to society than the third...Like Piketty, I’m also a big believer in the estate tax. Letting inheritors consume or allocate capital disproportionately simply based on the lottery of birth is not a smart or fair way to allocate resources.

Gates argument is inconsistent: why is taxing capital only okay after death? If that works, why not do it during people's lives? Because (he says) inheritors can't be trusted to 'smart[ly] or fair[ly] allocate resources.' But he also says a tax on consumption would take care of that for their parents: that's the whole idea. If they don't allocate their capital in a 'smart or fair' manner, it will be taxed, and if they do, it won't.

Why should we trust a consumption tax to lead businessmen to make 'smart and fair' spending decisions, but not also trust it to do the same for their children?
posted by cjelli at 1:05 PM on October 16, 2014 [2 favorites]


Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane.

And what if you don't do anything with your money? What if you acquire a vast amount of money and just...sit on it? Or swim around in it Scrooge McDuck style? You're then contributing less to society than any of the previous three types of rich people, but under a consumption tax, no matter how progressive, you're also paying less. That seems like a pretty big flaw for someone as supposedly intelligent as Mr. Gates to fail to account for.

Now, you might well ask, who does that? What's the point in getting super-rich if you're not going to spend it? What good is having a giant pile of cash? Well, I have no idea. I am not a billionaire and find that mindset extremely hard to comprehend. Nevertheless, the evidence suggests that's exactly what they're doing.
posted by mstokes650 at 1:05 PM on October 16, 2014 [25 favorites]


Why can't you enact a consumption tax and a capital tax?
posted by Apocryphon at 1:06 PM on October 16, 2014


Apocryphon: Gates uses the fact that the Forbes 400 hasn't been the same for the last 200 years as an argument that the U.S. isn't doing so badly in terms of mobility. Piketty spends a lot of the book arguing that the two world wars and specific mid-20th century policies were the cause of that mobility, and those causes are no longer around.
posted by ropeladder at 1:09 PM on October 16, 2014 [2 favorites]


I don't see why we should rule out consumption tax all on its own- the devil is in the details, after all. And why can't we use various types of taxes? Gates already is in support of a strong estate tax in addition to the consumption tax.

1) consumption taxes are inherently anti-progressive. the less money you make, the more of your total income you consume rather than save. so, a progressive consumption tax is almost an oxymoron... you might as well just talk about progressive income taxes. Does Bill Gates advocating restoring progressivity to income taxes (i.e. a 70% top bracket)? Nope.

2) Gates can't even come out for *raising* the estate tax.
I believe we should maintain the estate tax and invest the proceeds in education and research...
He's just against abolishing it altogether.

Neither of which address the long term consequences of r > g.
posted by ennui.bz at 1:10 PM on October 16, 2014 [13 favorites]


Do you honestly accept every statement made by anyone at face value without regard to their motivations? You must be very susceptible to advertising.

The Bill and Melinda Gates foundation has made 30 billion dollars of grants since its inception.

It doesn't seem unreasonable to give Bill the benefit of the doubt.
posted by Sebmojo at 1:10 PM on October 16, 2014 [6 favorites]


Charity is one thing. Active participation in the establishment of a just social order is another.
posted by No Robots at 1:12 PM on October 16, 2014 [20 favorites]


The other interesting Piketty news this week was this survey of economists that also misunderstood Piketty's claims about r>g.
posted by ropeladder at 1:14 PM on October 16, 2014


Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane.

Was Bill thinking of Jobs, Gates and Ellison there?
posted by plastic_animals at 1:16 PM on October 16, 2014 [16 favorites]


1) consumption taxes are inherently anti-progressive. the less money you make, the more of your total income you consume rather than save. so, a progressive consumption tax is almost an oxymoron... you might as well just talk about progressive income taxes. Does Bill Gates advocating restoring progressivity to income taxes (i.e. a 70% top bracket)? Nope.

Again, the implementation details are important. Couldn't you grant exceptions for consumption on basic needs, and thus do some sort of low-income bizarro version of business expense write-offs? Weigh consumption of luxury goods more? Couldn't you peg the consumption tax to income and capital level as well to have a clearer picture of the living situation of the people taxed?
posted by Apocryphon at 1:16 PM on October 16, 2014


It seems like Gates isn't ignoring Piketty, he's just disagreeing and argues that the forces that lead to redistribution are important. He may be incorrect in that assertion, but I don't see that as a direct misreading of Piketty.

It's not a misreading, the statement I quoted shows he just flat-out didn't read the book because that statement I quote is directly contradicted by what's written there. Gates is just wrong that what he says contradicts Picketty because Picketty explains why we haven't just seen infinite unbroken capital accumulation in the 20th century.
posted by Sangermaine at 1:17 PM on October 16, 2014


Weigh consumption of luxury goods more?

The price differential just doesn't work out like that. A Tesla Model S can be yours for $90k. That's only about four times more than a normal, practical Honda Civic. You can buy a house that is, in effect, a mansion, for only $500k in a lot of places. You could pay three servants living wages for $100k/yr., total. You can buy a great suit for about five times more than a shitty suit from Macy's.

When you're banking millions a year, there is just literally no way a consumption tax will hurt you as much, proportionally, as it hurts the average person.
posted by sonic meat machine at 1:23 PM on October 16, 2014 [8 favorites]


Couldn't you peg the consumption tax to income and capital level as well to have a clearer picture of the living situation of the people taxed?

How would that work, in practice? Do you report your income when you buy stuff so that you can be taxed on it, or do you report all your purchases to the IRS once a year? How would that be enforced?

I'm honestly having a hard time picturing how you would implement a progressive consumption tax that was sufficiently impactful to reduce inequality while also not being wildly impractical to enforce.

A tax on capital seems immeasurably simpler to implement, relative merits aside.
posted by cjelli at 1:28 PM on October 16, 2014 [10 favorites]


Gates is just wrong that what he says contradicts Picketty because Picketty explains why we haven't just seen infinite unbroken capital accumulation in the 20th century.

Fair enough. As I haven't read the book, I'll defer to your critique.

That said, the review itself is fairly short and insubstantial, true. He doesn't go into any of his points in-depth, nor any specific idea of how a consumption tax should really work. But my takeaway is that while Gates' advocacy of the consumption tax could be interpreted as him safeguarding his social class, it could also be interpreted as him further encouraging his fellow billionaires to actually spend their wealth on things that would benefit society. He even mentions Andrew Carnegie. And while a few more robber barons with a conscience certainly wouldn't be sufficient to offset the systematic problems that's causing inequality, at least it's a start towards a greater change in the culture of wealth, no? (Which is a rather sad statement, showing how far we've fallen.)

Now, whether or not that would actually work in reality is a different story.
posted by Apocryphon at 1:31 PM on October 16, 2014 [1 favorite]


Do you report your income when you buy stuff so that you can be taxed on it, or do you report all your purchases to the IRS once a year?

You report your income and your savings. Your spending is your income minus your savings, so that's what you pay tax on.

I prefer a value-added tax which gets paid all along the supply chain, since it discourages tax evasion. If you combine it with a basic income, it gets all the benefits of consumption taxes without mistreating the poor. If you fund the basic income with the consumption tax, you can set it so it's neutral for a family in the middle class, good for the poor, and bad for the rich.
posted by anotherpanacea at 1:37 PM on October 16, 2014 [5 favorites]


Why can't you enact a consumption tax and a capital tax?

It's the KISS principle. Keeping the message simple is essential to having buy-in from the poor, dumb and gullible. Hence Herman Cain's "9-9-9 Plan", or Steve Forbes' "17% Flat Tax".

Explanations about progressive taxation or marginal tax rates etc. are difficult to market or communicate effectively, even though society has proven historically to benefit from applications of progressive taxation. America had its strongest economy during years of progressively higher taxation of higher income brackets. During a downturn, simple-minded solutions like billg's are easier to sell.
posted by a lungful of dragon at 1:38 PM on October 16, 2014 [3 favorites]


Picketty explains why we haven't just seen infinite unbroken capital accumulation in the 20th century.

Well, the real question is whether this is a just-so story. If you have a model, and it holds except when it doesn't, to what extent is your model predictive? Inequality will increase just like it always does, unless it doesn't, like it sometimes doesn't?

