The Vast Gulf between Reason and Gibberish

Nichloas Kristof really hates rich people. Instead of showing the great divide between the rich and the poor, Kristof merely shows that vast gulf between sober thoughtfulness and wild-eyed radicalism; between logic and gibberish.

A Hedge Fund Republic?

By NICHOLAS D. KRISTOF

Earlier this month, I offended a number of readers

We weren’t offended, Nick. We were laughing at you.

with a column suggesting

It was more like a verbal bludgeoning.

that if you want to see rapacious income inequality,

And really, why wouldn’t you be looking for rapacious income inequality? What a warped world view.

you no longer need to visit a banana republic.

But I’ve had my vacation to California planned since August!

You can just look around.

My point was that the wealthiest plutocrats now actually control a greater share of the pie

Plutocrats have invested heavily in the pie industry in recent years due to widespread declines in pumpkin prices. Warren Buffet says that it’s a wise investment.

in the United States than in historically unstable countries like Nicaragua, Venezuela and Guyana.

I’m just spit-balling here, but that would seem to indicate that income equality is a feature of instability.

But readers protested that this was glib and unfair, and after reviewing the evidence I regretfully confess that they have a point.

A concession! How magnanimous! Should I start a slow-clap?

That’s right: I may have wronged the banana republics.

Read: “I hate America now more than ever!”

You see, some Latin Americans were indignant at what they saw as an invidious and hurtful comparison. The truth is that Latin America has matured

Economically and politically, no, they haven’t matured. Narco-terrorism is spreading from South to Central America. The failed ideology of Communism is on the rise in the region and Brazil just elected a former militant guerilla. What’s more, in a period marked by the rise in China and India, Latin America, with a wealth of cheap labor, has seen only modest growth. In short, Latin America has the maturity of an election for sixth grade treasurer.

and become more equal in recent decades, even as the distribution in the United States has become steadily more unequal.

The best data series I could find is for Argentina.

FYI, That link has absolutely nothing to do, specifically, with Argentina. Indeed the graphica trends (because I can’t be bothered to actually read this nonsense) are remarkably mundane. There isn’t a clear trend anywhere.

In the 1940s, the top 1 percent there controlled more than 20 percent of incomes.

In the 1940’s, Argentina was also a prosperous nation.

That was roughly double the share at that time in the United States.

Since then, we’ve reversed places.

America has continued growing to unprecedented historical prosperity while Argentina has whimpered its way through hyperinflation and political instability to become the peer of economic powerhouses like Greece, Iran, and Thailand.

The share controlled by the top 1 percent in Argentina has fallen to a bit more than 15 percent. Meanwhile, inequality in the United States has soared to levels comparable to those in Argentina six decades ago — with 1 percent controlling 24 percent of American income in 2007.

And yet, the top 1 percent of Americans pay roughly a third of income taxes.

At a time of such stunning inequality, should Congress put priority on spending $700 billion on extending the Bush tax cuts to those with incomes above $250,000 a year?

Yes.

Or should it extend unemployment benefits for Americans who otherwise will lose them beginning next month?

God, no.

One way to examine that decision is to put aside all ethical considerations and simply look at where tax dollars will do more to stimulate the economy.

I can’t imagine anything more economically inefficient than paying people not to work.

There the conclusion is clear: You get much more bang for the buck putting money in the hands of unemployed people because they will promptly spend it.

Except consumption does not drive growth; production drives growth.

In contrast, tax cuts for the wealthy are partly saved — that’s both basic economic theory and recent history — so they are much less effective in creating jobs. For example, Republicans would give the richest 0.1 percent of Americans an average tax cut of $370,000.

Those evil Republicans want to give $370,000 of rich people’s money to those same rich people! It’s almost like…freedom.

Does anybody really think that those taxpayers are going to rush out and buy Porsches and yachts, start new businesses, and hire more groundskeepers and chauffeurs?

More to the point, does anybody think that the government should redistribute wealth based solely on the criterion of who will spend it most quickly?

In contrast, a study commissioned by the Labor Department during the Bush administration makes clear the job-creation power of unemployment benefits because that money is immediately spent.

Yet more evidence that, despite popular belief, Bush was a markedly moderate conservative.

The study suggested that the current recession would have been 18 percent worse without unemployment insurance and that this spending preserved 1.6 million jobs in each quarter.

