In January 2021 just 47.4% of the civilian population had full-time jobs, compared with 2020's average of 47.3%

Biden reportedly said in response to the employment situation summary today:

"At that rate it's going to take ten years to get back to full employment. That's not hyperbole that's a fact."

The fact is employment has never recovered to pre-Great Recession levels, and Biden is as little likely to fix that as were Obama and Trump.

The Reagan era tax reforms hollowed out the labor economy. 

Before Reagan, high marginal tax rates on ordinary income steered that income into capital investment, gains from which received preferential tax treatment if held long enough. The investment grew the economy, providing good jobs for Americans and tax revenues for government at all levels. The arrangement distrusted rich people to do the right thing with their money, but rewarded them if they did.

Reagan libertarianism changed all that.

We were sold the idea that lower taxes on high ordinary incomes would still result in capital investment because we could trust people to do the right thing with their own money.

Guess what? Libertarian trust of human nature turned out to be as false as liberal trust of human nature. 

Under the influence of libertarian free trade dogma and growing globalization, that investment went abroad where there was far cheaper labor, lower taxes and less regulation. Profits soared for the few, bringing the number of billionaires from less than fifty in the 1980s to nearly 800 today. Meanwhile the good jobs gradually disappeared and income inequality soared.

Ordinary people today cannot afford cars, educations, health care, and houses as a result.

Add in cheap labor competition from immigration at a clip of 1 million a year and you can understand how Trump was so popular, however incompetent and narcissistic he was.

Trump may be gone, but the people remain screwed by these problems and by the time serving politicians and 2.8 million federal bureaucrats working for pensions who stand in the way.

Returning to the status quo ante might fix it, but it would take a generation to start feeling it. And who among us has the vision and the cojones to pull it off?

Certainly not the women and snowflakes who cry crocodile tears of fear on the House floor. Certainly not the sailors on board the Chafee who are in a panic because the cooks are infected with COVID.

The country is rotting from the inside out. All it will take to bring it down is . . . a series of unfortunate events.

Berman and Milanovic show increased "intersection between the top decile of capital-income recipients and labor-income earners" since Reagan 1986 tax reform has led to higher income inequality

Regrettably the study does not mention another factor, how free-trade, particularly with China and East Asia generally, helped drive wages in the US at the bottom ever lower. The Reagan era produced a perfect storm of screwed for the bottom half in America.

Here:

Where does homoploutia come from? The data do not allow us to determine that with certainty, but they allow to investigate what is consistent with individual hypotheses. There is strong evidence that increased wage-stretching that began around 1980 is associated with the rising homoploutia (the other alternatives that do not perform as well are rising inequality of capital incomes and rising capital share).

The link between higher inequality of labor incomes and homoploutia might have occurred in two ways. The first is that many high-earning individuals saved a large share of their wages, invested it, and after some years began receiving large capital incomes. The second is that many capital-rich people decided, perhaps because of changed social norms, or because top jobs became more lucrative as marginal tax rates were reduced, not to treat university education as “luxury consumption” but rather to use it to secure good jobs. It could be, of course, that both mechanisms were at work. 

LOL, what a shock: Chicom state capitalism has produced the most severe income inequality in the world, enriching The Party

Story.

According to the Proceedings of the National Academy of Sciences of the United States, China has the world’s highest Gini coefficient, a measurement of inequality. The institute found the gap stemmed from structural problems with China’s political system. State capitalism has been effective in fueling growth in the economy, but worsened inequality because of its inefficient distribution. The downside of China’s state capitalism has been exposed. 

LOL: Rat-infested cities tend to be Democrat cities

Trump’s Attack on Baltimore Doesn’t Go Far Enough:

Take a look at the eight other cities that beat Baltimore on Orkin’s rattiest cities list. What do they all have in common? We’ll, let’s see:

Chicago hasn’t had a Republican mayor since 1931. Philadelphia last saw a Republican mayor in 1952, Detroit in 1962. San Francisco has been Democrat-controlled since 1964. Washington, D.C., has never had a Republican mayor.

