Reactions to story from Time

• 

  I Think I’m Gonna be Sick

  http://thelastcapitalist.wordpress.com/2008/07/01/i-think-im...
  23 days ago in The Last Capitalist · No authority yet

  I just read an article from Time magazine from June 2, and it actually made me sick to my stomach.  Until I read this, I kept convincing myself that people were just ignorant to how far toward socialism the left was leaning.  Now, on the other hand, I am genuinely sick. After reading this article I actually had a sick feeling in my stomach for awhile.  Ladies and gentleman, this is what the Democrats actually want.  Perhaps what makes me the sickest about all of this is that they don’t even need to hide it anymore.  The article claims that something needs to be done to take wealth from the top earners in our country and give it back to the lower income citizens. Sounds noble, like Robin Hood.  The only way to change this is to steal something that was earned by a citizen through peaceable, voluntary exchange and give it to…who?  Who makes these decisions about wealth redistribution?  See, the difference between Robin Hood and the American Socialists is that freedom wasn’t there in Robin Hood’s era.  There was no way to better yourself.  You had no choice but to do what you were told by the government, whoever that may be.  This is why we have Capitalism in the first place. There are many reasons why Capitalism is the best form of society.  The most important reason it is better than wealth redistribution is that nobody decides anything for you.  You are free to do what you wish with your resources.  Peaceable, voluntary exchange.  With Socialism, wealth redistribution, or whatever you want to call it to make it sound good, it is not peaceable or voluntary.  Besides who do you think should have the right to decide who gets what?  The beaurocracy?  I’m sure that doesn’t sound like a very exciting option.  Especially those who live in Cleveland.  Hopefully we will not be so blind as to look to government intervention in a time that isn’t really that bad to “save” us from ourselves.  Hell, if it wasn’t for much of the government intervention previously, we wouldn’t have many of the problems we do today.   If anything, we need the opposite of the Socialism that Time suggests.  In the long run, I hope freedom will prevail.   
• 

  The strange fantasy world of the income-inequality denialists

  http://time-blog.com/curious_capitalist/2008/06/the_strange_...
  24 days ago in The Curious Capitalist - Justin Fox - Economy - Markets - Business - TIME · Authority: 242

