are the implications of this picture?
am not an economist, but then again, most likely you aren't either.
On the other hand, the economy affects you and me, so we need to come
to grips with these issues to participate intelligently in the political
process. There needs to be a genuine national dialog on these
issues at all levels.
we divided the income of the US into thirds, we find that
the top ten percent of the population gets a third, the
next thirty percent gets another third, and the bottom sixty
percent get the last third. If we divide the wealth of the
US into thirds, we find that the top one percent own a third,
the next nine percent own another third, and the bottom
ninety percent claim the rest. (Actually, these percentages,
true a decade ago, are now out of date. The top one percent
are now estimated to own between forty and fifty percent
of the nation's wealth, more than the combined wealth of
the bottom 95%.)
of the L-Curve when you read your daily news [I hope you do READ
your daily news rather than rely on the TV infotainment that
masquerades as news]. What are its implications for tax structures,
campaign finance reform, the policies of the IMF, the WTO, and the
World Bank, abandonment of inner cities, factory closings, sweatshop
labor, "guest worker" programs, US foreign policy, why
we go to war, etc. How does welfare for the poor stack up
against corporate welfare?
the goal be to get motivated and get yourself onto the vertical
spike? [Some people who have responded to this site see it
this way, but I think that misses the point.] I saw a bumper
sticker recently that says it best for me:
economy produces tremendous wealth but it also produces tremendous
poverty. Sure, some people can be lazy, but when large
numbers of hard working people live in poverty and the middle class
is shrinking, it is a systemic, not an individual
problem. There is plenty to go around, but it doesn't adequately
go around. It goes to the top, and leaves the masses to fight
over the crumbs. (If you are mathematically inclined, check
out a recent
study of the income distribution that identifies two distinct
income classes in the US with different mathematical bahavior.)
True, it has been this way through the ages, but that doesn't mean
we should be satisfied with such a system. I believe we can
doctors and lawyers and professional people, with incomes over a
hundred thousand dollars may feel "rich". They may
have nicer homes and cars, and they may have attitudes
that separate them from the masses. But they still must work
for a living and are primarily consumers of their earnings.
Whether they recognize it or not, they actually have more
in common with the people at the bottom than they do with the people
in the top 1/2%.
horizontal spike has the votes. The vertical spike has the
money. Who wins, when it comes to electoral politics?
Who has influence? Whose interests are being represented
in Washington? Can democracy meaningfully exist where the
distribution of wealth, and thus the distribution of power, is this
recently went through an economic boom where people on
the horizontal spike showed little if any improvement in their condition
while those in the vertical spike showed huge gains. Can this
be considered "prosperity"? Do we really want to
gear up our national policies to repeat this performance?
in the vertical spike would like to have you resent the poor who
are portrayed as welfare leeches. Which group actually has
a bigger negative impact on your lifestyle: the people in the bottom
half of the graph, or the people in the vertical spike?
the vertical spike just Bill Gates? NO. In 1997 over
144,000 tax returns were filed with adjusted gross incomes of $1
million or more [up to 240,000 in 2004]. As the vertical spike rises it thins down
to a few individuals, but there is a growing class of billionaires
that collectively holds a substantial fraction of the wealth of
the country. [In March 2006 Forbes reported 793 billionaires in the US with combined net worth of $2.6 trillion. In March 2007 Forbes reported 946 billionaires in the US with combined net worth of $3.5 trillion. That is a 1-year increase of 19% in the number of billionaires and an increase of 35% in their net worth during a time of increasing poverty. Severe poverty is at its highest point in three decades.]
on the vertical spike can use their influence single-mindedly and
very effectively. A single billionaire can get the undivided attention
of any politician he wants, any time he wants. If he doesn't
get what he wants he can, in fact, "fight city hall,"
the statehouse, and even the federal government. People on
the horizontal spike must pool their limited individual power and
organize to have any effect at all. This is a very difficult
thing to manage, in practice.
mainstream media has been bought up by people in the "vertical
spike." The primary channels for information and expressed
opinion are controlled and filtered by a small, powerful group on
the vertical spike whose interests are not representative of the
majority of Americans. Even when there is no direct political
message the programming is tailored to the perspectives and sensitivities
of large corporations. The business of media is to sell advertising.
