Anyone Worried Yet? CBO "Warns" That One Indicator of Public Initiative Is Set To Rise Sharply

   (Commentary posted by Roger Erickson, hat tip to Alice Marshall)

Federal "Deficit" Is Set to Rise Sharply, CBO Warns

So? No reason to panic. Just relabel this article as "CBO Says Indicator of Public Initiative Set To Rise Sharply"

Unless taxes rise just as sharply, that also equates to "Net Private Financial Savings To Rise Sharply" - which doesn't sound so scary.

How well that rise in private liquidity is distributed is the bigger issue - which too few are talking about. If there's too much income & wealth disparity, it's very much analogous to generals hoarding all the weapons. On paper they still have an army, but in practice it's toothless. Same for an economy. If too few are allowed to hoard most of the currency, the first thing lost is national agility.

What's really happening here is that the CBO staff are Semantic Weasels and sophists, and they're crying about a nominal wolf at a fictional door. The only question savvy citizens should be answering is "WHY are they crying that."

Why inequality matters — it's a class thing.

This week at the Monkey Cage blog, Duke University political scientist Nicholas Carnes wrote a fascinating pair of posts arguing that, when it comes to America's political system, class matters -- even more than a lot of us thought. The posts are based on his recent book, White Collar Government: The Hidden Role of Class in Economic Policy Making. It's hardly news to American voters that our elected officials tend to be wealthy, to a wildly disproportionate degree. But the extent to which this is so is stunning.

Carnes points out that, although millionaires make up only 3 percent of the population, they "have a majority in the House of Representatives, a filibuster-proof super-majority in the Senate, a 5 to 4 majority on the Supreme Court and a man in the White House." At the same time, working class people -- whom he defines as "people with manual-labor and service-industry jobs" -- make up more than half of the population, yet people from working class backgrounds have never held more than 2 percent of the seats in Congress.

You might suspect that a legislator's class background would not independently affect the policies she supports -- that, once you control for other factors like political party and constituents' views, the impact of class would disappear. But this is not the case; as Carnes writes, "even after controlling for these factors using a variety of statistical techniques, there are still significant differences between politicians from different classes."

Inequality Matters
Congress is a millionaires' club. Why that matters, and what we can do about it.
Kathleen Geier
(h/t Mark Thoma at Economist's View)

Should Americans Be Required To Save?

Commentary by Roger Erickson

Depends on the context. For example.

Should Americans be required to save ... for corporate welfare? *

Right concept? Wrong application of logic?

Or would Albert Camus approve of this absurd question, posed for the right reason?

Corporations know know how to invest your fiat BETTER than you do? Why not let more citizens decide, on their own, which corporations to invest THEIR FIAT in ... privately? If we have income disparity and wealth disparity, don't we have freedom disparity?

* Corporate Welfare

Eric Zuesse — U.S. Wealth Is Now the Most Concentrated at the Top Since 1916

A bit more than one twenty-fifth of all income in the U.S. is now being taken in by the top one-ten-thousandth of the U.S. population. That one rich statistical person is bringing in considerably more income than all of the poorest 2,000 people do in that same statistical 10,000 Americans.

We must go back nearly a hundred years to find a time when the top 0.01%, the top 1 in 10,000 people in the U.S., were making more than 4% of the nation’s total income, as they were in the latest calculated year, 2012. This figure of income-concentration among the top 0.01% was the all-time high 4.4% in 1916. In 1915, it was 4.36%. Before that, it was under 3%. And it has never again been anywhere near 4%, until 2012, when it broke through the 4% barrier yet again, for the first time in 97 years, at 4.08%. Other than in 2012, the highest it has been in recent decades was 3.53% in 2007, under Bush, at the peak right before the 2008 crash. This money-concentration is now more extreme than it was even then – even at Bush’s peak.

The details are being reported at the global academic database of income-distribution, which is called “The World Top Incomes Database,” and which is headed by the world’s four leading researchers on income-distribution: Tony Atkinson, Facundo Alvaredo, Thomas Piketty, and Emmanuel Saez.

AlterNet — Economy
U.S. Wealth Is Now the Most Concentrated at the Top Since 1916
Eric Zuesse

Thomas L. Hungerford on rising inequality due to tax policy

Abstract:  
This paper examines changes in after-tax income inequality among tax filers between 1991 and 2006. In particular, how changes in wages, capital income, and tax policy contribute to changes in income inequality is investigated. To examine the role of these three possible contributors to the increase in income inequality, the Gini coefficient is decomposed by income source using the method developed by Lerman and Yitzhaki (1985). The Gini coefficient of after-tax income increased by 15 percent (0.071 points) between 1991 and 2006. By far, the largest contributor to this increase was changes in income from capital gains and dividends. Changes in wages had an equalizing effect over this period as did changes in taxes. Most of the equalizing effect of taxes took place after the 1993 tax hike; most of the equalizing effect, however, was reversed after the 2001 and 2003 Bush-era tax cuts. Similar results are obtained with other inequality measures.
SSRN

Changes in Income Inequality Among U.S. Tax Filers between 1991 and 2006: The Role of Wages, Capital Income, and Taxes
Thomas L. Hungerford — January 23, 2013