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The Strange Rise of Bourgeois Bolshevism

Discussion in 'GatorNana's Too Hot for Swamp Gas' started by philnotfil, May 21, 2020.

  1. gatorpika

    gatorpika Premium Member

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    The question isn't whether it's "good" or "bad", it's what's driving the pattern and can we mitigate that? We have a lot growth economy where there is less investment and therefore fewer new and good jobs. Earnings are higher because companies are managing spending more aggressively because of the lack of growth and aren't investing which tends to reduce earnings in the short term. Wages don't grow because the top line isn't growing as well. So the benefits of the higher earnings accrues to the shareholders and they take a bigger cut of the pie. You could mandate higher wage levels, but then that further stresses the demand for labor as companies will figure out how to do more with fewer people. Automation and outsourcing are options now so we don't need the labor like we used to. Meanwhile without wages growing, inflation cuts into disposable income and people buy less stuff, further pressuring revenues. It's a vicious circle. All the politicians are promising is either "free market" or mandated benefit spending by the companies and neither addresses the problem. The elephant in the room is China, but the days when we could expect to be far ahead of the rest of the world are probably gone. In the future with more and cheaper automation we will likely need an entirely new economic paradigm. Many of the left wing futurists are selling flavors of socialism, but ultimately you need capitalism to get there because capital produces the stuff that such a society needs. It also could be significantly worse with some significant percentage of the population on welfare as there is no work and without political power given they have no means. There are tons and tons of hard questions to unravel in such a future and if the current political trends continue, we won't have anywhere near the competence needed in Washington to deal with it.
     
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  2. docspor

    docspor GC Hall of Fame

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    you should not say marginal rates don’t matter. I’d suggest using the term binding marginal rate or effective marginal rate. It’s like a min wage of a penny is irrelevant b/c it affects no one
     
  3. philnotfil

    philnotfil GC Hall of Fame

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    Sure, effective marginal rates are more important than theoretical marginal rates.

    I believe the term effective tax rate already encapsulates this difference without needing to invent a new phrase.
     
  4. gatorpika

    gatorpika Premium Member

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    The thing though is that most restrictions on free markets were done for a reason, or in reaction to some abuse that was socially not beneficial. You can optimize market performance on paper but in the real world there are social consequences in terms of labor rates, unemployment, etc. I can build a widget factory that makes widgets very cheaply and profitably, but if I pollute half the state in the production process then maybe it isn't the best thing to do socially, or even economically. My production might hinder others from using the polluted land for their own production and result in a net loss. I have always believe that there needs to be some kind of balance derived from pragmatism where some decisions are going to be economically beneficial and some are not. I don't think we do enough of that because the subject matter is beyond the reasoning of the average voter and we tend to argue from the margins. We used to have politicians that would make those decisions for us, but now it seems like they are resorting more and more to ideological or emotional arguments as well.
     
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  5. docspor

    docspor GC Hall of Fame

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    effective rate does not cover marginal rate. My effective rate is about 12, my marginal rate is 37
     
  6. gatorpika

    gatorpika Premium Member

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    We should probably be talking about statutory vs. marginal rates. My mistake in earlier posts, been a bad posting day for me. The marginal rate is the actual rate you pay on the next taxed dollar. The statutory rate is the IRS percentage of your income applied based on your income level. The effective rate the overall rate to tax paid to income earned. So for example if your statutory rate is 35% for your income level, you don't pay 35% of your total income. You pay 15% on like the first 20K, then 22% on like the next 40K or whatever the schedule says. You also reduce the amount subject to taxation with deductions and credits. So your effective rate after calculating all that might be 25% of your total income rather than 35%. If someone offers you a new job with a $20K raise, then without any additional deductions available your marginal rate on that next $20K would be the same as the statutory rate, or 35%. You would have to hand over 35% of that $20K to the IRS.
     
