Should US wealth be redistributed?

[bUU]

The news this morning should (but perhaps won't) help many folks understand what redistribution of wealth actually looks like.

http://www.reuters.com/article/2013/03/16/us-eurozone-cyprus-idUSBRE92E02220130316

The distinction between income and wealth is important, on both financial and moral grounds. Income represents the portion of society's value (note the possessive - it is deliberate) that is being allocated to someone for doing some work, investing in some enterprise, etc., within society's economy (again, the possessive is deliberate). There is no way, in that context, to rationally evade the fact that money we earn wouldn't actually have value unless society furnished an economic system of exchange, and furnished a marketplace for labor and capital. Taxing income is like paying rent on a storefront you've opened up in a metaphorical shopping mall. While everyone would love the rules to be stacked in their favor, society is a shared construct, and our society, specifically, is deliberately compassionate, even though some folks would personally prefer a more callous and uncaring society.

While wealth came from income, the past is the past. An example of this principle from another context: We don't charge citizens with crimes for things they did before the laws said those things they did were crimes. This respect for what was, in the past, acknowledges a very clear line between what is just (taxing income sufficient to cover society's costs) and what is unjust (redistributing wealth to cover society's costs).

[syracusa]

Do you think that redistributing the wealth of the richest people in the US should to the poorest people would make any difference at all?

No. Redistribution doesn't work because those who already have their hands on the lion's share cannot conceive how it would possibly be "fair" to take from their huge chunk and give to others.

What should be done in the first place is fair DISTRIBUTION, not RE-DISTRIBUTION.

You simply should not get to pay employees crumbles (as in third world country slave wages) so that those at the top will end up with enormous profits and then cry "redistribution is unfair" if such a thing is attempted.

The focus should be on fair distribution in the first place - not on RE-DISTRIBUTION. Laws limiting how much you can screw up the population when you hire them should be in place.

[syracusa]

The news this morning should (but perhaps won't) help many folks understand what redistribution of wealth actually looks like.

http://www.reuters.com/article/2013/03/16/us-eurozone-cyprus-idUSBRE92E02220130316

The distinction between income and wealth is important, on both financial and moral grounds. Income represents the portion of society's value (note the possessive - it is deliberate) that is being allocated to someone for doing some work, investing in some enterprise, etc., within society's economy (again, the possessive is deliberate). There is no way, in that context, to rationally evade the fact that money we earn wouldn't actually have value unless society furnished an economic system of exchange, and furnished a marketplace for labor and capital. Taxing income is like paying rent on a storefront you've opened up in a metaphorical shopping mall. While everyone would love the rules to be stacked in their favor, society is a shared construct, and our society, specifically, is deliberately compassionate, even though some folks would personally prefer a more callous and uncaring society.

While wealth came from income, the past is the past. An example of this principle from another context: We don't charge citizens with crimes for things they did before the laws said those things they did were crimes. This respect for what was, in the past, acknowledges a very clear line between what is just (taxing income sufficient to cover society's costs) and what is unjust (redistributing wealth to cover society's costs).

Like.

[dunnrobert700]

Even if you could argue that wealth distribution is out of whack in the country right now because some people gamed the system (and this is definitely a possibility though not a certainty), any fix other than finding people who broke the law, prosecuting them and taking the money back for remuneration (unlikely as if crimes were committed they were gotten away with) is prohibitively dangerous.

Our economy is based on voluntary exchanges of value. The minute you give anyone the power to confiscate someones wealth and redistribute it based on their judgement, you create the opportunity for corruption and opportunities for corruption always have people lining up to exploit them. This is actually how our wealth distribution got messed up in the first place and in that insight is the solution.

[bUU]

any fix other than finding people who broke the law

Exploitation isn't illegal. The point is to remove/reverse the incentive for doing it.

prohibitively dangerous.

What would be prohibitively dangerous is not reversing the trend toward further increase in economic inequality, or worse, leaving that path open.

Our economy is based on voluntary exchanges of value. The minute you give anyone the power to confiscate someones wealth and redistribute it...

Like I said before, there is a difference between wealth and income. We've got so far to go before any reasonable person pay any attention to calls for wealth redistribution. However, if we leave the income inequality as it is, we will get there, and the fault will rest with us for not remedying the problem now, and reversing the effect it has had over the last fifty years, when we have the chance.

[dunnrobert700]

Maybe maybe not, but there's a key problem with the question.

Wealth is not something that was just laying around when we got here and then everybody grabbed some and maybe some people got too much and some didn't so we need to collectively decide to take from some and give to others to be fair.

Wealth is just a proxy for value to other people, and it has to be created and is still being created. By individuals. So if an individual applies intellect, imagination and energy to create something of value to other people, who should have the right to "allocate it" other than that individual?

My other thought on this topic is that given the above, frittering about "wealth allocation" is a bit of a distraction from what matters far more, which is focusing on empowering individuals to create their own wealth. Wealth is not finite. I can get wealthy without taking wealth from anyone else. Why "reallocate" when you can "create"?