Programming is simply the hook to hold an audience until the next
commercial. Serious examination of ideas of any kind is seen
as counterproductive because it may alienate or bore part
of the potential audience. The result is nonstop sensationalistic
binges of O.J., Princess Di, Monica, and Elian. The growing
media monopoly dilutes and distorts the national dialog, and thereby
destroys the basis for democracy. We must find ways
to rebuild community and learn to talk to each other directly.
taxes are cut, whose taxes are cut and whose programs
are cut? What kinds of taxes are being cut and what kinds
of taxes (whether they are called taxes or not) are being
imposed? Sales tax and use fees tax primarily the horizontal
spike. The pre-Reagan progressive income tax drew more from
the vertical spike.
flat tax would shift the burden downscale even more. The sales
pitch for this shift usually focuses on "simplification."
Simplification is unrelated to the issue of who the money is coming
from. You could have a simple progressive tax just as easily
as a simple flat tax. The proposal to eliminate the income tax entirely
would be disastrous. Those on the vertical spike would escape
virtually all of their obligations and the burden of government
would be born almost entirely by those of us on the horizontal
spike, both through increases in other forms of taxation and reduction
of services. The income tax originally taxed ONLY the vertical
spike. This is the direction tax reform needs to take if it
is to be truly considered "reform."
the people on the horizontal spike take control of their own destinies
and truly make this a nation governed in the best interests of the
people? If so, how?
the L-Curve "good" or "natural" or "inevitable"?
What are the alternatives? The economy is a complex system,
but it is essentially a human invention. It can be "managed"
(or influenced) in many ways. If it is not managed intentionally,
then it is managed (or manipulated) by those who hold political
and economic power, typically to their own advantage. It is
not enough to create a strong economy. It is
just as important to ask how the benefits of the economy
are distributed through the population. A truly democratic
society needs to find ways to manage the economy to benefit the
population as a whole. This is not being done.
sources: Census Bureau / Internal Revenue Service / Economic Policy Institute)
Note: these data sources are notably lacking in data within the top
1%. Census data goes up to $300,000 and IRS data goes up to $1 million.
Information to plot the vertical spike had to be obtained from news
articles and other sources of commentary. If information on the top
1% is not known or easily obtained, statements about the socioeconomics
of income and wealth are suspect. Michael Parenti
has written an illuminating article on this topic.
I first posted this site, several people have quibbled over various
technical points. Here are a few of the issues raised:
in net worth" is not the same thing as "income,"
according to one reader. However, I recently received a comment
from economist John
Maher who wrote, "I believe the first reader's comment
is incorrect. Increase in net worth IS income according to the renowned
economist, John R. Hicks in Value and Capital. Hicks is right."
income of very wealthy people typically varies radically from one
year to the next. Sometimes years of huge earnings are followed
by years with similarly huge losses. I agree. I have added a comment
to this effect in the main body of the text above. Those of us on
the horizontal spike, however, find radical jumps in income much
harder to achieve. The overall L-Curve pattern persists through
published wealth of billionaires is typically estimated by their
holdings in their own companies. These estimates do not include
their typically vast diversified investments.
on paper, from growth of investments, needs to be distinguished
from "taxable income." It's true that there are
differences among different kinds of income, so they aren't strictly
comparable, but political and economic power derives from wealth,
whether it is taxable or not.
response to all of these kinds of questions, in short, is that the truth
of my central thesis is not dependent on the exact height of the graph
or shadings of definitions. As one correspondent put it, there
is a "money spike" and there is a "population spike".
There are two classes in this country. One class derives concentrated
power from its concentrated wealth. The other class has power
only in numbers. That power is effective only to the extent that
it can be mobilized through organization.
we come to terms with these issues, phrases such as, "We the people...,"
and, "of the people, by the people, and for the people," are
inform your friends and associates about this site. I can't carry
on lengthy dialogues with everyone who visits the site, but if you have
something to say, please feel free to communicate by email. Please don't be offended
if you don't get a personal reply. I read all responses and will
consider your comments.