West Coast



West Coast

Public Forum

December 2011

Income Disparity Topic

West Coast 1

Topic Analysis 1/2 2

Topic Analysis 2/2 3

Topic Definitions 4

Pro 5

Yes Income Disparity 6

Income Disparity Is At Record Highs 7

Income Disparity Hurts Democracy 8

The Public Wants To End Income Disparity 9

Income Disparity Causes Class Warfare 10

Income Disparity Hurts Economic Growth 11

Income Disparity Caused The Financial Crisis 12

Economic Growth Key To Democracy 13

Corporations Influence Politics Too Much 14

Con 15

No Income Disparity 16

Income Disparity Is A Myth 17

Class Warfare Will Not Happen 18

Wealth Disparity Does Not Hurt The Poor 19

Economic Freedom Is Good 20

Nothing Wrong With The 1% 21

Occupy Wall Street Is Bad 22

Top 1% Already Pays All The Taxes 23

We Should Encourage High Incomes 24

Topic Analysis 1/2

The Public Forum topic for December2011 is “Resolved: In the United States, current income disparities threaten democratic ideals.” The Pro side of this resolution will argue thatthe political and economic system in America overwhelmingly benefits the top 1% of income earners – skewing the democratic process. The Con side will argue that the influence of money on politics is overstated, and that some level of income stratification is a necessary and desirable byproduct of living in a capitalist democracy. This months Public Forum Briefs are intended to give you a set of evidence to prepare and debate these questions.

TOPIC OVERVIEW

To understand the saliency of this month’s topic, it is useful to have a little background on the ongoing Occupy Wall Street (OWS) protests. OWS got underway in mid-September, and is a spontaneous and leaderless mass protest against the perceived inequalities of the US financial and political system. It is comprised of a group of protestors who are living in Zucotti Park in the Wall Street district of New York City, though it has also spun off to include a host of other “Occupy X” protests in cities around the country. While many people criticize OWS for the lack of a definable political agenda or list of specific demands, it is a byproduct of extreme frustration with the banking and political system following the latest financial crisis. The common theme underlying all of these protests is that the financial system in America unfairly benefits the wealthiest individuals, while leaving the poor and the middle class out in the cold. One of the common tropes of the movement is to divide people into two “classes” – the top 1% of income earners in the US, vs. the 99% of everyone else.

There are many ways to measure and characterize the differences in wages and income between the very rich and the rest of society, such as looking at income statistics, or median wage growth. There is quite a bit of disagreement amongst economist about precisely how large the “income gap” is between the super rich and the middle class, but most estimates agree that concentration of wealth in a smaller number of hands is increasing, and that wage disparity is a growing trend. Some estimates say that as high as 35-50% of all wealth in the U.S. is concentrated in the hands of the top 1% of income earners.

Disparities such as this are one of the primary causes of things like the Occupy Wall Street movement. They also underlie many of the day’s most hotly contested political issues surrounding economics, and especially wealth redistribution – how to deal with the crisis in social security, Medicare, or the tax code all touch directly or indirectly on issues of social justice vis a vis the real or perceived wage gap.

It is worth noting that people in the United States generally disfavor this state of affairs. People on both side of the political spectrum and from most social strata agree that wealth disparity is a problem, and that an ideal society would be a great deal more egalitarian. How to go about solving this problem garners a great deal of different proposals from the right or the left – but in any “democratic” sense, the people of America are unhappy with the status quo.

This month’s topic hinges primarily on how you define “democratic ideals.” Some see the existence of wealth disparities as inimical to values such as equality or social justice – while others view them as simply examples of the American Dream working successfully. It is clear that income disparities have important implications society wide, from economic growth to corporate influence on politics to poverty – whether those impacts are positive or negative revolve largely around the value set you choose to adopt.

Topic Analysis 2/2

DEBATING THE PRO SIDE

First, the Pro will need to defend that income disparities in fact exist. This should be relatively easy – despite some economists opinions to the contrary (discussed below), the general consensus is that the wage gap is large and widening. It has not been a static trend – with wealth gaps changing significantly over time in the last several decades. But by almost any measure income disparities in 2011 are at very high rates historically – some even say “all time highs.” To put it in perspective – many comementators say that the status quo compares unfavorably to wealth disparities which existed during the 1920’s era of “Robber Barons” and unchecked corporate greed.

Next, the Pro should decide on which set of “democratic ideals” they will be defending. Is it the idea of general social egalitarianism? Is it economic equality? Is it a broader sense of social justice? While most people can agree on the basic principles of democratic self-rule, it is much harder to agree on what democracy should be attempting to maximize. Equality would be one of the easiest for the Pro to defend. After all, large income gaps are, essentially by definition, unequal. The Pro also needs to defend how this inequality negatively impacts democracy writ large. Wealth disparity, for example, can be argued to undermine the principle of “one person, one vote,” substituting a crude form of “one dollar, one vote,” where corporations and elite special interests have an outsized impact on American politics.

The Pro could also defend that the existence of large wage gaps pragmatically undermines the US economy – many economists bemoan the decline of the middle class and the negative effects that wealth disparities had on creating a housing bubble which ultimately led to the recent financial crisis. In turn, the Pro can then defend that a healthy economy is a vital precursor to the functioning of any democracy.

The Pro should be ready to defend against charges that income disparity is really a statistical myth invented by the liberal media. The should also primarily be ready to defend against claims that wealth disparities are just an inevitable outcome of the capitalist system. They need to argue that while in theory, anyone can “rise through the ranks” to better their social position, that pragmatically income disparities create an elite plutocracy which can control the system to the detriment of the lower classes.

DEBATING THE CON SIDE

The Con should start by questioning whether or not wealth disparities even exist. There are a number of economists who claim that the Pro’s understanding of economics is off base, and that while the rich have certainly gotten richer, the poor have as well. They argue that rising median wages over the past few decades, along with a complex set of statistical factors actually show that income disparities are not nearly as large a problem as the Pro claims. This is a helpful claim for the Con to win, regardless of the rest of their attacks.

The Con should also defend that current wealth disparities are not necessarily evidence of a system gone wrong. They can argue that the rich have earned their position in society via hard work and ingenuity – and they are entitled to the fruits of their labors. They should argue that freedom to pursue profit in a capitalist economy is what separates American democracy from the failures of socialist economies throughout history – and that the existence of the American Dream is a vital component to US democratic ideals.

They should also argue that one ideal we should maximize is a set of positive incentives for social mobility – and focusing on the 1% is a way to encourage people to reach for the stars – rather than ensuring economic mediocrity for the whole 99%. They should argue the US is hardly experiencing class warfare. An ever increasing segment of society has access to things which were formerly considered the exclusive province of the ultra-rich – after all, everybody these days has an ipod.

