Tuesday, October 22, 2013

The Great American Income Shift...

by: Les Carpenter
Rational Nation USA
Liberty -vs- Tyranny

There has been a great shift in wealth in America. As the video will show the shift is decidedly and hugely in the direction of the very top income earners. If this continues unabated our nation is staring down the barrel of great social unrest and the upheaval that always follows. Simply put the present income distribution scenario, if it continues on its current path will result in the system collapsing on itself. One way or another.

Fixing Capitalism so a much broader base of Americans can create a measure of wealth and security for themselves and their family, thus growing the American middle class once again, is not socialism or collectivism. It is good common sense and it is the only thing that will ultimately save Capitalism. Corporations and CEO's were doing just fine back in the 50's, 60's, and 70's and so was the rest of America economically speaking. What has changed? Watch the video to find out.

Hat Tip: Progressive Eruptions


  1. Thank you, Les, for posting this.


  2. What changed since World War II? The rise of the plutocracy and the decline of the middle class – perfectly correlated with changes in marginal tax rates! What else has changed? A major political party that frames stalking points for the plutocracy and games the system on their behalf - but no longer represents the middle class.

    Since WWII, there has been a massive redistribution of wealth - but not in the direction claimed by the GOP or their sock puppets. These days, wealth floats to the top - while debt and privation sinks to the bottom. How bad is it, you ask? This bad: A 20% increase in wealth for the top, a 3% decline for the bottom, and less than 1% for the rest.

    Such thinking is self-destructive because there cannot be capitalism without consumers; and there cannot be consumers when the middle class is starved for cash.

    Furthermore, income inequality has made the Great Recession worse and the recovery far weaker than expected. Meanwhile, plutocrats and their sock puppets trade on fears and insecurities, shortages and debt, ignorance, envy, and resentment.

    I'll be posting my own thoughts later this week.

    1. You said (O)CT(O)PUS... "Such thinking is self-destructive because there cannot be capitalism without consumers; and there cannot be consumers when the middle class is starved for cash."

      I would simply add... and is shrinking in numbers as we speak.

      Capitalism, the greatest creator of wealth is being destroyed by those who fail to realize what rational self interest is.

      Henry Ford knew what it was. But there are no more Henry Ford the 1'st alive these days.

  3. But who will reverse this?

    The SCOTUS is corrupt and just pimping for huge campaign contributors.

    Congress is bought and sold.

    The police have been thoroughly militarized to protect us from the scary Muslims (and to put down nasty protests).

    Our media are virtually useless and dedicated to tripe.

    And I have to say, RN, the Libertarians absolutely do not realize that a stable, more egalitarian society is in their rational self interest.

    1. You said Ducky... "And I have to say, RN, the Libertarians absolutely do not realize that a stable, more egalitarian society is in their rational self interest."

      On this we are in agreement. As an individual I strongly support much of what the Libertarian party advocates. However, on the economic side it amazes me that so few seem to understand what rational self interest really means.

      There is no question in my mind this nation needs to get its fiscal house in order and spend no more than we take in. But cutting taxes while at the same time increasing spending doesn't seem to make much sense.

      In my mind it is all a matter of priorities. Obviously the priorities of our elected officials are arranged in a nonsensical way.

  4. I began worrying about the problem back in the 70s as mfg started off-shoring and those jobs shrank.
    It is argued that the economics required cheaper labor because we weren't productive. Yet, US productivity has risen far faster than wages in this country. We note some economic experts say that only better US productivity can reverse the wealth distribution process- but what about those places
    where we now buy our consumer goods? Productivity in terms of GDP/hours worked:
    United States 63.27
    Japan 44.5
    Singapore 43.8
    Taiwan 39.8
    S. Korea 29.7
    ...the economics of outsourcing were so favorable that we now call the insurance company or the
    software company and get "Hello, how can I help you? This is Rob" in a thick foreign accent. So
    we are left with fast food jobs, government jobs, retail....we don't make stuff anymore. High end
    banking does not create wealth, it moves money around, sucking from here and piling it there.
    We cut taxes on the wealthy, while the 99% are burdened with sales tax, FICA and property taxes;
    a poorly designed idea that investment and trickle down would gradually expand the middle class and raise their equity. I did the opposite, IMO.
    So aside from the moral inequity, I agree with you Les- we are staring down 'the barrel of great
    social unrest', but there are still many who seem blind to it. We need to wake up and do something
    before we become another third world country.

  5. BB Idaho, tour points are all spot on.

    As a manager in manufacturing for many years my labor costs as a percentage percent of my organizations overall cost averaged about 10%, a relative insignificant number.