Even if Picketty is right, all we know is that inequality increases, so long as nothing happens to stop it from increasing... and the things that can happen that actually work to equalize wealth tend to be massive global catastrophes rather than state-level policies.
posted by anotherpanacea at 1:41 PM on October 16, 2014 [3 favorites]


The real question is, why does anyone give a fuck what Bill Gates thinks?
posted by cthuljew at 1:41 PM on October 16, 2014 [20 favorites]


Well, it is interesting that one today's great capitalists feels compelled to comment on socialism.
posted by No Robots at 1:43 PM on October 16, 2014


A tax on capital seems immeasurably simpler to implement

In a world where everyone owns publicly traded securities outright? Maybe. But not so much in a world of closely held businesses and illiquid assets. The compliance costs would be enormous, putting aside the likely unconstitutionality of such a tax.
posted by jpe at 1:46 PM on October 16, 2014 [3 favorites]


They might not be experts or even knowledgeable about public policy, but they're certainly in a position to affect it, so we should at least consider what they're saying, if at least to defend against it or attack it if necessary.
posted by Apocryphon at 1:47 PM on October 16, 2014 [1 favorite]


A tax on capital seems immeasurably simpler to implement, relative merits aside.

The only widespread current capital tax are real estate taxes. They only work because the value of real property changes relatively slowly in time, compared to other asset classes. When real property values change quickly, there are distortions in valuation for tax purposes which are remedied by an appeals process. For almost every other major asset class, the value of the asset is not easily definable. If you take Gates as example, if he decided to suddenly divest himself of MS stock, the value of that stock would change drastically. This is true for the value of any corporation. So, there is book value... but if you announced a capital tax based on book values of assets, oh my would there be a boom for accountants. And throughout all of this you would have to have an appeals process... who is better able to appeal?

I think the only reason why people on the left go along with Piketty's capital tax idea is that it would require a level of transparency and regulation of capital markets that is tantamount to nationalization.

If you fund the basic income with the consumption tax, you can set it so it's neutral for a family in the middle class, good for the poor, and bad for the rich.

Again, consumption as a fraction of income plummets as you move into the top 1% In an economic recovery which has seen almost 100% of economic growth go to the top 10% You are talking about taking from the middle classes to give to the poor while the 1% float off into the upper atmosphere. That's a wet dream for the right-wing.
posted by ennui.bz at 1:48 PM on October 16, 2014 [11 favorites]


Yes, consumption is a very small fraction of income for the very rich.

But ultimately I don't care about how rich the very rich are; I care about how poor the very poor are. And so I'd prefer a method that a. improves the position of the worst-off, and b. has a broad base of ideological support. A 'national sales tax' and 'social security for all' is a whole lot easier to explain and implement than the global wealth tax.

True, neither of them are very likely. But the global wealth tax is infinitely less likely.
posted by anotherpanacea at 2:06 PM on October 16, 2014 [5 favorites]


anotherpanacea: "I prefer a value-added tax which gets paid all along the supply chain, since it discourages tax evasion."

LOL.
posted by chavenet at 2:11 PM on October 16, 2014 [1 favorite]


That seems like a pretty big flaw for someone as supposedly intelligent as Mr. Gates to fail to account for.

Because Bill Gates is full of PR Bullshit. When you read those breathless stories about how he isn't going to give his fortune to his children read the fine print about how much it is estimated they will actually inherit.

They will still be gifted right into the 6% wealth percentile. His miniscule is about 5.9 Billion people's wildest dream and that ignores the ridiculously advantaged lives they have lead so for.

Bill Gates is trying to squeeze through the eye of the needle and even then he still insists on doing it on his terms. He isn't giving up his wealth. He is using it. He creates his own charities rather than giving up his wealth. He pushes undemocratic agendas hard using his charitable giving.

Bill Gates is a robber baron.
posted by srboisvert at 2:16 PM on October 16, 2014 [12 favorites]


I prefer a value-added tax which gets paid all along the supply chain, since it discourages tax evasion.

It just means that the last purchaser ends up paying a lot more. The middlemen won't eat the price of the taxes.

But ultimately I don't care about how rich the very rich are; I care about how poor the very poor are.

Sure. But regressive taxes literally push the middle downwards, don't move the poor (because if they move into the middle, they get slammed), and allow the rich to continue along the path towards total oligarchy.
posted by sonic meat machine at 2:16 PM on October 16, 2014


Even if Picketty is right, all we know is that inequality increases, so long as nothing happens to stop it from increasing... and the things that can happen that actually work to equalize wealth tend to be massive global catastrophes rather than state-level policies.

That's essentially what Picketty presents, yeah. It's pretty depressing, actually. Even he says his ideas on a global capital tax are pretty unlikely. It seems like short of world disaster or everyone somehow agreeing to come together and stop it, increasing inequality is inevitable.
posted by Sangermaine at 2:20 PM on October 16, 2014


I saw this on another site this morning. It triggered my 'Move along, nothing to see here' response. Fortunately many others here have posted references to Bill Gates' days as a monopolist at Microsoft - so there's no need to belabor the point that Gates' opinions are not to be trusted.
posted by McMillan's Other Wife at 2:23 PM on October 16, 2014 [2 favorites]


Consumption taxes provide a disincentive to spending, which is what we don't want. We want the rich to spend their money. In fact, part of the problem with the rich having so much wealth is that they sit on most of it (how many 50-million-dollar yachts can one multibillionaire own?), and it isn't circulated through the economy. This is why Reagan-style tax cuts don't do jack shit for the economy, whereas things like the EITC and food stamps, etc. are incredibly stimulative.

We need wealth taxes. They have too much wealth. We should take it and spread it around. (Take that, McCain.)
posted by persona au gratin at 2:24 PM on October 16, 2014 [7 favorites]


Even if Picketty is right, all we know is that inequality increases, so long as nothing happens to stop it from increasing... and the things that can happen that actually work to equalize wealth tend to be massive global catastrophes rather than state-level policies.

They don't have to be if we understand the mechanisms by which the problem occurs well enough. Why isn't it possible to enact policies that make it impossible for the pace of investment wealth growth to exceed general GDP growth? All we need to accomplish that is much higher /better structured capital gains taxes.
posted by saulgoodman at 2:27 PM on October 16, 2014


It just means that the last purchaser ends up paying a lot more. The middlemen won't eat the price of the taxes.

They don't eat the taxes now. This is tax incidence 101: the distribution of the tax burden depends on bargaining positions, not who actually pays the bill. The advantage of a VAT is that each link in the supply chain reports on the links before and after: their incentive is that if they report the value-added correctly, they pay less tax.

regressive taxes literally push the middle downwards, don't move the poor (because if they move into the middle, they get slammed)

They're not regressive if the middle class receives an basic income equal to its tax burden. And most poor people would be happy to have middle-class's problems. The idea is to fund a real redistribution of incomes, while incentivizing work and investment.

You've got to tax something: you can tax saving, you can tax working, or you can tax spending. And you want people to spend, save, and consume, sure, so we should definitely subsidize those things. Given those choices, though, it seems obvious that spending is the best thing to tax, and consumption is the best thing to subsidize!
posted by anotherpanacea at 2:28 PM on October 16, 2014 [2 favorites]


sonic meat machine: Yet another "consumption tax" proposed by someone who could never "consume" a significant fraction of his fortune by living normally. Not to mention, Piketty's rentier hypothesis dismissed by someone who I would say is the premiere rentier of the modern era.
That's an incredibly naive, broad-brushed attack on a man who has famously declared he will not pass on (the vast majority of) his wealth to his children, and who has created and funded a charitable foundation with the largest donation in world history, with a multi-year track record of attacking large world problems facing the poor fiercely.

Just because he's white, male, and rich doesn't mean he's evil. Try judging him by his deeds.
posted by IAmBroom at 2:30 PM on October 16, 2014 [1 favorite]


You can also tax investment returns, anotherpanacea.
posted by saulgoodman at 2:31 PM on October 16, 2014


Whatever your theoretical stance towards consumption taxes might be, it does seem to me striking that if you look at OECD countries ranked by Gini coefficient, all the countries that have strikingly less economic inequality than the US have high VAT or GST taxes.