Topic Definitions

Current means going on now

RandomHouse Dictionary, 2011, “current,”

1. passing in time; belonging to the time actually passing: the current month. 2. prevalent; customary: the current practice. 3. popular; in vogue: current fashions. 4. new; present; most recent: the current issue of a publication. 5. publicly reported or known: a rumor that is current.

Income disparity means a wage gap for equal labor

InvestorDictionary, 2011, “Income disparity,”

An income disparity or wage gap is most commonly an inequality in pay or salary for equal labor. For example, these terms are commonly used to describe the income differences between males and females for the same job or labor. However, they may be used in any situation when wages are arbitrarily different between two or more groups. However, income disparity is also used by those people concerned with the low level of the minimum wage, relative to the income of the wealthy. In this context, it is not equal money for equal work as it is in the previous sense, but the sense that money should be a just reward, earned when deserved at the rate that is deserved. For example, many jobs the poor take on involve much harder labor than jobs the rich take, and some rich people never work. If that were the case, that would be income disparity, a man works all day and makes less money than a man that does not work.

Threaten means to be a danger to

RandomHouse Dictionary, 2011, “threaten,”

1. to utter a threat against; menace: He threatened the boy with a beating. 2. to be a menace or source of danger to: Sickness threatened her peace of mind. 3. to offer (a punishment, injury, etc.) by way of a threat: They threatened swift retaliation. 4. to give an ominous indication of: The clouds threaten rain.

Democratic ideals are dignity, justice and equality

Paul Gorskiand Bob Covert, 2000, “Defining Multicultural Education,”

The national identity of the individual requires his/her understanding and commitment to the democratic ideals such as human dignity, justice and equality. Here the focus is on becoming effective members of a democratic society. An individual's strong national identification is essential to his/her development of a global identity.

Pro

Yes Income Disparity

Massive income disparity now – most recent statistics prove

Hope Yen, 9-28-2010, “Census finds record gap between rich and poor,” Salon,

The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession. The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968. A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations. At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower. “Income inequality is rising, and if we took into account tax data, it would be even more,” said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in poverty. “More than other countries, we have a very unequal income distribution where compensation goes to the top in a winner-takes-all economy.”

Income disparity is large and growing

Common Dreams, 10-26-11, US Income Disparity, headline/2011/10/26-6

Income for the richest Americans has grown 15 times faster than for the poor since 1979, a government study showed, as a poll out Wednesday highlighted deep anxiety over uneven wealth distribution a year ahead of US elections. The income disparity, and concentration of more than 80 percent of US income wealth in the top 20 percent of earners, highlights the volatility in the race for the White House as President Barack Obama's Republican challengers push plans to reduce taxes for the wealthy as a way to prime the sluggish economy. From 1979 to 2007, the wealthiest one percent of Americans more than doubled their share of the nation's income, from nearly eight percent to 17 percent, the non-partisan Congressional Budget Office said in a report released Tuesday. "Income after transfers and federal taxes for households at the higher end of the income scale rose much more rapidly than income for households in the middle and at the lower end of the income scale," it said.

End of the recession did nothing to end income inequality

Matthew P. Drenna, Prof @ Cornell, 11-14-2011, “Income inequality is bad economics,” Huffington Post,

The Occupy Wall Street movement is a helpful reminder that banks were bailed out by taxpayers while households received no significant government help in avoiding foreclosure, lessening debt burdens, or finding work through a serious economic stimulus. But, we might wonder, why is this anger flaring up now, when economists declare that the Great Recession is over? The answer is the economic condition of millions of individuals is either worse or no better than it was at the depth of decline in 2009. It was recently reported that median household income, adjusted for inflation, has fallen 6.7 percent since the official end of the recession. That verified what millions know to be true -- that inequality has gotten out of hand and no abatement is in sight.

Income Disparity Is At Record Highs

Wealth disparity is at record highs

Michael I. Norton, Harvard Business School, and Dan Ariely, Psychology @ Duke, 2011, “Building a Better America,” Perspectives on Psychological Science,

Most scholars agree that wealth inequality in the United States is at historic highs, with some estimates suggesting that the top 1% of Americans hold nearly 50% of the wealth, topping even the levels seen just before the Great Depression in the 1920s (Davies, Sandstrom, Shorrocks, & Wolff, 2009; Keister, 2000; Wolff, 2002). Although it is clear that wealth inequality is high, determining the ideal distribution of wealth in a society has proven to be an intractable question, in part because differing beliefs about the ideal distribution of wealth are the source of friction between policymakers who shape that distribution: Proponents of the ‘‘estate tax,’’ for example, argue that the wealth that parents bequeath to their children should be taxed more heavily than those who refer to this policy as a burdensome ‘‘death tax.’’

Income inequality is at an all time high

Huffington Post, 8-14-2009, “Income Inequality is at an all-time high,”

Income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression, according to a recently updated paper by University of California, Berkeley Professor Emmanuel Saez . The paper, which covers data through 2007, points to a staggering, unprecedented disparity in American incomes. On his blog, Nobel prize-winning economist and New York Times columnist Paul Krugman called the numbers "truly amazing ." Though income inequality has been growing for some time, the paper paints a stark, disturbing portrait of wealth distribution in America. Saez calculates that in 2007 the top .01 percent of American earners took home 6 percent of total U.S. wages, a figure that has nearly doubled since 2000. As of 2007, the top decile of American earners, Saez writes, pulled in 49.7 percent of total wages, a level that's "higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the 'roaring" 1920s.'" Beginning in the economic expansion of the early 1990s, Saez argues, the economy began to favor the top tiers American earners, but much of the country missed was left behind. "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007," Saes writes.

Median income is dropping like a rock

Matthew P. Drenna, Prof @ Cornell, 11-14-2011, “Income inequality is bad economics,” Huffington Post,

The decline of median income does not represent the reversal of a previously upward trend. To the contrary, the standard of living for most Americans has been in a downward trend for a decade. On the eve of the Great Recession, in 2007, median income was lower than it had been in 2000, the eve of the prior recession. Now it has dropped more. In the three decades prior to 2000, household income for 95 percent of Americans was basically stagnant while the top 5 percent of households captured most of the growth of income. In other words, income inequality marched ever upward, approaching its former zenith of the roaring 1920s.