[bUU]

No creation happens in a vacuum, and especially economic creation doesn't - it requires a fertile ground, especially the economy that is created by, supported by, and managed by society. Society therefore has an obligation to ensure that neither that which it furnishes nor others within society are excessively dominated by those with both avarice and power.

[syracusa]

Wealth is not something that was just laying around when we got here and then everybody grabbed some and maybe some people got too much and some didn't so we need to collectively decide to take from some and give to others to be fair.

Wealth is just a proxy for value to other people, and it has to be created and is still being created. By individuals. So if an individual applies intellect, imagination and energy to create something of value to other people, who should have the right to "allocate it" other than that individual?

My other thought on this topic is that given the above, frittering about "wealth allocation" is a bit of a distraction from what matters far more, which is focusing on empowering individuals to create their own wealth. Wealth is not finite. I can get wealthy without taking wealth from anyone else. Why "reallocate" when you can "create"?

Oh, it SO IS finite!!!

The proposition that "wealth is infinite" is one of the most foolish ideas ever perpetrated by humanity and was born with the introduction of the monetary system, which in and of itself, is nothing but an illusion. Talk about believing in fairy tales; and I thought the 21st century man was supposed to be the "rational kind". Wishful thinking.

This proposition that "wealth is not finite" and can just be "created" on and on if only everyone became entrepreneurial enough...is not only downright mind-boggling but also extremely arrogant and myopic. How so many people were able to buy into this in-your-face falsehood is testimony to how a complete lie can become truth if repeated often enough.

The only wealth that truly matters in the end was indeed CREATED - but certainly not by people of any kind; or if you prefer, it was "Big Banged" and "evolved". And it is indeed 100% finite, unless you plan on moving to the Moon or elsewhere in space.
If you are religious, it was a Creator who created "it" (land, water, clean air to breathe, natural resources); if you are not, it was just Nature.
I don't care who you pick, but either way, no amount of entrepreneurship, brains, "drive" or capital is going to invent more land, more water and more natural resources.
If wealth was not finite, land everywhere could be obtained for nothing - just like any commodity that is in huge/infinite supply (I wonder which one would that be).

Bill Gates did not create "wealth". He created "leverage" that allows him to take over a large amount of natural space, resources and other advantages, which means others won't have access to those resources and advantages because he can block access to them with his money, when push comes to shove.
Yes, there will always be new generations of creative people who will come up with new ideas and fill up their bank accounts in the process - but that doesn't mean they created real wealth. They just create advantages for themselves which allows them to take a huge slice of the very much finite wealth pie, leaving most others to fight over the crumbles.


Humans have given themselves way too much credit over the past 500 hundred years or so.

[bUU]

The proposition that "wealth is infinite" is one of the most foolish ideas ever perpetrated by humanity and was born with the introduction of the monetary system, which in and of itself, is nothing but an illusion.

More precisely, a human-fabricated construct.

This proposition that "wealth is not finite" and can just be "created" on and on if only everyone became entrepreneurial enough...is not only downright mind-boggling but also extremely arrogant and myopic.

Indeed, such a system works because there are a preponderance of consumers. The number of sellers needs to be limited, or competition eats away at the ability to generate revenue. And I don't think anyone here is saying that entrepreneurs shouldn't receive a modest premium as compared to what would otherwise be an evenly-allocated portion of the whole - just that the premium that is being exacted (generally through abuse of power even though those opposed to economic justice will deny it) it offensively excessive.

Bill Gates did not create "wealth". He created "leverage" that allows him to take over a large amount of natural space, resources and other advantages, which means others won't have access to those resources and advantages because he can block access to them with his money, when push comes to shove.

To be fair, Bill is one of those who is donating to society a lot of what that leverage obtained for him. And he recognizes that our society really shouldn't allow such extreme leverage to exist, since most people won't do the responsible thing as he is.

They just create advantages for themselves which allows them to take a huge slice of the very much finite wealth pie, leaving most others to fight over the crumbles.

This cuts to the crux of the issue. It's not the action but the extent to which folks are aiming to drive their advantage over others, through what can only be described as exploitation (again, though those opposed to economic justice will deny it). There needs to be a societal epiphany that everyone is deserving of equal worth and dignity, even if not equal comfort and luxury; That the lowest in society shouldn't be expected to live in a manner for which the highest in society wouldn't "be caught dead"; That cost-reduction, off-shoring, spiking productivity, automation, and similar devices the powerful use for their enrichment have a cost to society, and society must ensure fairness by passing the entirety of that cost along to those who cause it to be incurred. If you want to make a profit on some creative or innovative idea, then that's great, but make sure your profit is far in excess of the costs (to others, as well as to yourself) of achieving your advantage, because you should be held to account for all the costs your decisions incur.

Humans have given themselves way too much credit over the past 500 hundred years or so.

Great points.