    When your competition is domestic, and everyone is operating at decent efficiency with material costs close between competitors then yes that 10% can make a difference and finding ways to increase productivity is important to the bottom line.

    But we are in a global marketplace and we have the most productive workforce in the world yet we cannot compete without going offshore. The problem is clearly not labor productivity related.

    How this is going to shake out is uncertain. But my money rests on serious social unrest, a serious depression, and the results will be exactly what Capitalists have railed against for years. MORE GOVERNMENT CONTROL and HIGHER TAXES. Long term rational self interest seems not to have been part of their equation.

    It's now off to conduct my stability ball strength training session.

  6. I remember many years ago reading William F Buckley, something he wrote back in the 70's, lamenting the lack of US domestic investment as compared to Japan, Germany and such. William Friggin Buckley. Not many intelligent conservatives left out there anymore.

    The state is like a body, and if you let a body age and decay, it will die, all the cells, not just those here or there. We utterly and completely wasted trillions of dollars on the military after WWII. That is the difference now. That is the reason why the numbers change the way they do after the war. We wasted our national treasure on the military instead of the physical and institutional health of the body republic.

    After WWII, for the first time in our history, we did not stand down. We have essentially been in a constant state of war for 72 years now. 72 years. 3 1/2 generations wasted.

    We may not be able to emerge from this in the end. After all, every generation lost is one more removed from the intellectual opportunity to right things.


  7. I guess that I have to be the odd man out on this one. First of all, these are static categories that the ominous voice is talking about here, not actual flesh and blood human beings. If you look at the income data over time you will see that close to 60% of the people in the bottom quintile are out of it (a large chunk of which move up 2 quintiles) within a decade and I strongly suspect that the same would hold true for wealth. Also not figured into the equation are transfer payments (not to mention money that's been made under the table) which significantly increase the purchasing power of the bottom 20%. I cite, for example, data from the Department of Labor which has shown that consumption as a percentage of income has gone up from 112% in 1961 to 198% in 2007.......And what exactly is this ominous voice suggesting that we do here? Take the people's property? Confiscate their money. Take them into oblivion (which wouldn't work anyway in that the government actually collected more per capita at a 50% top rate than they did at a 91% top rate). It's kind of unclear to me.

  8. And BB's assertion that we "don't make things anymore" is false. Yes, China has surpassed us as the #1 manufacturer but we are still a strong #2 (at close to 20% of the world's output - not bad, considering that we're only 5% of the population). That, and our manufacturing sector has actually been growing steadily since WW2 (by nearly 6-fold, adjusted for inflation). Yes, we have been losing jobs but that has probably been more due to automation than to outsourcing.......Oh, and as for "making things" being a sign of a strong economy, I really gotta go somewhat negative on that one, too. I mean, just look at countries like Cuba. Their manufacturing sector as a % of their total economy is almost 3Xs what ours is. Does anybody (other than possibly wd) really think that Cuba is a country that we should be emulating?

    1. A suggested reading, "Three Billion New Capitalists." It is nigh time to start thinking outside the box. Our global competitors have.

    2. Having seen the skewed (and skewing) wealth distribution figures, I'm not as optimistic as Will. Currently, manufacturing as a %GDP in the US is 12.9%;
      China 37.4% - S. Korea 30% - Taiwan 27% - Germany 20.7 %.
      ...The US manufacturing sector has gone down from its high of 28.6% (#1 to #5) as a GDP
      sector, while finance and real estate has gone up (#4 to #1) from 10.5 to 21.4% while the
      old bugaboo, government has remained fairly steady. These figures reflect $/GDP, not
      the resulting shifts in jobs or incomes...but they are definitely related.
      IMO, because of vested interests, our view of the situation is colored by money in politics.
      Chamber/ banks/ wealth have shifted blame (if there is any) to unions and teachers. Very
      successfully, if you read the right wing blogs. If self-described 'christians' and 'patriots'
      fall for that line, I'm not surprised. Most libertarians tend to be more thoughtful and think in a larger box from what I've seen.

    3. The manufacturing sector has increased nearly 6-fold (adjusted for inflation). The only reason that its percentage of GDP has gone down is because the other sectors (retail, energy, tech, health, finance) have increased at an even greater clip. And there does seem to be a Renaissance in manufacturing as we speak in that a lot of businesses are starting up here because of the cheap and abundant natural gas that we've discovered. Yeah, I'm relatively optimistic (as long as the EPA doesn't go completely bonkers).