Income Disparity Hurts Democracy

Experts agree income disparity is a huge problem for democracy

Timothy Noah, 9-3-2010, “The United States of Inequality,” Slate,

But income inequality is a topic of huge importance to American society and therefore a subject of large and growing interest to a host of economists, political scientists, and other wonky types. Except for a few Libertarian outliers (whose views we'll examine later), these experts agree that the country's growing income inequality is deeply worrying. Even Alan Greenspan, the former Federal Reserve Board chairman and onetime Ayn Rand acolyte, has registered concern. "This is not the type of thing which a democratic society—a capitalist democratic society—can really accept without addressing," Greenspan said in 2005. Greenspan's Republican-appointed successor, Ben Bernanke, has also fretted about income inequality.

Income inequality is at record highs – this undermines democracy

STL Today, 9-30-2010, “Record income inequality threatens democracy,”

Income inequality is at record levels in the United States, the Associated Press reported earlier this week after crunching new numbers from the Census Bureau. In fact, income inequality was only slightly greater in 2009 than it was in 2008. But the trend toward greater income inequality has been apparent since the early 1980s — the decade when Gordon Gekko, a fictional character in Oliver Stone’s “Wall Street,” first extolled the virtues of greed. History — even fairly recent history — is not America’s strong suit. We ignore it at our own peril. As far back as 1915, when Wisconsin statistician Willford King published the first comprehensive study of income and wealth in the United States, income inequality stoked fears of those concerned for the future of democracy.

Income disparity is even worse than it was with the Robber Barons – undermines democracy

STL Today, 9-30-2010, “Record income inequality threatens democracy,”

Mr. King would be shocked to learn that the wealthiest 1 percent of Americans today control about a quarter of the nation’s riches. That’s a 66 percent greater share than they controlled at the close of the Gilded Age — the age of Cornelius Vanderbilt, John D. Rockefeller and the so-called Robber Barons. Should you care? Some defenders of the status quo argue that even mentioning the vast and growing income gap is a form of “class envy.” But there’s a reason Andrew Carnegie and some of his wealthy peers eventually gave away most of their vast fortunes: self-interest. They recognized that having large segments of the population locked in dead-end jobs that barely paid a subsistence wage was a recipe for violent revolution, not vibrant democracy. Americans used to have to look to Central American “Banana Republics” to see countries where a small elite controlled most of the wealth. Today, we need only look in the mirror.

The Public Wants To End Income Disparity

The public agrees – wealth should be more equal

Michael I. Norton, Harvard Business School, and Dan Ariely, Psychology @ Duke, 2011, “Building a Better America,” Perspectives on Psychological Science,

Despite these (somewhat predictable) differences, what is most striking about Figure 3 is its demonstration of much more consensus than disagreement among these different demographic groups. All groups—even the wealthiest respondents—desired a more equal distribution of wealth than what they estimated the current United States level to be, and all groups also desired some inequality—even the poorest respondents. In addition, all groups agreed that such redistribution should take the form of moving wealth from the top quintile to the bottom three quintiles. In short, although Americans tend to be relatively more favorable toward economic inequality than members of other countries (Osberg&Smeeding, 2006), Americans’ consensus about the ideal distribution of wealth within the United States appears to dwarf their disagreements across gender, political orientation, and income.

The public overwhelmingly wants money out of politics

People for the American Way, 8-11-2010, “New Poll Shows Americans Want Less Corporate Influence in Politics,”

Last month, we commissioned a poll asking people across the country what they thought of corporate influence in elections and the Supreme Court’s decision in Citizens United to expand that influence. The results were staggering . A whopping 85% of voters surveyed said they thought corporations already have too much influence in our political system. 95 % agreed that “Corporations spend money on politics mainly to buy influence in government and elect people who are favorable to their financial interests.” 77% supported a constitutional amendment to allow Congress to limit the amount corporations can spend on elections, and 74% said they’d be more likely to vote for a candidate who shared that view.

Public wants to end corporate influence on politics

People for the American Way, 8-11-2010, “New Poll Shows Americans Want Less Corporate Influence in Politics,”

Yesterday, released the results [PDF ] of a new poll on corporate money in politics, and guess what? The MoveOn poll found: “79% of voters polled, including 72% of Republicans and 75% of Independents, believe that it’s important that a candidate commit to reducing the influence of corporations over elections” “Almost two out of three voters (60%) disagree with the Supreme Court’s decision in the Citizens United case. Sixty-seven percent of those would be more likely to support a candidate who backs a constitutional amendment to overturn the decision.” “Seventy-seven percent of voters overall (including 70% of Republicans Independents), view corporate election spending as an attempt to bribe politicians rather than an expression of free speech that should not be limited.” No matter how you cut the numbers, the pattern is clear. Americans want voters, not corporate money, to own our democracy.

Income Disparity Causes Class Warfare

Income inequality puts us on the brink of class warfare

Timothy Noah, 9-3-2010, “The United States of Inequality,” Slate,

This was the era in which the accumulated wealth of America's richest families—the Rockefellers, the Vanderbilts, the Carnegies—helped prompt creation of the modern income tax, lest disparities in wealth turn the United States into a European-style aristocracy. The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation's industrialists, and President Woodrow Wilson's attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe. In American history, there has never been a time when class warfare seemed more imminent. That was when the richest 1 percent accounted for 18 percent of the nation's income. Today, the richest 1 percent account for 24 percent of the nation's income. What caused this to happen? Over the next two weeks, I'll try to answer that question by looking at all potential explanations—race, gender, the computer revolution, immigration, trade, government policies, the decline of labor, compensation policies on Wall Street and in executive suites, and education. Then I'll explain why people who say we don't need to worry about income inequality (there aren't many of them) are wrong.

Theoretical upward mobility is insufficient to solve the negative effects of income gap

Timothy Noah, 9-3-2010, “The United States of Inequality,” Slate,

Why don't Americans pay more attention to growing income disparity? One reason may be our enduring belief in social mobility. Economic inequality is less troubling if you live in a country where any child, no matter how humble his or her origins, can grow up to be president. In a survey of 27 nations conducted from 1998 to 2001, the country where the highest proportion agreed with the statement "people are rewarded for intelligence and skill" was, of course, the United States. (69 percent). But when it comes to real as opposed to imagined social mobility, surveys find less in the United States than in much of (what we consider) the class-bound Old World. France, Germany, Sweden, Denmark, Spain—not to mention some newer nations like Canada and Australia—are all places where your chances of rising from the bottom are better than they are in the land of Horatio Alger's Ragged Dick.

