Financial News

[StrangeSox]

Probably...but that's why I tend to not like these types of comparisons that lump massive groups together in order to make a point. I don't think it's surprising that the rich get richer...since they're the ones with money to invest. Just as I don't think it's surprising that the poor get poorer, when everything they buy/need gets more and more expensive. From phone bills to electricity...and phony "tax cuts".

 

The "1% got 121%" was the attention-grabbing headline, but Saez's work gets deeper than that.

 

For a while, the poor weren't getting poorer in relative or absolute terms. Now, they are. This study is just looking at the numbers and isn't examining why that's been happening, whether that's good or bad, and what (if any) policy response there should be.

 

My taxes never dropped over the past decade. They were simply shifted around from federal the local...but the amount of money I was paying out in taxes, whether that be in the form of sales, income, property, etc...never changed...if anything it rose quite a bit. So while tax cuts are nice, if they're actual tax cuts (which they never are), they didn't really help anyone, since they were really just tax shifts.

 

Saez has argued for a higher top marginal tax rate elsewhere based on his work, but he isn't doing so here.

[witesoxfan]

Forgive me, I hadn't actually looked at the numbers. Real growth rate was 11.2% for the top 1%, and it was -0.4% for the bottom 99%. Considering the real growth rate was 1.7% and the top 1% took 11.2% of that, this doesn't seem like a big deal to me given such small growth and, if anything, is cause for concern given how short the previous recessionary periods were and the extreme growth following them. That is not an issue of the 1% but of the economy in general.

 

Either way, I'm still going to stick with the "recessed economy with room for investment" model because, quite frankly, you did see similar things leading into the Great Depression, but bad policies created the Depression itself. WWII decreasing unemployment in the US down to about 1.5% was the main catalyst in getting the US out of the Great Depression, and taxes were extremely high until Reagan cut taxes in the 80s. Investment soared in the 90s and I'd guess the biggest factor in that was the breakthrough of the Internet. Since that point, growth has been pretty steady year in and year out with the peaks largely being affected by capital gains. Naturally the 1% is going to be more volatile because you are looking at a smaller sample. Look at the growth for the top 5% and the top 10% - it's incredibly steady for the previous 25 years.

 

This is much ado about nothing.

[StrangeSox]

The top 1% didn't take 11.2% of 1.7%, they took 121% of the 1.7% growth.

 

The growth of the total income shares of the top 5 or 10% has been pretty linear, but realize that, when we're talking about income shares, it's a zero-sum game. If the top 10% are capturing a larger share of the income, then the bottom 90% are capturing a smaller share.

 

Figure 1 presents the pre-tax income share of the top decile since1917 in the United States. In 2011, the top decile includes all families withmarket income above $111,000. The overall pattern of the top decile shareover the century is U-shaped. The share of the top decile is around 45percent from the mid-1920s to 1940. It declines substantially to just above32.5 percent in four years during World War II and stays fairly stable around33 percent until the 1970s. Such an abrupt decline, concentrated exactlyduring the war years, cannot easily be reconciled with slow technologicalchanges and suggests instead that the shock of the war played a key and lasting role in shaping income concentration in the United States. After decades of stability in the post-war period, the top decile share has increased dramatically over the last twenty-five years and has now regained its pre-war level. Indeed, the top decile share in 2007 is equal to 49.7 percent, a levelhigher than any other year since 1917 and even surpasses 1928, the peak of stock market bubble in the “roaring” 1920s. In 2011, the top decile share isequal to 48.2 percent.

[witesoxfan]

The top 1% didn't take 11.2% of 1.7%, they took 121% of the 1.7% growth.

 

The growth of the total income shares of the top 5 or 10% has been pretty linear, but realize that, when we're talking about income shares, it's a zero-sum game. If the top 10% are capturing a larger share of the income, then the bottom 90% are capturing a smaller share.

 

Yes, and the fact of the matter is, 121% of 1.7% is still a very small comparative number to the growth of previous years. The period itself is smaller as well. That the remainder actually lost money, to me, is far more indicative of economic strength than it is a bad sign that the 1% gained that much. If there is money to be had, the 1% will find it.

 

I understand how the graph works and I think my lament's term description fits it fairly well, though I'm sure there are discrepancies. In my mind, Obama's next term is going to be vital to the American economy and if, under his tenure, the US can't stimulate any sort of sustainable growth, the economy itself is going to be in a bad place due to the natural economic swings and cycles.

[StrangeSox]

I don't think we're really disagreeing there, ultimately. That the top 1% captured all of the income growth and then some is indicative of the weakness and type of 'recovery' we've experienced over the past several years and while the stock market's doing just fine, most people aren't.

[southsider2k5]

Of course incomes/wealth are going to go the wrong way. We just went through a period of time where people have moved from the private to the public sector. It just goes to show you don't want people dependent on their governments if you want to create growth.

[StrangeSox]

huh?

