Debate about Wealth Inequality

Here is a Facebook debate about wealth inequality and government policies, I had with Varun Menon on March 14, 2013.

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Varun K. Menon “This is an interesting presentation . I give credit to the producer for filming a very appealing and compelling video. I do understand the facts that are trying to be presented. However, the video does not take into account several factors that have contributed to the difference in wealth ownership in the United States, including the very fact that taxes were lowered from the severe rates they were set at in the 1970s. This in itself demonstrates that the problem is not the wealth of the most successful Americans, but rather that although every wealth category in America has grown since the 70s, the top 20% has grown at a much higher rate. Socialist philosophy should not be centered on bringing America’s top down, but rather its bottom up through fair and equal opportunity and enforcement of the law. This presentation and accompanying message paints a picture of absolute “doom and gloom” and attempts to compare the wealthiest nation in the world with a developing nation that still faces problems with staggering poverty, defined much differently from that in the U.S. Such a designation in the U.S. merits access to Federal welfare that is generous, but not appropriately spent, which has led to uncontrollable deficit spending through mounting entitlement programs. Hope that I was able to provide a qualifying opinion on this matter so that the subject may be most fairly represented and understood.”

L Larry Liu “The wealth inequality video is excellent. And it is a real problem. The more unequal wealth is distributed, the less the economy can develop. Varun’s point about “not tearing down the rich, but building up the poor” sounds nice in theory, but if inequality is really extreme, then you can keep dreaming about uplifting the poor. Take say, higher education: while it became more and more expensive to attend college, the rich do not mind the extra expenditure, while the poor are locked out of college or have to take on enormous debts to attend it. Now, if they go out and find a job, they are initially burdened by debts, which the rich children do not have. If wealth were distributed relatively equally (I wrote ‘relatively’ not ‘absolutely’), then there would be no point raising tuition to unbearable levels. It is only if you can cater to the powerful and rich that prices can go up.

(I must admit that this is not the only factor for rising tuition. Another one is the constantly increasing demand due to competitive pressures in the labor market- outsourcing and automation as main arguments.)

For those concerned about inequality: Robert Reich always has his eyes on the issue, and he links federal politics with economic circumstances and economic outcomes. http://robertreich.org/”

Varun K. Menon “Larry, I am more than willing to give to education causes, but I will give no dime to the government to redistribute.”

L Larry Liu “If you are an assistant in a research lab, then it was likely federally funded. You have taxed some farmer in Iowa, or a billionaire in California just so we can finance research positions at the universities. 82% of Penn’s research funding derives from the federal government. With the sequester, $34-42 million in research funding for Penn are on the chopping block, 3,000 low-income students will lose access to federal student aid, 2,300 students will lose access to work-study jobs. http://www.thedp.com/article/2013/02/sequester-looms-over-u-funding

Varun, it seems to be that you are all too willing to cut the education budget to the bare bones, and pray that there are enough billionaires like Ronald Perelman to finance us magnificent college programs. http://www.thedp.com/article/2013/02/perelman-gives-25-million-to-school-of-arts-and-sciences

Let me put it like this: it ain’t gonna happen.”

Varun K. Menon “No Larry- I am fine with education and especially research funding. What I don’t like is welfare programs that pay people to do nothing. I hate wealth redistribution. I think that funding public education and sustainable private sector job opportunities should be our welfare system. As Reagan said, the best welfare program is a job.”

L Larry Liu “Varun, I actually have no problem with that statement, except that your claim rests on a very tenuous assumption. The assumption is that we have a full employment economy, where everyone that wants a $30/hour job will get it if he works reasonably hard enough and trains hard enough. But let us be honest with what happened over the last 30 years: there is no full-employment economy. We have elevated unemployment, a labor participation rate, which is the lowest in decades (http://data.bls.gov/timeseries/LNS11300000), and 58% of our newly created jobs are in the low-wage sector (http://www.nytimes.com/2012/08/31/business/majority-of-new-jobs-pay-low-wages-study-finds.html?_r=0), which means that even if you want to make a living with it, you can’t, and will likely need government handout. Furthermore from the same article, “Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.” Here comes the kicker: the very hated “government redistributers” are not creating jobs to lower unemployment, but shedding them. Public-sector employment decreased by 580,000 since 2009 (http://www.hamiltonproject.org/papers/a_record_decline_in_government_jobs_implications_for_todays_economy_an/). Before you celebrate Ronald Reagan, you should perhaps consider the problem that decreasing public-sector jobs “cost the private sector 751,000 jobs” (http://www.epi.org/blog/years-recovery-state-local-austerity-hurt/).

In this very bad labor market, can you blame anybody for being on welfare? In fact, a welfare program coupled with a jobs program is probably what we need to reduce poverty and save the middle class in this country. As our tech-friends correctly note, with increasing automation we reduce labor necessary to maintain ourselves, meaning we should work less, not more. ““The robots are not going to take all our jobs in the next year or two,” McAfee said. “But over the longer term, if we’re moving into an economy that’s heavy on technology and light on labor, and we are, then we have to consider some more radical interventions. For example, something like the guaranteed minimum income,” McAfee said.” (http://www.wired.com/business/2013/02/socialist-memes-at-ted/)

An idea well articulated by Warwick Univ. prof., Robert Skidelsky, “If one machine can cut necessary human labor by half, why make half of the workforce redundant, rather than employing the same number for half the time? Why not take advantage of automation to reduce the average working week from 40 hours to 30, and then to 20, and then to ten, with each diminishing block of labor time counting as a full time job? This would be possible if the gains from automation were not mostly seized by the rich and powerful, but were distributed fairly instead.” http://www.project-syndicate.org/commentary/the-future-of-work-in-a-world-of-automation-by-robert-skidelsky#tVzFIM29GrIs8xvk.99″

Varun K. Menon “That’s why I support pubic spending on public works projects- repairing America’s deteriorating infrastructure!”

Varun K. Menon “Let’s give people the work they want- and let’s pave the way to America’s infrastructure dominance in the process! This is what public spending should be about. Education, infrastructure, research, and efficient and effective service.”

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