Tea Party & Fellow Travellers

I have been impressed with the overall level of intelligent debate in the topic I started about US government shutdown. I did try to set the scene impartially, as being an outsider I don't have the knowledge (or probably any right) to take sides. In this topic I'm being somewhat biased, as the debate has to me identified the Tea Party people to me as being similar to groups in my country and others. (Not Republicans overall please, to me they're normal just to the right, as is their right).

Sorry that it will be somewhat long and complex, but the subject is not amenable to shoot from the hip analysis.

A statistical point I'd like to make first is that a median is more useful than an average. If you have nine people earning $50k a year in a room, the average and median income is $50k. Bill Gates enters and the average income goes into the $millions while the median is still $50k.
Now the Credit Suisse has analysed world wide individual wealth finding that Australians have the highest median wealth followed by Switzerland (with Norway, Sweden, Canada, New Zealand and the usual top countries following). This is less important than the distribution. The top 10% of Australians own 50% of the wealth, but the top 10% of US citizens own 86% of the wealth, with many of the wealthiest world citizens in that group.
The second information part of my long winded discussion is drawn from the OECD. The Program for the International Assessment of Adult Competencies has rated adults across all countries on a range of abilities (smartness)and the median results coincidentally parallel those above, with Japan inserted in the top order as well. The USA is well down on the median, but a second parallel is that the USA has some of the very brightest people in their top 10%, and these are drawn from the top 10% of their socioeconomic pyramid.

Now it is widely accepted that human beings have similar potential across the world, but societies can either encourage or inhibit that potential. How many female Beethovens have been born in Afghanistan, but had to accept a breeder role in purdah? Or low caste in India, or medieval peasants in Europe?

So does the ethos of the far right elitist groups lead to a society wherein only those born to privilege can actually achieve their full potential, and is this detrimental to the nation as a whole?

Alternatively is it good economic sense to spread the wealth to assist disadvantaged individuals to grow their potential to contribute?

Please be nice in discussion.

As a US citizen, let me thank you for at least attempting to understand what is driving politics in this country. I hope you and others (including me) will learn from these discussions. As these talks here and in other topics continue, please remember that my country is in the middle of a societal as well as economic upheaval. To a greater and greater extent, personal ethics and morality are conflicting with societal and religious ethics and morality. This is spilling over into politics in ways that the founders never foresaw or intended. Gender identity, abortion, adoption and contraception have all become political choices rather than private decisions. The fact that we have seemingly locked ourselves into a two party system is both a strength and a weakness. If there were more parties, there would be more possibility for compromises.

Let's review this research paper Congress had prepared.

http://www.fas.org/sgp/crs/misc/RL33433.pdf

I would like to compare the median household income to mean housefold income as well as comparing total net worth as a percentage of total population the US. These comparisons will illustrate a couple of things. First the median to mean comparison will capture the rise or fall of those halves of the population above and below the median by measuring the disparity between the median and mean. Since the median is simply the measure of distribution of indvidual incomes and the mean is total income devided by total working population, disparity between the two will show income changes at the extremes.

1989 Median household income was $79,100 and the mean was $313,600. That is a disparity of 4.0 times the median. The difference is explained by just how much money the high income extremes actually made.

Over time the following happened.
Year----Median-------Mean----Disparity
1989---$79,100-----$313,600---4.0
1992---$75,100-----$282,900---3.8
1995---$81,900-----$300,400---3.7
1998---$95,600-----$377,300---3.9
2001---$106,100----$487,000---4.6
2004---$107,200----$517,100---4.8
2007---$126,400----$584,600---4.6
2010---$77,300-----$489,800---6.5

As we can see until the .Com bubble burst the ratio between median and mean incomes stayed relatively constant between 3.8-4.0. After the .Com burst and Greenspan started making monetary policy much looser, the higher than average incomes rose more quickly than than the median. This phenomenon was even more extreme in the latest crash and Bernanke's loose money policy. Sure everyone took a hit in incomes, but the very wealthy benefited from all this loose money even more than they did when the .Com bubble burst.

Now let's take a look at wealth. The collumns are the percentage of the Total net worth owned by that percentage of the population.

Year 0%-50% 50%-90% 90%-99% 99%-100%
1989-----3.0-----29.9-------37.1-------30.1
1992-----3.3-----29.6-------36.9-------30.2
1995-----3.6-----28.6-------33.2-------34.6
1998-----3.0-----28.4-------34.7-------33.9
2001-----2.8-----27.4-------37.1-------32.7
2004-----2.5-----27.9-------36.1-------33.4
2007-----2.5-----26.0-------37.7-------33.8
2010-----1.1-----24.3-------40.0-------34.5

Again we see the same type of movement after the 200 .Com bubble burst and the 2008 financial crisis. Net Worth of the bottom 90% took a hit relative to the top 10%. The bailouts only bailed out the wealthy, who didn't need it.

As for the total distributuin of wealth in the top 10%, I am more sanguine about that. After all the vast majority of Google's market capitalization is owned by a handfull of people. The same can be said for Apple, Microsoft, Oracle, Amazon and a host of other companies that have created a massive amount of wealth in this country and helped increase productivity by about 80% in this country since 1970. that increase in productivity means goods and services are cheaper than they would otherwise have been.

My point is that the charts show that our elites have benefited from the massive intervetion policies this country has enacted. Also since the Bush era increases in the size and scope of government, the rich have increased their wealth much more quickly than anyone else. Note this process only sharply accellerated under Obama. The one common theme between those two presidents has been increased regulations. That's one of the reasons Wall Street donates much more the the democrats than to republicans. Small business donates more to republicans than to democrats for the same reason. Increased regulation means those already wealthy gain more and make it harder for those not already wealthy to gain it.

