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Income Inequality Rose Most Under President Clinton - IBD article


Tim Eriksen
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Surprising article based on what we currently hear in the news. 

http://news.investors.com/Article/590383/201111030805/Income-Inequality-Rose-Under-Clinton-Obama.htm

 

According to the article the rich actually got poorer under Bush. 

 

"Others argue that income mobility matters more than equality.

One study found that more than half of the families who started in the lowest income bracket in 1996 had moved to a higher one by 2005.  At the other end of the spectrum, more than 57% of families fell out of the top 1%."

 

Interesting stuff.

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Lower interest rates?

 

The wealthiest 5% of U.S. households saw incomes fall 7% after inflation in Bush's eight years in office,

 

Good point.  Could also be due to distortion from the stock market bubble caused in the 90s.  Hard to say, though.

 

Regardless, income inequality in the US has been increasing since the 80s.  Don't think you can blame it on particular presidents -- that would be too cute by half. 

 

More likely, it has resulted from secular changes in the US economy combined with policies favoring the wealthy and the general trend of shifting risk from firms back onto households.

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Lower interest rates?

 

The wealthiest 5% of U.S. households saw incomes fall 7% after inflation in Bush's eight years in office,

 

Good point.  Could also be due to distortion from the stock market bubble caused in the 90s.  Hard to say, though.

 

Regardless, income inequality in the US has been increasing since the 80s.  Don't think you can blame it on particular presidents -- that would be too cute by half. 

 

More likely, it has resulted from secular changes in the US economy combined with policies favoring the wealthy and the general trend of shifting risk from firms back onto households.

 

While I agree it is too simplistic to blame or credit Presidents, The University of Michigan economist argues that the growth in inequality occurred between 1979 and the mid 1990's.  That is interesting since the common perception is that is has occurred since that time and primarily under Bush, which according to the article is not accurate.  Even your comment that inequality has been rising since the 80's could infer that it is ongoing.  Yet according to the article, one could also say that inequality has not been rising since the mid 1990's which gives an entirely different understanding of the situation.

 

You also state that inequality has resulted from secular changes in the US economy combined with policies favoring the wealthy.  That seems non-specific and simplistic as well.     

 

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Just reading the excerpt you quote, it sounds like a misleading use of statistics to make a political point. Under bush there was the dot com bubble burst and the beginning of the credit crisis, while the 1990s ended on a huge bull market.

 

That might be true, but if you read the whole article you would see that is not the case.  It argues that the increase in inequality was from 1979 to the mid 1990's, which was before the dot com bubble.  I didn't link to the article in order to generate a partisan debate.  The purpose was to challenge the common beliefs that many hold that may not be correct.   

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Lower interest rates?

 

The wealthiest 5% of U.S. households saw incomes fall 7% after inflation in Bush's eight years in office,

 

Good point.  Could also be due to distortion from the stock market bubble caused in the 90s.  Hard to say, though.

 

Regardless, income inequality in the US has been increasing since the 80s.  Don't think you can blame it on particular presidents -- that would be too cute by half. 

 

More likely, it has resulted from secular changes in the US economy combined with policies favoring the wealthy and the general trend of shifting risk from firms back onto households.

 

While I agree it is too simplistic to blame or credit Presidents, The University of Michigan economist argues that the growth in inequality occurred between 1979 and the mid 1990's.  That is interesting since the common perception is that is has occurred since that time and primarily under Bush, which according to the article is not accurate.  Even your comment that inequality has been rising since the 80's could infer that it is ongoing.  Yet according to the article, one could also say that inequality has not been rising since the mid 1990's which gives an entirely different understanding of the situation.

 

You also state that inequality has resulted from secular changes in the US economy combined with policies favoring the wealthy.  That seems non-specific and simplistic as well.   

 

That's funny -- because when I said that income inequality has resulted in part "from secular changes in the US economy" and the "general trend of shifting risk from firms back onto households," I was trying to acknowledge that the situation is more complex than simply blaming income inequality on class warfare (or on Republicans).

 

But somehow you took it differently. 

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I think as Gates states that the inequality is due in good part to education.  What I don't understand is why there is not more of focus there.  That is a cause we can do something about and I think it crosses party lines.  What is needed is radical reform (results for the money we now spend and only if it works spend more - if it fails try something different) not just more money thrown at it.  As an aside, the actual cost for a good liberal arts college education is about $20k per year based upon the cost from schools that don't take federal aid (Grove City and Hillsdale).  The actual cost of a high school education is much less also about 50% less than we are paying in Upstate NY.  It is shame that the gov't allows the education mafia to inflate the price of the one item that can reduce inequality.   