In Los Angeles, Democrats have run the city in all but eight of the past 58 years, in New York, it’s eight in the past 74 (not counting John Lindsay, who switched parties while in office). Cleveland’s been run by Democrats in all but 16 of the past 78 years.

Indeed, if you want to see what liberal Democratic policies tend to produce, go to any one of those cities, or other Democratic strongholds. Democrats promise to help the poor and downtrodden, grow the middle class, make life more fair. But their policies consistently produce the opposite.

These cities are rife with crime. Baltimore ranks No. 1 for robberies and No. 2 for murders. Many of the other rat-infested cities also rank high for violent crimes. Their infrastructure is crumbling. The middle class has largely abandoned them. 

And far from tackling inequality, Democrats have made it worse. Washington, San Francisco and New York are all in the top 10 for biggest income inequality levels, according to the Brookings Institution. Other Democrat cities — Providence, Miami, Boston, New Orleans — are also on the list.

Washington, San Francisco, New York, Detroit, and Cleveland are also among the 10 worst-run cities, according to WalletHub. Three other Democratic strongholds — Oakland, Flint, Hartford — make WalletHub’s worst-run list.

 

Ann Coulter says she agrees with AOC: Raise taxes on the rich

Ann just wants to punish the Koch Brothers in the process, but there's a better reason to agree.

Good government acts like a curb on a street, steering behavior. That's what taxing the rich used to be all about.

How so?

Once enacted in 1916, high taxation of ordinary income didn't result in high revenues for government. That's why the income tax was extended to almost all earners instead of just the rich when it became clear within a few years that government wouldn't have enough money to play in the international sandbox without more dough. For their part the rich won long term tax concessions through diverting derivation of income from capitalist enterprises, the latter benefiting not just themselves as owners but also individuals with jobs, the country with productivity, and the government with additional multiple streams of revenue. It was an intricate but effective way of benefiting all concerned. 

The mistake with the Reagan Revolution was that it misunderstood human nature. It thought lots of new untaxed ordinary income would end up getting invested just the same way, and turn America into something never before seen. But the money didn't get invested the same way. It fled abroad where the cost of doing business was cheaper. It helped create middle classes wherever it went, but ours withered on the vine. Meanwhile the number of US billionaires mushroomed, the ratio of CEO pay to worker pay went ballistic, and general income inequality increased dramatically. Real incomes for most people have barely moved up since the 1970s.

And now here we are with an America never before seen indeed, where libertarian advocates of this destructive system tell us with a straight face that this is patriotism.

Unfortunately, none of this is in the pea brain of AOC, let alone in Ann Coulter's, Kevin McCarthy's or Donald Trump's.  

Frank Rich: The sole upside of the 2008 crash is that it exposed the kleptocratic Establishment of both parties

The chief kleptocrat, of course, was Bill Clinton, but Franky doesn't mention that, nor that his hero Barack Obama, who in the worst of economic times managed to come in third for increasing income inequality, is hard at work in retirement trying to catch up with him. Former President Carter, meanwhile, is building and restoring over 30 homes in Indiana for his 2018 work project. 

Still, it's a worthwhile read, if your indignation has been flagging of late.

In 2008, America Stopped Believing in the American Dream

You first, English jerk

Billionaire Richard Branson: America should give out free cash to fix income inequality

American business abandoned America starting in 2000, investing gargantuan sums abroad instead of here at home

This is why we have so much income inequality in 2017.

American business increased investment levels abroad by 282% since the year 2000, chasing cheaper labor and resources and jurisdictions with few regulations (environmental, safety, wage and insurance laws).

But domestically investment is down, almost 18%. This is why incomes are stagnant, GDP is low, and good jobs are scarce in the United States.

Don't let the Republicans do this to us again.

