Aside from the economic problems with his argument, there are glaring Constitutional and moral problems with it.
Russ Roberts
· 2 years ago
Yanick,
Well done. The first part of the sentence you can give him the benefit of the doubt. By the end, when he invokes "gains," he's presuming they're the same people. In fact, they are not.
Forbes
· 2 years ago
Prof. Roberts: I read a little too fast, so this was the sentence I focused on, "In contrast, the top tenth of 1 percent of earners today make about four times as much as in 1980, while those higher up have enjoyed even larger gains."
It seems to me, when talking about the "top tenth of 1 percent of earners," there isn't anyone "higher up" to enjoy "larger gains."
In both instances, today and 1980, Mr. Frank is comparing the same top slice of taxpayers--the top tenth of 1 percent. Inasmuch as today's taxpayer in the 99.99 percentile makes more than that of the 99.9 percentile, short of introducing data demonstrating otherwise, there no reason to believe the "four times as much as 1980" relationship is inadequate to describe the change over time.
T Sowell fan
· 2 years ago
Isn't one logical error that "median" income changes don't tell us anything about changes in the tax burden (absolute or relative) of any particular middle class family of today?
i.e. Don't we need to know about changes in the statistics of the ratio of individual taxes to income rather than just income?
To put it another way, couldn't the tax paying population have increased faster since 1980 than the inflation-adjusted tax burden?
John S
· 2 years ago
I have often heard the claim that the supply of labor from the wealthy is inelastic in support of taxing the wealth more than we do now, and from what I gather, this is certainly true of the short run. However, I would expect the supply of labor from the wealthy to be much more elastic in the long run because the ratio of lifestyle adjustment costs to income is much lower in the long run.
Methinks
· 2 years ago
Isn't another problem with that sentence that "income" doesn't include any redistribution or the growth in non-money income such as health benefits? So, while real money wages may have declined a bit, if all benefits were included, real wages are actually higher. I believe Thomas Sowell made that point not that long ago.
Methinks
· 2 years ago
Well, the supply of labour may be largely inelastic. However, the willingness of that labour to supply capital for risky ventures is highly elastic.
But Frank is an idiot in other ways. Socialized medicine is more expensive and of lower quality. I was a "victim" of socialized medicine in Europe for four years. Demand regularly outstrips supply and the supply is of much lower quality than in the United States. Death from cancer is higher and rarely are extra measures taken to save a life. Waiting months or years for non-elective surgery is common and the facilities are only marginally better than Soviet Russia. The only way to get anything resembling standard care in the United States is to be very very wealthy or very well politically connected. Socialized medicine truly only favours the very rich.
Anonymous Austrian
· 2 years ago
In addition to the fact that the median income doesn't represent the same families today as the median income from 1980, the top 1% by income are different people. Chances are that a 55 year old CEO today in the top 1% was not a 28 year old CEO in the top 1% in 1980.
cpurick
· 2 years ago
"Chances are that a 55 year old CEO today in the top 1% was not a 28 year old CEO in the top 1% in 1980."
No, in fact, he was probably in the middle class then. Thus, Frank has unwittingly explained what really happened to the poor downtrodden middle class of the 1980s.
Patrick
· 2 years ago
Errors aside, the argument is again based on a the redistribution of wealth paradigm-Marx put in a more polite way than Stalin did or Hugo Chavez does now. The same ridiculous phallacy and the old "after all, they can afford it.." mentality. It stems from the old socialist theme that if one person gets money it takes away from another or, "the rich get richer..." nonsense. Since capital is not finite but can be created and expanded and passed on and through society in free trade transactions. Just utter crap-and don't even get me started about universal health care-if it happens it will totally shatter our economy.
Jim VAT
· 2 years ago
How about, "You have it, I want it, hand it over."?
Methinks
· 2 years ago
"It stems from the old socialist theme that if one person gets money it takes away from another or, "the rich get richer..." nonsense."
aahhh. The lump of wealth fallacy. My favourite. I'm endlessly amused by the number of (sort of) Economists - like Krugman - who commit it vigorously and constantly.
SaulOhio
· 2 years ago
Wasn't it someone on this blog that claimed there is no such thing as a "trickle-down theorist"? Trickle down theory is a strawman.
Steven E. Landsburg
· 2 years ago
Let's take Frank's implicit assumptions at face value:
1) Given the current median income, the median family doesn't want to spend more for better health care.
2) We ought to tax the rich to help those in the middle.
How the HELL does it follow that you should tax the rich to give people in the middle something that they would *prefer not to have*, given the cost?
Methinks
· 2 years ago
"Trickle down theory is a strawman."
The New York Times is a straw man factory.
Methinks
· 2 years ago
"How the HELL does it follow that you should tax the rich to give people in the middle something that they would *prefer not to have*, given the cost?"
