Life in America: wealth inequality and more

Many of you by now have seen this video:

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(click here to watch it with Spanish subtitles)

It is a few months old, but thanks to Upworthy and a few similar sites has made a big resurgence in recent weeks on social media. Today, a larger infographic was created, telling a bit more about what has changed in the last 30 years. Interestingly, if we look at the chart embedded on mean household income, the picture from 1983 looks a lot like what 9 out of 10 Americans (Democrats, Republicans, and the rest) see an IDEAL wealth distribution in America:

On the down-side, by breaking into 20% portions, the real inequality is masked (the top quarter of the lowest 20% pulls the rest up) and the extraordinarily high income of the top 1 or 2% is masked by the lower portions of the top 20%. Interestingly, the video points out that:

  1. People (again, 9 out of 10) have an ideal of some inequality, but it is a minimal inequalty which allows for social support for those who need it and rewards for those who work hard or (as is often the case) are just lucky.
  2. People believe wealth inquality is too great, but
  3. what they believe is the current state of wealth inequality isn’t even close to the actual state of affairs.
This is a problem. This is a problem for democracy. If people are supposed to make informed decisions in the voting booth, they (we) need to know the actual state of affairs. It is important to understand not only that the situation is vastly worse in terms of inequality than we tend to believe, but also what happens to societies where the top few become too greedy. For those interested in spending a bit over an hour with a lecture via Columbia University which covers much of the last few hundred years in the US and Europe, here is an also very recent lecture called “Inequality in America: The 1% in International and Historical Perspective“:
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And for everyone else, the full “Life in America, 1983 vs Today” infograph:
Life in America: 1983 vs. Today

And for Buddhist content, here is the Buddha recounting his advice to a king in a past life. Note: the context is one where the king wants to make a ‘great sacrifice’ because he’s so filthy rich. The Buddha convinces him of some better ideas and what the ‘best sacrifice’ is.

SPOILER: the best sacrifice is to renounce household life, go forth as a monk, and seek awakening, but that all comes later. first:

Your Majesty’s country is beset by thieves, it is ravaged, villages and towns are being destroyed, the countryside is infested with brigands. If Your Majesty were to tax this region, that would be the wrong thing to do. Suppose Your Majesty were to think: ‘I will get rid of this plague of robbers by executions and imprisonment, or by confiscation, threats and banishment’, the plague would not be properly ended. Those who survived would later harm Your Majesty’s realm. However, with this plan you can completely eliminate the plague. To those in the kingdom who are engaged in cultivating crops and raising cattle, let Your Majesty distribute grain and fodder; to those in trade, give capital; to those in government service assign proper living wages. Then those people, being intent on their own occupations, will not harm the kingdom. Your Majesty’s revenues will be great, the land will be tranquil and not beset by thieves, and the people, with joy in their hearts, will play with their children, and will dwell in open houses.

Kutadanta Sutta (DN 5) translated by Maurice Walshe

We could perhaps replace ‘king’ with corporate CEO if we are to talk about who controls the wealth, but most likely we would think of the Buddha instead talking to the President. Or we might look at it and say “yes, this is happening now, too – but the ‘theives’ ARE the CEOs.” However you see it, the Buddha’s advice of distributing grain to those raising crops (family farmers, not the corporate industrial operations), giving capital (low interest loans?) to those in trade, and to those in service (again think here of the lowest paid, not the fat-cats inside the beltway), assign proper living wages sounds like good and much-needed advice in our day.

  • http://www.florforhillary.blogspot.com Eddie Bryan

    Shit, when it comes to records and movies I’m living in the 80′s.
    I could have thought of some better contemporary music and
    film though I believe. Nurse Jackie and Weeds on TV and
    of course Lincoln and those other nominated the other night.
    But what was said in the info graphic was really serious.
    The top 1% is America’s very real Scrooge.

  • Jason Malfatto

    If Your Majesty were to tax this region, that would be the wrong thing to do.

    I’m not sure what the Buddha’s rationale was for this advice, but taxes – particularly on wealth – need to be higher in the US if we are to stand any realistic chance of correcting the maldistribution of the past few decades.

    Some relevant links that help to make this case are here, here, and here.

    Also, if you haven’t already read The Spirit Level: Why Greater Equality Makes Societies Stronger , I highly recommend it. It draws the correlations between income inequality and a host of social and health problems (from an epidemiological perspective).

    • Hanan

      >realistic chance of correcting the maldistribution of the past few decades.

      Why do the people that have less, deserve to have more? I have less, (actually I have much less), but I don’t understand why I am entitled to more from others?