People aren’t even aware of the magnitude of the income gap

Michael I. Norton, Harvard Business School, and Dan Ariely, Psychology @ Duke, 2011, “Building a Better America,” Perspectives on Psychological Science,

Given the consensus among disparate groups on the gap between an ideal distribution of wealth and the actual level of wealth inequality, why are more Americans, especially those with low income, not advocating for greater redistribution of wealth? First, our results demonstrate that Americans appear to drastically underestimate the current level of wealth inequality, suggesting they may simply be unaware of the gap. Second, just as people have erroneous beliefs about the actual level of wealth inequality, they may also hold overly optimistic beliefs about opportunities for social mobility in the United States (Benabou& Ok, 2001; Charles & Hurst, 2003; Keister, 2005), beliefs which in turn may drive support for unequal distributions of wealth.

Income Disparity Hurts Economic Growth

Income disparities hurt economic growth

Bonnie Kavoussi, 9-20-2011, “Widening Income Inequality Bad for Economic Growth,” Huffington Post,

The widening gap between the wealthy and everyone else in the United States may be hindering a broader economic recovery, according to a new study. The study out of the International Monetary Fund found that greater income equality positively correlates with stronger economic growth. Released in September, the study more specifically concluded that a 10 percent decrease in inequality increased the expected duration of economic growth by 50 percent. The IMF paper, which studied a sample of countries around the world between 1950 and 2006, found that in countries with more income inequality, such as Jordan and Cameroon, the economy more frequently plunged into deeper recessions, while economic growth lasted much longer in more equal societies. Indeed, greater levels of income equality corresponded more strongly to sustained economic growth than other economic factors, including lower debt levels, according to the report. "Sustainable economic reform," the authors write, "is possible only when its benefits are widely shared." The United States

Income disparities undermine the basis for economic growth

Bonnie Kavoussi, 9-20-2011, “Widening Income Inequality Bad for Economic Growth,” Huffington Post,

Some economists have attributed stagnant wages for most Americans over the past four decades in part to growing inequality , as the rich have mostly benefitted from the country's recent economic gains . And so long as Americans don't spend like before, the economy may not be able to fully recover. Historically the backbone of the U.S. economy, the eroding middle class has created an anemic economy , Berkeley labor economist Robert Reich recently wrote. He emphasized that the spending of the richest people alone is not enough to lead to "a virtuous cycle of more jobs and higher living standards." Nobel Prize-winning economist Joseph Stiglitz agrees. "An economy in which most citizens are doing worse year after year -- an economy like America's -- is not likely to do well over the long haul," he recently wrote in Vanity Fair.

More equal income is key to economic recovery

Matthew P. Drenna, Prof @ Cornell, 11-14-2011, “Income inequality is bad economics,” Huffington Post,

To develop a strong economic recovery and avoid another decade of stagnant income, we need a more equal distribution of income that would promote the strong consumption spending required for full employment. This means enacting a serious stimulus package, protecting collective bargaining rights, and instituting help for homeowners and the long-term unemployed -- tall orders indeed with the Senate Republicans determined and able to block any such efforts. Occupy Wall Street may lack an agenda, but their actions and our grim situation should move Obama to take bold steps. This agenda would anger the banks and Congress, but Obama would be doing the right thing. And given the current unpopularity of the banks, Obama needs them as enemies going into this election.

Income Disparity Caused The Financial Crisis

Income inequality caused the financial crisis

Matthew P. Drenna, Prof @ Cornell, 11-14-2011, “Income inequality is bad economics,” Huffington Post,

The long-term rise of income inequality was a major cause of the unprecedented and unsustainable increase of household debt that brought on the financial crisis and Great Recession. That overhang of debt is hindering our recovery from the Great Recession. Beginning in the late 1970s households attempted to offset their mostly stagnant incomes with three strategies: greater labor force participation by women, working longer hours and/or more than one job, and borrowing and reducing saving to maintain their consumption. The resort to borrowing at an unusually high rate began in 1995. The period from 1995 to 2007, especially post-2000, can be characterized as a perfect firestorm of household indebtedness, fueled by four factors: 1) stagnant or declining real incomes for most households because of the long-term rise in income inequality; 2) unusually low interest rates after 2000; 3) legal and institutional changes that relaxed borrowing standards of lenders, raised the availability of credit, and made housing a more liquid asset; and 4) the housing price bubble. The end came in 2006-2008 with the bursting of the housing price bubble, rising interest rates, the financial crisis, and the Great Recession. It is widely agreed that the enormous run-up of household debt triggered the financial crisis of 2007 and the Great Recession.

Income inequality was the key cause of the financial crisis

Matthew P. Drenna, Prof @ Cornell, 11-14-2011, “Income inequality is bad economics,” Huffington Post,

In all that has been written about the financial crisis and the Great Recession, the usual suspects fingered are low interest rates, shockingly easy credit, the housing price bubble, and reckless leveraging by banks. No noted economists have placed income inequality in the lineup of villains. Long ago, Keynes argued that a more equal distribution of income promoted the strong consumption spending required for full employment. Contrary to Keynes, Milton Friedman claimed that income distribution was not relevant for the theory of consumption. Friedman won that argument, so his theory of consumption, which posits no role for the distribution of income, has become the mainstream theory. One pillar of Friedman's theory is that the rate of saving would be stable in the long run. That assumption, although correct for long periods in the past, was not true for the long period prior to the Great Recession, from 1984 to 2007, when it fell from 10 percent to a low of 2 percent of disposable income. What were consumers doing with all that money they chose not to save and that they borrowed with second mortgages and house refinancing? Federal Reserve data show that they were not purchasing financial assets or paying off other debts. They were spending it. One would think that the drumbeats of a declining saving rate and rising debt leading up to the Great Recession might make mainstream economists question the theory, but that has not happened. Their theory blinded them to the facts.

Economic Growth Key To Democracy

Growth key to democracy

William J Baumol, professor of economics at NYU, Robert E. Litan, Senior Fellow of Economic Studies at the Brookings Institute, and Carl J. Schramm, President and chief executive officer of the Kauffman Foundation,” 2007, Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity

Now, ask the question the other way around: does economic growth lead to democracy? Certainly the experience of South Korea, which for decades after World War II was essentially a benevolent autocracy but eventually became a democratic form of government, supports this view Glaeser et al., 2004). As incomes grow, so does a country’s middle class, which is more likely and able to demand political freedom. Conversely, here is ample evidence that countries already democratic are likely to backslide from that form of government when their economies perform poorly. It is striking, for example, that three-fourths of the collapses of democracies since 1977 were preceded by stagnant growth.2°

Economic decline collapses democracy - empirically proven

Benjamin Friedman, Prof of Political Econ @ Harvard, 2005, The Atlantic, Aug 5, ) ET