It follows for people who believe in slavery and don't understand incentives - socialists.
Objectivist
· 2 years ago
Frank's support for socialized "medicine" is repulsive. Everyone knows that we need to eliminate Medicare and Medicaid. Besides that, I am also in favor of allowing imports of drugs from other countries, since that supports free market competition. If other countries socialist systems cut down fair prices for drugs, I see no reason why Americans should not take advantage of the subsidies provided by foreign governments which "negotiate" lower drug prices.
steep
· 2 years ago
The marginal tax rate discussion is still missing one important point. The $1000 Child Tax Credit is applied against FICA taxes as well.
Dale gribble
· 2 years ago
Good point that the top 1% or higher taxpayers are not all the same. Lawyers doctors professionals etc will draw a stead check year in year out. risk takers will not, maybe a few big scores and then likely a drop off. Easy for the Lieyars to demand higher taxes since they feed off the high tax system.
Methinks
· 2 years ago
"Lawyers doctors professionals etc will draw a stead check year in year out. risk takers will not, maybe a few big scores and then likely a drop off."
Good point. What's the latest failure rate for star-ups? The last number I saw was 80%.
Mesa EconoGuy
· 2 years ago
Up until about 1995, it was extremely unusual to find vocal economic zero-summers in the financial markets/commentary. See any of Russ Roberts’ previous posts (and the complete economic history of this country, and the world, et al.) as to why this view of the economy and markets is factually incorrect.
Now, it is relatively commonplace (see Paul Krugman). I would probably categorize George Soros as one of them, though not exclusively due to his far left politics.
It is this incorrect bias that leads to the incorrect conclusion that 1) taxing the rich will lead to more overall prosperity, and 2) there is too much (perceived) income inequality.
In fact, the real problem is there are too many economically ignorant journalists telling us there is too much income inequality. To wit:
“Back then, I was a Marxist economist and have not completely rid myself of the man’s influence — thus explaining why I chose a career on the risk side. Many people think of Marx exclusively as the father of communism, forgetting his key contribution to the field of economics: pointing out the dangers of a capitalist economy with too much wealth concentrated in too few hands.
From a recent United Nations study (which showed that the richest 2 percent of the world’s adults own half its wealth) to this year’s Forbes 400 (no one with a net worth under $1 billion qualified) to the Trader Monthly 100 issue you’re holding (featuring a record five traders who earned at least $1 billion last year alone), accelerated wealth concentration is becoming ever more quantifiable.
This issue might not inspire Al Gore to make a documentary, but it should be no less serious a concern than outsized carbon emissions.
[Note the Marxist connection to Carbon emissions.]
When, as Marx believed, wealth accrues in too few hands, demand dries up and the whole system collapses under its own weight. I’ve been thinking about this as I watch what I believe to be the investment playing field’s increasing tilt in favor of the fat cats.
My assertion is this: The big players now possess an unprecedented — and growing — advantage. Only the biggest pools of capital (and at no time in history have those capital pools been this big) get access to the sweetest investment opportunities. Thus, the highest rollers, going forward, will outperform everybody else by an increasingly wide margin. “
Pardon my French, but Bullshit! No, no, no, no, no, no…how do you then explain the greatest ever menu of financial products and services publicly available, the proliferation of inventive and accessible investment vehicles like ETFs and Mutual Fund marketplaces, the largest ever proportion of the public participating in the investment arena, and the eventual elimination of commissions altogether? Not to mention the continued and massive expansion of the independent Registered Investment Advisor market?
This is highly luddite – and this guy was a professor, albeit Marxist, i.e. not credible. Of course there are more billionaires, there are also more millionaires, too! Economic performance has been phenomenal over the past 5 years. And there are (depending on what statistics you choose) fewer middle-class: because many are now upper class, as confirmed by IRS tax receipts:
According to this guy’s highly flawed reasoning, we should all be working for one J. Pierpont Morgan right about now. Granted, this is the FHM of the financial press, but the point stands.
So this “tax-the-rich”/”too-much-income-inequality”/”I’m-jealous-of-your-car-but-I’m-too-lazy-and-irresponsible-to-take-charge-of-my-own-choices” Paul Krugman litany is basically false, and the people making it are boring and stupid, especially the ones with PhDs. Unfortunately, they’re the ones getting lots of press and misleading our kids.
Mesa EconoGuy
· 2 years ago
And universal healthcare will fail.
David P. Graf
· 2 years ago
As a Navy brat, I grew up going through the military healthcare system. It seemed good to me on the whole. Of course, you did have to question why they put the ward for pregnant women almost eye level on the flight path for the naval air station in San Diego. My youngest sister, not surprisingly, was born a bit premature. Why would a system like this be objectionable?