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  7. docspor

    docspor GC Hall of Fame

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    What Is the Effective Tax Rate?
    The effective tax rate is the average tax rate paid by an individual or a corporation. The effective tax rate for individuals is the average rate at which their earned income, such as wages, and unearned income, such as stock dividends, are taxed. The effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed, while the statutory tax rate is the legal percentage established by law.

    What Is the Marginal Tax Rate?
    A marginal tax rate is the rate at which tax is incurred on an additional dollar of income. In the United States, the federal marginal tax rate for an individual increases as income rises. This method of taxation, known as progressive taxation, aims to tax individuals based upon their earnings, with low-income earners being taxed at a lower rate than higher-income earners. While many believe this is the most equitable method of taxation, many others believe this discourages business investment by removing the incentive to work harder.
     
  8. SeabudGator

    SeabudGator GC Hall of Fame

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    Ayn Rand, Marx and Hayek are all geniuses theoretically and idiots pragmatically. The notion that an economy can be left to the better nature of capitalists or governments sounds great with a harp but utterly fails when humans grab the reins. Power corrupts.

    Unfortunately, what we now have is crony capitalism. Politicians require so much capital (and pocket much) that they lie in bed when making laws with their supporters. What comes out is absurd laws like the carried interest tax scam that allowed hedge fund managers huge tax breaks.

    Two finishing comments on this thread:
    - Nobody here can point to a fortune 500 CEO that pays a lower tax rate than their administrative assistant b/c none do (Buffet was offering $1M to any CEO who paid a higher tax rate. No takers b/c they pay capital gains tax not tax on wages).
    - And the song continues with the March economic relief package that appears to offset non corona related losses for the wealthiest. Opinion | Crumbs for the Hungry but Windfalls for the Rich. This is not a R or D issue as both parties did this.
     
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  9. GatorRade

    GatorRade Rad Scientist Premium Member

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    I absolutely agree. The environmental issue is me that seems quite appropriate for government intervention. Hayek noted this as well. (No one would guess it, but he even argued for universal basic income). But even in the “scientific” realm of environmental protection, the issues are often thorny and cronyism often manifests.

    One other aspect of change that seems under-appreciated is the emergence and power of social norms. The difference between legislation (speed limit is 55) and law (no one gets a ticket for driving 57). Many of these regulatory laws came about due to changes in our social norms, rather than the other way around. The affluent did not quit smoking when bans went into place; they did it when it became less socially acceptable.

    Of course no social stigma will become attached to subtle impacts on complex ecological processes of which most of us are unaware, so that will be of no use for regulation. However, as you point out, the same is true of government action. No matter what we path we choose, the flaws will be grievous and many.
     
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  10. gatorpika

    gatorpika Premium Member

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    FYI, saw this today while trying to decide whether it was worth my time to read Picketty's work. It includes contemporary comparisons, not historical though but sources various studies on the subject.

    Marginal Tax Rates - Econlib
     
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  11. gatorpika

    gatorpika Premium Member

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    I think one of the recent failures of our political system is the lack of a universal social stigma given that we have a bipolar political environment. If one party/group prioritizes some issue, the other party/group will oppose it. Mostly this has been on the GOP side, but the Democrats have their issues as well. You aren't stigmatized within your own group (frankly the opposite as you get a bunch of "best post evers") so people continue to believe that the issue is political rather than real. I am beginning to think that one of the most evil things ever invented was the like button on social media because it implemented basic reinforcement theory on people. They mistake support for being on the right track instead of just people who like you showing their love. Or they believe that that support extends beyond their bubble and those that disagree are haters or whatever. Those that do get broader traction often get it out of celebrity rather than the merit of their ideas. An you also have a broader reach as the internet is accessible basically by everyone so some set of ideas largely ignored in the past can more easily gain followers. IMO it's not so much that politics is broken, it's that we are broken (and I will throw in media, though that's our fault too). Politicians follow the votes and media follows the clicks/views.