Not just in America but in the other Western democracies, too, history is replete with instances in which a turn away from openness and tolerance, often accompanied by a weakening of democratic institutions, has followed economic stagnation. The most familiar example is the rise of Nazism in Germany, following that country's economic chaos in the 1920s and then the onset of worldwide depression in the early 1930s. But in Britain such nasty episodes as the repression of the suffragette movement under Asquith, the breaking of Lloyd George's promises to the returning World War I veterans, and the bloody Fascist riots in London's East End all occurred under severe economic distress. So did the ascension of the extremist Boulangist movement in late-nineteenth-century France, and the Action Française movement after World War I. Conversely, in both America and Europe fairness and tolerance have increased, and democratic institutions have strengthened, mostly when the average citizen's standard of living has been rising. The reason is not hard to understand. When their living standards are rising, people do not view themselves, their fellow citizens, and their society as a whole the way they do when those standards are stagnant or falling. They are more trusting, more inclusive, and more open to change when they view their future prospects and their children's with confidence rather than anxiety or fear. Economic growth is not merely the enabler of higher consumption; it is in many ways the wellspring from which democracy and civil society flow. We should be fully cognizant of the risks to our values and liberties if that nourishing source runs dry.

Corporations Influence Politics Too Much

Corporate influence on politics is only on the rise after Citizens United

Aaron Loudenslager, 11-11-2010, “Corporations shouldn’t influence politics,” North Wind,

Corporate America and its owned subsidiary, which happens to be called the Republican Party, defeated its number one enemy in American politics in the last election. Russ Feingold, a three-term U.S. Senator from Wisconsin who was the only senator to vote against the Patriot Act, lost his re-election bid due to his passionate positions regarding the role of corporations, not only in elections, but also in society in general. Corporations removed one of their fiercest critics by funneling money to the Ron Johnson campaign and by outspending Feingold’s campaign at a rate of 3:1. Ironically, Ron Johnson is a corporate man himself and owns a plastic company in Wisconsin called PACUR. Last year, the Supreme Court ruled in Citizens United v. Federal Elections Commission that corporations cannot be discriminated against because of their “corporate identity” and therefore can spend unlimited amounts of money in elections, even though the holding of this case goes against over 100 years of established case law, including the Supreme Court case Austin v. Michigan Chamber of Commerce.

Corporations run both parties

Aaron Loudenslager, 11-11-2010, “Corporations shouldn’t influence politics,” North Wind,

Why do citizens not trust Corporate America? Is it the fact that between 1998 and 2005 only one-third of corporations paid any federal income tax? Is it the fact that former corporate executives find themselves in federal agencies regulating the industries they once worked for, with examples such as former Goldman Sachs CEO, Henry Paulson? Corporate influence can be seen in both the Democratic and Republican Parties with examples such as Dick Cheney, John Boehner, Max Baucus and Chris Dodd. The Democratic Party is home to the last of the true progressives such as Feingold and Dennis Kucinich (D-OH), but overall it is still captured by corporate interests, just not to the extreme extent that the Republican Party currently is.

Corporate dominance is ruining democracy

Michael D. Shear, 2-16-2011, “Feingold Forms Political Group to Combat Corporate Influence,” NYT,

Russ Feingold, the former Democratic senator from Wisconsin who lost his bid for re-election in November, has formed a new political organization aimed at countering the impact of corporate money in politics. In a video to supporters, Mr. Feingold said that the group, called Progressives United, would try to hold politicians “accountable to the people” rather than to their big-dollar donors. “Washington, sadly, has become a playground for corporations and our lobbyists,” Mr. Feingold said. “It’s time we stood up to the total dominance of corporate power that’s invaded our democracy and hijacked our elections.” Mr. Feingold, who after losing in November took a job teaching at Marquette University Law School, was a crusader against corporate financing of elections while he was in the Senate. He joined with Senator John McCain of Arizona, a Republican, to pass campaign finance laws that sought to limit corporate contributions. But a decision by the Supreme Court last year, Citizens United, overturned much of the Bipartisan Campaign Reform Act, generally known as the McCain-Feingold act, by broadly allowing corporations to contribute to political campaigns.

Con

No Income Disparity

The rich are actually getting poorer – trend has stagnated

David Leonhardt, 1-18-2011, “Income Inequality,” NYT,

But economists say -- and data is beginning to show -- that a significant change may in fact be occurring. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon. This change raises several broad economic questions. Among them is whether harder times for the rich will ultimately benefit the middle class and the poor, given that the huge recent increase in top incomes coincided with slow income growth for almost every other group. Just how much poorer the rich will become remains unclear. Few economists expect the country to return to the relatively flat income distribution of the 1950s and 1960s. Indeed they say that inequality is likely to remain significantly greater than it was for most of the 20th century.

Washington is trying to address income inequality now

David Leonhardt, 1-18-2011, “Income Inequality,” NYT,

With the Senate’s passage of financial regulation in May 2010, Congress and the White House completed 16 months of activity that rivaled any other since the New Deal in scope or ambition. Like the Reagan Revolution or Lyndon Johnson ’s Great Society, the new progressive period has the makings of a generational shift in how Washington operates. First came a stimulus bill that, while aimed mainly at ending a deep recession , also set out to remake the nation’s educational system and vastly expand scientific research. Then President Obama signed a health care bill that was the biggest expansion of the safety net in 40 years. Congress then shaped a bill that would tighten Wall Street’s rules and probably shrink its profit margins. If there is a theme to all this, it has been to try to lift economic growth while also reducing income inequality. It is far too early to know if these efforts will work. Their success depends enormously on execution and, in the case of financial regulation, specifically on the Federal Reserve, which did not distinguish itself during the housing bubble.

Incomes in the US are increasing

James Pethokoukis, 10-31-2011, “Sorry, liberal media, income inequality really is way overblown,” The American,

Over at the Columbia Journalism Review blog, Ryan Chittum takes issue with everything I wrote about income inequality in a recent post. (I don’t think he cared much for the font, either.) My piece merely pointed to several studies — ones rarely mentioned by the mainstream media — that suggest a) income inequality is hardly “exploding,” and b) the past 30 years have hardly been a lost three decades for the American middle class. My response: 1. Chittum thinks I have misused a study by Northwestern University economist Robert Gordon. Does Gordon believe inequality has increased? He does, indeed. The first sentence of the study, which Chittum highlights in his post: “The evidence is incontrovertible that American income inequality has increased in the United States since the 1970s.”