    4. Any renaissance is a chimera, wishful thinking.

  9. jmj, your mention of William F. Buckley brings back memories of a time when conservatives coild stand proud. A time when being a conservative meant something far different than it does today.

  10. Just imagine if we had just spent 20% less on the military all these years, and instead spent that money on education or research or energy efficiency or just not spent it at all. Just imagine that. It makes a huge difference.


  11. Since we are imagining jmj, I think that if we had used that imagined 20% for honest scientific research and maintaing and improving our infrastructure would have made a great positive difference. Or, as you said just not have spent it al all..

    But we did spend that 20% on the military industrial complex, often foolishly and with little to now concern for our nation' rational self interest.

    So, here we, still stuck in our cold war mentality, and all the rest of our 20th century thinking believing that we should continue doing more of the same. That jmj is the thinking of the modern republican party. The Tea Party wing with its talk about fiscal responsibilty and controlling the national debt and deficits has that much right. Now, if they were serious they would argue for a return to Clinton era marginal tax rates and begin a serious discussion on how and where to reduce spending to arrive at balanced budgets.

    But Cruz, Gohmert, Bachman, Palin, Rubio, et all aren't really serious people. To a greater or lesser degree they want to keep doing the same things over again.

  12. There is a story of entrepreneurship within my family – witnessed within my lifetime - that gives me a historical perspective. My grandfather was a master-machinist who tried and failed at several manufacturing startups during the 1920s and 30s. His break came during World War II when he received a government contract to produce shell casings for the war effort.

    After the war, with no more demand for military parts, he was forced to change direction, adapt to a peacetime economy, and retool the family business. He turned the business into a manufacturer of consumer products, specifically kitchen cutlery. During the 1950s, the firm employed about 1,000 people and became a famous household name (these are some of the trademarks and design patents registered by my family. The photos no longer refresh but you get the idea).

    Trends in outsourcing started – not with China in the 1990s – but almost immediately after the post war period. You can talk about American labor costs and productivity, the high price tag of cold war militarism, or substandard infrastructure investment – all true – but you miss another perspective that gets almost no mention in the history books: How economic policy was turned into an instrument of foreign policy.

    In brief, the countries defeated during WWII were devastated economies, and the U.S. was determined not to repeat the mistakes of the first World War – namely, to recreate the conditions of privation and resentment that led to the next world war. Hence, the post-war reconstructions of Germany, Japan, and other industrialized nations ravaged by war.

    The economics of manufacturing in the U.S. started to change in the late 1950s when the cost of finished goods manufactured in Asia became cheaper than the cost of raw steel in the U.S. My family, for instance, started to outsource in the early 1960s, and the business changed from net manufacturer to net importer within a decade.

    Trade with China is another example of how economic policy turned was into an instrument of foreign policy; in this instance, global trade was used as an instrument for promoting capitalism in a communist country – resulting in economic interdependence as a means of keeping the peace.

    There is a point when you should start normalizing national priorities, declare your foreign policy initiatives a success, and start taking care of your own country and people.

    We have not yet crossed this threshold.

  13. Here are two excellent articles on the subject....and of course once again one of them totally disproves Will and his "quintile" argument...



  14. What have you disproved? The only thing that these 2 rump articles put forth is the same old static categories argument. AGAIN, according to the IRS's own data, 58% of the INDIVIDUALS in the bottom quintile in 1996 were out of it by 2005 and a fair chunk of them had moved up more than one quintile. And the mechanisms for this are such things as increased education, finding a better job, getting a promotion within a certain company, etc.. Where did you and Obama get this ridiculous notion that human beings are these helpless creatures who are forever stuck at a certain station in life? It's bizarre.

    1. First off, your use of IRS quintiles is uniformative because the IRS only has five quintiles and here is what the data looks like for 2011:

      Quintile Upper Limit Mean

      Lowest $20,262 $11,239
      Second $38,520 $29,204
      Third $62,434 $49,842
      Fourth $101,582 $80,080
      Highest Fifth -- $178,020

      For a family of four the official poverty rate in 2011 would put them in the second quintile. Your focus on "58%" who move up one quintile or more just means that poverty had a cost of living raise.

  15. And even amongst the very wealthy, and according to Forbes, 273 of the Forbes richest 400 were totally self-made. We live in a country in which 4-5 kids with a computer can make a million dollars almost overnight and that shouldn't get lost on the road to socialism, protectionism, either.