    So what you have is a bunch of people buoyed by the likes they get on facebook believing that their simplistic views of the world are realistic and gravitating to the media and politicians that echo those feelings. They like simple concepts or ideologies that are easy to grasp. They attribute negative information to the rhetoric of the other side so they can continue to believe in their fantasy world. They believe there is a simple and easy to understand answer for everything (free markets cure all, billionaires will pay for utopia). They believe in a war between the opposing sides where you can not give an inch or compromise. In such a world pragmatic leadership is very hard to impossible. In that world it's easy for one party to oppose everything coming from the other side and wait it out for the next election when they hope to have more power. In the case of the GOP it's also exactly what more corrupt big donors want as there is no pushback against the party when they move to dismantle some of the regulatory framework put in place to protect the common citizen. In short it's pretty much a mess and not likely to get better in the near term IMO.
     
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  12. GatorRade

    GatorRade Rad Scientist Premium Member

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    Totally agree. I think this tendency to prioritize the group at all costs is our biggest challenge now that our groups are often political parties. The original studies that led to the minimal group paradigm are amazing and disturbing.

    Minimal Group Paradigm - IResearchNet

    As Flake said as he was on his way out, there’s no way he’d oppose the president if he were seeking re-election, as there is absolutely no incentive to reach across the aisle. Trying it would more than likely get you voted right out of office.

    At this point loyalty to the party is the #1 trait. (And that is separate from the problems inherent in democracy!). It’s one reason I was excited about Amash as he actually talked openly about these problems.
     
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  13. chemgator

    chemgator GC Hall of Fame

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    How is the current level of inequity any worse than it was 120-130 years ago, when many industries were run as monopolies, or small groups who conspired to set prices before anti-Trust legislation? When in some industries, if you wanted a job, you had to live in the company camp, and pay company prices for everything you bought, making it difficult to avoid going into debt while working a 6-day and sometimes 7-day work week?

    Worker: "Mr. Rockefeller, I'm on my 5-minute break and I object to your lack of a comprehensive health care plan! We're being repressed!"

    Rockefeller: "When did we start giving out 5-minute breaks? Someone give this man a beating and put him back to work!"
     
    Last edited: May 24, 2020
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  14. gatorpika

    gatorpika Premium Member

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    Seriously. And those people were better off than the preindustrial people scraping out a living on small farms. The increase in wealth and standard of living over the last 300 years has been huge.
     
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  15. SeabudGator

    SeabudGator GC Hall of Fame

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    When I was a kid I walked uphill in the snow both ways to school...

    Every generation complains that subsequent generations have it better and are soft. And they are right. But that is the magic of human progress that has created ever more stable civilizations that can afford the luxuries of longer lives, justice, equality, leisure time, health, and education. Read "The Better Angels of our Nature" by Pinker.
     
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  16. 92gator

    92gator GC Hall of Fame

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    Nah man, going for 21st century groovy key board cowpoke...

    Did I miss the mark? :p
     
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  17. 92gator

    92gator GC Hall of Fame

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    &

    I thought the fisherman has made his fortune, and that's why he was whiling a way his time on the beach, fishing--in which case, it's a fantastic parable!

    If the point was to somehow romanticize the notion of eeking out a meager living a la Huck Finn, and pretending the guy ain't got no worries...well yeah, then is paltry romantic fantasy fiction...
     
  18. nolancarey

    nolancarey GC Hall of Fame

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    Nah, I did.
     
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  19. gatorpika

    gatorpika Premium Member

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    I took it as he could work his ass off to become rich and then have the free time to do what he wants, but he is already doing what he wants so no point. That's a legit choice for some people and if they can make it work for themselves then good. My mom used to live in Durango, Co and there were a bunch of people that had busted their asses in the corporate world for several years, made some money and decided they just wanted to ski. They bought stores or coffee shops in the area to give themselves a living income and spent their free time on the slopes. Not everybody has that opportunity though and if they did, then there would be nobody working to produce the stuff we need for the good life. Maybe someday when we get high level AI and robots, but not yet.
     
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