So despite the obvious theoretical objections it is demonstrably untrue in the real world that VAT-style taxes inevitably exacerbate economic inequality.
posted by yoink at 2:31 PM on October 16, 2014 [3 favorites]


yoink! You're back. Good to see you. Right. All those countries have significant transfers/VAT rebates.
posted by persona au gratin at 2:36 PM on October 16, 2014


You can also tax investment returns, anotherpanacea.

Which disincentivizes investment, and is also much easier to evade. The US finance industry was built on complicated tax avoidance procedures, and that's how they managed to shift so much of our retirement savings from fixed-return pensions to market-based 401ks and IRAs.

If wealth is bad, it's bad because it creates inequalities that give the rich too much power over our political system. (Contrast that with poverty, which is bad no matter how equal or unequal we are.) You're not going to get Congress to overthrow the financial sector. Better to find a way to eliminate poverty and let inequality do its thing. So that means that our public policy prescriptions have to be things that can actually get the wealthy on board.
posted by anotherpanacea at 2:36 PM on October 16, 2014


Just because he's white, male, and rich doesn't mean he's evil. Try judging him by his deeds.

...seriously? Do you know anything about how the man got rich? Have you heard of the "embrace, extend, extinguish" mantra? The purposeful scuttling of industry standards? Vendor lock-in at every level of the PC industry? The "Microsoft tax?" The abuse of the H1-B system? Collusion with the NSA?

I mean, Microsoft in the 80s and 90s was pretty much the exemplar of vile, competition-killing corporate practices. You don't make $80 billion by being a nice guy.
posted by sonic meat machine at 2:36 PM on October 16, 2014 [16 favorites]


Andrew Carnegie had a change of heart too, didn't he? Are we to believe people are immutable, or they act the same way in all social contexts? Is redemption a myth? Or at the very least, do we believe that bad people might do good things to try to salvage their legacies?
posted by Apocryphon at 2:40 PM on October 16, 2014 [3 favorites]


Whatever your theoretical stance towards consumption taxes might be, it does seem to me striking that if you look at OECD countries ranked by Gini coefficient, all the countries that have strikingly less economic inequality than the US have high VAT or GST taxes.

And in addition they also have income taxes at rates higher than the U.S. So the correlation is not consumption vs income tax. The correlation is much higher rates of taxation in all forms.

Just to provide an idea of the difference, U.S. taxes at all levels (federal, state, local) amount to 24% of GDP. In Sweden, they amount to 44% of GDP.

If the U.S. taxed at the rate of Sweden, there would be additional tax revenue of $3400 billion a year. Goodbye deficits, goodbye national debt, goodbye Social Security cuts, goodbye Medicare cuts, and say hello to free healthcare for every single person in the country.

None of this is due to the supposed miracles of a consumption tax. It is quite simply much higher rates of taxation of all kinds accompanied by massive redistribution.
posted by JackFlash at 2:59 PM on October 16, 2014 [16 favorites]


Remember, though, that Sweden still has very high levels of wealth inequality.

So the question is: if we know how to improve income inequality but not wealth inequality, shouldn't we at least improve income inequality?
posted by anotherpanacea at 3:02 PM on October 16, 2014 [2 favorites]


Andrew Carnegie had a change of heart too, didn't he?

All the fancy libraries he built didn't bring back the men he had killed in labor strikes.
posted by sonic meat machine at 3:02 PM on October 16, 2014 [17 favorites]


I wonder what their widows thought of St Andrew's "change of heart?"
posted by sonic meat machine at 3:03 PM on October 16, 2014 [1 favorite]


sonic meat machine: Just because he's white, male, and rich doesn't mean he's evil. Try judging him by his deeds.

...seriously? Do you know anything about how the man got rich? Have you heard of the "embrace, extend, extinguish" mantra? The purposeful scuttling of industry standards? Vendor lock-in at every level of the PC industry? The "Microsoft tax?" The abuse of the H1-B system? Collusion with the NSA?

I mean, Microsoft in the 80s and 90s was pretty much the exemplar of vile, competition-killing corporate practices. You don't make $80 billion by being a nice guy.
I stand corrected. He's white, male, rich, AND a ruthlessly unrepentant mass-murderer on the scale of the great tyrants of history. He's probably trying to wipe out malaria and polio just so he can bathe in the blood of healthier infants.

I guess he's so evil that no good idea could possibly come from him, so it's both moral and appropriate we should judge him by the group he belongs to.
posted by IAmBroom at 3:10 PM on October 16, 2014 [2 favorites]


All the fancy libraries he built didn't bring back the men he had killed in labor strikes.

But we're not debating on whether or not if he was good or not. We're debating on whether if he did good things. And somehow, if Bill Gates is capable of doing good things.
posted by Apocryphon at 3:12 PM on October 16, 2014


we should judge him by the group he belongs to.

Yes. That is the inescapable logic of social life. Choose your group well, people.
posted by No Robots at 3:15 PM on October 16, 2014


anotherpanacea:
"But ultimately I don't care about how rich the very rich are; I care about how poor the very poor are."
I'm not certain the riches of the, um, rich can be causally disconnected from the absence of similar riches among the poor and so I'm not sure how you could meaningfully increase the relative share of wealth on one side without making a significant dent into the share of wealth on the other.
posted by Hairy Lobster at 3:29 PM on October 16, 2014


All the fancy libraries he built didn't bring back the men he had killed in labor strikes.

True, but spurning the libraries won't do that, either.
posted by Sticherbeast at 3:35 PM on October 16, 2014 [1 favorite]


True, but spurning the libraries won't do that, either.

Use the libraries to build a just social order.
posted by No Robots at 3:36 PM on October 16, 2014


And in addition they also have income taxes at rates higher than the U.S.

Not by much more in most places when you factor in state tax.
posted by jpe at 3:36 PM on October 16, 2014 [1 favorite]


Use the libraries to build a just social order.

Sure. And if they get used in that way, then we'd all agree that the libraries were quite good, even if Carnegie himself may have been another story.
posted by Sticherbeast at 3:39 PM on October 16, 2014


Just because he's white, male, and rich doesn't mean he's evil. Try judging him by his deeds.

A benevolent dictator is still a dictator. A bigshot philanthropist is still a bigshot. Who decides what is done with Bill Gates' money? Who decides how much of it gets spent on these causes? Oh hey, Bill Gates does. Is he the best person to decide that? Would the world perhaps be better off if Bill Gates had to spend a chunk of that fortune in the form of say, a wealth tax, to perhaps fund some democratically-determined social programs?

Because that's what we're arguing about, to bring this back to the comment that kicked off this apparent referendum on Is Bill Gates A Good Person, Y/N. Bill Gates wants a consumption tax and not a wealth tax. A consumption tax that mainly wouldn't affect him, because he spends his money mainly on philanthropy and charitable causes and not luxury yachts. As far as wealth tax vs. consumption tax, it doesn't matter if Bill Gates is spending his money on good things or not - what matters is that he wants to reserve solely to himself the power to determine how his money is spent, rather than letting our (allegedly) democratic government determine how to spend a portion of that fortune. Bill Gates may very well do wonderful things with the power to determine where billions of dollars go and how they get spent - but he sure isn't willing to give up that power.
posted by mstokes650 at 3:49 PM on October 16, 2014 [18 favorites]


Only Nixon could go to China
posted by rosswald at 3:51 PM on October 16, 2014


Just because he's white, male, and rich doesn't mean he's evil. Try judging him by his deeds.

That wealth was procured by repeated unpunished criminality. Off the top of my head I would guesstimate that his criminal practices took about $400 right out of my pocket. Indirectly he has probably garnished my earnings by thousands and I am not unique. Just about every single person in the world was victimized by Microsoft's criminality because the excess charges they got away with through their actions increased the cost of just about everything that ever involved a computer.

That he, along with his apologists, now wants us to reboot his karma and thank him for the fact that he is spending money on projects of his own choosing is beyond rich. It is stratospheric wealth memory overrun.