      • Justin Whitaker

        Hanan, in very simple economic terms: if you’re working, you are producing wealth. In the past your boss took some of that wealth (let’s say 60%), payed him/herself, invested, etc, and left you with the other 40% as take-home pay. Today the ratio is more like 95% to 5% depending on what level you work at and who your CEO/boss is. The real question should be, why is the CEO entitled to make 300 times as much as his average worker, per hour. None of us is opposed to some inequality (I do want to get paid more for teaching – which requires advanced degrees – than I would be paid for filing, and I’m okay with my University President making 3-4 times as much as I’ll ever make because his/her level of responsibility and, again training, are much greater than mine), but I DONT think people should be working full time jobs and not getting out of poverty – in a country with abundant wealth – while the richest people have more money than they could ever need. Again, the janitor is working hard, they do DESERVE fair wage. The CEO is working hard too, and deserves more, but not 300 times as much. That’s a basic wage of $20k/year and a CEO pay of $6,000,000/year. It’s outrageous, and, sadly, many CEOs make even more….

        • Hanan

          No, I am sorry, why doesn’t the CEO deserve 300 times more? Who is to decide? Who is to decide how much money a millionaire needs? Frankly, this is what scares me, when a society would start deeming it necessary to regulate what is “fair.” Just because you or I think a CEO is making too much money, doesn’t mean I should be able to take it. And it certainly doesn’t mean that money should be given to others. Part of the beauty of living a life of Liberty — meaning liberty for all including the man that dreams of being a CEO – is that there are no guarantees. If someone is working full time and not getting out of poverty ( not sure how you define poverty) then that is not the fault of the CEO making millions. I am sure there are mitigating circumstances why Mr. X is having a hard time, but there seems to be a fallacy that from that, it means others have to be paid less. At a certain point this ends up being the re-spun game of the proletariat vs. the bourgeoisie.

          The reason why the CEO should be making more than his average worker???? Simple. It’s because he is the CEO. Meaning, he is incharge of the durability of the company that is hiring these workers. No CEO, no company, no workers. He is not ENTITLED to more money, he EARNED more money, whether you like it or not. It is the FREEDOM of a group of people to come together in good faith and pick someone they freely choose to give X money to, because in the long run it is beneficial. If a group of workers don’t like it, they have the FREEDOM to leave. If society does not like the way a company is run, they have the FREEDOM to not do business with that company. It’s the average worker that should be questioned why he is ENTITLED to have other people’s waged redistributed to him. You can have liberty or you can have equality. If you pick one, you will diminish the other. You simply have to pick which you value more at any given point.

          • http://www.patheos.com/blogs/americanbuddhist/ Justin Whitaker

            “You can have liberty or you can have equality. If you pick one, you will diminish the other.”

            So, America was much less free 30 years ago? And would be more free if 70% of the people were in poverty while, say, 99.9% of the wealth were held by 1% of the people? More free?

            • Hanan

              No. That’s not what I said. If you regulate peoples earning through law, you are taking away liberties whether you like it or not. You can’t have equality of result without removing someone elses liberties. If you are saying “you can’t earn this much, it is not fair, we are going to create a system where you don’t make as much as WE think is fair” you have just diminished freedom. Freedom is not ONLY what is freedome of the press and speech. It’s a basic freedom to live a life with your own pursuits without others pointing fingers and demanding you should not be making what you have worked for.

              It’s a mockery to present this as 70% of people are living in poverty just BECAUSE they aren’t making what the top 1% are making

              • Justin Whitaker

                We *do* regulate earnings through law, by way of taxes. Most of us pay around 30%, last I checked. People who’s income is based on capital gains (investments) pay only 15% (on that income). Of those folks who have things like fancy horses to ‘write off’ often end up paying even less. I don’t think either of us is suggesting we A) eliminate taxes (regulation of earnings) or B) set ‘fair’ limits on earnings. I think we can just tweak the tax code back to the good old days when the more you earned, the more of each additional dollar went to taxes, AND support companies like Costco where the CEO says that it’s better business to pay people more and himself less, and perhaps a few other things…

              • Matti

                Yes, it would be an egregious breech of liberty to tell CEOs that they can’t take 95% off the top of the wealth generated by their workers. Next thing you know we’re telling them that they can’t make their male employees sign prima noctis rights for their male bosses in case they get married.

            • Hanan

              Freedom means many things. One of them is pursuing a career that will pay you millions, working hard and climbing that latter. Everyone has a right to pursuit that achievement as long as it is legal.

      • Jason Malfatto

        Hanan: What Justin said.

        I’ll just add that I think it’s a mistake to assume that people necessarily “deserve” whatever they get as a result of playing the market game – whether that outcome follows from employment, returns on investments, inheritance, or some combination thereof. Or, as political philosopher Michael Sandel put it:

        [W]hile we are entitled to the benefits that the rules of the game promise for the exercise of our talents, it is a mistake and a conceit to suppose that we deserve in the first place a society that values the qualities we have in abundance.