Income Disparity Is A Myth

Income inequality is a myth – data doesn’t support it

James Pethokoukis, 11-1-2011, “The one chart that explodes the myth of U.S. income inequality,” The American,

Promoters of the income inequality meme—Occupy Wall Street, the Obama White House, liberal think tanks, “progressive” bloggers—typically point to data showing how “rich” households and families have been getting even richer vs. those in the middle class. But yet there’s no evidence of any significant change in income inequality among individuals as this gobsmacking chart from the must-follow Political Calculations blog shows: An explanation from PC: The chart [above] shows what we find for each grouping of Americans according to their Gini Coefficient, where a value of 0 indicates perfect equality (everyone has the same income) and a value of 1 indicates perfect inequality (one person has all the income, while everyone else has none). … But here’s the thing. We have already confirmed that there has been absolutely no meaningful change in the inequality of individual income earners in the years from 1994 through 2010. If income inequality in the United States was really driven by economic factors, this is where we would see it, because paychecks (or dividend checks, or checks for capital gains, etc.) are made out to individuals, not to families and not to households.

Income inequality doesn’t exist – it’s a byproduct of family grouping

James Pethokoukis, 11-1-2011, “The one chart that explodes the myth of U.S. income inequality,” The American,

It would seem then that the real complaint of such people isn’t about rising income inequality, but rather, how people choose to group themselves together into their families and households. This is another version of The Big Sort, the supposed red state/blue-state trend of like-minded people clustering with each other. The reason that the income inequality levels recorded for families and households are lower than those for individuals are because most families and households may have one high income earner, who is balanced out by individuals within the families or households who have low or no incomes. But, if people with very high income earning potential join together to form families and households, and increasingly do so over time, perhaps because such people might have things in common that make forming themselves into families and households an attractive proposition, then income inequality among families and households will increase.

No rise in income disparity – median family income is growing

James Pethokoukis, 10-18-2011, “5 reasons why income inequality is a myth” The American,

1. In a 2009 paper, Northwestern University economist Robert Gordon found the supposed sharp rise in American inequality to be “exaggerated both in magnitude and timing.” Here is the conundrum: Family income is supposed to rise right along with productivity. But median real household income—as reported by the Census Bureau—grew just 0.49 percent per year between 1979 and 2007 even as worker productivity grew four times faster at 1.95 percent per year. The wide gap between the two measures, if accurate, would suggest wealthy households rather than middle-class families grabbed most of the income gains from faster productivity. But Gordon explained that this “compares apples with oranges, and then oranges with bananas.” When various statistical quirks are harmonized between the two economic measures, Gordon found middle-class income growth to be much faster and the “conceptually consistent gap between income and productivity growth is only 0.16 percent per year.” That’s barely one‐tenth of the original gap of 1.46 percent. In other words, income gains were shared fairly equally.

Class Warfare Will Not Happen

No class warfare – income disparity is really just a statistical myth

James Pethokoukis, 11-1-2011, “The one chart that explodes the myth of U.S. income inequality,” The American,

The same holds true for the opposite end of the income earning spectrum. If people with really low income earning potential join together to form families and households, or perhaps if they choose to split apart, and increasingly do so over time, then the resulting low income family and household will also make income inequality among families and households rise, even though there has been no real change in the amount of actual income inequality among individuals. So what we have here, as always in America it seems, is culture trumping economics (though the data don’t take into account how different income groups have different inflation rates, another equalizer). AEI’s Charles Murray has a new book coming out that will expand on how values and culture influence inequality. In any event, it is hard to see what of any of this has to do with forcing more equality through higher taxes and more government spending—or class warfare politics.

The middle class is doing just fine – no risk of class warfare

James Pethokoukis, 10-18-2011, “5 reasons why income inequality is a myth” The American,

5. Set all the numbers aside for a moment. If you’ve lived through the past four decades, does it really seem like America is no better off today? It doesn’t to Jason Furman, the deputy director of Obama’s National Economic Council. Here is Furman back in 2006: “Remember when even upper-middle class families worried about staying on a long distance call for too long? When flying was an expensive luxury? When only a minority of the population had central air conditioning, dishwashers, and color televisions? When no one had DVD players, iPods, or digital cameras? And when most Americans owned a car that broke down frequently, guzzled fuel, spewed foul smelling pollution, and didn’t have any of the now virtually standard items like air conditioning or tape/CD players?” No doubt the past few years have been terrible. But the past few decades have been pretty good—for everybody.

The top 1% aren’t exploiting the poor

James Pethokoukis, 10-18-2011, “5 reasons why income inequality is a myth” The American,

Sorry, the story just doesn’t hold together. According to left-wing think tanks, columnist and bloggers—and, of course, the Occupy Wall Street radicals—the top 1 percent have been exploiting the 99 percent for decades. The rich have been getting richer at the expense of the middle class and poor. Really? Just think for a second: If inequality had really exploded during the past 30 to 40 years, why did American politics simultaneously move rightward toward a greater embrace of free-market capitalism? Shouldn’t just the opposite have happened as beleaguered workers united and demanded a vastly expanded social safety net and sharply higher taxes on the rich? What happened to presidents Mondale, Dukakis, Gore, and Kerry? Even Barack Obama ran for president as a market friendly, third-way technocrat.

Wealth Disparity Does Not Hurt The Poor

Wealth isn’t zero sum – the 1% isn’t threatening democracy or equality

Steve Chapman, 11-7-2011, “What Occupy Wall Street Gets Wrong,” Reason,

But wealth and income are not like land. To start with, they are not limited in supply—they can multiply many times over without end, and they have done just that. And, unlike with patches of soil, everyone can get more without anyone consigned to less. There is not much more land in America than there was 50 years ago. But there is far more wealth. Since 1960, the total output of the U.S. economy, accounting for inflation, has more than quadrupled. Total physical assets have done likewise. The conviction among OWS activists is that the rich have improved their lot by taking money from the not so rich—that wealth has been cruelly redistributed upward. What they overlook is that the real gains come from the creation of new wealth. Steve Jobs did exceptionally well for himself, but he made the broad mass of consumers, here and abroad, better off in the process. Same for Sam Walton. What Oprah Winfrey created made her rich, but without her, those creations wouldn't have existed to entertain and gratify her audience.

The Rich are not undermining gains for everyone else

Steve Chapman, 11-7-2011, “What Occupy Wall Street Gets Wrong,” Reason,

The wealthy are far better off than they used to be. But their improvement has not come at the expense of those down the economic ladder. Economists Bruce D. Meyer of the University of Chicago and James X. Sullivan of the University of Notre Dame find that over the past three decades, both the poor and the middle class have made substantial material progress. "Median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009," they reported last month in a paper for the conservative American Enterprise Institute in Washington. Those in the bottom tenth of the income ladder enjoyed comparable gains.

