Cafe Hayek - Latest Comments in The vanishing middle class

Re: The vanishing middle class

Randy — Wed, 06 Feb 2008 10:29:59 -0000

Martin,

"...free resources currently bound up in the Federal planning apparatus."

Works for me. Keeping the money in the private economy most likely would increase median income. But I still don't see any need to restrict how people spend the increase. With more money available, they will spend it, and the investment money will follow the wants, simultaneously making investment itself more attractive to those who prefer to invest.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 10:28:39 -0000

What empire? A few military bases does not an empire make.

You obviously haven't counted lately.

What tribute are we collecting?

You need to ask the people around the bases.

Who are the regional governors of the American Provinces?

They're diplomats and generals.

I thought this was an empire.

You thought correctly.

You lost me there.

You seem lost, but I didn't lose you.

Also what is this thing about "greater variety of goods"?

That's "a greater variety of common goods", goods available to a large number of people. "Greater" is the opposite of "lesser". I'm sure how else to explain that to you.

When I look at the retail space online and brick-mortar I see a virtually infinite variety of goods, so what are you blathering about?

You'd have seen that a century ago too. Just look at an old Sears catalog. This fast is irrelevant. If you believe the variety of goods doesn't change and grow, we must live on different planets.

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 10:19:52 -0000

Eric:

You look at our current military expenditure as somehow not necessary. I think the high cost is dictated as much by American interest in keeping the world safe for commerce as much as American public opinion dictates that we don't use excessive force. If we carpet-bombed Iraq it'd be a lot cheaper dollar-wise, but the American people would have not stood for it morally. Basically $200-$300 billion is the "lets not be cruel" expenditures.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 10:18:33 -0000

Here's another eminently fair proposal. If you own a house in the U.K. and you're well able to support yourself, you may move equity here and immigrate with a fast track to citizenship. Let's encourage all of the wealthy retirees on Earth to move here and buy our houses.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 10:05:33 -0000

How does a "progressive consumption tax" raise median income?

You must have missed that part. See above.

Why not just eliminate FICA, SocSec and cut other spending?

I do propose to eliminate most of the payroll tax, the 10.7% that funds Old Age and Survivors Insurance, and to eliminate this portion of the Social Security program as described above and here:

http://www.knology.net/~mar...

Why add in another unfair tax?

The progressive consumption tax is not another tax. It's a reform of the income tax. Basically, it keeps the progressive income tax, simplifies it by taxing all income alike (including capital gains, dividends, rents, etc.), adds higher marginal rates at higher incomes and creates an individual investment account (like an IRA) with unlimited contributions to shelter income from the tax. You may earn a billion dollars in a year and pay no tax if you reinvest all of it. This consumption tax replaces the income tax. The higher marginal rates don't collect more revenue. They collect less, because that's what they're supposed to do.

Any tax that is not flat is inherently unfair and un-American.

Yea, oh god of "fairness", speakth that we may know thy will.

Here's how fair I want to be. I want Bill Gates to pay less tax than you do. He pays no payroll tax now, because he earns no wages. If he consumes relatively little going forward, he'd also pay less consumption tax than you, and I think that's completely fair.

Re: The vanishing middle class

Eric — Wed, 06 Feb 2008 09:25:20 -0000

FreedomLover --

While the variety of goods may seem infinite to you, it is only because you don't have the imagination to picture an even wider array. The cost of paying for the war(s) crowds out investment in more peaceful endeavors.

Many other things the government does crowd out other investment, too. Entitlement programs are the worst offenders -- but they're part of a separate debate.

On the other hand, many functions of our military apparatus make it very useful, like protecting shipping from pirates in the Strait of Malacca and protecting poor foreigners from genocide. So as with everything it appears to be a bit of a mixed bag, and I will leave the rest of the theorizing to people who know something about artillery. But I don't like wars, particularly ones that would have been so easy to avoid (in this case we could have avoided it by not invading Iraq).

By the way, congrats to Randy and Martin for agreeing so vehemently about the lack of differences between the two major political parties. I disagree too -- I think that there aren't any important differences between the two major parties! ;)

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 08:59:38 -0000

I find that liberals are usually running on fumes when they rant about the "American empire". I have to put up with that all the time.

