Summations Only

I don't see that in the graph. Could you elucidate? The most prominent and best correlation is that of the change in top 5% household incomes to the change in US GDP per capita. But middle class people buy things, too. In fact, what typifies being poor or middle class is that ones expenditures are pretty close to one's income; the rich have far more money than they can spend even if they spend it like spending it is their full-time job. If a rich person annually spends a million dollars, but had annual income (after tax, etc) of a million and one dollars, that million and first dollar doesn't "trickle down" at all because it's not ever being spent.The fact of the matter is that it's the middle class, the middle three income quintiles, that spend the majority of the nation's consumer spending: I mean, obviously; there's so many more of them. This is why the top income quintile spends less as a percentage of its income than any other quintile: If "trickle-down" is a function of spending, then that's how it doesn't work - the rich don't spend. No, that's exactly wrong. The question is about the decreasing marginal utility of money - the thousandth dollar has far more marginal utility than the millionth, therefore it makes an enormous amount of sense to transfer wealth from the rich who can't and won't spend it, to the middle class income levels who will spend it, and gain enormous utility in doing so.Edited by Admin, : Improve image presentation.

But it doesn't show that at all. Median household income is the blue line; top 5% incomes are the red. They're nowhere close to each other.The graph is percent change; in other words it's a first-derivative graph. If median incomes rose and fell in sync with top 5% incomes, the lines would track each other. But they're not even close. What tracks is top 5% incomes with total GDP; what doesn't track is median incomes with GDP or top 5% incomes, or minimum wage with growth in productivity.Edited by crashfrog, : No reason given.

I don't see the "sync". If median income was in sync with top 5% incomes, then when top 5% incomes rose 20%, median incomes would rise 20%. And since this is a graph of percent change, that means the lines would track each other. Like they do prior to 1980.But they don't track after 1980. When top 5% incomes have risen by 40% in 1990, median incomes rose only 20%. Minimum wage had fallen by 30%. In 2000, median incomes had risen by 30%, the highest growth since the start of the graph; but top 5% incomes had risen a whopping 100% since 1967.They're just not tracking in any intelligible sense that I can see. But that's exactly what it shows, that median incomes are almost completely insensitive to GDP gains, while top 5% incomes are almost completely determined by it.

Who cares if they happen at the same time? Indeed, under what possible situation would they happen at different times, since GDP is going to be a limiting factor on everybody's wage levels?

Again, I just don't see that at all. It's like we're looking at two different graphs, or something.

Isn't that exactly what we're practically interested in? The strength of the effect?Otherwise you're making a correlation = causality mistake, since the purpose of this discussion is about what policies or interventions, if any, would enrich the median income level. But it's not right there in the graph. The exact opposite is right there in the graph - that the median income level is all but insensitive to changes in the top 5% income level. Therefore trickle-down doesn't work. That's what the graph shows - increases in the top 5% income level don't cause commensurate increases in the median income level, because median income level is not correlated with top 5% income levels. And this is for the reason that I demonstrated earlier - the rich don't actually spend that much. Intuitively, you must understand that this is the case. If the rich spent all their money they wouldn't be rich! I've not seen even a single person in this thread make that argument, and I can only take this as another instance of us, somehow, looking at two completely different sources (since I don't think you're a liar.) But it's abundantly obvious that the rich are capturing the bulk of the increase in national GDP since 1980 while at the same time not being particularly responsible for it. The notion that the US economy is somehow grounded on a foundation of Paris Hilton's luxurious largesse is risible. There just aren't enough rich people, and enough hours in the day, to spend the wealth held by the top 1% assetholders. That's all wasted money. Even as an investment it's wasted because it must eventually be paid back to them with interest; the wealth of the rich actually impoverishes everyone else over time as they loan it out. Because you don't understand the tax code. 35% is the top marginal tax rate on wages and salaries, but the bulk of Romney's income is capital gains. Capital gains are taxed at 15% regardless of your income level; there's no "marginal rates" on capital gains, just a flat 15%. But Romney did pay a 35% rate on all his salary income after $400,000, if he actually had that in salary income. It's most likely that he did not (since he's currently unemployed.)If it's so impossible to tax the rich, if they're so much better at evasion than the IRS is at extraction, then why did Romney pay anything at all? Clearly it's not as hopeless as you make it out to be.And, look, who else are we going to tax? Nobody else has any money! Half of Americans paid absolutely no income tax last year because they had absolutely no wage or salary income - they were children, or unemployed, or retirees.Edited by crashfrog, : No reason given.