Struggle of the middle class isn’t the fault of the rich – sometimes, bad stuff happens

Steve Chapman, 11-7-2011, “What Occupy Wall Street Gets Wrong,” Reason,

Not that everything is copacetic. The Great Recession has wrought havoc on the middle class and the poor—eliminating jobs, reducing income, and slashing the value of homes. But if it's any consolation, the rich have seen their take shrink as well. Between 2007 and 2009, notes Steven Kaplan of the University of Chicago Booth School of Business, the share of all income going to the richest 1 percent of Americans fell by a full quarter. The miserable reality today is not that the many are doing worse because our capitalist system is set up to fleece them for the benefit of the few. They are doing worse because the economy went through a cataclysm from which it has yet to recover. When the economy crashes, it's those with the least education, fewest options, and slimmest resources who suffer most. That's true, by the way, in non-capitalist societies as well as capitalist ones. In either, people who have done nothing wrong often suffer. At moments like this, it's not surprising that many Americans would resent the wealthy and feel the urge to punish them. But the OWS demand for action against them is the equivalent of honking your horn when you're stuck in a traffic jam. It makes a lot of noise, without getting you anywhere.

Economic Freedom Is Good

Economic freedom under unrestrained capitalism is key to overall freedom

Milton Friedman, American economist, statistician, and public intellectual, and a recipient of the Nobel Memorial Prize in Economics, 2002, Capitalism and Freedom, p. 9

A citizen of the United States who under the laws of various states is not free to follow the occupation of his[or her] own choosing unless he [or she] can get a license for it, is likewise being deprived of an essential part of his [or her] freedom. So is the man [or woman] who would like to exchange some of his [or her] goods with, say, a Swiss for a watch but is prevented from doing so by a quota. So also is the Californian Who was thrown into jail for selling Alka Seltzer at a price below that set by the manufacturer under so-called “fair trade” laws. So also is the farmer who cannot grow the amount of wheat he [or she] wants. And so on. Clearly, economic freedom, in and of itself, is an extremely important part of total freedom. Viewed as a means to the end of political freedom, economic arrangements are important because of their effect on the con-centration or dispersion of power. The kind of economic or-ganization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.

History proves it’s best to leave things up to the free market – key to freedom

Milton Friedman, American economist, statistician, and public intellectual, and a recipient of the Nobel Memorial Prize in Economics, 2002, Capitalism and Freedom, p. 9

Historical evidence Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity. Because we live in a largely free society, we tend to forget how limited is the span of time and the part of the globe for which there has ever been anything like political freedom : the typical state of [hu]mankind is tyranny, servitude, and misery. The nine-teenth century and early twentieth century in the Western world stand out as striking exceptions to the general trend of historical development. Political freedom in this instance clearly came along with the free market and the development of capitalist institutions. So also did political freedom in the golden age of Greece and in the early days of the Roman era.

Capitalism is moral

Robert W. Tracinski, 2003, The Moral Basis of Capitalism,

Capitalism is the only moral social system because it is the only system that respects the freedom of the producers to think and the right of the individual to set his own goals and pursue his own happiness. With the fall of communism and the alleged end of the "era of big government," many commentators and politicians grudgingly acknowledge the practical value of capitalism. The free market, they concede, is the best system for producing wealth and promoting prosperity; the private economy, in Bill Clinton's words, is the "primary engine of growth."

Nothing Wrong With The 1%

Nothing wrong with wealth disparity – they take more risk and deserve more reward

Eugene Apicella, 11-10-2011, “1 percent not to blame,” Florida Today,

Don't blame '1 percent' for their success In response to Tuesday’s Rhonda Abrams’ column, “Small biz is part of the 99 percent,” the Constitution guarantees equal opportunity. It doesn’t guarantee equal outcome. That small businesses make what they make is irrelevant to what the top 1 percent of the earners make, or to what the top 1 percent own. One must consider the risk/reward equation — the reward should be commensurate with the risk one takes. If the risks outweigh the rewards, you don’t take the risk unless you’re an adrenaline junkie. If the rewards outweigh the risks, the market will adjust for the discrepancy.

Targeting the 1% is wrong – too generalizing

Charles C.W. Cooke, editor at National Review, 11-1-2011, “Who are the 1 percent,” National Review Online,

There is a real and potentially fatal problem with the “Us vs. Them” narrative that Occupy Wall Street has made the focal point of its campaign — most famously with the “99 percent against the 1 percent” rhetoric — and that is that it does not transmute smoothly into the more intimate “Me vs. You.” It is one thing haphazardly to generalize about “the 1 percent,” or “the rich,” or “Nazi bankers” and “fascist policemen,” and quite another to get down to cases. When I interviewed a lady who labeled the bankers and the police “Nazis,” she was notably reluctant to describe any one of those to whom I pointed in such extreme terms — “Well, maybe not him personally . . .” Put a face on an epithet, and the vitriol soon dwindles; indeed, the targets who retain their “miscreant” sticker even when named tend to be a long, long way away — far enough removed to be usefully employed as abstractions. This was something I noticed particularly keenly on Friday, at Occupy Wall Street’s march on the banks.

Protestors can’t even agree on who the 1% is

Charles C.W. Cooke, editor at National Review, 11-1-2011, “Who are the 1 percent,” National Review Online,

A number of participants may well fancy themselves actors in a glorious revolution, but they nonetheless have their work cut out in identifying their targets, especially given the understandable temptation to issue a waiver to anyone who so much as shows his face. Until OWS not only decides upon a plan of action but agrees on who exactly fills the “1 percent,” the band of shady figures who are allegedly corrupting the sacred principles of our democracy will remain steadfastly in silhouette. Referring to the recent Citizens United case, representatives of OWS frequently tell me that “corporations aren’t people.” As a matter of constitutional law that is debatable. But as the protesters mean it, the statement reveals a fundamental problem for those who are storming Bastilles across the country. You cannot put Citigroup’s head on a stick.

Occupy Wall Street Is Bad

Occupy Wall Street is nothing more than a witch hunt

Charles C.W. Cooke, editor at National Review, 11-1-2011, “Who are the 1 percent,” National Review Online,

How could they know what to make of him, though? “Occupy” is running a national chain of makeshift boarding houses for the terminally disaffected, the prerequisite to opening a franchise being only proof of sufficient indignation indefinitely to maintain a lease. This is not to suggest that there is no reason for the dissidents’ disquiet, or to deprive many of the boarders of their legitimate reasons to be upset with their lives (even if, more often than not, their plight has a radically different root cause than the one they have identified). But, justifiable angst aside, establishing exactly who is their problem remains elusive to most. Kevin D. Williamson put this most brilliantly in the last-but-one issue of National Review, in which he described the protesters as essentially being on a “witch hunt,” searching for any explanation of why their crops had failed.