[witesoxfan]

I don't think we're really disagreeing there, ultimately. That the top 1% captured all of the income growth and then some is indicative of the weakness and type of 'recovery' we've experienced over the past several years and while the stock market's doing just fine, most people aren't.

 

I think so too, but it's fun to argue just to argue.

 

We need to find ways to stimulate the economy that don't involve US citizens being killed on US soil. I don't mind spending on national defense because having a well stocked/enforced/equipped military is not a bad thing, but they don't need to be fighting overseas at all times.

 

Of course, if I had the answer, I sure as hell wouldn't be on here.

[Jenksismyhero]

Let's talk about something uplifting for a change, like the fact that Detroit is 100 MILLION BILLION TRILLION DOLLARS in debt:

 

http://news.yahoo.com/detroits-financial-c...iRRRz8AI5fQtDMD

 

(ok, just 14 BILLION...)

 

Have fun paying for that Michigan residents!

[ptatc]

I don't think we're really disagreeing there, ultimately. That the top 1% captured all of the income growth and then some is indicative of the weakness and type of 'recovery' we've experienced over the past several years and while the stock market's doing just fine, most people aren't.

This is why people with money to invest took advantage of the time when the stocks were low and are now rising.

[bmags]

This is why people with money to invest took advantage of the time when the stocks were low and are now rising.

 

Yeah, I don't know why everyone just didn't scrounge up some of their excess capital to re-invest when it hit 8,000.

[Balta1701]

Yeah, I don't know why everyone just didn't scrounge up some of their excess capital to re-invest when it hit 8,000.

Because there was a reasonable chance that the government wouldn't act strongly enough and the world would effectively implode?

[bmags]

Because there was a reasonable chance that the government wouldn't act strongly enough and the world would effectively implode?

 

I was kidding.

[witesoxfan]

Yeah, I don't know why everyone just didn't scrounge up some of their excess capital to re-invest when it hit 8,000.

 

And that was my point with regards to the 1% versus the bottom 99%.

[Jenksismyhero]

Because there was a reasonable chance that the government wouldn't act strongly enough and the world would effectively implode?

 

And money would have become worthless anyway, so it was a good gamble. I'm incredibly pissed I didn't jump in that early.

[Fastball Express]

Jeff Gauvin ‏@JeffersonObama

 

BREAKING: U.S. stocks add to HUGE Gains; Dow up 109 points

 

[Jenksismyhero]

Good, yesterday sucked.

[southsider2k5]

We are about 40 points from an all-time high on the Dow.

[Cknolls]

We are about 40 points from an all-time high on the Dow.

 

All it took was 2+ trillion expansion of the Fed balance sheet. God help us when the house of cards falls. not even the Fed is bigger than Mr. Market. Although the Bernank thinks he is. All parabolic market moves return to their origin, and for the S&P that would take us into the mid 400's. Their are some big long term cycles due to exert their influence between now, 2013 thru 2016. Should make for an exciting election. When rates rise they will be unable to sell the junk, if they even know what they own. And 100 billion more in interest payments for every 100 basis point move in rates will be crippling to the gov't. Pay off your debt while you can. Going out on a limb with a crazy prediction, the dollar falls as a reserve currency within 4 years.

[southsider2k5]

All it took was 2+ trillion expansion of the Fed balance sheet. God help us when the house of cards falls. not even the Fed is bigger than Mr. Market. Although the Bernank thinks he is. All parabolic market moves return to their origin, and for the S&P that would take us into the mid 400's. Their are some big long term cycles due to exert their influence between now, 2013 thru 2016. Should make for an exciting election. When rates rise they will be unable to sell the junk, if they even know what they own. And 100 billion more in interest payments for every 100 basis point move in rates will be crippling to the gov't. Pay off your debt while you can. Going out on a limb with a crazy prediction, the dollar falls as a reserve currency within 4 years.

 

You must have missed Ben saying they have no need to ever sell.

[StrangeSox]

has ck ever not predicted doom, DOOM! in the near-future?

[Balta1701]

has ck ever not predicted doom, DOOM! in the near-future?

To be fair...each of the last few times the DOW has touched record highs, 3 years later we've looked back and marveled at the incredible amount of fraud exposed as the collapse has taken hold.

[southsider2k5]

I bought Puts. We'll see what happens.

[Cknolls]

You must have missed Ben saying they have no need to ever sell.

 

 

Ha. He also said housing was contained back in 2008. He has no clue as to how to inwind. Better to just jawbone about it and sweet talk your way through it until you leave office. Let the next guy deal with it. Kind of like what Congress and the Prez are doing.

[Cknolls]

I bought Puts. We'll see what happens.

 

 

Wish they were as cheap as 2007-2008. That is another thing. Look at where we are now (Dow, S&P), where the vix is now, and where the out of the money puts are trading. Even though we are just off the highs and the vix is at 14% these puts still have a bigger bid to them than they did in 2007. My point has always been and will always be that th enews breaks with the cycles, not the other way around. I know it is counter-intuitive to think that way but in the context of market cycles it works.