How to tax the rich and only the rich as originally intended in 1913, and solve a lot of problems

In 1913 when the average Joe made about $800 a year, the first income tax under the 16th Amendment didn't worry him because he didn't pay it and probably thought he never would. The personal exemption for a married couple in the original tax code was $4,000.

Today that $4,000 personal exemption adjusted for inflation using the Consumer Price Index amounts to about $100,000.

Even in 2016 that kind of income is made by fewer than 10% of individual wage earners. Under the original income tax of 1913, 90% today wouldn't have to worry about paying the dreaded income tax either.

Is there a way to return to this golden age of taxation?

I'm here to tell you that I think so, and I say that as a conservative. We could easily simplify the tax code by returning to the status quo which prevailed before the First World War, pay all the bills, abolish Social Security and Medicare taxes, the corporate income tax and all the other little irritating taxes and reduce income inequality in the process. We'd also save a lot of time and money wasted in complying with the tax code's myriad baroque features.

Here's the math.

In 2016 according to the Bureau of Economic Analysis personal income in the United States was $15.9287 trillion.

Social Security's Office of the Chief Actuary tells us that in 2016 there were 163.5 million individual wage earners. If you exempt the first $100,000 of everybody's individual wage income in 2016, including from the rich, you're talking about $6.213 trillion of individual wage income which would be tax-free.

That leaves $9.7157 trillion of personal income left in 2016 to tax, to pay all the bills.

According to The Tax Policy Center, the bills were the total estimated federal outlays of $3.9513 trillion in 2016.

So, the tax is 40.67% (9.7157 X .4067 = 3.9513) on all personal income in excess of $100,000 a year, no itemized deductions, no credits of any kind (this is where they all came from in the first place, because the rich pissed, moaned and complained and bribed the politicians to carve out privileges for them to escape paying).

The rich, all 14.9 million of them, will still have $7.2544 trillion to play with ($1.49 trillion from their first $100K tax-free, just like everybody else, and $5.7644 trillion left over after taxes from the income in excess of $100K).

The rest of us, 148.6 million, won't pay any federal income tax, Social Security or Medicare tax, gasoline tax, or any other kind of federal tax on our $4.723 trillion. The only taxes we'll have to pay will be State and Local Income Taxes, property taxes, sales taxes and the like. Of course rich people will have to pay those too, but that's a problem for all of us and for a different level of politics.

I summarize:

$15.9287 trillion personal income 2016 (BEA)

-  3.9513 trillion federal taxes, all from those making $100,000+ per year @40.67%

-  7.2544 trillion left over for the 14.9 million making $100,000+ per year (top 10%)

-  4.7230 trillion left over for the 148.6 million making less than $100,000 per year (bottom 90%)

___________________________________________________________________

0

And the budget balances.   

Income inequality has increased really for just one reason: Growth of owner occupied housing is in decline

Homeownership is the ticket to the middle class, and fewer and fewer tickets are being issued:

Scott Winship in National Review thinks only 37% can't cover a $400 expense, not 47%

The toxicity of "47" from the 2012 election remains.

Here.

How still over a third is hard put to come up with $400 for an emergency is better news describes the self-satisfactions of elite New York conservatism in the age of Obama, under whom income inequality has reached new heights along with the wonderful expanded safety net including welfare state insurance. Why, the middle class doesn't even need to save 3-months' expenses anymore, he says! Go Hillary.

The essay is otherwise full of cherry-picked dates which make the comparisons nothing more than glazed apples to preserved oranges.

Scott Sumner is simply an ideologue, and a confused one at that, otherwise he wouldn't be as unhappy as he is

In "Libertarians have nowhere to turn" Scott Sumner the market monetarist laments:

'In my view neither major political party has libertarian inclinations. ... I'm slightly more sympathetic to the progressives who insist that I should really be a Democrat. They tell me "After all, you are rational. You believe in evolution and support carbon taxes and redistribution and think money was too tight during the Great Recession. You are pro-immigration and skeptical of the idea that America is an 'exceptional' nation, which must police the world." Those are all good arguments, but then I start obsessing about economics. After all, I am an economist.'