  One of the more interesting developments in the U.S. economy over the past few decades has been the dramatic rise in incomes at the very top of the scale. There's all sorts of anecdotal evidence for this, from spectacular paydays of hedge fund managers to the sharp rise in entrance requirements for the Forbes 400 to the prices of Fifth Avenue apartments to the private-jet boom. But the most exhaustive empirical evidence for this income explosion at the top has come from the work of economists Thomas Piketty and Emanuel Saez, who have mined IRS data to deliver a previously unavailable picture of the sharply rising share of income going to the top 1%, the top 0.1%, and even the top 0.01% of taxpayers. Whether this rise in income inequality is a good thing or a bad thing is a question I really don't have a good answer for. But I do think we ought to be discussing it. Certain elements among the right-wing economic chattering classes, though, have honed an interesting response to this rise in income inequality: They deny that it exists. My economic policy cover story of a while back, which cited Piketty and Saez, seems to be drawing these denialists out of the woodwork. Gary North is one, and now David Gitlitz joins in at National Review Online: On income inequality, Fox accepts as fact the findings of economists Thomas Piketty and Emanuel Saez that “75% of all income gains from 2002 to ’06 went to the top 1% — households making more than $382,600 a year.” But as Piketty and Saez have acknowledged, these results are significantly skewed by the fact that their data only includes income reported on individual tax returns. Following cuts in individual tax rates in 1986 (under Ronald Reagan) and 2003 (under George W. Bush), many of the businesses that had been reporting income under the corporate tax switched to the lower individual rate. In 1986, business income accounted for only 11 percent of the income reported by the top 1 percent of earners. By 2005 that share jumped to more than 29 percent. Clearly, much of the reported gain of the top 1 percent is accounted for in this bookkeeping shift. Uh, no it's not. That purported problem, raised by Alan Reynolds, was swatted down pretty convincingly by Piketty and Saez: Most of the scenarios described by Alan Reynolds, such as a shift from corporate income to individual income or from qualified stock-options to non-qualified stock options, would imply that high incomes used to receive capital gains instead of ordinary income. For example, a closely held C-corporation which does not distribute its profits increases in value and those accumulated profits would appear as realized capital gains on the owner individual tax return when the business is sold. Yet, our top 1% income share series including realized capital gains has also doubled from 10.0% in 1980 to 19.8% in 2004. A fair description of the current state of knowledge on the income distribution is that members of the economics establishment (from right-wingers to left) more or less unanimously accept the Piketty and Saez data as a more or less accurate representation of reality. There are big debates about what it all means, and why it's happening, but the only major objections that I know of to the Piketty-Saez data itself have been those raised on the op-ed page of the Wall Street Journal by Reynolds, a senior fellow at the libertarian Cato Institute who doesn't appear to have an advanced degree in economics or in anything else. It's a case where the scientific consensus says one thing, and this one guy says the opposite. I don't have an advanced degree in anything either, and I like to think that on occasion the scientific consensus will turn out to be wrong and the lone outsider right. But I'm pretty sure this isn't one of those cases. Why not? First, there's all that anecdotal evidence of vast new fortunes being created. Second, Piketty and Saez have pretty convincing answers to all of Reynolds' objections to their data. Third, Piketty and Saez come across as data jockeys with no particular axe to grind, while Reynolds is an overt ideologue. Finally, when Reynolds strays into an area that I actually know something about--the use of stock options in compensation--he is so clearly blowing smoke that it becomes difficult for me to trust anything else he says. Here he goes: There are other serious problems with comparing income reported on tax returns before and after the 1986 Tax Reform. When the tax rate on top salaries came down after 1988, for example, corporate executives switched from accepting stock or incentive stock options taxed as capital gains (which are excluded from the basic Piketty-Saez estimates) to nonqualified stock options reported as W-2 salary income (which are included in the Piketty-Saez estimates). My impression is that the switch began even earlier, after the first Reagan round of tax cuts. But as indicated in the Piketty-Saez quote above, they do keep track of capital gains income as well, and the trends in income distribution aren't significantly different with and without capital gains included. What's really misleading about this little passage from Reynolds, though, is that grants of stock and incentive stock options have always been limited in size--stock because companies have to take a charge against earnings when they give it out, and incentive options because of both legal limits and the fact that recipients have to put up money to buy the underlying stock and hold on to it for a while. There are no such limits on nonqualified option grants, which weren't (until recently) charged against earnings and can be flipped immediately when exercised. So as companies moved away from stock grants and incentive stock options and toward nonqualified options in the 1980s and early 1990s, there was some amount of substitution and tax shifting going on. But the really important development was that these new option grants were orders of magnitude bigger than the old ones. The result was a huge increase in executive pay that showed up in corporate financial disclosures as well. It was not a quirk in the IRS data. So here's where all that leaves me. I'm going to keep "accept[ing] as fact the findings of economists Thomas Piketty and Emanuel Saez." And anyone who says I shouldn't do so, without raising some major objections beyond the feeble array already trotted out by Reynolds, goes down in my book as something of a joker.
• 

  The strange fantasy world of the income-inequality denialists

  http://blog.e-researching.com/?p=16008
  24 days ago in E-researching · Authority: 11

