Monday, August 29, 2011

The Cost of Income Inequality

I've been a bit lazy but mindful. Facebook is making me lazy but I am always mindful of the original long form blogging that I have committed to. I look for little snapshots and try to understand them in a broader context. For instance, the food stamp chart above suggests an alarming expense that is part of the hidden depression problem. The growth of economic inequality costs us huge amounts of money in the form of food stamps and unemployment expenditures. These are the props that keep us from sliding ever downward. I don't wish to denigrate the human toll of the "downturn" but should we look at this from only a cost perspective, keeping the rich from paying taxes is costing us an arm and a leg. The increased unemployment taxes needed around the country (Hawaii has raised this tax on businesses 600%) to keep up with the burgeoning problem of keeping everything churning along seems to me to be unsustainable.

Revenue loss from just the top 1% is taking it's toll on our coffers:

The first column is the effective tax rate paid by the richest of the rich. It dives ever downward. The second column shows the money taken in from this group. The next column shows the amount we would have taken in had the rich not received all the tax breaks since 1986. The last column shows the lost revenue. This is not a cumulative total, it is yearly. We dig deeper and deeper so some billionaire can have a few extra billion a year.

The costs of unemployment benefits will no doubt cause employers to think twice about new hires which cost more unemployment tax than ever before.

Finally, here is a opinionated list of problems I read recently that I thought  was particularly relevant:

Can the US resolve these issues?

1) An excess credit problem, left over from the 2000s Housing boom and credit bubble — being solved v e r y s l o w l y through deleveraging and passage of time;
2) Slowing economy and high unemployment (including increasing High School drop out rates creating a structural employment problem);
3) Crumbling infrastructure: Electric Grid, Bridges, Tunnels, Roads, Naval Ports, Airports;
4) Medical Costs that are double the rest of the industrialized world’s yet produces worse results.
5) Systemic deficits caused by unfunded tax cuts, unfunded entitlements, and a military bigger than the next 20 countries combined, (plus a lack of fiscal discipline);
6) A wholly dysfunctional electoral process, including corporate control of what was once a democratically elected legislative branch;
7) Increasing wealth and income inequality (Historically not a long term positive for social unrest and political legitimacy)
8) An overt hostility to empiricism and science (which helped create most of our wealth) and an embracing of “magical thinking”
9) An intellectually bankrupt political class married to outmoded, disproven, fantasy based economic ideas.
OK, I had a bad day. :)