Apart from completely missing that the Democrat Party is the party of social freedom and the Republican Party is the party of economic freedom, it's rather singular for a self-described libertarian to embrace economic redistributionism so openly (not to mention a draconian form of taxation). To do so betrays a feeling for the left, not the right, which, if libertarians were only honest enough to admit it, has always been their inclination.

Sumner might reflect on the fact that we actually live in a perfect storm of libertarianism, in which economic (and social) actors have been unleashed to be all that they can be. The trouble is, only a few "succeed". The fact that income inequality has reasserted itself to a degree not seen since the gilded age is proof of the basic fact that not all men are created equal. The very best at making money have risen to the top and become enormously wealthy in an environment specifically designed to allow it to happen. The end result of economic libertarianism is that the very best will eventually succeed in hoarding all the goodies for themselves while the rest of us are left to serfdom. The end result of libertarianism is freedom for thee, but not for me.

The same can be illustrated on the social side, where some freak flags fly higher than all the rest. They rise to fame and influence beyond all their fellows in "art", "music", "literature" and "society", if you can call violent, vulgar and obscene Hollywood films, rap, "shady" novels and the Kardashians representative of those categories.

Conservatism, primarily rooted in religion, has historically functioned in society to apply the brakes to keep these actors from getting out of control and acquiring undue influence, whether socially or economically. The left only imagines itself capable of replacing religion's heretofore tempering role, which primarily functioned through willful self-restraint. Hence the efforts to reduce income inequality by force through taxation schemes, which obviously aren't working. On the social side the left has had even less success, except by recourse to venomous speech and conduct codes which meet with little assent and not a little fear and loathing among the many.

Freedom, as currently conceived in all its sterility, is quite literally killing America.

How massive government debt remains the biggest impediment to growth

Nominal GDP increased $604.9 billion dollars in 2013. The interest payment on the debt for fiscal 2013 was $415.7 billion, consuming almost 69% of GDP.

So far in 2014 nominal GDP is up $787.1 billion. The interest payment on the debt for fiscal 2014 just ended on September 30th was $430.8 billion, consuming almost 55% of GDP to date. At least that trend is in the right direction.

Interest payments on government bonds do not count as government spending in the category of consumption expenditures because they are not related to production as they are in business.

Interest expense has exceeded $400 billion in seven out of the last nine fiscal years.

The national debt stood at $17.824 trillion on September 30, 2014. The fiscal year interest expense of $430.8 billion therefore represents an interest rate on the debt of 2.42%. The 10-year Treasury currently pays 2.31%.

Now you may understand the Federal Reserve's Zero Interest Rate Policy, and its never-ending message to Congress pleading for fiscal restraint. Interest rates cannot be repressed forever without social unrest. Democrats need reminding that such restraint involves spending, while Republicans need reminding that it involves both spending restraint and necessary taxation. They could make a start by recognizing that income inequality begins by treating some money more equally than other money.

It's a waste of time asking Democrats for prudent anything, which is why Republicans now run the show again. We'll see if the Republicans got the message this time. As always, past performance is not a guarantee of future returns.

Hahahahaha: Obama decries income inequality after $50k/plate fundraiser

h/t John Kass

Bank Failure Friday . . . two tonight: the 10th and 11th in 2014

Reported here and here.

The FDIC still insures 6,730 institutions through March 31, 2014.

In February 2007, over 500 bank failures ago, the FDIC still insured 8,743 institutions, meaning about 1,500 additional institutions have succumbed to acquisition by bigger banks which have swallowed them up since the financial panic.

Call it income inequality, banker style.