It hasn't, though. The income of the top 5% has increased by more than 100%; the median income increased only by 30% over the same period."Trickle-down" doesn't work because, like I've already said, concentrating money in the hands of relatively few people wastes it, because there's too few of them to spend it. The only way that money benefits anybody else is if its spent. If it's lent or invested, it has to be paid back with interest, so it just winds up wasting even more money.

No, because the median is the value at the middle of the range. If the incomes at the top 5% increased while everyone else's remained the same, the median would increase because of growth at the top end. But that wouldn't be an example of a rising tide lifting all boats, but merely a statistical artifact of the increase in range of incomes. That's almost exactly what we should expect based on the model that the spending of the rich is income for everybody else, which for the most part it is; the problem is that the economy (and wage levels) are based on the spending of the middle class, not the rich. There's simply not enough rich people to base an economy on.

And clearly that's the case, since the vast wealth of the rich has not improved conditions for anybody else. Then again, we're back to how we're seeing completely different graphs, since the one I'm seeing shows a median income all but insensitive to the income of the top 5%. But that comment is not in any way along the lines of "kill Ivan's goat." It is not that the wealthy have wealth that is impoverishing others; it's that they have wealth that they cannot spend, that at best their significant income far in excess of consumption is like Silas Marner's buried bag of gold, a kind of deflation; at worst, as an interest-bearing tool of finance, it is lent out only to return with even more unspendable dollars in tow.It's not about "killing Ivan's goat", it's about the incredibly minuscule marginal utility of a dollar beyond that which you can consume. We know that in such a case the government can derive more utility from that dollar than the rich person can, because any expenditure of that dollar would be more utility than the rich person could derive. The point here is not to attack the consumption of the rich, but to recognize that the consumption of the rich has a practical upper bound that is exceeded, in many cases, by their income.And moreover - what possible reason could a rich person have to expend Herculean effort to protect money they'll never even be able to spend? At that point it's just scorekeeping, gamesmanship, putting up bigger numbers than the other guys at the club. Again, you fly in the face of relatively simple economics. The marginal value of these dollars to the wealthy are near zero because they can't be spent, but the number of hours in the day never increases for anybody - why spend that kind of time and effort to protect worthless money?You're not making any sense. The reason Romney doesn't get his taxes any lower than about 15% is that it's not worth it to him to spend the time to get them any lower, because he already has more than he can spend; his Presidential campaign hasn't even made a dent. It's not even his effort that has made his taxes so low. That's all the result of lobbying by people a lot less rich than he is, trying to protect their consumption from the confiscatory tax rates that might actually impact it. There's zero reason to suspect that the rich are going to spend valuable time mounting a concerted defense of money they can't even spend. It's nothing to do with being convinced by graphs, but by sound reasoning, and the abundant evidence that the declining marginal value of a dollar justifies confiscatory tax rates on super-incomes. Hell, the mega-rich don't even object - it's their less-wealthy sycophants with the misguided objections on their behalf.

Why should that amount ever be higher than zero? Oh, right, because: Because there's a non-zero amount of time and effort needed to protect income from taxation, and that cost-benefit calculation doesn't justify Herculean efforts to protect income well in excess of consumption.So we're in agreement. You can raise taxes on the rich, because what they care about is their level of consumption. The income after that is just putting up big numbers on the scoreboard. The evidence that it doesn't work is the evidence I've presented that the rich can't possibly spend enough to make it work.

