Tuesday, January 17, 2006

Wages are flat, and that's why most wage-earners should vote for Democratic candidates

Business publications tend to do the best job at cutting through some of the fog.

The best way to judge the strength of the economy is not the price of U.S. stocks or the general growth of the economy, but the growth in wages.

If wages are going up, then most people are better off because they have more money to raise their quality of life.

If not, then they don't.

And in 2005, wages were basically flat.

This Business Week article by Michael Mandel lays it out well.

And what I take away from this is that we should quit taxing wages so highly and start taxing wealth and pollution more.

The payroll tax (13.6%) on income less than $90 grand that is paid by working people should not be a lower rate than the capital gains tax (10%) that is paid by wealthy people.

That's backwards. Because higher wages generate more wealth.

The Republican Party (especially in D.C.) is designed around the principle of not taxing wealth. The Democratic Party is not, and that's the best reason to vote for Democrats -- especially those willing to talk about wealth.

Here's a good part of the article:

WHY FOLKS ARE SOUR. Most people, however, have been lucky to keep up with inflation. Look at a new set of wage numbers buried deep in the Web site of the Bureau of Labor Statistics. These data report fourth-quarter median weekly earnings of full-time wage and salary workers for different occupations (median means that half earn more, and half earn less).

The first thing that jumps out is that both the 3.2% yearly wage gain for managers and the 2.4% gain for professionals fell short of the 3.5% increase in the consumer price index. That goes a long way to explain why people are so sour about the economy. Strong growth and low unemployment don't mean much if your buying power is declining.

Also not keeping pace with inflation were those who work in service occupations (a broad category that includes police and firefighters, cooks, janitors, home health aids, hairdressers, and child-care workers), production occupations, and maintenance and repair occupations.


13 comments:

Lazerlou said...

I think what we've seen is the success of the welfare state. Marx was oh so wrong because he never antcicpated the welfare state, which some would argue is the very means by which the prol have been kept docile and controllable anf or the most part in our country, at least in the last 60 years non-violent. At some point the standard of living for the working class person became good enough such that other issues could be manufatured that concern the working class person more than their wages. Give someone a 20-30K salary and a good dose of the opiate of the masses, along with a healthy injection of fear and paranoia, and they aren't voting for their own economc self interest anymore. They are voting based on religion and fear, and the strange overlap of the two. I think were all doomed Dan. I think the ruling class will destroy us all becasue the working class has been so easily satiated by the most minimal material well-being.

Nathan Kaufman said...

http://www.cato.org/dailys/2-20-98.html

http://www.ssa.gov/OACT/ProgData/taxRates.html

The payroll tax rate may be higher than what you post in your blog (I am not sure). It may depend what is considered in "payroll" taxes. Does medicare count?

CF said...

How will raising the capital gains tax increase wages? I agree that we should lower payroll taxes or allow people (especially the working poor) to invest that money in private accounts. But I'm not sure what that has to do with capital gains, other than "it ain't fair that them fat cats get so darn rich" - which isn't really an argument. If the argument is that wealth should be seized and redistributed, well, that's certainly been done before in other countries. The results aren't pretty. Lazerlou, you sound almost disappointed that the "prol" haven't set up a guillotine in Daley Plaza yet.

Lazerlou said...

No, cause I would be the first to be beheaded. I'm just resigned to the fact that class society has found a way to persist, thrive even through the welfare state, and it has gotten to the point where many uneducated working class people vote based on religion and fear of others. It is a sad state of affairs tha only education can cure, but so long as those with poor educations keep voting for those who would keep them uneducated, then we will have no progress.

Freud, in Civilazation and its Discontents, famously noted the battle of the giants, eros and thanatos, is playing out in modern civilazation. I don't think Eros is winning in this battle and wouldnt be surprised if we see the end of modern civilazation in our time. Marx, while wrong about class dynamics within the western world, seems right on when you view the current struggle between the haves and have nots in this world through his lens. We might have too much destructive power to go around without enough social justice to prevent the end of the world through nuclear war.

Lazerlou said...

Sorry for my dark post. I just have a hard time accepting how middle and working class Americans vote Republican. The unchecked inefficient but rapid economic growth of the west, fueled by American capitalism and Republican control will end in our own destruction I'm afraid, either environmentally or through the anger of the majority of the rest of the world that lives in poverty and who will continue to resent our exploitation of natural resources and the less fortunate.

Nathan Kaufman said...

Perhaps related to wage trends:

It would be interesting to reconcile the bankruptcy rates in Illinois to the bankruptcy rates for the U.S.

Dan Johnson-Weinberger said...

I'm assuming that if we agree to cut the payroll tax, we need to find some other source for the lost revenue, and the capital gains tax seems to be an efficient way to do it. I don't think that raising the tax on wealth will raise wages -- I'd just rather cut taxes on wages and instead tax wealth.

Nathan Kaufman said...

http://www.accf.org/publications/testimonies/test-impact-capital-march1997.html

I think you have to be careful on taxing capital gains. It may not be optimal to raise a capital gains tax to offset a decrease in payroll taxes. I've been meaning to read the Summers and DeLong paper mentioned in the URL above (Summers and DeLong worked for the Clinton administration - see excerpt from URL above pasted in the end of this comment). It might be more effective for government to work on taxes, regulations, or changes that improve coordination and alignment of incentives of various entities in the state.


Excerpt:
Studies by University of California Professor J. Bradford De Long and Deputy Secretary of the Treasury Lawrence H. Summers also conclude that investment in equipment is perhaps the single most important factor in economic growth and development. Their research provides strong evidence that, for a broad cross section of nations, every one percent of GDP invested in equipment is associated with an increase in the GDP growth rate itself of one-third of one percent, a very substantial social rate of return.