  One of the more interesting developments in the U.S. economy over the past few decades has been the dramatic rise in incomes at the very top of the scale. There's all sorts of anecdotal evidence for this, from spectacular paydays of hedge fund managers to the sharp rise in entrance requirements for the Forbes 400 to the prices of Fifth Avenue apartments to the private-jet boom. But the most exhaustive empirical evidence for this income explosion at the top has come from the work of economists Thomas Piketty and Emanuel Saez, who have mined IRS data to deliver a previously unavailable picture of the sharply rising share of income going to the top 1%, the top 0.1%, and even the top 0.01% of taxpayers. Whether this rise in income inequality is a good thing or a bad thing is a question I really don't have a good answer for. But I do think we ought to be discussing it. Certain elements among the right-wing economic chattering classes, though, have honed an interesting response to this rise in income inequality: They deny that it exists. My economic policy cover story of a while back, which cited Piketty and Saez, seems to be drawing these denialists out of the woodwork. Gary North is one, and now David Gitlitz joins in at National Review Online: On income inequality, Fox accepts as fact the findings of economists Thomas Piketty and Emanuel Saez that “75% of all income gains from 2002 to ’06 went to the top 1% — households making more than $382,600 a year.” But as Piketty and Saez have acknowledged, these results are significantly skewed by the fact that their data only includes income reported on individual tax returns. Following cuts in individual tax rates in 1986 (under Ronald Reagan) and 2003 (under George W. Bush), many of the businesses that had been reporting income under the corporate tax switched to the lower individual rate. In 1986, business income accounted for only 11 percent of the income reported by the top 1 percent of earners. By 2005 that share jumped to more than 29 percent. Clearly, much of the reported gain of the top 1 percent is accounted for in this bookkeeping shift. Uh, no it's not. That purported problem, raised by Alan Reynolds, was swatted down pretty convincingly by Piketty and Saez: Most of the scenarios described by Alan Reynolds, such as a shift from corporate income to individual income or from qualified stock-options to non-qualified stock options, would imply that high incomes used to receive capital gains instead of ordinary income. For example, a closely held C-corporation which does not distribute its profits increases in value and those accumulated profits would appear as realized capital gains on the owner individual tax return when the business is sold. Yet, our top 1% income share series including realized capital gains has also doubled from 10.0% in 1980 to 19.8% in 2004. A fair description of the current state of knowledge on the income distribution is that members of the economics establishment (from right-wingers to left) more or less unanimously accept the Piketty and Saez data as a more or less accurate representation of reality. There are big debates about what it all means, and why it's happening, but the only major objections that I know of to the Piketty-Saez data itself have been those raised on the op-ed page of the Wall Street Journal by Reynolds, a senior fellow at the libertarian Cato Institute who doesn't appear to have an advanced degree in economics or in anything else. It's a case where the scientific consensus says one thing, and this one guy says the opposite. I don't have an advanced degree in anything either, and I like to think that on occasion the scientific consensus will turn out to be wrong and the lone outsider right. But I'm pretty sure this isn't one of those cases. Why not? First, there's all that anecdotal evidence of vast new fortunes being created. Second, Piketty and Saez have pretty convincing answers to all of Reynolds' objections to their data. Third, Piketty and Saez come across as data jockeys with no particular axe to grind, while Reynolds is an overt ideologue. Finally, when Reynolds strays into an area that I actually know something about--the use of stock options in compensation--he is so clearly blowing smoke that it becomes difficult for me to trust anything else he says. Here he goes: There are other serious problems with comparing income reported on tax returns before and after the 1986 Tax Reform. When the tax rate on top salaries came down after 1988, for example, corporate executives switched from accepting stock or incentive stock options taxed as capital gains (which are excluded from the basic Piketty-Saez estimates) to nonqualified stock options reported as W-2 salary income (which are included in the Piketty-Saez estimates). My impression is that the switch began even earlier, after the first Reagan round of tax cuts. But as indicated in the Piketty-Saez quote above, they do keep track of capital gains income as well, and the trends in income distribution aren't significantly different with and without capital gains included. What's really misleading about this little passage from Reynolds, though, is that grants of stock and incentive stock options have always been limited in size--stock because companies have to take a charge against earnings when they give it out, and incentive options because of both legal limits and the fact that recipients have to put up money to buy the underlying stock and hold on to it for a while. There are no such limits on nonqualified option grants, which weren't (until recently) charged against earnings and can be flipped immediately when exercised. So as companies moved away from stock grants and incentive stock options and toward nonqualified options in the 1980s and early 1990s, there was some amount of substitution and tax shifting going on. But the really important development was that these new option grants were orders of magnitude bigger than the old ones. The result was a huge increase in executive pay that showed up in corporate financial disclosures as well. It was not a quirk in the IRS data. So here's where all that leaves me. I'm going to keep "accept[ing] as fact the findings of economists Thomas Piketty and Emanuel Saez." And anyone who says I shouldn't do so, without raising some major objections beyond the feeble array already trotted out by Reynolds, goes down in my book as something of a joker.
• 

  TIME for Socialism

  http://robchapmanonline.com/2008/06/28/time-for-socialism/
  26 days ago in Rob Chapman · Authority: 9

  by Thomas J. DiLorenzo Anyone who is still wondering why the so-called “mainstream media” was so hostile toward Congressman Ron Paul’s campaign for the Republican presidential nomination will find an answer in the June 2 issue of Time magazine. Congressman Paul is a deeply educated student of economics, among other things, and an unabashed advocate of economic freedom and limited constitutional government; Time magazine is staffed by socialist ideologues who display little or no evidence of ever having studied economics at all. The second paragraph of “How the Next President Should Fix the U.S. Economy,” by one Justin Fox, explains the real problem as Time sees it: Americans enjoy too much economic freedom. The natural solution, therefore, is to strip them of their freedom with higher taxes, more regulations, and greater regimentation of their lives. The cause of all of today’s economic problems, says Time, is of course Ronald Reagan, who supposedly cut taxes, went about “slashing regulation,” and preached “the gospel that individual Americans were better suited to make economic decisions than bureaucrats in Washington were.” Where on earth did Americans ever get such a crazy idea? But there is hope, says Time. “There are signs that … America’s 25-year love affair with tax cuts and deregulation” is ending. One reason for this is that the federal budget is “way out of balance.” According to Time, the fact that the Bush administration has been even more spendthrift (on domestic spending as well as military) than the notorious Johnson administration, and has accumulated huge budget deficits, is evidence that Americans have too much freedom and too much money in their pockets. They need to be taxed more severely in the name of budgetary “balance.” Not one word is devoted to the idea of cutting spending of any kind by a single dollar, let alone abolishing entire government bureaucracies altogether. (Continue Reading Original Article)
• 