Mesa EconoGuy
· 2 years ago
David, that system isn’t objectionable at all; it could never be run efficiently on a national scale by any government.
See Walter Reed.
Then ask Canada.
rob
· 2 years ago
Error: Do you mean because these wages don't include employer provided fringe benefits like healthcare. Or could it be that he's not accounting for technology gains?
All Comments
Error: They aren't the same families.
Aside from the economic problems with his argument, there are glaring Constitutional and moral problems with it.
Yanick,
Well done. The first part of the sentence you can give him the benefit of the doubt. By the end, when he invokes "gains," he's presuming they're the same people. In fact, they are not.
Prof. Roberts: I read a little too fast, so this was the sentence I focused on, "In contrast, the top tenth of 1 percent of earners today make about four times as much as in 1980, while those higher up have enjoyed even larger gains."
It seems to me, when talking about the "top tenth of 1 percent of earners," there isn't anyone "higher up" to enjoy "larger gains."
In both instances, today and 1980, Mr. Frank is comparing the same top slice of taxpayers--the top tenth of 1 percent. Inasmuch as today's taxpayer in the 99.99 percentile makes more than that of the 99.9 percentile, short of introducing data demonstrating otherwise, there no reason to believe the "four times as much as 1980" relationship is inadequate to describe the change over time.
Isn't one logical error that "median" income changes don't tell us anything about changes in the tax burden (absolute or relative) of any particular middle class family of today?
i.e. Don't we need to know about changes in the statistics of the ratio of individual taxes to income rather than just income?
To put it another way, couldn't the tax paying population have increased faster since 1980 than the inflation-adjusted tax burden?
I have often heard the claim that the supply of labor from the wealthy is inelastic in support of taxing the wealth more than we do now, and from what I gather, this is certainly true of the short run. However, I would expect the supply of labor from the wealthy to be much more elastic in the long run because the ratio of lifestyle adjustment costs to income is much lower in the long run.
Isn't another problem with that sentence that "income" doesn't include any redistribution or the growth in non-money income such as health benefits? So, while real money wages may have declined a bit, if all benefits were included, real wages are actually higher. I believe Thomas Sowell made that point not that long ago.
Well, the supply of labour may be largely inelastic. However, the willingness of that labour to supply capital for risky ventures is highly elastic.
But Frank is an idiot in other ways. Socialized medicine is more expensive and of lower quality. I was a "victim" of socialized medicine in Europe for four years. Demand regularly outstrips supply and the supply is of much lower quality than in the United States. Death from cancer is higher and rarely are extra measures taken to save a life. Waiting months or years for non-elective surgery is common and the facilities are only marginally better than Soviet Russia. The only way to get anything resembling standard care in the United States is to be very very wealthy or very well politically connected. Socialized medicine truly only favours the very rich.
In addition to the fact that the median income doesn't represent the same families today as the median income from 1980, the top 1% by income are different people. Chances are that a 55 year old CEO today in the top 1% was not a 28 year old CEO in the top 1% in 1980.
"Chances are that a 55 year old CEO today in the top 1% was not a 28 year old CEO in the top 1% in 1980."
No, in fact, he was probably in the middle class then. Thus, Frank has unwittingly explained what really happened to the poor downtrodden middle class of the 1980s.
Errors aside, the argument is again based on a the redistribution of wealth paradigm-Marx put in a more polite way than Stalin did or Hugo Chavez does now. The same ridiculous phallacy and the old "after all, they can afford it.." mentality. It stems from the old socialist theme that if one person gets money it takes away from another or, "the rich get richer..." nonsense. Since capital is not finite but can be created and expanded and passed on and through society in free trade transactions. Just utter crap-and don't even get me started about universal health care-if it happens it will totally shatter our economy.
How about, "You have it, I want it, hand it over."?
"It stems from the old socialist theme that if one person gets money it takes away from another or, "the rich get richer..." nonsense."
aahhh. The lump of wealth fallacy. My favourite. I'm endlessly amused by the number of (sort of) Economists - like Krugman - who commit it vigorously and constantly.
Wasn't it someone on this blog that claimed there is no such thing as a "trickle-down theorist"? Trickle down theory is a strawman.
Let's take Frank's implicit assumptions at face value:
1) Given the current median income, the median family doesn't want to spend more for better health care.
2) We ought to tax the rich to help those in the middle.
How the HELL does it follow that you should tax the rich to give people in the middle something that they would *prefer not to have*, given the cost?
"Trickle down theory is a strawman."
The New York Times is a straw man factory.
"How the HELL does it follow that you should tax the rich to give people in the middle something that they would *prefer not to have*, given the cost?"
It follows for people who believe in slavery and don't understand incentives - socialists.