Lazerlou said...

Well how about luxury taxes then, or how about givingthe estate tax its teeth back. Perhaps a tax on cash as opposed to capital gains? Lets not punish capital that is invested in growing companies. Let's concerntrate on wealth that is used to buy second homes, Louis Vuitton bags and Ferarris. Lets tax divorce, lets tax plastic surgury. Lets tax gasoline too.

Maybe even a sin tax of trans fat and booze?

Just put me in charge of taxes, I'll promise to find a way to tax the rich such that it doesnt hurt the poor indirectly.

CF said...

The original post is "wages are flat...vote democratic" - that does not logically flow into "take money from the rich." The fact that it does to many intelligent people is a core reason why the Left has steadily lost electoral ground since the 1976 (the last time a Dem Presidential candidate won more than 50% of the vote). I would like to see wages raised; one way to do it is to crack down on employers that hire illegal immigrants, another way is to raise the minimum wage - which I support knowing perfectly well it will increase unemployment. But punishing the winners of a free society makes no economic sense and is only a tool of totalitarianism. Taxing plastic surgery is clever, but won't raise any significant revenue. Taxing second homes will, but that will punish homebuilders and mortgage lenders and will slow the economy. It will also raised the value of, and taxes on, existing homes, which benefits the wealthy and punishes the poor. Remember the yacht tax? It crippled the New England shipbuilding industry. Remember when we got rid of expense account lunches? It killed thousands of restaurants put waitresses and busboys out of work. The best way to create jobs and increase wages is to promote innovation and free markets. We need to be manufacturing the next superwidgets and not figuring out how to keep unskilled workers building overpriced cars in Michigan for $75K/year. If government wants to help, it can crack down on teachers unions and improve education so that more kids are thinking about being the next Bill Gates instead of the next Britney Spears.

Lazerlou said...

I don't think it is an honest argument to constantly point out how taxing the rich leads to fewer jobs and more hardship for the poor. Sure taxing certain industires will put a drag on their growth and may even shrink the relavent market, but that is within the broader context of an underrgulated employment market. If you increased wages and decreased minimum hours requirements, such actions might offset the negative consequences for labor of a industry becoming less profitable by taxation. The costs would be born by the bottom line and shareholders/ownership, not workers, which would ultimately result in the redistributive efect such taxes were meant to have.

The same goes for the ex post regulation of private sector litigation. Plaintiffs lawyers are constantly blamed for rising insurance premiums. It is the insurance industry's #1 argument. However, passing costs along to consumers is not inevitable or necessary. We could easily require inurance companies not to pass along costs of being caught committing fraud to consumers, and require shareholders/ownership to bear such costs. But we don't.

he who is known as sefton said...

In the beginning, I decided to join the campaign to impeach your "smirking chimp", my "dum'ass botch". As evidence for that, you'll soon be invited to click on a hyperlink.

Before doing so, however, I would like you to read through the rest of this text. In case, you'd like to know, the hyperlink to your blog, specifically, "DJWinfro", is found at the third hyperlink on the list below ... ah, please remember, no clicking until AFTER reading the entire text.

Perusing your blog, I believe I arrived at what is a reasonable inference. That is, both you and your readers would welcome news that indicates the campaign to impeach the president is increasing in both vigor and breadth. Ah, you'll find that evidence by clicking on the second enclosed hyperlink.

As for my plan for capturing Osama, again I should like to ask to refrain from clicking on any enclosed hyperlink, until AFTER you've read the entirety of the text.

http://hewhoisknownassefton.blogspot.com/2006/01/osama-and-our-president-dumass-botch_20.html

The hyperlink just above this sentence leads to my game plan. If you've gotten this far on the first read, without clicking on any of the enclosed hyperlinks, congrats!

Whatever the case, remind or prepare, please keep in mind that it's a good bet that everything else to snag bin Ladin has already been tried. I think it's time we tried drawing on one of the few activities Americans do better than any other national group, music and pizza delivery being among those few activities.

http://hewhoisknownassefton.blogspot.com/2006/01/danger-senator-specter-danger.html

http://www.reachm.com/amstreet/states-writes.htm#IL

toodles
......\
.he who is known as sefton

oh, yes, surely, you've heard about the government "requesting" certain records about internet activity. oh, br'dah! ... cynical and skeptical lil'ole me, I'm smelling a rat in all that. Quite candidly, I have cause to suspect that more than compiling statistics on access to pornographic websites is involved.

oh, yeah, right after Hitler came to power, the German people were assured that, if they were innocent of untoward activity, they would have nothing to worry about ... yeah, right.

Incidentally, the second hyperlink leads to a piece that relates to governmental eavesdropping WITHOUT a warrant.

Dan Johnson-Weinberger said...

CF, taxing high incomes isn't 'take money from the rich' anymore than the payroll tax is 'take money from regular people'. It's just figuring out how to finance the things that are worth buying. And generally speaking, it makes the most sense to put that burden on the incomes that can afford it the most. There's always a cost to any tax, just like there's always a cost to not making a smart public investment. Your Ayn Rand talk of 'punishing the winners' is nonsense. We're financing projects that make us all better off (like universities that conduct research to generate fantastic products and services) and it's a pretty straightforward cost-benefit calculation as to who ought to pay the bill. Currently, people on the lower end pay more than they should. That's wrong as a matter of policy and a political opportunity for the Democratic Party to make the case for change.