The problem with free-market ideology in our time isn't about the tax code, it's about patriotism

Free-marketeers in our time want to wipe away the favors of the tax code, many of which go to the middle class in the form of credits and deductions, and to end the taxes on capital which they say deprive the middle of opportunity. 

That seems to be the upshot of the libertarian attempt to co-opt the meaning of the Dave Brat victory over Eric Cantor as expressed by Kim Strassel of the Wall Street urinal, for one. Central to that thesis is poo-poo-ing the importance of the immigration stance of Eric Cantor, which was attacked by Brat with the support of anti-amnesty conservatives, especially Laura Ingraham, and complaining about "the insane complexity of taxes".

What the kerfuffle shows is that Dave Brat is a mighty conflicted person, as are all libertarians, some more some less, a condition they share with liberals, and that he may end up being worse than the man he now replaces. Brat spent much of the campaign talking about closing loopholes and simplifying the tax code, but opposed more immigration because Americans are having massive trouble finding work. The better angels of his nature, all Christian, were at work there. But to his free-market self, there should be no reason why citizenship shouldn't be free. Why should there be a law restricting it to those born here? The federal government has no role "making my life work", he has said. See how well your life works when there's no army to stop an invasion, and there's no will to create one. Just ask Arizona.

Immigration is an issue which ought to direct the attention of the American right toward the bigger picture of what has happened to this country since the Reagan revolution slashed taxes, but hasn't because the right is now obsessed with principles over people. It has become as "ideologized" as any leftist camp. In fact the political discussion on the right deliberately obscures how libertarianism has already impoverished the many and rewarded the few. Some of its adherents today actually foresee an American future more starkly drawn that way, as did Ayn Rand. It isn't capitalism which is to blame for all the income inequality, it's libertarianism.

With the permanently lower tax regime in the US since Reagan also came a headlong plunge into global free trade which has created vast middle classes abroad where there were none before, at the expense of our own. The anchor manufacturing industries of the middle class in this country were exported to places where labor was cheaper, leaving the hollowed out shell of a service industry economy behind to pick up the pieces here.

Where's the patriotism, I'd like to know? Neither side wants to touch the trade argument, mostly because they are all profiting from the new status quo while we are fed a bunch of lies about who are the real conservatives. The answer is none of them are. They've all betrayed us and joined the global investor class where borders no longer matter.

To be a conservative in our time is to be for families with children here, for good jobs here, and for tax and trade policies which prop up those things here and put Americans first, not foreigners and disloyal Americans and disloyal American businesses.

If that's too complicated for you, maybe you shouldn't be in office.  

The Case Shiller Home Price Index Shows Housing Prices Almost 20% Above The Long Term Mean Level

The current level of the Case Shiller Home Price Index is 152.48 and the mean level is 127.51.

About 140 on the index looks like the historical high water mark beyond which housing appears to be in a bubble, meaning we are in one.

Given the scale of the recent extreme housing bubble, housing should not have been prevented from correcting fully, probably well below 120, in order to reset the market on a surer basis. That might have prevented the current escalation in prices, which are unaffordable to almost everyone beneath upper middle class income levels of around $76,000.

Recent tirades against income inequality forget that the bottom half of the population typically has most of what wealth it has tied up in housing and is not well diversified. Loss of homes and home equity have been major drivers of income inequality under Barack Obama, compounded by loss of employment and housing policy inattention, even as stock markets have been driven higher by nominally positive policy through Obama's Federal Reserve chairs.

Obama sent money, after all, to Aunt Zeituni's family to help with her funeral, but he did not attend, and went golfing instead.

America Becomes France, Shrugs Shoulders Over Disastrous Q1 GDP Of 0.1%, News Media Avoid Story

No major news outlet makes the disaster of GDP under Obama, who owns the absolute worst record in the post-war, the lead story this morning except for business news outlets like CNBC and Marketwatch. ABC's story is a one line headline from AP. That's it! You have to actively go looking for the GDP story under "Money" or "Business" or "Economy" to find it just about everywhere even though it is the story of our time because it's the reason there are no jobs, no income growth, declining living standards and growing income inequality. All brought to you by Barack Hussein Obama, hm hm hm, who has turned America into a slum.