Robber Baron.
posted by srboisvert at 3:57 PM on October 16, 2014 [17 favorites]


Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane. While it’s true that the wealth of all three people is contributing to inequality, I would argue that the first two are delivering more value to society than the third.

We have no idea what kind of business #1 is reinvesting in. We have no idea what kind of charity #2 is funding.

We do know that #3 is creating jobs for the makers of yachts and planes, and presumably the crews required to keep them going.

(It's also wrong to say they are "contributing" to inequality. I'll assume they mean "exemplifying".)
posted by IndigoJones at 4:09 PM on October 16, 2014 [4 favorites]


The Bill and Melinda Gates foundation has made 30 billion dollars of grants since its inception.

It doesn't seem unreasonable to give Bill the benefit of the doubt.


This has been beaten pretty well to death, but this is precisely why he has created his charity: so you will forget his past misdeeds. Works every time!

It seems like Gates isn't ignoring Piketty, he's just disagreeing and argues that the forces that lead to redistribution are important.

Argues? He gives one us examined, half-assed example. He didn't argue anything, and he certainly didn't give any kind of authoritative response to Piketty.
posted by Steely-eyed Missile Man at 4:10 PM on October 16, 2014 [4 favorites]


This entire discussion brings to mind a Simpsons episode where Lisa somehow convinced Mr. Burns to use his wealth and power for "good". To her dismay, his solution to world hunger was to invent a device that indiscriminately harvested sea life to create a gruel-like supplement to feed the children of the world. It has been awhile, so I might be miss-remembering the exact plot of the episode, but I think that was overall takeaway of the plot: that even power exercised with charitable intentions by the powerful can have negative effects.

Now that was cartoon, so I don't mean to ascribe cartoonishly evil intent to someone like Bill Gates, but I think it highlights the double-edged sword of charitable giving at such scales. Consider the hypothetical case of a community of coal miners or other industrial workers where strong unions allow for a generally middle class lifestyle throughout the community. Now consider a tycoon figure who uses some sort of power to crush the unions, thus enriching themselves but impoverishing the community. If that tycoon were to then try to use their wealth to alleviate the poverty they caused, would society really have gained anything? I would say no.

I wouldn't necessarily put Bill Gates in that category. In fact, I would argue that the development of the PC industry required something like Microsoft to function as a midway point between the completely closed platforms of companies like Apple and Commodore and the free-for-all of platforms like Linux; although stronger regulation should have been around to curb some of Microsoft's more abusive practices. However, I would not say the same thing about billionaire "philanthropists" like the Walton's and Koch brothers. A consumption tax would not touch the accumulated wealth and power they represent.

Even if you look at the philanthropy of Gate's, I would have to say that his record in terms of the overall good he has done is decidedly mixed. His public health efforts to help eradicate diseases like Malaria are commendable, but it is certainly possible that in a world where wealth is more equitably distributed such efforts might have met with even greater success. I think that this dynamic is most clearly illustrated in the arena of "education reform". The solutions offered by entities like the Gates foundation appear entirely driven by the preconceptions that the "reformers" bring to the problem. As a result, I would say that the reform efforts have failed and probably have worsened whatever problems existed.

In all, I would say the above illustrates how the distribution of wealth affects power in society: the power to decide what problems to address through "charity" and the power to decide how those problems are addressed.
posted by eagles123 at 4:14 PM on October 16, 2014 [9 favorites]


A tax on capital seems immeasurably simpler to implement

Some of the arguments against it include offshore accounts and illicit gains, and under-reporting in general, which requires policing, and wide-spread loathing of the government. The idea of a progressive consumption tax also works sideways when it allows the government to target items for taxation according to their value to society. For example, questionable pesticides might require a major tax to discourage abuse, while fresh food is subsidized on the way to the market.
posted by Brian B. at 4:19 PM on October 16, 2014


It seems to me that Gates is taking a lot of his criticisms from Kevin Hassett, in particular the differentiating capital of varying social utility. Hassett makes the claim that you can't say that property ownership is not in anyway comparable to capital investment in labor. I think that is a different kind of analysis, and in no way invalidates Piketty's work.

Also, the idea that a consumption tax could correct wealth inequality is absurd for the aforementioned reason that the wealthy consume only a tiny fraction of their income, so a consumption tax is necessarily regressive.

I think Gates gets it right when he says this though:

"I agree that taxation should shift away from taxing labor. It doesn't make any sense that labor in the United States is taxed so heavily relative to capital. It will make even less sense in the coming years, as robots and other forms of automation come to perform more and more of the skills that human laborers do today."

The continued devaluation of labor is like global warming: it's happening, most educated observers agree it is problematic, no one has a viable solution and there is a well organized know-nothing movement encouraging us to ignore it. Eventually the only people with "real" jobs will be robot technicians from Sri Lanka or Somalia or wherever the developing economy du jour is, so I honestly don't care about wealth inequality, or the tax structure. If the Forbes of the world want a flat tax, give it to them, hell forget the minimum wage while you're at it - just so long as we have sufficiently high GMI and universal healthcare. We are on the verge of a protracted era of uncomfortably high unemployment, so tweaking the current model of regressive taxation (if you include capital gains) with a piss poor safety net ain't gonna cut it.
posted by Colby_Longhorn at 4:43 PM on October 16, 2014 [2 favorites]


None of this is due to the supposed miracles of a consumption tax.

No one claimed that it was. My point was simply that the question about a consumption tax is always "how is it implemented?" not simply "is it a good thing or a bad thing?" The claim that consumption taxes are inherently evil and necessarily lead to increased inequality does not bear actual comparative examination of real-world cases. The level of analysis in much of this thread ("Gates proposes a consumption tax because this necessarily tends to his advantage as a rich man") is simply silly. What we need to know is what kind of consumption tax he proposes and how he proposes to mitigate its regressive effects.
posted by yoink at 4:44 PM on October 16, 2014 [2 favorites]


so there's this evil bastard who lives down the street from me. he has a really nice garden. should I hate his garden?
posted by philip-random at 5:06 PM on October 16, 2014


What we need to know is what kind of consumption tax he proposes and how he proposes to mitigate its regressive effects.

I was assuming a form of VAT like in Europe, noting that sales taxes are limited to single digits from black markets, and are becoming obsolete with online markets anyway. Another form of consumptive tax only taxes income that is not invested, which would be more favorable to Gates. With the VAT, "the consumer has paid, and the government received, the same dollar amount as with a sales tax." The benefits include collecting more money, and shifting the burden of accounting from individuals to businesses with accountants. One way these taxes become progressive is to use the taxes for progressive purposes, like health care and education.
posted by Brian B. at 5:07 PM on October 16, 2014


Seconding one or two people here, can we at least agree that capital gains should at least be taxed comparably to, you know, actual *work*?
posted by uosuaq at 5:12 PM on October 16, 2014 [7 favorites]


As far as I know, every OECD gives preferential tax treatment to investment income. Which is sorta interesting.
posted by jpe at 5:16 PM on October 16, 2014 [1 favorite]


Oh hey, Bill Gates does. Is he the best person to decide that? Would the world perhaps be better off if Bill Gates had to spend a chunk of that fortune in the form of say, a wealth tax, to perhaps fund some democratically-determined social programs?

Well, it is his money. As for a wealth tax to fund "democratically-determined social programs" any bill proposing that sort of wealth redistribution would be DOA.
posted by MikeMc at 5:28 PM on October 16, 2014 [2 favorites]


But my takeaway is that while Gates' advocacy of the consumption tax could be interpreted as him safeguarding his social class, it could also be interpreted as him further encouraging his fellow billionaires to actually spend their wealth on things that would benefit society. He even mentions Andrew Carnegie. And while a few more robber barons with a conscience certainly wouldn't be sufficient to offset the systematic problems that's causing inequality, at least it's a start towards a greater change in the culture of wealth, no?

Tom Monaghan, the founder of Dominos who spent hundreds of millions on anti-abortion activism, thinks he's spending his wealth on things that actually benefit society. Do you really want robber barons deciding what is beneficial?
posted by layceepee at 5:33 PM on October 16, 2014 [9 favorites]


>The Bill and Melinda Gates foundation has made 30 billion dollars of grants since its inception.

>It doesn't seem unreasonable to give Bill the benefit of the doubt.