OWS doesn’t even have demands – they would just hurt the 99%

Brian Bock, 11-14-2011, “Occupy Wall Street, a good idea gone horribly wrong,” Chatham Journal,

All protests should have a clear goal in mind. I ask myself what is the goal? Is it to shut down commerce as was done in Oakland by closing the port? Is it to completely shut down all major banks? Shut down wall street? Close the businesses that happen to operate in the vicinity? All of these are extremely dangerous to the health of the United States. What happens if the big banks are forced out of business? What if the ports are shut down for an extended amount of time? What if all the small businesses surrounding the protest areas shut their doors? Who is hurt by all of this? The 1% or the 99%? First hundreds of thousands of jobs will be lost directly, then hundreds of thousands more will be lost indirectly (suppliers etc.) Who is hurt -- the CEO or the bank teller?

Occupy Wall Street is detrimental to the 99%

Brian Bock, 11-14-2011, “Occupy Wall Street, a good idea gone horribly wrong,” Chatham Journal,

Stock prices would understandably drop dramatically. That would show the 1%, wouldn’t it? What about the millions of Americans who count on pension funds that have invested in the stock market? Again, it’s the average guy, the policeman, the union worker, the teacher being hurt. I get frustrated when I read articles by National and local journalists praising the movement while at the same time denigrating the TEA party. Compare all you want, but the facts are; all after all the TEA party protests, NOBODY was arrested. NO assaults, NO rapes, NO property damage, and even with all of the talk about gun-toting right wingers there were no shootings. That can’t be said about OWS.

Before anyone supports this movement any longer, please look at the results and consider the ramifications. Most of us agree that the bailouts were poorly handled by all involved, but these occupations are not the answer. Let’s hit the “reset” button and start a peaceful debate. Too many innocent 99 percenters are being hurt.

Top 1% Already Pays All The Taxes

The wealthiest 1% already pay an incredibly large percentage of total income tax

Catherine Rampell, 7-30-2009, “Top 1% Paid More in Federal Income Taxes,” NYT,

The top 1 percent of taxpayers paid 40.42 percent of total federal income taxes in 2007, according to the most recent data from the Internal Revenue Service .This represents the second year in a row that the richest 1 percent paid more in federal income taxes than the bottom 95 percent (not, however, the bottom 99 percent). This was noted in a blog postfrom the Tax Foundation, an organization that promotes lower tax rates. For comparison, here’s a chart showing the portion of adjusted gross income earned by the top 1 percent and by the bottom 95 percent. You’ll see that one major reason why the share of taxes paid by the richest Americans has risen is that the richest Americans have experienced much greater income growth: And here’s a chart showing the portion of income taxes paid by the top 1 percent and those by the bottom 99 percent (so that altogether 100 percent of federal income taxes are included):

Most taxes are already paid by the wealthy

Heritage Foundation, 2011, “The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes,”

Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.

The rich already pay all the taxes – US system is progressive

Robert Longley, 2011, “Who Pays the Most Income Tax?”

Feeling overtaxed? Under the U.S. income tax system, most of the taxes collected are supposed to be paid by the people who make the most money. Thanks to President Bush's tax cuts, that is exactly the way the system works, says the U.S. Treasury Department. According to the Office of Tax Analysis, the U.S. individual income tax is "highly progressive," with a small group of higher-income taxpayers paying most of the individual income taxes each year. In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.8 percent) of all individual income taxes, but reported roughly one-third (30.6 percent) of income. The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002. This group of taxpayers has paid more than 30 percent of individual income taxes since 1995. Moreover, since 1990 this group’s tax share has grown faster than their income share.

We Should Encourage High Incomes

Rising tide is key to American self-image – should allow income via merit

Gene Sperling, Fall 2007, “Rising-Tide Economics,” Democracy Journal, Iss. 6,

Perhaps a better phrase to capture the notion of shared prosperity was John F. Kennedy’s observation that “a rising tide lifts all boats.” For progressives, the rising-tide metaphor is not a causal assumption that growth will automatically raise everyone. Rather, it is the aspiration and test for economic policy: Does it both raise the tide and lift all boats? This vision of shared prosperity is not only demanded by the global, interdependent economy, but rooted in the historic values of the progressive vision of the United States. Moving forward, we must recognize that the economy is undergoing a profound transformation, making it distinct from both the industrial era and even the beginnings of the Internet Age just a decade ago. In such a world, economic growth can be explosive, but growth alone is not enough. For Americans, shared prosperity, an opportunity for upward mobility, and economic outcomes determined more by merit than the accident of birth are fundamental to who we are as a nation.

We should seek to benefit those at the top, not the bottom – key to incentives

Eric Falkenstein, 6-14-2011, “In Defense of Trickle Down Policy,”

Milton Friedman noted the perverse change in direction in his lifetime:I was able to go to [college in the 1930s] because . . . The state of New Jersey at that time offered scholarships on a competitive basis. Had a series of exams, and the people who succeeded in those exams and who could demonstrate financial need received free tuition at Rutgers . . . The tragedy is that the state of New Jersey in their new incarnation now has a similar program, but the qualification for getting a scholarship is below average academic quality . . . It typifies what's happened in our society. Instead of emphasizing strengthening the opportunities open to the able, we have tended increasingly to shift into a state of victims in which the emphasis is on raising the people at the bottom. Now, no social progress has ever come from the bottom up. It's always come from the top small number pulling up the society as a whole and raising it.This from EducationNews , which has a nice timeline of the mortgage crisis, how it started with such good intentions, and many little milestones. Reversing the rewards structure to help those at the bottom hurts incentives, and doesn't help those at the bottom any more than my kid's 'participation trophies' help them gain self-esteem. It just encourages ever more intrusive policy on the theory that it merely wasn't sufficient.

Rich poor gap is central to the American dream – you can make it if you work hard

Economist, 6-15-2006, “The rich, the poor and the growing gap between them,”

AMERICANS do not go in for envy. The gap between rich and poor is bigger than in any other advanced country, but most people are unconcerned. Whereas Europeans fret about the way the economic pie is divided, Americans want to join the rich, not soak them. Eight out of ten, more than anywhere else, believe that though you may start poor, if you work hard, you can make pots of money. It is a central part of the American Dream. The political consensus, therefore, has sought to pursue economic growth rather than the redistribution of income, in keeping with John Kennedy's adage that “a rising tide lifts all boats.” The tide has been rising fast recently. Thanks to a jump in productivity growth after 1995, America's economy has outpaced other rich countries' for a decade. Its workers now produce over 30% more each hour they work than ten years ago. In the late 1990s everybody shared in this boom.

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