They Have Really Pretty Graphs

A big way our antiquated political system has let us down (way down) in recent years is the growth of inequality. It all goes back to the Reagan Revolution:

In August 1981, President Reagan signed the Economic Recovery Tax Act of 1981, which enacted a 27% across-the-board federal income tax cut over three years, as well as a separate bill that reduced federal spending, especially in anti-poverty programs [Wikipedia].

The Tax Reform Act of 1986 was the top domestic priority of President Reagan’s second term. The act lowered federal income tax rates, decreasing the number of tax brackets and reducing the top tax rate from 50 percent to 28 percent [Wikipedia].

Income tax rates have fluctuated since then under Republican and Democratic administrations without much change to Reagan’s policies. And when we consider the many deductions, exemptions and loopholes that tax lawyers and accountants are paid to take advantage of for their moneyed clients, effective tax rates have always been lower than the official rates.

I was reminded of this history when somebody linked to a new site called Realtime Inequality. It was created by three UC Berkeley economists in order to show how different “income and wealth groups” benefit or fall behind when new growth numbers come out each quarter”:

Realtime Inequality provides timely and high-frequency estimates of the distribution of income and wealth in the United States. Our statistics distribute the totality of national income and household wealth across socio-economic groups and are updated each quarter when new macroeconomic numbers are published. (National income is similar to Gross Domestic Product and a better indicator of income earned by US residents.)

This makes it possible to estimate economic growth by socio-economic groups consistent with quarterly releases of macroeconomic growth, and to track the distributional impacts of government policies during and in the aftermath of recessions in real time. 

The site has graphs for both income and wealth that you can play around with for different groups and time periods. Thus, one measure of income growth between January 1980 and March 2022 shows that income (corrected for inflation) rose 333% for the top tenth of one percent and 26% for the bottom fifty percent.


While one measure of wealth for the same period grew by $89 million for the upper tenth of one percent and less than $10,000 for the bottom fifty percent.


It’s kind of fun to play with if you don’t think about it too hard.

Cutting Taxes for the Rich Simply Helps the Rich (Duh)

Some counterintuitive ideas are fine. Others counterintuitive ideas are stupid (and self-serving).

A counterintuitive idea popular among conservatives is that helping the rich makes them productive while helping the poor makes them lazy. Another is that cutting taxes on the rich increases what the government collects in taxes. Sure it does!

From CBS News:

Tax cuts for the wealthy have long drawn support from conservative lawmakers and economists who argue that such measures will “trickle down” and eventually boost jobs and incomes for everyone else. But a new study from the London School of Economics says 50 years of such tax cuts have only helped one group — the rich.

The new paper by [two British economists] examines 18 developed countries — from Australia to the United States — over a 50-year period from 1965 to 2015. The study compared countries that passed tax cuts in a specific year, such as the U.S. in 1982 when President Ronald Reagan slashed taxes on the wealthy, with those that didn’t, and then examined their economic outcomes. 

Per capita gross domestic product and unemployment rates were nearly identical after five years in countries that slashed taxes on the rich and in those that didn’t, the study found. 

But the analysis discovered one major change: The incomes of the rich grew much faster in countries where tax rates were lowered. Instead of trickling down to the middle class, tax cuts for the rich may not accomplish much more than help the rich keep more of their riches and exacerbate income inequality, the research indicates.

“Based on our research, we would argue that the economic rationale for keeping taxes on the rich low is weak” said a co-author of the study. “In fact, if we look back into history, the period with the highest taxes on the rich — the postwar period — was also a period with high economic growth and low unemployment.”


But not to worry, conservatives! Facts have a well-known liberal bias.

A Really Big Pile Indeed

The (Roughly) Daily blog has a visual guide to wealth in America (thanks, Ted). The text, which takes a while to find, includes a few key facts:

We rarely see wealth inequality represented to scale. This is part of the reason Americans consistently under-estimate the relative wealth of the super rich.

Jeff (Bezos) is so wealthy, that it is quite literally unimaginable.

You can use your scroll bar to see why you can’t imagine it. But don’t stop until you get to the wealth of the 400 richest Americans, a sum that’s super-unimaginable.

Remember during the presidential campaign when Senators Warren and Sanders called for a wealth tax and at least one billionaire wept bitter tears?

warrenmugbillionairetears_111419warrencampaign (2)

It looks like they’re still selling the mugs, although, given current circumstances, nobody knows when they’ll be delivered.

Note: I can’t vouch for the visual guide’s accuracy, but according to other sources, Bezos’s pile is around 1,500,000 times more — that’s 1.5 million times more — than the median net worth of a U.S. household, and 12,600,000 times more than the median for households under 35. That’s a really big pile.

One of Those Charts

The last time we had a big overhaul of the federal tax code was in 1986. Back then, the poorest 90 percent of the population owned 3 1/2 times as much as the richest 1/10th of 1 percent. I’ll say that again. In 1986, the net worth of the least wealthy 90% of Americans was 3.5 times the net worth of the richest 0.1%.

That’s not the America we live in today. As of 2013, the richest 1/10th of 1 percent owned as much as the poorest 90 percent. To repeat: the net worth of the richest 0.1% was the same as the net worth of the poorest 90%. 


I’m sure the red line goes even higher now and the blue line goes lower. We should keep this astounding economic inequality in mind when we have the opportunity to vote eleven months from now. That will be eleven months after the Republicans ram through another overhaul of the tax code, one that helps the richest Americans get even richer.

Us, Them and Incentives Again, But Briefly

Remember when Clinton was President and the federal government briefly ran a surplus? The Republican response was: “Cut taxes!” Their justification was: “It’s our money, not the government’s!”. Since then, the surplus having been eliminated, the Republican response has been: “Cut taxes! That will lead to growth and reduce the deficit!” Which isn’t completely relevant to “Us, Them and Incentives”, but I’m getting there. It’s another example of how adherence to a political ideology can lead to inconsistency, especially when you try to justify what you already want to do. 

In writing about the Republican approach to incentives this week (less income for the rich will make them less productive, but less income for the poor will make them more productive), I may have been unfair. Maybe the Republican position makes sense based on the relative economic success of the rich and the poor.

After all, rich people are doing well, you might say, so they must be doing things right. Therefore, let’s reward them. That way they won’t get discouraged and stop doing things right. Poor people, however, aren’t doing well, so they must be doing things wrong. Obviously, we shouldn’t reward them for doing things wrong. And, if we don’t reward them, maybe they’ll start doing things right. In a capitalist nutshell, economic incentives should be given to productive people, and economic disincentives should be given to unproductive people.

This approach sounds an awful lot like social engineering, which the Republicans are supposed to be against. Putting that aside, however, the question is whether it’s a good idea to make life harder for people who are struggling and make it easier for people who aren’t. If you view life as a total morality play, in which good people prosper and bad people don’t, maybe it does makes sense. That is, we all know, the reason for heaven and hell (which St. Thomas Aquinas understood so perfectly).

But people are doing well or badly these days, economically-speaking, for lots of different reasons: skills, health, age, location, connections, work ethic, luck, education, competition and so on. In fact, one major hindrance to doing well economically is being poor to begin with (when you’re poor, it’s harder to get around, harder to fit in, harder to stay healthy, and so on). Once we view our fellow Americans as individuals with actual, often difficult lives, not simply as Us and Them, the reasonable response is to help the ones who are struggling, not the ones who are already getting ahead.

(Coming soon, “A Guide to Reality, Part 11”, I hope.)