[elessar78]

I was reading a book on anthropology called Before The Dawn, and the author made the case that all government has ever been-since the emergence of the first tribal chiefs-is for the purpose of wealth redistribution. Taking tributes or taxes and redistributing back to the populace OR to the societal elites.

Nowadays, when we talk about wealth (not income) inequality I think it has a lot to do by the middle class inability to accumulate wealth. Middle class posters here are probably in the minority because rhey tend to acquire appreciating assets.

There isn't an external mechanism to make sure that wealth is distributed in an equitable manner. But it behoove a the upper classes to make sure that the middle or lower classes don't feel like they are getting screwed over. When they do it usually occurs in some violent manner-- French Revolution anyone?

The wealthy doesn't have to "give" them money per se ("transfer payments") but it can be in kind govt services- arts, healthcare, roads and infrastructure, higher eduction, etc

[JoeP]

I know quite a few people with big incomes who also have high expenses, so they are redistributing their income on their own (and in some cases, jeopardizing their net worth doing so). I know others at the low end of the income scale who have lived frugally, kept their debts very low, invested very early, and now have money to spend on vacations and distributions to their charities and their family.

What I'm confused about is how mandatory redistribution (aside from taxes going toward entitlements) would be handled. Would the minimum wage walmart worker get a Bonus Check just because they earn less? What would be used to calculate how much of my money is to be taken away: income or net worth?

IMHO, following Dave Ramsey's advice, if you want to be rich, do what rich people do (discounting those who've inherited money). Read "The Millionaire Next Door." Become financially literate so you don't make stupid mistakes. And don't use income as a gauge for "richness"; rather, focus on building and maintaining net worth.

[syracusa]

To be fair, Bill is one of those who is donating to society a lot of what that leverage obtained for him. And he recognizes that our society really shouldn't allow such extreme leverage to exist, since most people won't do the responsible thing as he is.

Don't get me wrong, I wasn't picking on Bill Gates, personally. I don't know much about him other than his Microsoft company is worth very much. I heard he is a great guy and that he donates a lot to charity. He is simply part of the system - and he does the right thing WITHIN the system.
I simply commented on the system itself and and on this mantra that "wealth is not finite" - which is a terrible, terrible lie.

[bUU]

Pop Personal Finance advice is like Pop Psychology advice - worth far less than its peddlers are willing to admit. Dave Ramsey takes you only so far - it doesn't make you rich. Such advice just reduces the chances of being poor. The reality that folks like Dave Ramsey aren't willing to be upfront about is that you really may not have the kind of control over your financial future that you might hope.

Regardless, one approach to economic equality involves disincentivizing that most excessive disparities between revenues per employee and compensation. Moderate disparities are normal, but we're now seeing some rather offensive disparities, and knocking those down will go pretty far toward pointing us back towards the level of economic inequality of the 1960s, for example. It is worthy of noting that back in 1962, income over a certain level was taxed almost three times as much as we're taxing that income today. Policies that fostered such changes were among those that brought about the current, outrageous levels of economic inequality.

[syracusa]

There isn't an external mechanism to make sure that wealth is distributed in an equitable manner. But it behoove a the upper classes to make sure that the middle or lower classes don't feel like they are getting screwed over. When they do it usually occurs in some violent manner-- French Revolution anyone?

The scary part is that revolts like the French Revolution or any other kind of revolution are no longer realistic. The masses have absolutely no leverage against the very powerful anymore, even if they somehow experienced some magical awakening from this extreme individualistic way of thinking and seriously considered global collective action.

The means of suppression the powerful have today are historically unparalleled. You just don't get to attack the king's palace anymore, take him by the collar, and threaten him with the guillotine.

I always wondered...if the global masses saw their living conditions deteriorating more and more ...exactly what are they gonna do?

[syracusa]

Pop Personal Finance advice is like Pop Psychology advice - worth far less than its peddlers are willing to admit. Dave Ramsey takes you only so far - it doesn't make you rich. Such advice just reduces the chances of being poor. The reality that folks like Dave Ramsey aren't willing to be upfront about is that you really may not have the kind of control over your financial future that you might hope.

Regardless, one approach to economic equality involves disincentivizing that most excessive disparities between revenues per employee and compensation. Moderate disparities are normal, but we're now seeing some rather offensive disparities, and knocking those down will go pretty far toward pointing us back towards the level of economic inequality of the 1960s, for example. It is worthy of noting that back in 1962, income over a certain level was taxed almost three times as much as we're taxing that income today. Policies that fostered such changes were among those that brought about the current, outrageous levels of economic inequality.

Also, don't underestimate the effects of population growth.

The more of us there are around, the smaller the piece that can be allocated to each one - even with moderate inequality. If we went back to the same wealth distribution we had in the 60's, the rich today would be living less well than their counterparts were living at the time.
So you're expecting the rich to sign off on their own decrease in quality of life? Na-huh.

Rational and humane step no 1 would be "start promoting serious population control everywhere". It might not be easy to do or popular, but if the rich want something done, it CAN be done.
Over the long term, this is THE ONLY answer there is.