  TIME for Socialism

  http://theamericanstatesman.wordpress.com/2008/06/27/time-fo...
  27 days ago in The American Statesman · Authority: 1

  Thomas J. DiLorenzo / Ludwig von Mises Institute | June 23, 2008 Anyone who is still wondering why the so-called “mainstream media” was so hostile toward Congressman Ron Paul’s campaign for the Republican presidential nomination will find an answer in the June 2 issue of Time magazine. Congressman Paul is a deeply educated student of economics, among other things, and an unabashed advocate of economic freedom and limited constitutional government; Time magazine is staffed by socialist ideologues who display little or no evidence of ever having studied economics at all. The second paragraph of “How the Next President Should Fix the U.S. Economy,” by one Justin Fox, explains the real problem as Time sees it: Americans enjoy too much economic freedom. The natural solution, therefore, is to strip them of their freedom with higher taxes, more regulations, and greater regimentation of their lives. The cause of all of today’s economic problems, says Time, is of course Ronald Reagan, who supposedly cut taxes, went about “slashing regulation,” and preached “the gospel that individual Americans were better suited to make economic decisions than bureaucrats in Washington were.” Where on earth did Americans ever get such a crazy idea? But there is hope, says Time. “There are signs that … America’s 25-year love affair with tax cuts and deregulation” is ending. One reason for this is that the federal budget is “way out of balance.” According to Time, the fact that the Bush administration has been even more spendthrift (on domestic spending as well as military) than the notorious Johnson administration, and has accumulated huge budget deficits, is evidence that Americans have too much freedom and too much money in their pockets. They need to be taxed more severely in the name of budgetary “balance.” Not one word is devoted to the idea of cutting spending of any kind by a single dollar, let alone abolishing entire government bureaucracies altogether. (Article continues below)   Then there are “soaring energy prices,” caused by increased worldwide energy demand coupled with sluggish supply growth that has been blocked by environmental regulation. This would include the regulations that prohibit oil exploration in 85–90 percent of the outer-continental shelf off the Atlantic and Pacific coasts, as well as in most of Alaska. Even though regulation has caused this problem, the “solution,” according to Time, is more regulation of the energy industry. A third reason for “hope” that Americans will give up their economic freedom is the housing crisis, which again was caused primarily by the Fed-generated boom-and-bust cycle, with a little help from the government’s thirty-year policy of forcing banks to make bad loans to uncreditworthy borrowers under the Community Reinvestment Act. Time wants to blame it all on the free market, however, and makes no mention at all of the role of monetary policy in generating the housing-market crisis. Health-care costs began spiraling out of control as soon as government became involved in the post–World War II era, especially with the advent of Medicare and Medicaid. Health care and health insurance are arguably the most heavily regulated industries in America; decades of cost-increasing regulations have been the main cause of the “health care crisis” that the socialist ideologues at Time are so worried about. Government control of health-care markets is the problem; therefore, the obvious “solution” is even more government control of health-care markets, says Time. Time’s Justin Fox presents a tired, old, laundry list of failed socialistic interventions. These include protectionism; more income “redistribution” (a.k.a., legal theft) via the tax system, i.e., “heavy taxes on the rich”; more pork-barrel “infrastructure” spending — and higher taxes to pay for it; an additional round of tax increases “to close the budget gap” (which of course tax increases never do); yet another round of tax increases on oil, gas, and natural gas to “steer” consumers away from these items; more tax increases still in the form of elimination of the mortgage-interest deduction, which “costs the government about $80 billion a year”; and, of course, socialized medicine, the tax increases for which would entirely swamp all of the previously mentioned tax increases. (Time promises to explain how to “make universal health care work” in a separate article. I can’t wait.) What Time’s “fix” involves is essentially the Sweden-ization of America, where the average working family would be handing over 65–70 percent of its earnings to government bureaucrats, with regulation-induced price increases eating up perhaps another ten percentage points. This all needs to be done at the very beginning of the next administration, moreover, for “putting off change won’t be an option much longer.” It is a perfect recipe for impoverishing America.

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