Re: The vanishing middle class

Methinks — Wed, 06 Feb 2008 08:43:36 -0000

apologies if someone already brought this up (didn't have time to carefully read every post)

"stagnating" wages don't include benefits and incentive compensation. Strange, because those two components are growing as a percentage of total comp. And, of course, people in all classes change over time. One year they may be classified as above average, another below and another average income. Thus, it seems meaningless to talk about "the middle class" as if they are some unchanging lump of humanity.

The best thing about the United States is that people are more free here to change the circumstances of their life than in any other country I've very lived.

As for the military empire....the amount we spend on military pales in comparison to the amount we're spending on entitlement programs. This notion that we can somehow pull back within our borders and ignore the rest of the world is fantasy, but making people pay for their lunch seems much more do-able to me.

Re: The vanishing middle class

Randy — Wed, 06 Feb 2008 08:33:47 -0000

"...but the "political class" certainly is not limited to employees of the federal and state governments..."

The way I think of it, it comes down to owners (rent collectors) and tenants (rent payers). The political class is the owners.

"...bickering voices that the two major parties direct at each other..."

There's really only one party. They are only arguing amongst themselves over how to split up the rents they've collected. Neither is the least bit interested in collecting less rent. Its what they do, not what they say, that counts. Libertarians will never be in charge, because you can't be in charge without collecting rents, and the more you collect the more power you have. Libertarians can only point out what should be obvious - that too much power in the hands of the political class is a threat to liberty.

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 08:21:42 -0000

And slash the empire. Withdraw U.S. forces from Iraq, sell 90% of the Vatican sized embassy there to local interests, cease construction on the permanent military bases and sell these assets as well. Sell 'em cheap at a nominal loss. Do the same with similar resources globally. Free the resources bound up in these organizations to explore a greater variety of goods for more common consumption.

Posted by: Martin Brock | Feb 6, 2008 1:19:10 PM

What empire? A few military bases does not an empire make. What tribute are we collecting? Who are the regional governors of the American Provinces? I thought this was an empire. You lost me there. Also what is this thing about "greater variety of goods"? When I look at the retail space online and brick-mortar I see a virtually infinite variety of goods, so what are you blathering about?

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 08:19:47 -0000

Martin:

How does a "progressive consumption tax" raise median income? You say you want to eliminate FICA, but what does that have to do with the other tax if you say we have to cut spending anyways? Why not just eliminate FICA, SocSec and cut other spending? Why add in another unfair tax? Any tax that is not flat is inherently unfair and un-American.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 08:19:10 -0000

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 08:12:23 -0000

Tell me how to raise the median income in this country.

I've suggested a progressive consumption tax repeatedly. It's not a panacea in isolation, but if adopted, it would slash income tax revenue, from the wealthy specifically, and hopefully slash state spending with it. If so, it would free resources currently bound up in the Federal planning apparatus. It would also change the consumption profile and leave market forces to explore a wider variety of more common goods rather than a variety of less common goods. This change would affect employment as well. Median income has risen under this type of arrangement in the past as a matter of fact.

I've suggested a system of parental support and private investment to replace Social Security. I'd go further and forbid Treasury securities in the accounts.

I've suggested privatizing education by creating a negotiable propriety in a portion of people's educational value. So basically, your parents pick educators for you when you're young, and you owe these educators a percentage of your income for a period thereafter. If you don't produce, these educators have an incentive to sell their entitlement to other educators who might profit by educating you otherwise.

If we've essentially sold exclusive rights to produce for U.S. consumption, we just need to default on these obligations. We sold you the right, but we were lying, and we aren't buying the right back from you now, unless you just want us to print some money for you. Sorry about that. Hope you'll go on trading with us anyway.

I don't say a word about any Federal spending or expanded central authority or statutory wages. I don't say a word about limiting competition, quite the contrary. I don't say a word about border fences and other restraints of trade.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 07:51:00 -0000

I'm just thinking that one very large element of the "status quo" is the desire of the political class to maintain its revenue stream.

