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  1. Subscriber no1marauder
    It's Nice to Be Nice
    22 Jul '12 16:46 / 1 edit
    Economist Joseph Stiglitz has an excellent short piece in the LA Times. I'm not normally a big fan of copy and pasting but I think it nicely summarizes how we got where we are and the way out:

    Despite what the debt and deficit hawks would have you believe, we can't cut our way back to prosperity. No large economy has ever recovered from serious recession through austerity. But there is another factor holding our economy back: inequality.

    Any solution to today's problems requires addressing the economy's underlying weakness: a deficiency in aggregate demand. Firms won't invest if there is no demand for their products. And one of the key reasons for lack of demand is America's level of inequality — the highest in the advanced countries.

    Because those at the top spend a much smaller portion of their income than those in the bottom and middle, when money moves from the bottom and middle to the top (as has been happening in America in the last dozen years), demand drops. The best way to promote employment today and sustained economic growth for the future, therefore, is to focus on the underlying problem of inequality. And this better economic performance in turn will generate more tax revenue, improving the country's fiscal position.

    Even supply-side economists, who emphasize the importance of increasing productivity, should understand the benefits of attacking inequality. America's inequality does not come solely from market forces; those are at play in all advanced countries. Rather, much of the growth of income and wealth at the top in recent decades has come from what economists call rent-seeking — activities directed more at increasing the share of the pie they get rather than increasing the size of the pie itself.

    Some examples: Corporate executives in the U.S. take advantage of deficiencies in our corporate governance laws to seize an increasing share of corporate revenue, enriching themselves at the expense of other stakeholders. Pharmaceutical companies successfully lobbied to prohibit the federal government — the largest buyer of drugs — from bargaining over drug prices, resulting in taxpayers overpaying by an estimated half a trillion dollars in about a decade. Mineral companies get resources at below competitive prices. Oil companies and other corporations get "gifts" in the hundreds of billions of dollars a year in corporate welfare, through special benefits hidden in the tax code. Some of this rent-seeking is very subtle — our bankruptcy laws give derivatives (such as those risky products that led to the $150-billion AIG bailout) priority but say that student debt can't be discharged, even in bankruptcy.

    Rent-seeking distorts the economy and makes it less efficient.When, for instance, speculation gains get taxed at a lower rate than true innovation, resources that could support productivity-enhancing activities get diverted to gambling in the stock market and other financial markets. So too, much of the income in the financial sector, including that derived from predatory lending and abusive credit card practices, derives not from making our economy more efficient but from rent-seeking.

    If we curbed these abuses by the financial sector, more resources (especially the scarce talent of some of our brightest young people) might be devoted to making a stronger economy rather than to exploiting the financially unsophisticated. And the banks might actually go back to the boring business of lending rather than high-risk and often opaque speculation.

    Curbing rent-seeking is not that complicated (aside from the politics). It would take better financial regulations, fairer and better-designed bankruptcy laws, stronger and better-enforced antitrust laws, corporate governance laws that limit the power of CEOs to effectively set their own pay, and, in all of these areas, more transparency. Because so much of the income at the top is from rent-seeking, more progressive taxation (and in particular, taxation of capital gains) is necessary to discourage it. And if the additional revenue is used by the government for high-return public investments, there are double benefits.

    Countries with high inequality tend to underinvest in their collective well-being, spending too little on such things as education, technology and infrastructure. The wealthy don't need public schools and parks. That's another reason economies with high inequality grow more slowly. Indeed, the United States has grown much more slowly since the 1980s, while inequality has been growing more rapidly than it did in the decades after World War II, when the country grew together.

    Public investments are of particular importance today; they increase demand in the short run and productivity in the medium to long term. Increasing public investment would help make up for continued weakness in the private sector. Investments in training for new jobs could facilitate the economy's structural transformation, helping it move from sectors with declining employment (like manufacturing) to more dynamic sectors. Strengthening education would help restore the American dream and help make the country once again a land of opportunity where the talents of our young people are fully utilized.

    The right says that we can achieve greater equality only by belt-tightening. But that vision would result in a slowdown of the economy from which all would suffer. Because so much of America's inequality arises from rent-seeking and other activities that distort the economy, curtailing inequality would actually strengthen the economy. Investing public money in the collective good rather than allowing it to be captured by rent-seekers would enhance growth at the same time it reduced inequality.