Sure, but they spend nearly all of it.You're simply allowing your moral objections to funding someone else's largesse to blind you to the fact that the largesse ultimately being funded is your own. It's in everybody's interest to spend money on the poor even if the indolent, lazy poor spend it all on cigarrettes and t-bone steaks and lottery tickets. All that spending is stimulative. Well, don't forget it. One of the unintended "consequences" of government waste is that it is private income.

Well, ok; so what does "improvement" mean?

Their spending drives the economy: Untrue. The middle class - defined broadly as the middle three income quintiles - spend 60% more than the rich in absolute terms. Taken as a percentage of income, the disparity is even higher; the rich spend less as a portion of their income than anyone else in basically every category. That's by defining "rich" as the top income quintile, but defining the rich more narrowly as "the 1%" the disparity is even sharper.People should understand this very intuitively; if the rich spent all of their money, they wouldn't be rich. And there's only so many hours in the day to engage in consumption (spending.) The rich actually earn far in excess of their consumption, their ability to spend, and despite finance that money is completely wasted, in economic terms. The economy functions better when money is in the hands of the middle class, not the rich - because in the hands of the middle class, it gets spent. In the hands of the rich it gets lent. How many more? One hundred times more? Not likely; economies of scale and simple volumetric math mean that it doesn't take a hundred times the effort to build a house with a hundred times the space or a hundred times the sale price. Building one hundred $200,000 employs a lot more layers, framers, wallboarders, electricians, plumbers, roofers, and other people than does building a single $20,000,000 McMansion.The spending of the rich simply can't drive our economy - there's not enough of them and they don't spend enough.The rich create jobs: Untrue. The rich don't create jobs.It's important to understand the difference between hiring that is the result of expansion and hiring that is the result of employee turnover; if Don retires, Phil is promoted to take his place, and the firm hires new graduate Tony to step into Phil's vacant position, no job has been created; that's just hiring that is the result of turnover. Businesses actually create jobs when they expand into new fields or new markets, and the businesses owned by the rich aren't the ones doing that. Small businesses and new businesses are the ones that expand; existing mega-corporations are about as big as they're ever going to get. And small businesses are primarily owned by people firmly in the middle class; the average annual small business income to proprietors/owners in the United States is under 60k. And, of course, the vast majority of next year's new jobs will come from businesses that don't yet exist - new business hiring is the predominant source of new employment.

Who cares? Proportionality is irrelevant. Tax cuts for the rich aren't going to make anybody rich who already isn't, by definition, since they apply only to the already rich. The question is whether the classical "trickle-down" policies - tax breaks for the wealthy meant to stimulate and increase their consumption by increasing their wealth - can work, and the abundant evidence is that they cannot, because you cannot increase the consumption of someone by increasing their wealth, if their wealth already far outstrips their ability to consume.Trickle-down by definition cannot work because the consumption of the rich is insensitive to their tax levels. Only in the near-term. No business succeeds until it attracts spending instead of just investment. Being in debt is not enriching, and the power of the rich to indebt us to them is not ultimately a force for growth among the middle class. It's actually quite the opposite.

I asked you before, and I understand if it got lost in the shuffle - what counts as a "benefit"? When we say the economy "improves", what does that mean? Just from an ethical perspective we have to understand that a benefit that is not broadly distributed is really no benefit at all, and really isn't a policy aim. The diversion of broad increases in productivity by the American workforce from their rightful earners to themselves. The graph makes that plainly clear. You asserted that before but it doesn't seem to be the case. This growth is simply too large in magnitude to merely be the result of moving money out of tax dodges because the coast is clear, and the institution of the Alternative Minimum Tax makes that highly unlikely in any case. The increase in income among the top 5% incomes represents a real increase in their wealth, not just a greater exposure of it. Wealth actually has moved from the middle income quintiles up to the top. I'm saying you can't ground an economy on just moving money around in leaky buckets, and that's not how wealth is created. That's economics 101. Businesses are supported by spending, not by investment.