    1. In a country with a populaiton of over 300 million you want to claim that a pool of 400 is representative of the total? You want to claim where 273 of 400 is representative of the whole? Since 96 of these 273 self made their wealth with investments (with the vast majority of that wealth being created back over 20 years ago at a minimum), do you want to claim that this is true today?

    2. Will,

      There is an old saying: You are what you eat. Similarly, you believe what you read. If you live inside a partisan bubble of spin and talking points, you’ll never attain a more comprehensive picture, or the truth.

      Here, for instance, is a report from the Organization for Economic Cooperation and Development (OECD). It concludes that social mobility in the U.S. is dramatically lower compared with other developed countries. The U.S. ranks well below Denmark, Australia, Norway, Finland, Canada, Sweden Germany, and Spain in terms of how freely people move up or down the social ladder.

      Another is this report: America Without a Middle Class, which states:

      The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

      But core expenses kept going up. By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago -- for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance.

      To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder

      Or this: Harder for Americans to Rise from Lower Rungs.

      Or this: Social immobility erodes the American dream.

      Bon appetite.

    3. Bullcrap, Tao (the part about the bottom quintile only getting a cost of living raise). If you look at the actual flesh and blood human beings in the bottom quintile in 1996, their income actually went up 91% (adjusted for inflation) by 2005. That and the people in the top 1% showed a 26% decrease during that same time frame. And these are numbers that come from the IRS.............And those numbers that you put forth here a) don't include transfer payments (which obviously increase a person's purchasing power) and b) are family statistics. I mean, are simply not aware that the families in the upper socioeconomic classes have significantly more workers per household than those in the lower ones (4 times as many; 2 compared to .5) and that that is a major factor for the discrepancy?

    4. Will, my numbers came from the IRS website...and the IRS has only five quintiles thus any claim you make about the top 1% and the IRS is bogus. Tell me how the IRS determines how many workers are in a household? How exactly do you determine that there is a ".5" worker in a household? If you would THINK about your own statistics you would realize that the 58% of people the rise out of the bottom quintile in 10 years do so because they go from single, part time employed teenager to full time employed married with two incomes household. But as a household with two incomes and two kids, raising from the bottom quintile to the second quintile you still are below the national poverty level.

      Remember Will, when you quote "THE IRS" that is exactly the place I begin my search to come up with my points to question your illogic....

    5. I misspoke. The data that I came up with was from a 2007 study by the Treasury Department and it pertained to INDIVIDUAL (though, yes, a lot of it is young people moving up the food chain) tax returns. That, and the workers per household statistic was derived from the U.S. Census Bureau - http://www.startribune.com/opinion/commentaries/118617054.html - As for the .5 workers stat, that's an average, Sherlock (some families having no workers, some having one, some having 2 part-time workers, etc.).

    6. Lets see, on one hand you talk about the lower quintile only having .5 workers per household and the wealthy having 2 workers per household, then you claim the data is based on "Individual" (the treasury data) then you go on to talk about "households".....

      then you post a link that clearly states its "opinion/commentaries"

      On your website you post a link to a you tube video of a professor discussing mobility...a professor tied to the Mercatus Center, a Koch brothers sham...

      I believe you are the only one who is befuddled enough to believe your own data....

  16. So, everything rosy in Will-land. Never mind!


    1. And I never said that everything was "rosy" (the recovery is in fact anemic). I was just addressing the myths that a) we aren't "making things anymore" (we still produce nearly 20% of the total manufacturing output and have a 19% industrial base when you also include energy and mining) and b) the rich (individual human beings and not categories) are getting richer and the poor are getting poorer. That's all, fella'.

  17. "The IRS only has 5 quintiles" - that's what a frigging quintile is! 5! They should have had, what, 6 quintiles? Oh, my God.......And if you were really serious about improving social mobility you might want to take a look at dialing back on some of these regulations. According to the Small Business Administration, small businesses pay 40% more per employee for compliance ($10,585 to $7,755) than do large businesses and do you know how much that it costs to start a cab business in NYC? Try close to a half a million dollars. Socially mobilize that.

  18. And the reason that I brought up the Forbes richest 400 is because when I tell the leftists that the top 1% is composed largely of doctors, lawyers, engineers, etc. and that these people went to school for 6-8 years and that the vast % of them have absolutely nothing to do with Wall Street, they always respond by saying, "yeah, but what about the 1% of the 1%. Do you see now?