    By giving priority to the austerity/deficit cutting agenda, we'll fail to achieve any of our goals. But by putting the equality agenda first, we can achieve all of them: We can have both more equality and more growth. And if we get better growth, our deficit will be reduced — it was weak growth that caused the deficit, not the other way around. We can achieve the kind of shared prosperity that was the hallmark of the country in the decades after World War II.

    http://www.latimes.com/news/opinion/commentary/la-oe-stiglitz-inequality-20120722,0,4061042.story

    Comments?
  2. Subscriber AThousandYoung
    It's only business
    22 Jul '12 18:06
    I've never seen rent used in that context before.
  3. 23 Jul '12 02:54
    Originally posted by AThousandYoung
    I've never seen rent used in that context before.
    Read some classical works of economists, from Adam Smith to Mises, or if you prefer Keynes, and rent is clearly more than what people pay to live under someone else's roof.
  4. 23 Jul '12 03:04
    Originally posted by no1marauder
    Economist Joseph Stiglitz has an excellent short piece in the LA Times. I'm not normally a big fan of copy and pasting but I think it nicely summarizes how we got where we are and the way out:

    Despite what the debt and deficit hawks would have you believe, we can't cut our way back to prosperity. No large economy has ever recovered from serious recess ...[text shortened]... ary/la-oe-stiglitz-inequality-20120722,0,4061042.story

    Comments?
    The problem with this theory, is that it looks at people as inter-temporal abstractions.

    Even the last five years show that from debt growing by 2 to 3 hundred billion a year, we've gone to deficits of in excess of a trillion to one and a half trillion.

    The stuff about inequality is pap, and there is no evidence that rich people cause poor ones. In fact the empiracle evidence is that the poor tend to be less poor, in nations with more agregate wealth, that is less equality.

    On Stiglitz' assertion, "No large economy has ever recovered from serious recession through austerity. But there is another factor holding our economy back: inequality." he offers no proof. Has it ever been seriously tried? And if it failed, why? No, he skips right ahead to his theory, inequality. Some of the most backward, and stagnant economies in world history were the most equal.
  5. Subscriber no1marauder
    It's Nice to Be Nice
    23 Jul '12 03:25 / 1 edit
    Originally posted by normbenign
    The problem with this theory, is that it looks at people as inter-temporal abstractions.

    Even the last five years show that from debt growing by 2 to 3 hundred billion a year, we've gone to deficits of in excess of a trillion to one and a half trillion.

    The stuff about inequality is pap, and there is no evidence that rich people cause poor ones. ty. Some of the most backward, and stagnant economies in world history were the most equal.
    Again your ideas about what constitutes "no evidence" are idiosyncratic to say the least.

    More aggregate wealth does not equal "less equality" as you falsely state. And "inequality" isn't Stiglitz's or anyone else's "theory".
  6. Subscriber AThousandYoung
    It's only business
    23 Jul '12 06:09 / 1 edit
    Originally posted by normbenign
    Read some classical works of economists, from Adam Smith to Mises, or if you prefer Keynes, and rent is clearly more than what people pay to live under someone else's roof.
    Wow you are obnoxously arrogant.

    I think I've asked you this once before and you ignored me -

    Were in Adam Smith does he discuss this topic? Last time you blew me off when I asked you to discuss your intellectually arrogant comments about Adam Smith. Are you going to provide the reference this time or ignore me again?

    From The Wealth of Nations:

    Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry....

    Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them.
  7. 23 Jul '12 10:14 / 1 edit
    Oh dear, another argument for Marxist-like policies, cause we all know that Marxist countries all have booming economies......right?
  8. Subscriber no1marauder
    It's Nice to Be Nice
    23 Jul '12 12:46 / 1 edit
    Originally posted by whodey
    Oh dear, another argument for Marxist-like policies, cause we all know that Marxist countries all have booming economies......right?
    Do you think the policies the US followed in the post-WWII era to about the mid 1970's were "Marxist"?

    Stiglitz gave numerous examples where the wealthy are able to capture a greater share of economic resources because of government action. Surely you free marketers shouldn't have a problem with taking steps to end this.
  9. 23 Jul '12 13:35
    Originally posted by no1marauder
    Do you think the policies the US followed in the post-WWII era to about the mid 1970's were "Marxist"?

    Stiglitz gave numerous examples where the wealthy are able to capture a greater share of economic resources because of government action. Surely you free marketers shouldn't have a problem with taking steps to end this.
    He thinks Pelosi is a communist, and the secretary of state is a socialist, so I hope that was not a rhetorical question.

    Article made a lot of sense to me, but I grew up in a Keynesian command economy, sorry I mean Marxist dictatorship.
  10. 23 Jul '12 13:56
    Originally posted by no1marauder
    Again your ideas about what constitutes "no evidence" are idiosyncratic to say the least.

    More aggregate wealth does not equal "less equality" as you falsely state. And "inequality" isn't Stiglitz's or anyone else's "theory".
    "Again your ideas about what constitutes "no evidence" are idiosyncratic to say the least."

    How about some of this evidence then, instead of just broad assertions by you and Stiglitz.

    Where is the evidence that rich people create the poor? Or dispute that the poor tend to be less poor and less desperate in generally wealthy nations. Dispute with evidence or arguments that you and Stiggy view groups as inter-temporal abstractions rather than flesh and blood individuals who move silently from one class to another, many of the poor in free societies becoming rich in a decade or two.

    And before austerity is dismissed, because a major economy hasn't been recovered on that basis, one would have to show that somewhere it has been tried, as an alternative to inflating our way out of recessions.