The rapid rise of income inequality in the US dates from the close of the gold window

From The New York Sun, here:

The top decile's share of income went from something like 33% in 1971 to above 47% by 2010.

Hmmm. What could account for that? ...

Before this date, unemployment was, by today’s standards, low. ... From 1947 to 1971, unemployment in America ran at the average rate of 4.7%; since 1971 the average unemployment rate has averaged 6.4%. Could this have been a factor in the soaring income inequality that also emerged in the age of fiat money? ...

It doesn’t take a Ph.D. from MIT or Princeton, however, to imagine that in an age of fiat money, the top decile would have an easier time making hay than would the denizens of the other nine deciles, who aren’t trained in the art of swaps and derivatives. ...

[H]onest money ... works out better for more people. And there is a moral dimension to the question of honest money. This was a matter that was understood — and keenly felt — by the Founders of America, who almost to a man (Benjamin Franklin, a printer of paper notes, was a holdout), cringed with humiliation at the thought of fiat paper money. They’d tried it in the revolution, and it had been the one embarrassment of the struggle. They eventually gave us a Constitution that they hoped would bar us from ever making the same mistake.

The One Chart Which Best Explains The Reason For The Growth Of Income Inequality In The US

The chart comes from The Motley Fool, here, and has nothing to do per se with the subject of the current debate about income inequality occasioned by the US tour of French economist Thomas Piketty promoting his new book Capital in English translation.

But the chart offers a little appreciated explanation for why income inequality has grown in the United States: the tax code of the United States itself treats income unequally, giving preference to long term capital gains. Key here isn't just that rates increase progressively and are unequal, but that capital gains income is at all levels taxed unequally compared to ordinary income, at lower rates. Is it a surprise then that one form of income would tend to grow more than the other in order to take advantage of the lower rates?

Ordinary income has been taxed at extraordinarily high rates off and on since the First World War while long term capital gains have been taxed at comparatively much lower rates off and on just about as long, as a favor to the few who have historically been able to play in that sandbox. It shouldn't surprise us though that the half of the nation which over time has joined the investor class has benefited disproportionately from this arrangement.

It has been a principle of conservative economics from the time of Reagan that if you want less of something, tax it. Well that's what has happened to ordinary income, where wages have been stagnating for some time while gains from investments have soared. You push here, it comes out there. Ordinary income tax rates have come down and stayed down since Reagan's revolution, it is true, but the differential between ordinary income tax rates and long term capital gains taxes has remained, favoring the returns from capital.

Cullen Roche here takes the view that we should raise taxes on long term capital gains, especially for the top 0.1% where he believes most of the inequality shows up:

The solution, in my opinion, is simple and based on a relatively widespread misunderstanding. We currently tax “investment income” favorably. The rationale for this is that we want to incentivize “investment”. That makes sense except for the fact that very few of the people transacting on secondary markets or obtaining dividend payments are actually promoting investment. In fact, one could argue that dividends disincentivize firms from using profits in a more innovative manner. And transactions on secondary exchanges only finance investment in the case of secondary offerings. Otherwise, buying stocks and bonds is a simple allocation of savings and does not remotely resemble the financing of investment. Why these forms of income are tax advantaged makes very little sense in my view. So a higher tax rate on dividends and secondary market transactions seems to make a lot of sense in my view.

I beg to differ. The tax code as it stands is doubly offensive in that it not only favors one form of income over another but that it also discriminates against income as it grows. To make the tax code "fair", it should treat all income the same way. If we equalized all tax rates to 10% irrespective of level or source or time, there would be so much opportunity to make money in this country that yours truly, Cullen Roche and Thomas Piketty would all have something far better to do than write about this, and you something far better to do than read about it.