This has been beaten pretty well to death, but this is precisely why he has created his charity: so you will forget his past misdeeds. Works every time!


You can't fool all of the people all of the time. If a Robber Baron has so much money he declares it to be "for all practical purposes, infinite," and then he uses that money to establish a monopoly on philanthropy, that is social engineering.
posted by charlie don't surf at 5:33 PM on October 16, 2014 [1 favorite]


What many people on the right propose is a consumption tax to replace income taxes and there is no example of that for any country, let alone ones with low inequality.

So using the example of OECD countries with lower inequality, you need consumption taxes and high income taxes, including high taxes on capital income. You almost never hear someone who favors a consumption tax including those other taxes.

What we need to know is what kind of consumption tax he proposes and how he proposes to mitigate its regressive effects.

Well, of course. And until he does that, he is no better than Paul Ryan pushing his magic asterisks. The simple fact is that consumption taxes on their face are regressive. Where are the details to make them less regressive?

But we already have an income tax system. Instead of creating a whole new complicated tax system, we could accomplish much the same thing by simply increasing the rates on the present income tax and eliminate some of the special treatment for capital income.
posted by JackFlash at 5:33 PM on October 16, 2014 [4 favorites]


If you have a model, and it holds except when it doesn't, to what extent is your model predictive

But that's exactly what a model is. No model predicts everything.
posted by MisantropicPainforest at 5:41 PM on October 16, 2014


If the problem is that the returns on investment are outstripping actual growth, then somebody in the chain is capturing too much value--specifically, investors. The only way to fix that directly is to ensure that, on average, investor returns are level with inflation, not beating it, but investors don't want to hear that, nor do the people who peddle investment for a living.
posted by saulgoodman at 5:43 PM on October 16, 2014 [1 favorite]


Whatever your theoretical stance towards consumption taxes might be, it does seem to me striking that if you look at OECD countries ranked by Gini coefficient, all the countries that have strikingly less economic inequality than the US have high VAT or GST taxes.

So despite the obvious theoretical objections it is demonstrably untrue in the real world that VAT-style taxes inevitably exacerbate economic inequality.


This... is not how evidence for causality works.
posted by MisantropicPainforest at 5:45 PM on October 16, 2014


This... is not how evidence for causality works.

Yes... it is.

If you say X is a sufficient condition for Y, but Y is absent in all the cases of X, then you're wrong to call X the sufficient condition for Y. Apply the same method to variables and look for concomitant variation and you've got a pretty good start on causality.

There are plenty of reasons to believe that income taxes exacerbate inequality more than consumption taxes. Everything we know about work suggests that it's better to be a worker than not; just one example: skills atrophy during periods of unemployment. So a poor person living in a society that subsidizes labor is, ceteris paribus, going to be better off than a poor person living in a society that subsidizes consumption. They'll have more income mobility if they're in the labor market. And if they're working, the society will have more goods and services to distribute than it would have had if they were unemployed.

Most societies have a patchwork of income and consumption and capital taxes, but you can break down the particular situation someone is in and try to compare them to a person in a similar situation elsewhere by thinking about relative taxes. What's it like for low-skilled (legal) immigrants? What's it like for high school dropouts? What's it like for single mothers with a GED? In the US, many people in these positions face extremely high tax rates when they try to work; they lose so many in-kind benefits that they even face negative income prospects for working additional hours at certain points. That means they only work in the grey and black markets, and get stuck in poverty traps.

Which explains why income taxes and income-based benefits tend to exacerbate both inequality and poverty compared to consumption taxes and non-means-tested benefits. (Of course, because it's easier to time-shift consumption, consumption taxes are more volatile. Nothing's perfect, and you'll always need a mix.)
posted by anotherpanacea at 7:47 PM on October 16, 2014 [1 favorite]


So a poor person living in a society that subsidizes labor is, ceteris paribus, going to be better off than a poor person living in a society that subsidizes consumption.

"All other things equal" is the key phrase. We know empirically that the U.S. had its highest rate of economic growth and lowest rate of inequality when income tax rates and capital tax rates were historically the highest. What history suggests is that despite all the theoretical models, in the real world the effective difference between income taxes and consumption taxes is way down in the noise of measurement.

Really, when it comes down to it, as a first order effect, all that matters is how much total tax each person pays, regardless of method, and how must each person receives in transfers, regardless of the method. Take more money from the rich and give more money to the poor. It doesn't need to be complicated, no matter what the economic theorists say.
posted by JackFlash at 8:25 PM on October 16, 2014 [1 favorite]


Really, when it comes down to it, as a first order effect, all that matters is how much total tax each person pays, regardless of method, and how must each person receives in transfers, regardless of the method.

That seems pretty plausible, JackFlash. In aggregate it's almost certainly going to work out that way.

I think there's some strong evidence for margins, though, when it comes to poverty alleviation, as well as poverty exacerbation. This is the so-called 'poverty trap' problem, where the margins at which you might gradually work your way into the middle-class actually put you back into poverty, making you worse off (sometimes for a long time) before you're better off.

Over time, margins can shift aggregates quite a lot. That's Piketty's whole point!
posted by anotherpanacea at 8:41 PM on October 16, 2014


"All other things equal" is the key phrase. We know empirically that the U.S. had its highest rate of economic growth and lowest rate of inequality when income tax rates and capital tax rates were historically the highest. What history suggests is that despite all the theoretical models, in the real world the effective difference between income taxes and consumption taxes is way down in the noise of measurement.

Alternately, high income tax rates and capital tax rates may be the chief engine of economic growth, as they serve to pump money out of the depths in which it tends to pool and then distribute it up* to those who actually need it.

*: Money is described as a liquid. Money, liquid-like, tends to flow toward where money already is (I believe r > g is one way of describing this effect). Liquids, on Earth, tend to flow down, but since our language is set by the rich, and because the rich like to flatter themselves, we describe money as a weird anti-gravity liquid that flows "up" to the "top." This obfuscation is obnoxious and I try to avoid it whenever possible. Money flows down, and the people who have a lot of it are at the bottom, not the top. As such, income redistribution means taking money from the bottom — the real bottom, the thing we tend to describe as the top, the place where everything is wet with money — and sends it back up to the top — the real top, which tends to be bone dry.
posted by You Can't Tip a Buick at 8:42 PM on October 16, 2014 [4 favorites]


Alternately, high income tax rates and capital tax rates may be the chief engine of economic growth, as they serve to pump money out of the depths in which it tends to pool and then distribute it up* to those who actually need it.

I agree. I think a driving force in the recent financial collapse is that income became so concentrated in the top (er, bottom, whatever) 1%. Low tax rates on the rich created a glut of savings looking for someplace, anyplace to go, resulting in risky careless investments. They had to literally invent all sorts of new investment vehicles to sop up the excess savings. Most of these involved lending money to the middle class who had stagnant incomes.

Better to tax that excess income and distribute it to the middle and lower class as transfers rather than as debt that simply increases the income share going to the rich.
posted by JackFlash at 8:57 PM on October 16, 2014 [4 favorites]


so there's this evil bastard who lives down the street from me. he has a really nice garden. should I hate his garden?
That depends on whether there are bodies buried in it.
posted by fullerine at 11:52 PM on October 16, 2014 [3 favorites]


Well, it's not as though they really had nowhere to put their money. I mean, you always can buy treasuries. It's that they have such a shitton of money that throwing a few hundred billion at risky investments that fail isn't a big loss for them. And they might get even richer. Because when you're really rich, it's all about scorekeeping against the other plutocrats.
posted by persona au gratin at 12:02 AM on October 17, 2014


Just as an aside, there are about 100 billionaires in the UK, and only 2 of them, JK Rowling and James Dyson (the inventor) pay the "correct" amount of income tax. The others all use (lawful) tax avoidance schemes to, well, avoid paying tax. I suppose clever rich people would find a way to avoid paying consumption tax as well.
posted by Major Tom at 2:22 AM on October 17, 2014


What if you acquire a vast amount of money and just...sit on it?