I call bullshit. Without unemployment insurance, people would have taken inferior jobs. Businesses would have benefitted from superior labor for less and swung to profitability more quickly. By subsidizing unemployment, the government has effectively dampened the downward market forces on labor that would have spurred the jump in profitability that markets so desperately need. This is how markets course-correct.

But there is also a larger question: What kind of a country do we aspire to be? Would we really want to be the kind of plutocracy where the richest 1 percent possesses more net worth than the bottom 90 percent?

We want to be the country where anyone can aspire to wealth beyond their wildest dreams, and where only their own failings prevent them from achieving it. This—poor, (and I mean that figuratively, because I’m sure Kristof makes five times what I make) pitiable fellow—is freedom.

Oops! That’s already us. The top 1 percent of Americans owns 34 percent of America’s private net worth, according to figures compiled by the Economic Policy Institute in Washington. The bottom 90 percent owns just 29 percent.

Fantastic! My fellow 90-percenters have something to aspire towards.

That also means that the top 10 percent controls more than 70 percent of Americans’ total net worth.

Thanks for running through the arithmetic for me, champ. 100-29=?

Emmanuel Saez,

Who wrote the article linked to above about Argentina. (The only link in this entire article.) If you’re only going to use one source, why not just get Professor Saez to write this nonsense?

 an economist at the University of California at Berkeley

Known for its sober, fair-minded worldview.

who is one of the world’s leading experts on inequality,

What the fuck does one do to become an expert in inequality?

notes that for most of American history, income distribution was significantly more equal than today. And other capitalist countries do not suffer disparities as great as ours.

“There has been an increase in inequality in most industrialized countries, but not as extreme as in the U.S.,” Professor Saez said.

Until recently, wealth was seen as a mark of good character. In a country without an enforced aristocracy or caste system, it has to be.

One of America’s greatest features has been its economic mobility, in contrast to Europe’s class system. This mobility may explain why many working-class Americans oppose inheritance taxes and high marginal tax rates.

Also, because Americans have a built-in compass that always points towards freedom.

But researchers

All researchers?

find that today

After a twenty-year lurch to the left, including the massive expansion of government in private life.

this rags-to-riches intergenerational mobility is no more common in America than in Europe — and possibly less common.

How can freedom function when government chokes off risk-takers? How can entrepreneurship function when the government entrenches the market shares of the major players with bailouts, tax breaks, and legal exemptions (read: Obamacare)? How can businesses grow when we cap the collective wealth of the rich? How can we become rich beyond our wildest dreams if we are propagandized to despise the fat cats?

I’m appalled by our growing wealth gaps because in my travels I see what happens in dysfunctional countries where the rich just don’t care about those below the decks.

That’s not why they’re dysfunctional. They’re dysfunctional because the society fails to acknowledge that wealth must correlate with merit.

The result is nations without a social fabric or sense of national unity.

Chicken and the egg. Most historians and anthropologists would say that unsuccessful nations don’t have cohesion because the national boundaries in the postcolonial era were drawn along arbitrary lines. The social discord predated the income inequality.

Huge concentrations of wealth corrode the soul of any nation.

Since you’ve already made the argument that America is now, and has been for a while, more prone to concentrations of wealth, you must also argue that the “soul” of the country is corroding faster. Yet riots are happening in France and Britain, not here. Mexicans have given up on their government. Not here. Here, we just want the government to have more faith in us. We just want to be free.

And then I see members of Congress in my own country who argue that it would be financially reckless to extend unemployment benefits during a terrible recession,

It would. Unemployment insurance destroys the market forces that get people back to work faster.

yet they insist on granting $370,000 tax breaks to the richest Americans.

Granting? Fuck that. I make my own money. The government doesn’t GRANT that I can keep any portion of it. I elect a representative to decide how much of it they can confiscate, that doesn’t mean that any portion of my post-tax income is a magnanimous grant from the government. That’s mine, and I earned it.

I don’t know if that makes us a banana republic or a hedge fund republic,

Hedge funds are a way of engaging in risky investments that are, through other investment vehicles, discouraged or prohibited by government regulation. Hedge funds are the last vestige of freedom left on Wall Street. If you want to impugn that by reducing them to icons of wealth, then so be it. You’ve already shown yourself to be without worth.

but it’s not healthy in any republic.