    "More aggregate wealth does not equal "less equality" as you falsely state."

    More often than not aggregate wealth is not distributed evenly, therefore less equality. Are there exceptions? There are to most rules, but you haven't cited any.

    What is this thread about, except that Stiglitz rehashes some old canards of collectivists on the evils of inequality.
  11. 23 Jul '12 14:01
    Originally posted by AThousandYoung
    Wow you are obnoxously arrogant.

    I think I've asked you this once before and you ignored me -

    Were in Adam Smith does he discuss this topic? Last time you blew me off when I asked you to discuss your intellectually arrogant comments about Adam Smith. Are you going to provide the reference this time or ignore me again?

    From The Wealth of ...[text shortened]... haps, the species of revenue which can best bear to have a peculiar tax imposed upon them.
    I apologize for any appearance of arrogance. I responded to your questioning rent seeking on the basis of your frequent comments on urban landlords.

    I am not sure what you want me to comment on with regards to Adam Smith's treatment of rents. If I ignore or simply miss something, it is because I don't log on here even daily.
  12. Standard member sh76
    Civis Americanus Sum
    23 Jul '12 14:16 / 2 edits
    Originally posted by no1marauder
    Economist Joseph Stiglitz has an excellent short piece in the LA Times. I'm not normally a big fan of copy and pasting but I think it nicely summarizes how we got where we are and the way out:

    Despite what the debt and deficit hawks would have you believe, we can't cut our way back to prosperity. No large economy has ever recovered from serious recess ary/la-oe-stiglitz-inequality-20120722,0,4061042.story

    Comments?
    While of course I agree that we can't cut our way to prosperity, deficit hawking and increasing income equality are not mutually exclusive. Common sense spending cuts and Laffer-safe tax increases could balance the budget and not hurt the recovery. If just the people I've dealt with are any indication, Medicaid could probably be cut by 20% without really impacting its mission (there's a lot of fat on that steak). Increase the retirement age. Add asset tests for food stamps and section 8, etc. and I'll show you hundreds of billions of dollars in savings.

    As the stimulus showed, big spending alone is not the answer and even if it were, enormous deficits are long run poison as many Europeans are now finding out.

    Edit: I'm not arguing against anything in the article.
  13. 23 Jul '12 14:38
    Originally posted by sh76
    While of course I agree that we can't cut our way to prosperity, deficit hawking and increasing income equality are not mutually exclusive. Common sense spending cuts and Laffer-safe tax increases could balance the budget and not hurt the recovery. If just the people I've dealt with are any indication, Medicaid could probably be cut by 20% without really impact ...[text shortened]... ny Europeans are now finding out.

    Edit: I'm not arguing against anything in the article.
    How about eliminating baseline budgeting? How about Congress do its Constitutional duty to pass a budget, instead of another continuing resolution?

    Last Bush deficit was $200 billion. Obama deficits have all been a trillion plus more. What is the extra spending? Or is it all shortfalls of revenue due to unemployment? If it is the later, is that dealt with by further creating uncertainty among investors and business creators?

    Dismissing austerity is preposterous, as is the notion of taxing our way to prosperity on the backs of those who are already doing the most.
  14. Subscriber no1marauder
    It's Nice to Be Nice
    23 Jul '12 15:32
    Originally posted by normbenign
    "Again your ideas about what constitutes "no evidence" are idiosyncratic to say the least."

    How about some of this evidence then, instead of just broad assertions by you and Stiglitz.

    Where is the evidence that rich people create the poor? Or dispute that the poor tend to be less poor and less desperate in generally wealthy nations. Dispute with e ...[text shortened]... t that Stiglitz rehashes some old canards of collectivists on the evils of inequality.
    Where exactly does Stiglitz claim that "rich people create the poor"? Your argument starts with a Strawman assertion and thus further discussion of that "point" is a waste of time.

    In 1937-38, President Roosevelt decided that the worst of the Depression was over and significantly cut spending for the PWA and WPA among other programs. The result was a sharp downturn. At present, States are pursuing pro-cyclical austerity programs and it is dragging down the economy. These are far from exclusive examples. "Austerity" has been tried and has miserably failed.

    Your ideological rigidness and blindness is on full display. What Stiglitz actually does is propose some commonsense measures to promote growth in what is currently a stagnating economy. You fail to even address any of the measures proposed and like most right wingers, you have no constructive proposals of your own.
  15. Subscriber no1marauder
    It's Nice to Be Nice
    23 Jul '12 15:37
    Originally posted by normbenign
    How about eliminating baseline budgeting? How about Congress do its Constitutional duty to pass a budget, instead of another continuing resolution?

    Last Bush deficit was $200 billion. Obama deficits have all been a trillion plus more. What is the extra spending? Or is it all shortfalls of revenue due to unemployment? If it is the later, is that de ...[text shortened]... the notion of taxing our way to prosperity on the backs of those who are already doing the most.
    "Doing the most" what? Rent seeking and other non-productive activities?