        This might be a blind spot in Buddhist ethics (and politics), what with Buddhism’s emphasis on karmic law as a kind of cosmic justice.

        OTOH, Buddhism also emphasizes compassion and friendliness – virtues that are not exactly characteristic of societies marked by high degrees of economic inequality. (See The Spirit Level or the Equality Trust site – say, starting here – for the evidence on that.)

  • http://www.TaxNetWealth.com Eugene Patrick Devany

    I sponsor the non-commercial website TaxNetWealth.com. There is a graph which illustrates both the distribution and the change in net wealth between 1995 and 2010 at http://www.taxnetwealth.com/01_The_Wealth_Gap.aspx. The video above is wonderful but it does not show how the tax code with its $1.2 trillion in annual tax expenditures caused a redistribution of wealth to the top 10% over the 15 year timeframe. The next 40% of the population (the middle and upper middle class) lost 8% of their net wealth. The poorer 50% of the population (the poor and lower middle class) lost a devastating 70% of their net wealth (going from a 3.6% share down to 1.1% in just 15 years).
    I oppose a “soak the rich” wealth tax on top of progressive income tax rates but I support a revenue neutral 2% net wealth tax (excluding $15,000 cash and $500,000 in retirement funds). This net wealth tax would produce about 40% of federal revenue – enough to eliminate the job killing payroll taxes and provide a sound tax base for Social Security and Medicare benefits. The revenue would also enable the individual income tax to be reduced to a flat 8% (because the $1.2 trillion in annual tax expenditures are not needed with very low tax rates). The combined tax liability would be progressive even though rich and poor would pay the exactly same 2% (net wealth) and 8% (income) tax rates because the top 10% have about 75% of the net wealth.
    The capital gains, estate and gift taxes tend to be wealth tax substitutes and would not be needed if all assets were taxed the same. Taxing all assets and maintaining the U.S. worldwide tax jurisdiction also makes tax avoidance difficult. Best of all, a net wealth tax has a negative reinforcement effect on investment (as in “use it or lose it”). The combination of the low income tax rate with the elimination of the capital gains tax actually accelerates business trade and investment. The elimination of the 15.3% tax on labor encourages consumer spending, full domestic employment and increased profits.
    A 4% VAT would complete what is known as the 2-4-8 Tax Blend and enable the corporate income tax to be reduced to 8%. Every other developed country in the world uses a VAT to reduce corporate taxes. The low corporate income tax rate would also result in trillions of dollars in foreign corporate profits being repatriated to the U.S.

  • Tom Armstrong

    I think that asking people in a survey ‘what they think ought to be a best distribution of incomes’ is unhelpful. I would bet that people are just pulling a notion of what it should be out of their heads on the fly.

    We ought to have goals in mind and forge tax and other government programs and policies to meet our goals. I submit that an important goal ought to be encouragement of social mobility, AND that people do work. Making employment one of our most highly taxed income items is a mistake, I think. To encourage working, payroll taxes should be reduced mightily. Other types of income are today not taxed, include income many receive from bonds of various sorts. This is outrageous to my mind. Money ‘sitting around’ earning interest should be tagged with one of the highest tax rates.

  • http://theoldadam.com/ theoldadam

    In Cuba…there much more equality.

    In North Korea…there is real equality.

    In the old Soviet Union…there was a lot of equality.

    No freedom, though.

    We shoot for equality of opportunity. Not equality of outcomes. The latter always brings tyranny, and suffering, along with “equality”.

    • Justin Whitaker

      I can’t say much about Cuba, but the Soviet Union and North Korea both had/have a small elite of incredibly powerful and rich individuals, supported by the labor of the masses (who, according to one commenter above, shouldn’t complain). I agree that we need equality of opportunity – but that means that ‘basic’ needs that give us an equal starting point, need to be fairly distributed. Things like basic food, medicine, and education for even the poorest people should be provided so that they can reach the same ‘starting point’ as those who are born into relative wealth. Luckily America has many programs to provide these things, but, as we can plainly see, these have been cut greatly over the years and are at risk of further cuts. This both increases inequality and decreases freedom for those not lucky enough to be born into well-off households. It also feeds a host of social ills that can even effect the wealthy. Norway, the Netherlands, Canada, the UK, and Sweden (in fact nearly all other industrialized countries) have noticeably less inequality and better standards of living and happiness amongst the people than the US. One can still get rich there, but when one does, one necessarily (via taxes) benefits everyone around them much more than in the US.


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