I'd say that's just about all of it, but the "political class" certainly is not limited to employees of the federal and state governments, elected and otherwise. It's not like there was no state in the feudal period.

It forces children into schools in order to increase productivity and establish the habit of regimentation, establishes programs to funnel a large percentage of national earnings into the hands of their favorites... you get the idea. It just seems me that those who claim to want to change the status quo are actually its defenders, and vice versa.

If you're talking about the bickering voices that the two major parties direct at each other, I completely agree. Tragically, if the Libertarian party became a significant force, it would soon succumb to the same, stagnant, inbred dialectic. I hate to be fatalistic, but that's how I see it.

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 07:49:29 -0000

Martin:

Tell me how to raise the median income in this country.

Re: The vanishing middle class

FreedomLover — Wed, 06 Feb 2008 07:45:41 -0000

Martin:

People like you have been predicting the Socialist Democrats sweep to power due to Reagan's "thrashing of the middle class" for 20 years now. It hasn't happened yet. Billy boy signed NAFTA and welfare reform. Billary will not do any better or worse. Face it, neither your hero Ron Paul or space alien Kucinich are going to be President.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 07:39:39 -0000

Are you saying that masses of people are going to vote for democrats ...

Yes.

... in the hopes that they will be forced to want less things?

No. They want things more.

I guess I can see how that might seem rational to a democrat...

The Democratic and Republican parties are two peas in a pod. The difference between a two party state and a one party state is one party, and this distinction ultimately is meaningless. We cycle between waves of futile expectation, expecting one party to unwind the forcible proprieties of the other, while the network of these proprieties only becomes ever more complex and tangled. Most people wander around looking for a tightly woven patch in this tapestry, and when we find ourselves at a joint in the network where lots of cash flows at the moment, we purchase as many rents as we can or we just consume and hope for the best.

We reached a point for while where inflation mostly affected the price of these rents, so we have very low interest rates on long term Treasuries for example. We're now approaching a turning point in the baby boomers' demand for rents. They'll now gradually accumulate less and sell more. We might hope for a new generation of buyers to take up the slack, but median income growth stopped soon after the baby boom ended. [Of course, it wasn't really the end of a boom. It was the start of a bust.] If the stagnation creeps to ever higher income percentiles, something seems unsustainable.

Sure, mp3 players are much nicer than 45s on a turntable, but I don't expect the mass of people to give up their mp3 players to buy a few shares, and they can't effectively buy 45s or turntables at any price anymore. Will people rising in the corporatist hierarchy buy these shares? I don't know. If we are selling rights to produce for U.S. consumption to Chinese and other proprietors, I just don't believe that the corporatist administration can remain long in the U.S.

A couple of decades ago, when this demographic trend was driving rent prices up, I heard lots of talk about it. I remember it well. Now that we're approaching the end of the buying phase of this trend, the silence is deafening. Or maybe I've just stopped listening. I don't know. I've hardly seen television in years.

Re: The vanishing middle class

Eric — Wed, 06 Feb 2008 07:18:29 -0000

Martin --

I reject all of those things too. (Except maybe the problems of doing business with undemocratic regimes and selling business processes; I'm not sure about those.) I just want people to look at a wider range of measures before making statements like, "life is getting worse for middle class Americans." Nevertheless, the developments you describe are indeed undeniable.

The point I was making in reference to your first post was that CPI doesn't tell the whole story about changes in purchasing power, therefore "real" wages don't tell the whole story. (I just tried to post a bunch of links to other data, but for some reason it didn't work. Just search Cafe Hayek for "CPI" and you'll see some actual research and a good number of anecdotes in the linked posts. Maybe that post will show up later.)

By all means, let's change the status quo. But we need to be careful going around 'fixing' this and that on the basis of weak data.

Re: The vanishing middle class

Mcwop — Wed, 06 Feb 2008 07:06:22 -0000

They commute further distances to live in affordable housing. They have more and better things but they have more debt and less savings and decreasing benefits and stagnant wages. The system completely rigged by men of money with access to cheap American dollars direct from the Fed to spur more buying and more debt and greater taxation to pay the debt.