Wouldn't this basically have the same effect on the economy as just destroying the money — i.e. disinflation, so everyone else's money is worth more? If your money is in a bin marked "Never use this money", what difference does it make if the bin is destroyed? It seems to me that having money and never using it amounts to giving the money to everyone else who owns the same currency.
posted by martinrebas at 2:49 AM on October 17, 2014


Martinrebas - unfortunately, when everyone KNOWS you own so much money, that very fact influences economic forces in ways that can contribute to inequality. This is why, and call me crazy, I think our definition of wealth needs reform, with a view to becoming more practical and rational - money that no longer significantly participates in the economy should be valued less than it is right now.

As an aside, I'd like to defend Bill Gates a little - he really does have no reason to write a pro-equality article for cynical reasons (PR? Are you kidding? The guy is too rich to give a shit in this fashion). He may of course be mistaken about how to tackle equality, but I'm a little sick of the naive conspiracy theory of society approach.
posted by pixelrevolt at 4:12 AM on October 17, 2014


If you say X is a sufficient condition for Y, but Y is absent in all the cases of X, then you're wrong to call X the sufficient condition for Y. Apply the same method to variables and look for concomitant variation and you've got a pretty good start on causality.

Did anyone here say that consumption taxes are a sufficient condition for inequality? No, what people are saying is that consumption taxes will exacerbate inequality, ceteris paribus.
posted by MisantropicPainforest at 5:00 AM on October 17, 2014


Today's national income tax would be unconstitutional if it weren't for the sixteenth amendment, which gives congress the power to levy it. The constitutionality of a policy isn't an argument for whether the policy is right or not, only for whether the government has legal authority to do it. Those are entirely unrelated concepts.

If solidarity for a particular policy could be established to 3/4 majority, the constitution can be changed, but somehow we seem to achieve a 50/50 split that keeps any real change from happening, and only deepening divides.
posted by I-Write-Essays at 5:04 AM on October 17, 2014


And yet the extant examples of VATs have less inequality. Because the ceteris paribus clause is asking us to hold equal things that are not equal: specifically that VAT systems fund transfers more effectively than income taxes, and they incentivize labor and savings while encouraging thrift. Encouraging the rich to be thrifty is one of the best ways to create social equality, because there's no social benefit from making and consuming luxuries in a conspicuous manner.
posted by anotherpanacea at 5:07 AM on October 17, 2014


Encouraging the rich to be thrifty is one of the best ways to create social equality...

What? Why? The rich being thrifty just leads to them swimming in a pool of gold coins. Buying luxuries at least recirculates that back into the economy.
posted by sonic meat machine at 5:58 AM on October 17, 2014


If your money is in a bin marked "Never use this money"

It's not, though. "Cash" typically comprises short-term loans to companies and governments.

The constitutionality of a policy isn't an argument for whether the policy is right or not, only for whether the government has legal authority to do it.

Obviously, but the original comment was about the feasibility of a wealth tax. The likelihood of being able to institute one is relevant to that.

using the example of OECD countries with lower inequality, you need consumption taxes and high income taxes, including high taxes on capital income.

Our cap gains rate - between 25% and 31% depending on state taxation - is pretty close to the middle of the pack for OECD nations.
posted by jpe at 6:23 AM on October 17, 2014


The rich being thrifty just leads to them swimming in a pool of gold coins.

Not really at all. I think this is at the heart of discussions over wealth and income inequality, so it's important. We all know that the rich own much more than they use; they don't literally stick the rest under their mattresses, though! They lend the money to banks, to governments, and to corporations.

So if I've got a million dollars (I don't, sadly) I can buy a yacht (spurring yacht production) or I can invest it in a corporation that makes something. If most people are buying yachts, then I'll invest in Big Yacht. And indeed a lot of wealthy people get wealthy just selling things to other wealthy people!

But in a thrifty culture, Big Yacht isn't very Big. So instead, I invest in agriculture, or medicine, or computers, because most people are buying food, health, and tech. So instead of owning a yacht, I lend the money to the people making the stuff most people need. Or I lend it to a bank who shares it with people buying houses, starting businesses, etc.

Sure, this is hopelessly simplistic. But the real key here is that thrift is not selfish: thrift is charity. At the end of the day, a thrifty person who doesn't spend their money is letting other people spend it instead. They could have a yacht but instead they loan it to the bank who loans it to someone who needs a home. Somewhere down the road, maybe the rich person will consume a whole lot of yachts, and indeed sometimes they do. But quite often, they don't! (In fact, it's a mark of the nouveau riche that they tend to spend a lot more of their wealth on consumption than the longterm rich do.)

So one concern about very high capital gains taxation rates is that you're encouraging the wealthy to spend rather than invest: you're saying that we'd be better off if they bought more yachts and lent less money to people who want houses and to businesses that want to invest in physical capital.

I think you can acknowledge all this and still think inequality is a very bad thing. In fact, I think you have to acknowledge all this if you want to figure out how to minimize inequality!
posted by anotherpanacea at 6:42 AM on October 17, 2014


Sure, if you invest your money, it recirculates as well. That's not what is happening, though.
posted by sonic meat machine at 7:12 AM on October 17, 2014


Sure, this is hopelessly simplistic. But the real key here is that thrift is not selfish: thrift is charity.

No it's really not, because investors expect inflation-beating returns on their investments on average. That's the original problem that leads to the exact situation Picketty describes. We don't invest to be thrifty, we invest hoping to beat inflation.

If investment were actually viewed and done as thrift or charity, as opposed to being seen as a way to beat currency devaluation due to inflation, this might be a net good, but people (and institutions) have the expectation now that they should be able to reliably beat inflation on average over the long term on their investment portfolios. We can't have and satisfy those expectations without returning more on investments than actual fundamental economic growth justifies, whether that's how we'd like it to be able to work or not. The math doesn't work.
posted by saulgoodman at 7:20 AM on October 17, 2014 [4 favorites]


And yet the extant examples of VATs have less inequality.

Which is in absolutely no way evidence of the claim that consumption taxes do not produce inequality.
posted by MisantropicPainforest at 7:21 AM on October 17, 2014


So one concern about very high capital gains taxation rates is that you're encouraging the wealthy to spend rather than invest: you're saying that we'd be better off if they bought more yachts and lent less money to people who want houses and to businesses that want to invest in physical capital.

Depends. When they lend this money, do they charge interest?

he asked innocently.
posted by You Can't Tip a Buick at 7:33 AM on October 17, 2014 [2 favorites]


Ah, yes, usury. The most redistributive force in our economy! I alone have given tens of thousands of my excess dollars to enrich the poor, beleaguered captains of industry. Truly, their world would be poorer without it.
posted by sonic meat machine at 7:45 AM on October 17, 2014 [1 favorite]


That's not what is happening, though.

Again, cash is an investment. It's a short term loan to a bank for a deposit account or to companies and governments in the case of money market accounts.
posted by jpe at 7:48 AM on October 17, 2014


Consumption taxes make sense in a system with lower inequality, with a large and healthy middle class, and where the proceeds are used to fund programs for those at the bottom of the economic ladder.
posted by Nothing at 7:54 AM on October 17, 2014


That's not what is happening, though.

Just to clarify: if I have a million dollars and just leave it in the bank, it's still being invested by the bank, I just don't get the returns. It still counts as reserves for that bank to lend against. If I keep it in Treasury bonds, it's money for the government to spend on my behalf. And if I keep it literally under my mattress, then I'm still leaving the yacht unbought, which is itself better than buying the yacht: those workers can build someone else a yacht, or better, build something entirely different and useful to others.

And sure, rich people get interest and returns on their investments. But until they transform those gains into consumption, the same principle applies. What we should worry about is not what they save or what they rack up on their balance sheets: that's just money under the mattress. What we worry about is when they spend their money on things that make the rest of us worse off: things we want too but can't afford at that price (like political influence) or don't want anyone to have (like the ability to dominate others).
posted by anotherpanacea at 7:57 AM on October 17, 2014


I wonder if Islamic financial systems without interest tend towards lower inequality. Islamic countries don't seem to stack up especially well on the Gini coefficients, not that that tells you much.
posted by forgetful snow at 8:01 AM on October 17, 2014


Shariah compliant financing is a little like structured finance, with the primary difference being the regulator they're trying to dupe (god and the OCC or Fed, respectively).
posted by jpe at 8:06 AM on October 17, 2014 [3 favorites]


I think, perhaps, simplifying the differences between western and islamic economies to just "charges interest/doesn't charge interest" is a little lazy?
posted by trif at 8:08 AM on October 17, 2014


Liquids, on Earth, tend to flow down, but since our language is set by the rich, and because the rich like to flatter themselves, we describe money as a weird anti-gravity liquid that flows "up" to the "top."