 

Packer

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That's funny -- because when I said that income inequality has resulted in part "from secular changes in the US economy" and the "general trend of shifting risk from firms back onto households," I was trying to acknowledge that the situation is more complex than simply blaming income inequality on class warfare (or on Republicans).

 

But somehow you took it differently.

 

Ya not sure what the point of this thread is. No one is saying its this president or another. Most of the discussion is centered around policy not so much party....

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i also think one very important point is the rise of india and china.

 

the supply of lower skill labor has increase tremendously due to india, china and varies other countries

 

what happens when supply increase that out pace demand, the price drops

 

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Especially for low skilled labor.  The shortages are in engineering and science, the more highly skilled portion of the labor force.  Traditionally, some of the low skilled labor becomes more skilled which leads to income mobility (if the skills are gained in areas of labor shortages).  We just need to incentivize where the need is versus where it is not.

 

Packer

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The problem with the idea that we just need to incentivize more Americans to get engineering and science degrees is that supply and demand factors apply to those jobs as well. 

 

There are quite a few engineering and science majors who are being laid off or who have jobs where they are being paid far less than what they would have made a decade ago.  This is because a lot of work has been transferred abroad.  The US does not have a monopoly on good scientists and engineers.

 

So the most important thing, in my mind, is to be educated in a way that is translatable to multiple jobs and to be nimble.  Being entrepreneurial is even better. 

 

Ironically, higher skilled services where a higher education degree is not necessary and where the service cannot be shifted abroad may be the way to go for a lot of Americans.  Plumbers make a pretty good living.  Utility workers who do maintenance can do pretty good too.  On the ground construction work also cannot be outsourced, although low cost laborers can be imported (sometimes illegally), and you are subject to the construction cycle.  Lots of "low skilled" folks are making a lot of money working for energy companies too, although they are also subject to cyclical forces.

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My observation is these grad are having no problem finding multiple offers and althogh some of the lower level coding and testing can be outsourced, the higher level requirements development and customer facing applications cannot.  You point about the trades is also on point. 

Packer

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I agree that some product development cannot be outsourced, particularly the design aspects of creating products and services that face US customers. 

 

But I just worry sometimes that people in the US think we will always have a lock on the higher end of the supply chain.  We should have policies that make sure that we remain an attractive place for businesses that will employ science and engineering grads.  For example, the Green Card for every science/engineering graduate student idea is a good one because a lot of those guys might stay in the US and create science and engineering jobs in the US.  But if we make life difficult for these guys, they may take what they've learned and create new Silicon Valleys in their home countries.  Nothing wrong with that, of course, but it doesn't benefit people in the US, who may find themselves having to go abroad to work on cutting edge stuff. 

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Video

 

http://finance.yahoo.com/blogs/daily-ticker/poor-public-school-education-not-wall-st-blame-183736325.html;_ylt=At5mNKZAsmu_hZfo5RMBXL8p2YdG;_ylu=X3oDMTE2bXA5bDVrBG1pdANEVCBJbmRleARwb3MDMzIEc2VjA01lZGlhQmxvZ0luZGV4;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3

 

Ferguson agrees with Packer. I agree to a degree, but I dont think its something thats quite solvable. We have crappy parents, and crappy schools. Fixing the schools without fixing the parents wont do much.

 

Best selling author and Harvard professor Niall Ferguson recently had at it on CNN with Columbia professor and director of the Earth Institute Dr. Jeffrey Sachs over the Occupy Wall Street movemen Sachs - as he recently told the Daily Ticker - thinks Wall Street has acted like robber barons and deserves harsher regulations and increased taxes.

 

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Thanks for posting video.

 

I always enjoy listening to professor Ferguson.

 

I am disappointed in the lack of attention to math and science at the elementry level. There are many days when my kids get no math or science class at all on those particular days.

 

In high school kids have the option I believe in not taking math in the last 2 grades here in Ontario.

 

Teachers + guidance counselors make it to easy for kids to underachieve.

 

Kids (and their parents) are allowed to make decisions in grade 9 that will effect them for the rest of their lives-example taking the "easier" non academic math in grade 9 or 10 closes all kinds of doors once they are done high school because they cannot take anything that requires a math prerequisite in university or college.

 

It all may boil down to incentives-their parents had a well paying job ($25-30/hr), without any special skill, working in a big 3 assembly line, kids think that that will be available to them as well-but those jobs are being transplanted to lower wage countries. The incentives are changing.

 

Kids with crappy parents + good teachers have a chance.

Kids with crappy parents + crappy teachers have very little or no chance.

Kids with good parents + crappy teachers have a chance.(most of us have had sub par teacher and we still found a way to succeed..kids have to learn to cope with these situations as they will recur in the future)

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