Small businesses are the bottom 90% trying to reach to the top 10%. They know regulations will protect those already in the top 10% and make life harder for everyone else.

Is it any wonder that TEA Party members want to defund as much of the current government as we can? Everytime the government intervenes or increases regulations, the rich benefit at the expense of everyone else. The bottom 50% are getting screwed by this administration as their incomes and net worth are destroyed, yet the republicans are being blamed for that misery? Sure the PR is better by those elites (repub and dem progressives), but any thinking indivudal that truly cares for people has to consider that perhaps their beloved Democrat Party's (repubs at a much smaller percentage) progressive policies are not working. That the more government interferes the larger portion of the remaining wealth a country has will aggregate to the elites, appartchiks and 1%ers.

Edit:Spelling

Dang PeterZ,

I have been trying to sweat, grind and communicate something that illustrates this for 3 years(and failing miserably) and you do it in one post.

Awesome job.

For a how somethings that make me wonder. People in other places have implied that the US is encouraging the development of a "gray" economy. Those who are working under the table and not reporting said activity to the government. Do you have any feel for how that might affect those numbers?

An extremely jealous(and thankful,
T2M

Not directly. I would assume that insights might be obtained from the decrease in the velocity of money since 1980. The monetary base has increased along with GDP but the velocity of money has decreased. That suggests a larger monetary base is required to support a given level of economic output.

If there was a significant increase in the gray economy, then it might be assumed that the velocity of money would also increase or at least hold steady as people put their assets to use to capture more of that gray economy. This isn't happening yet. I would argue that as inflation becomes more obvious and the GDP doesn't increase in proportion to the increase in inflation, then that would indicate a growing impact in the gray economy.

thinkstoomuch wrote:Dang PeterZ,

I have been trying to sweat, grind and communicate something that illustrates this for 3 years(and failing miserably) and you do it in one post.

Awesome job.

For a how somethings that make me wonder. People in other places have implied that the US is encouraging the development of a "gray" economy. Those who are working under the table and not reporting said activity to the government. Do you have any feel for how that might affect those numbers?

An extremely jealous(and thankful,
T2M

Many thanks PeterZ, that has explained a lot to me. Sounds like the problem is that every time you vote you elect a politician regardless of label. Not sure how we have partially avoided the same situation, as some of our regulations do actually reduce profiteering.

Looks like I'm not the only outsider puzzled by the US system. This article is in our press at present http://www.news.com.au/business/markets ... 6736769493

At its core, Daryl, the American federal government was set up to make it difficult to do ANYTHING. The fundemental premise was that government only handled what the individual or state couldn't. In light of that it made sense to have checks and balances that hamstrung the federal government's ability to easily enact laws. That's what liberty meant to our founding fathers.

Our system wasn't meant to handle a federal government with broad powers. The states and the people don't have the resources to constrain a central government (all three heads together) that decides to simply do what it wills. The American electorate has counted on those checks and balances for a LOOOOONG time. Do some research on how often this electorate elects a divided government.

We need congress to use its power to stop an administration from simply altering laws as this one did to tthe Afordable Care Act; the small business exemption and exemption to Congressional staff etc. That requires Congress to re-write the law to effect. Yet, that has happened and no comments from the press. If that precidence stands, what happens next time when an administration decides it does not like some portion of a law? Perhaps a rabid progressive who wants to restart the Margret Sanger's eugenics policies wins the White House. Can he/she simply enforce some portion of the abortion rights laws to ensure only the "unwanted" portions of the population gets abortions but no one else can easily? Perhaps an elite Wall Street type who selectively enforces tax laws? Absent the checks and balances of the system, those potential administrations can do just that.

So, as to the government shut down, Congress should have the power to shut down government if only as a last resort to prevent an administration who over reaches his/her authority from doing more harm. Keep in mind that less than 30% actually like the ACA. Yes, support of its repeal only has 35% or so. The disparity probably has to do with how liked the President is. Respondents don't want to see him harmed politically even more than the want to have the ACA repealed. That doesn't mean they like this horrible law.

So, if Congress can't act to protect the American people from a horrible law those very people don't like in huge numbers by using every tool at their disposal, then what purpose do they serve?

Daryl wrote:Looks like I'm not the only outsider puzzled by the US system. This article is in our press at present http://www.news.com.au/business/markets ... 6736769493

Hmm, Daryl;

Basically there has never been a consensus between two points of view in our history. Those wanting a strong central government and those wanting a strong local government. The argument has lasted nigh on to 250 years and shows no sign of stopping any time soon.

We have the government that reflects both these contrary points of view moving one side, or the other over time, but always under the surface. Even George Washington was plagued look up Shay's Rebellion and the Whiskey Rebellion.

To quote the Ancient Greek, "There's nothing new under the sun."

Poker

And of course, Lincoln and the War Between the States. The Republicans were on the other side of state rights at that time.

pokermind wrote:Hmm, Daryl;

Basically there has never been a consensus between two points of view in our history. Those wanting a strong central government and those wanting a strong local government. The argument has lasted nigh on to 250 years and shows no sign of stopping any time soon.

We have the government that reflects both these contrary points of view moving one side, or the other over time, but always under the surface. Even George Washington was plagued look up Shay's Rebellion and the Whiskey Rebellion.

To quote the Ancient Greek, "There's nothing new under the sun."

Poker