  19. And how in the hell does Octopus know what I read (ironic in that he sends me an article from the hard-core leftist NY Times)? The frigging data that I've put forward here is from the IRS (again, a 91% increase in income for the bottom quintile from 1996 to 2005), for Christ.............That and I would also add that income mobility is only one of the indicators that we have to look at here. For example, did you leftists know that the U.S. has AVERAGED a 50% higher growth rate in GDP than France has over the past 30 years or so (2.9% versus 1.9%) and that that alone makes for a much bigger economic pie?............And Spain! He's bringing up Spain? That frigging country has an unemployment rate of nearly 20% and sky-high energy prices (mainly because of its idiotic and failed green initiatives). Yeah, social mobility in that mess of an economy is just what the doctor ordered. LOL!

  20. In today's America unfortunately, "fixing" capitalism is a surefire way of making the poor and middle class poorer.

  21. Tim, paradigms are hard to change and unfortunately the current (republican/tea party) belief in tax reductions at the time of great spending increases (wartime footing and the MIC) has been a very large part of our fscal problems. That and the corruption that huge amounts of money have had on our political system.

    I fear the nation is too far gone to ever find its way back and rebuilding a strong middle class and fiscal responsibility. I have given up on the concept of truly long term rational self interest. Very few individuals IMNHO realize whst the concept means.

    I'm glad to be in what is likely my last 1/4 of a century of my life.

  22. Will,
    Posted today: The American Dream Might as Well Be Dead.

    There were 4 articles listed in my comment above. Too much reading for you? BTW, the Organization for Economic Cooperation and Development (OECD) is an international think tank specializing in global macroeconomic issues. It seems, however, you regard any presentation of data that contradicts your opinion as some sort of leftist conspiracy. Unfortunately, your belligerence and ego are far larger than your resume ... and your qualifications.

    1. So Spain and Italy have better income mobility than we do. Who frigging cares. Those countries are basket cases and the fact that you apparently think that those are examples for us to follow is uproarious.......And you're the one who started it, fella', with your scurrilous and ignorant accusation that I only expose myself to one type of philosophy (if you knew anything about me you'd know that I'm a pretty equal opportunity guy who hammers conservatives quite a bit). I frigging read and listen to guys like Krugman and Reich ALL THE TIME. I just don't happen to agree with them. You have a problem with that? I mean, is your collectivist, central-planning ideology that fragile that you have to think that anybody who happens to disagrees with you de facto is a Hannityite or Limbaugh follower?......And my resume? You want to know my resume? I have 4 frigging college degrees (a Bachelors, a Masters, a 6th Year, and an Associates) and 9 more credits toward a 5th one, big fella' (I'd give you my complete reading list, too, but I certainly don't want to overwhelm you here). Good enough?

    2. I'll certainly vouch for your overall evenhanded approach to issues. You definitely hammer the right as much as you do the left.

      But, if you don't mind my saying so you seem to be most definitely out of character with your response to (O)CT(O)PUS.

    3. I'm sorry, Les, but reading these fellows' comments is like listening to fingernails on a chalkboard (right out of central-casting, it seems). And the guy did the very 2 things that most irritate me; accusing me of cutting and pasting (over at Shaw's) and accusing me of being partisan (it's especially irritating coming from a partisan).

    4. Will, I understand what you are saying. Partisans can be maddening. I am not a progressive by any stretch but at partisan republican and libertarian blogs I am considered a liberal and some even have choice names for me. Which is why I don't pay attention to the noise any more.

      For me it is more important to know who I am, try to see both sides of an issue, decide what makes the best sense to me and go with it.

      Neither the consevative or the liberal view is right 100% of the time. Both views can be wrong at times and are. In my view both should be listened to and evaluated based on the merit or lack thereof .

      I consider liberals among my friends and (O)CT(O)PUS is certainly one of them. We disagree more often than we agree but we don't take it personally. He is also a very smart dude. I finally figured out that when you realize how much you don't hnow and work on that life is more enjoyable. The best part is you can do this without giving up your principles or values.

  23. An exchange that took place in Cyberspace within the hour:
    On Ignorant Leftists; Octopus

    His avenue for uncovering "the truth"? Thumbing through the pages of the New York Times. I shit you not.


    (O)CT(O)PUS said...


    When you disparage a person on your weblog, at least have the decency to provide the link so readers can adjudge for themselves the subject conversation; otherwise all you have accomplished is a gratuitous argumentum ad hominem in a churlish and cowardly manner.

    OCTOBER 25, 2013 AT 7:36 PM
    Will "take no prisoners" Hart said...

    Fuck you.

    OCTOBER 25, 2013 AT 7:44 PM

    Very classy, Will. Very classy.

    1. It has been my experience that this is atypical of Will. I think you guys maybe just got off to a bad start.

      Remembering when...


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