Frank's support for socialized "medicine" is repulsive. Everyone knows that we need to eliminate Medicare and Medicaid. Besides that, I am also in favor of allowing imports of drugs from other countries, since that supports free market competition. If other countries socialist systems cut down fair prices for drugs, I see no reason why Americans should not take advantage of the subsidies provided by foreign governments which "negotiate" lower drug prices.
The marginal tax rate discussion is still missing one important point. The $1000 Child Tax Credit is applied against FICA taxes as well.
Good point that the top 1% or higher taxpayers are not all the same. Lawyers doctors professionals etc will draw a stead check year in year out. risk takers will not, maybe a few big scores and then likely a drop off. Easy for the Lieyars to demand higher taxes since they feed off the high tax system.
"Lawyers doctors professionals etc will draw a stead check year in year out. risk takers will not, maybe a few big scores and then likely a drop off."
Good point. What's the latest failure rate for star-ups? The last number I saw was 80%.
Up until about 1995, it was extremely unusual to find vocal economic zero-summers in the financial markets/commentary. See any of Russ Roberts’ previous posts (and the complete economic history of this country, and the world, et al.) as to why this view of the economy and markets is factually incorrect.
Now, it is relatively commonplace (see Paul Krugman). I would probably categorize George Soros as one of them, though not exclusively due to his far left politics.
It is this incorrect bias that leads to the incorrect conclusion that 1) taxing the rich will lead to more overall prosperity, and 2) there is too much (perceived) income inequality.
In fact, the real problem is there are too many economically ignorant journalists telling us there is too much income inequality. To wit:
http://www.traderdaily.com/magazine/article/5343.html
“Back then, I was a Marxist economist and have not completely rid myself of the man’s influence — thus explaining why I chose a career on the risk side. Many people think of Marx exclusively as the father of communism, forgetting his key contribution to the field of economics: pointing out the dangers of a capitalist economy with too much wealth concentrated in too few hands.
From a recent United Nations study (which showed that the richest 2 percent of the world’s adults own half its wealth) to this year’s Forbes 400 (no one with a net worth under $1 billion qualified) to the Trader Monthly 100 issue you’re holding (featuring a record five traders who earned at least $1 billion last year alone), accelerated wealth concentration is becoming ever more quantifiable.
This issue might not inspire Al Gore to make a documentary, but it should be no less serious a concern than outsized carbon emissions.
[Note the Marxist connection to Carbon emissions.]
When, as Marx believed, wealth accrues in too few hands, demand dries up and the whole system collapses under its own weight. I’ve been thinking about this as I watch what I believe to be the investment playing field’s increasing tilt in favor of the fat cats.
My assertion is this: The big players now possess an unprecedented — and growing — advantage. Only the biggest pools of capital (and at no time in history have those capital pools been this big) get access to the sweetest investment opportunities. Thus, the highest rollers, going forward, will outperform everybody else by an increasingly wide margin. “
Pardon my French, but Bullshit! No, no, no, no, no, no…how do you then explain the greatest ever menu of financial products and services publicly available, the proliferation of inventive and accessible investment vehicles like ETFs and Mutual Fund marketplaces, the largest ever proportion of the public participating in the investment arena, and the eventual elimination of commissions altogether? Not to mention the continued and massive expansion of the independent Registered Investment Advisor market?
This is highly luddite – and this guy was a professor, albeit Marxist, i.e. not credible. Of course there are more billionaires, there are also more millionaires, too! Economic performance has been phenomenal over the past 5 years. And there are (depending on what statistics you choose) fewer middle-class: because many are now upper class, as confirmed by IRS tax receipts:
http://opinionjournal.com/weekend/hottopic/?id=110008889
According to this guy’s highly flawed reasoning, we should all be working for one J. Pierpont Morgan right about now. Granted, this is the FHM of the financial press, but the point stands.
So this “tax-the-rich”/”too-much-income-inequality”/”I’m-jealous-of-your-car-but-I’m-too-lazy-and-irresponsible-to-take-charge-of-my-own-choices” Paul Krugman litany is basically false, and the people making it are boring and stupid, especially the ones with PhDs. Unfortunately, they’re the ones getting lots of press and misleading our kids.
And universal healthcare will fail.
As a Navy brat, I grew up going through the military healthcare system. It seemed good to me on the whole. Of course, you did have to question why they put the ward for pregnant women almost eye level on the flight path for the naval air station in San Diego. My youngest sister, not surprisingly, was born a bit premature. Why would a system like this be objectionable?
David, that system isn’t objectionable at all; it could never be run efficiently on a national scale by any government.
See Walter Reed.
Then ask Canada.
Error: Do you mean because these wages don't include employer provided fringe benefits like healthcare. Or could it be that he's not accounting for technology gains?