I have always just said "money is magnetic," but I like your liquid/pump metaphor.

I'd like to defend Bill Gates a little - he really does have no reason to write a pro-equality article for cynical reasons (PR? Are you kidding? The guy is too rich to give a shit in this fashion).

He's not too rich to escape basic human psychology, though. Everyone wants to be loved and to believe they're a "good person". I will read the article you linked, though.
posted by Steely-eyed Missile Man at 8:21 AM on October 17, 2014 [2 favorites]


I think, perhaps, simplifying the differences between western and islamic economies to just "charges interest/doesn't charge interest" is a little lazy?

Probably good that I didn't do that, then, and specified "without interest" as a further qualifying factor to "Islamic finance"? This was in response to the suggestion that usury is the most redistributive force in our economy. I did try to find more detailed studies of the impact of riba prohibitions on inequality but with no luck, or at least none that were publically accessible.
posted by forgetful snow at 8:27 AM on October 17, 2014 [1 favorite]


You Can't Tip a Buick: "
*: Money is described as a liquid. Money, liquid-like, tends to flow toward where money already is (I believe r > g is one way of describing this effect). Liquids, on Earth, tend to flow down, but since our language is set by the rich, and because the rich like to flatter themselves, we describe money as a weird anti-gravity liquid that flows "up" to the "top." This obfuscation is obnoxious and I try to avoid it whenever possible. Money flows down, and the people who have a lot of it are at the bottom, not the top. As such, income redistribution means taking money from the bottom — the real bottom, the thing we tend to describe as the top, the place where everything is wet with money — and sends it back up to the top — the real top, which tends to be bone dry.
"

I use this metaphor quite often ... Money = Mass. Like Mass it generates Gravity. The more massive something is, the more it gravitates other mass towards it. The trickle down theory makes sense if by "trickle down" you mean down = gravity = mass concentration of wealth.

Labor, on the other hand, is energy, literally, it is work. I haven't thought too much about that dichotomy (energy of labor as regards mass of money). There is some Marxist work being put towards a probabilistic approach to economics, using thermodynamics as an aim towards understanding the flows of capital. I can't recall the specific book I have on my tablet/reader, but I see there are other sites/papers that touch on this topic.
posted by symbioid at 8:43 AM on October 17, 2014 [2 favorites]


Perhaps rather than allowing the extremely wealthy to lend money at interest, we should just take it from them and lend it out to ourselves interest-free. It strikes me that this would be more effective than the current system, and as a side benefit it would dissuade people from attempting to become extremely wealthy.

Seriously though I can't tell if it's just the bubble I'm in, or wishful thinking, or an actual real thing, but it seems like more and more people — even people who capital finds semi-respectable — are objecting to the fundamental conditions of capitalism. Because of that, I'm less given that I used to be to give antisocial, community-destroying thieves like Bill Gates credit for issuing belated self-serving endorsements of equality that just so happen to drip with disapproval for any actual method we might use to actually institute equality.
posted by You Can't Tip a Buick at 8:46 AM on October 17, 2014 [3 favorites]


It's the bubble you're in.
posted by jpe at 8:50 AM on October 17, 2014 [1 favorite]


It could also be wishful thinking!
posted by You Can't Tip a Buick at 8:51 AM on October 17, 2014 [1 favorite]


Encouraging the rich to be thrifty is one of the best ways to create social equality...

So this is entirely wrong, and actually what is driving our current dilemma. Right now we have net thrift and super cheap money from the Fed (as well as several rounds of QE). The idea that more thriftiness and monetary policy will somehow fix this is disproved by recent history. We need a no bullshit fiscal policy that increases demand, but that is a pipe dream, so likely we're fucked, but here's some reading on the topic of deleveraging and the liquidity trap if you're interested:

Quick article about Richard Koo's deleveraging concerns

Koo's paper on the 'Balance Sheet Recession', Deleveraging and the Lessons from Asia.

Economist article about what Krugman calls the Liquidity trap
posted by Colby_Longhorn at 8:55 AM on October 17, 2014 [2 favorites]


This... is not how evidence for causality works.

Ah yes. The old, "what? How dare you impugn my beautiful hypothesis by examining whether or not it works in the real world!" You are well cut out to be an economist.

Look, if the causal hypothesis is "eating apples is bad for you" and you go study people who eat apples and find they live longer than most other people, that's pretty good (though not conclusive) evidence that the original hypothesis is faulty. If the hypothesis is "consumption taxes exacerbate economic inequality" and you go look at real-world economies and find that there is a negative correlation between consumption taxes and economic inequality, you have good, prima facie reason to be skeptical of your hypothesis. That is exactly how evidence for causality works (and please note that we're talking about "evidence" here not "proof").

It's obviously possible that you might do further analysis and discover that but for those pesky consumption taxes all those more egalitarian economies would be paradises of perfect egalitarianism. On the other hand, you also have to ask yourself "why did these far more egalitarian societies with political cultures far more committed to redistributive and egalitarian ideals see fit to impose these consumption taxes in the first place if they are the inherent evils they seem so evidently to be to me?" You might say to yourself "hmmm. Maybe there's something I'm missing here." Not, of course, if you're an economist, but, you know, if you're a regular person.
posted by yoink at 8:57 AM on October 17, 2014 [1 favorite]


Seriously though I can't tell if it's just the bubble I'm in, or wishful thinking, or an actual real thing, but it seems like more and more people — even people who capital finds semi-respectable — are objecting to the fundamental conditions of capitalism.

Right there with you, and I think it is both an actual real thing and one of the most important things about the Piketty phenomenon. Ten years ago any mention of anticapitalism was seen by the Serious People of the US liberal establishment as prima facie laughable lunacy, in itself a disqualification from the discussion; these days you have to actually use the word "communism" to achieve a similar effect, while advocacy for social democracy seems to be creeping back into more than fringe acceptability.

I'm not sure I see the "real thing" here as a significant change in popular opinion, though — more like a slight change in the prevailing winds of the ruling complex of ideologies, a combination of elite opinion, wonk opinion, and Internet-debate opinion that maybe is less like an emerging faction in popular opinion than a new public face for one that was already there.
posted by RogerB at 9:12 AM on October 17, 2014 [2 favorites]


Encouraging the rich to be thrifty is one of the best ways to create social equality...

Colby_Longhorn: So this is entirely wrong, and actually what is driving our current dilemma. Right now we have net thrift and super cheap money from the Fed (as well as several rounds of QE).
I'm having a hard time parsing how you've managed to interpret "near-0% borrowing from the Fed" and "heavy Fed buyouts of failing megacorporations" as "encouraging the rich to be thrifty". Additionally, capital gains taxes are at record lows.

The rich are being told, point-blank, perfectly directly by the US govt: "BORROW BORROW BORROW SPEND SPEND SPEND!"

High interest rates and high capital gains taxes force the very wealthy into thrift. We are not doing that.
posted by IAmBroom at 9:26 AM on October 17, 2014


Look, if the causal hypothesis is "eating apples is bad for you" and you go study people who eat apples and find they live longer than most other people, that's pretty good (though not conclusive) evidence that the original hypothesis is faulty.

If your n is like, 10 and all the apple-eating people share a whole host of common traits that aren't caused by eating apples but do affect health, then no its not.
posted by MisantropicPainforest at 9:29 AM on October 17, 2014 [1 favorite]


High interest rates and high capital gains taxes force the very wealthy into thrift. We are not doing that.
posted by IAmBroom at 9:26 AM on October 17 [+] [!]