Or it could be bad local tax policy that forced people and businesses out of urban centers (e.g. Baltimore's property tax rate is double the surrounding counties), which caused sprawl. Or the recent raising of regressive local taxes, which increase the cost of living for the middle class. And this was not to pay debt, for to pay for useless increased governmental spending at the state level. Now, at the federal level we have to pay for military - about $600 billion worth. Muirgeo, I see runaway government as a key problem, and not the CEO of Coca Cola.

Re: The vanishing middle class

Randy — Wed, 06 Feb 2008 07:01:28 -0000

I'm just thinking that one very large element of the "status quo" is the desire of the political class to maintain its revenue stream. It forces children into schools in order to increase productivity and establish the habit of regimentation, establishes programs to funnel a large percentage of national earnings into the hands of their favorites... you get the idea. It just seems me that those who claim to want to change the status quo are actually its defenders, and vice versa.

Re: The vanishing middle class

Martin Brock — Wed, 06 Feb 2008 06:42:06 -0000

Apologizing for the status quo? That's an interesting perspective.

If you consider the meaning of the words, it's a literal description.

I definitely reject the straight-line theory of economic development in nominally "Capitalist" economies. Things sometimes get worse. Things got worse in the seventies, and state policies in the preceding decade played a role.

I reject the theory that neo-conservatism (or whatever we're calling Bushnik policies these days) is anything like classical liberalism.

I reject the idea that global "free trade" agreements actually liberalize trade in the classical sense. These agreements globalize particular forcible proprieties and expand the territory over which particular corporatist tinkerers may operate.

The WTO creates international patent monopolies while corporatists expand the scope of patents to easily replicated software algorithms and incredibly broad "business processes". U.S. courts overwhelmed by patent disputes essentially hand authority over these disputes directly to the U.S. patent office. One party, Communist states with nominally "liberal" economies have huge current account surpluses with the U.S. and increasingly dominate patent applications. Solicitations for military and other state research contracts increasingly emphasize the value of these global monopolies. U.S. corporatists increasingly sell business processes to proprietors in one party states.

I can provide specific evidence for all of these assertions. We can argue about the import of these developments, but the developments are undeniable, and they're probably the tip of an iceberg, but I don't read a word about it in this forum.

Re: The vanishing middle class

MalcomX — Wed, 06 Feb 2008 06:40:47 -0000

The negative savings rate is NOT the problem. It is a symptom. A symptom of negative wage growth and people trying to maintain a standard of living they used to have.

Re: The vanishing middle class

Randy — Wed, 06 Feb 2008 06:12:07 -0000

Muirgeo,

Not sure I follow. Are you saying that masses of people are going to vote for democrats in the hopes that they will be forced to want less things? I guess I can see how that might seem rational to a democrat...

Re: The vanishing middle class

muirgeo — Wed, 06 Feb 2008 05:57:28 -0000

The theory here apparently is that the middle class is so stupid they are rushing to the polls in massive numbers because of the medias influence on them.

The theory is right but for the wrong reasons. Mass media saturates the average American with the message they need more and more and more. Indeed they spend more and more on things they don't need and bigger houses. Advertising WORKS that's why a Superbowl add cost a million buck a minute. But to keep up (which the number of foreclosure suggests they aren't) they work MORE family hours and have less time off. They commute further distances to live in affordable housing. They have more and better things but they have more debt and less savings and decreasing benefits and stagnant wages. The system completely rigged by men of money with access to cheap American dollars direct from the Fed to spur more buying and more debt and greater taxation to pay the debt.

But the bottom line is the midde class HAS figured out they are being ripped off and they're going to the polls NOT because of an impression they get from the media but from the real life they are living. And guys like Drew Carey trying to tell them to shut-up and be thankful will be stampeded by the democratic process as it swings back in favor of the people and away from the economic royalist.

Re: The vanishing middle class

Randy — Wed, 06 Feb 2008 05:51:27 -0000

Martin,

Apologizing for the status quo? That's an interesting perspective.