So isn't this what the liquidity trap is about? We're at the zero lower bound for interest rates, and yet for reasons the extremely wealthy are still practicing economically destructive thrift instead of releasing the money they've skimmed from us into the economy. As such, we need more straightforwardly redistributive policies.
posted by You Can't Tip a Buick at 9:36 AM on October 17, 2014 [1 favorite]


Our cap gains rate - between 25% and 31% depending on state taxation - is pretty close to the middle of the pack for OECD nations.

I know you aren't dumb. Of course you know that maximum marginal tax rate is not the same as effective tax rate. And of course you know that picking a few outliers like New York and California is not the same as the average national tax rate when large states like Texas and Florida have no income tax. And of course you know that the maximum federal tax rate is 23.8%, not 25%, but that is just nit-picking. And of course you know that capital taxes include not just capital gains but also dividends and corporate taxes.

When taken all together, the U.S. capital tax rate as a percentage of GDP is near the bottom of the pack. So your original statement is the sort of selective, intentionally misleading information you expect to get out of the Tax Foundation.
posted by JackFlash at 9:42 AM on October 17, 2014 [7 favorites]


Hi, this was a direct response to the idea that:

We all know that the rich own much more than they use; they don't literally stick the rest under their mattresses, though! They lend the money to banks, to governments, and to corporations.

Since we currently have sufficient, even excess, liquidity, I don't see how the rich putting more of their money "in the bank" helps at all. That said if I'm missing something let me know.

Also I think I came off disrespectful in tone in that post, and for that I apologize. I think these kinds of conversations are super important to have, and I don't want to ruin them by being an arrogant dick.
posted by Colby_Longhorn at 9:42 AM on October 17, 2014 [5 favorites]


jpe:
"Our cap gains rate - between 25% and 31% depending on state taxation - is pretty close to the middle of the pack for OECD nations."
While this is nominally true... what's the last time any entity/person with significant income from capital gains actually effectively paid taxes at a rate anywhere near those numbers?
posted by Hairy Lobster at 10:45 AM on October 17, 2014


Since we currently have sufficient, even excess, liquidity,

Very much this. The US Fed is either criminal or stupid; my mind on this changes regularly.

Asset inequality is an outgrowth of cheap money.

Income inequality is an outgrowth of globalization.

Both are traceable to our political lords and masters making nice to our financial lords and masters.

At least, that's my two cents.

what's the last time any entity/person with significant income from capital gains actually effectively paid taxes at a rate anywhere near those numbers?

Impossible to know so long as tax records (outside of publicly held entities) are confidential. Anyway, how do you define "significant"?
posted by IndigoJones at 11:32 AM on October 17, 2014


Since we currently have sufficient, even excess, liquidity, I don't see how the rich putting more of their money "in the bank" helps at all.

Sure, and when it comes to macro I think I'm probably right there with you (although there's good evidence that serious QE that explicitly targets NGDP or inflation is more effective than our half-assed version: see Canada).

But notice: increased growth won't increase equality. If we go back to growing with the old Keynesean tricks, then the capitalists will continue to get more than their fair share of the wealth as we grow. Encouraging the rich to invest in riskier assets will likely just make them richer than they already are (although the risk will redistribute much of that wealth from unlucky wealthy people to lucky wealthy people.)

When I talk about thrift, I just mean the difference between consuming luxuries and saving. I think a world where the rich look more like Jimmy Buffet and less like Paris Hilton is a good one, If we're going to have rich people I prefer they look like Bill Gates and at least try to do something about the most serious suffering in the world. I mean, you don't see a lot of Russian oligarchs trying to cure polio and prevent their families from becoming dynastic.
posted by anotherpanacea at 11:50 AM on October 17, 2014 [1 favorite]


IndigoJones:
"Anyway, how do you define "significant"?"
In a somewhat blurry way. When you're someone like me with a few small investments you end up paying those kinds of taxes but as the numbers get larger more and more doors open up and you get access to a whole range of mostly legal options that will cut your effective tax rates drastically. I remember a post on the Blue a year or two ago that linked to an article which explained a lot of the setups available through banks for avoiding taxes if you're rich enough. Don't have the time to dig it up though.
posted by Hairy Lobster at 12:08 PM on October 17, 2014 [1 favorite]


I think a world where the rich look more like Jimmy Buffet and less like Paris Hilton

I hope you meant Warren Buffet, because an overclass of Jimmy Buffets is my worst nightmare.

increased growth won't increase equality

So, I'm not an expert by any means, so correct me if I'm wrong, but as I read Piketty's simplified theory, r>g, if growth outpaces the rate of return on capital then we do decrease inequality: wages and inflation increase while the value or capital investments decrease.

Also, measures that increase demand should encourage investment in orthodox vehicles rather than exotic and novel schemes.

My point of view on all of this is there should be a more robust debate around the type and magnitude of transfers it will take to actually increase demand, because without those policies in place, discussions around liquidity and revenue seem unnecessary and premature respectively.
posted by Colby_Longhorn at 12:26 PM on October 17, 2014 [2 favorites]


I hope you meant Warren Buffet, because an overclass of Jimmy Buffets is my worst nightmare.

LOL! In fact, there's another brain malfunction in that comment: it's Australia that's targeting inflation effectively, not Canada. Jeeze.

if growth outpaces the rate of return on capital then we do decrease inequality: wages and inflation increase while the value or capital investments decrease.

That's my read, too. I think you have it right. But! Traditional post-recession stimulus measures increase growth by restoring the rate of return on capital. We get higher employment and higher GDP growth, but it's still capital-led.

From your last paragraph I think you're suggesting something a bit novel: transfer-led stimulus. I agree completely: when growth slows, we should stimulate the economy by targeting transfers from the wealthy to the poor and middle class. I take it that the basic income is a way to do this, and I'm open to other kinds of transfers, too. But we have to beware the incentive effects: for instance, if you seek to force transfers by raising minimum wages during a recession, you may exacerbate unemployment problems. That's why a lot of economists argue for EITC increases; you can pay for them by increasing taxes on the wealthy, but it doesn't have the effect of making workers more expensive, in fact it makes them cheaper!

A real helicopter drop seems like the best strategy, but no one else seems to think so.
posted by anotherpanacea at 12:48 PM on October 17, 2014 [1 favorite]


wastin' away in berkshire hathawayaville... lookin' for my lost class A share...
posted by You Can't Tip a Buick at 12:49 PM on October 17, 2014 [4 favorites]


Why Don't We Get Drunk and Screw (The Plebs Out Of Their Retirement Assets)
posted by tonycpsu at 2:38 PM on October 17, 2014 [3 favorites]


Some people say that the rich folks are to blame.

But it's you poors' fault.
posted by Steely-eyed Missile Man at 5:01 PM on October 17, 2014 [1 favorite]


Yet another politically minded mefi thread devolves into filk...
posted by You Can't Tip a Buick at 5:50 PM on October 17, 2014




So Drum's argument per projections post 2050 I've seen before, but:

As it turns out, the book offers no projection at all, but instead provides “a median scenario” of per capita output growth of 1.2 percent. “I am unable,” he writes, “to predict whether the actual rate will be 0.5 percent, 1 percent, or 1.5 percent. The median scenario I will present here is based on a long-term per capita output growth rate of 1.2 percent in the wealthy countries, which is relatively optimistic compared with Robert Gordon’s predictions (which I think are a little too dark). (from the Forbes article)

Also Drum states: "r > g has been true for centuries, but the rich have not gotten steadily richer over that time. Wealth concentration has stayed roughly the same"

I'm not sure if that is a misread or not, but even it we take that at face value, prior to the Depression/WWII there really wasn't a middle class as we know it today, and essentially no mobility - you were either an aristocrat or a pleb, so wealth concentration was nearly 1, right, so how could it have increased. And anyway, there are no shortage of examples dynastic families from antiquity on, so I am inclined to think it is a misread altogether. If he is including the post war era in that statement it is wrong for the reasons listed up thread.

I'm not sure there is anything new or exciting in the Drum piece, but it is always good to question and analyze sexy theories like Piketty's, especially when confirmation bias is such a risk (I'm looking at myself when I say that).
posted by Colby_Longhorn at 7:11 PM on October 17, 2014 [2 favorites]


« Older Women in Clothes   |   In which the host cannot pronounce his own name or... Newer »


This thread has been archived and is closed to new comments