Tuesday, December 06, 2011

Income Inequality and Occupy Caesar's Palace

JB asks,

"Can the Occupy movement ever gain traction with the larger (apathetic) portion of the 99% when stories keep coming out with headlines like 'Occupy protesters leave behind 30 tons of garbage in Los Angeles park?'"
I'm not sure what would satisfy the conditions for "gaining traction." We know that the media will be hostile to any movement that questions the status quo, especially if it is one in which it is not particular demands within the structure but the structure itself that is being questioned. We know also that this is part of a larger dynamic in which protesters are labeled "dirty hippies who don't want to get a job" and this ad hominem attack can be used to keep from asking the questions that need to be asked about both the moral fairness and economic sense of our current system.

That being said, the Occupy movement HAS changed the discourse. It is having an effect. It will not change the system. It will not be able to undermine the power that corporate interests have in Washington. But, it can shine some light on it and make it a live issue instead of allowing the country to be bankrupted in back-alley deals that serve only to shift all wealth upwards. It can slow the process and that may create a context in which larger changes become possible. What Occupy has done is to introduce frames into the current way of speaking and thinking about things that are healthier. I think that Occupy has the traction, if the goal is to allow us to start talking about issues we previously couldn't under the Republican frame. And if you doubt that, look at how nervous it is making Frank Luntz.

Philo asks,
"We've all seen the charts for wealth and income inequality, and it seems to be apparent that this has to be fixed by some redistribution mechanism. What is the right thing to do?"
Income is the amount you bring in and wealth is the amount you have. For those of us in the 99%, we spend most of what we make, putting it into the economy where it gets circulated again and again in what John Maynard Keynes called the multiplier effect. In this way, it is the poor, working, and middle class who are the real job creators. The wealthy make their money from investments, not wages -- that is they get more money just for being rich and then use most it to invest in ways that does not have a direct effect on the real economy, the wealth gets horded and does not raise all boats. The solution, therefore, begins by giving preferential treatment to money that was earned by actually working for it. The rate on capital gains -- free money for having money -- should be significantly higher than that for earned income which is taxed according to a fair and progressive set of rates.

Then, we need to increase the wealth, not just the income of the 99%. This has begun. One effect of the elimination of traditional pensions and the stock market bubble of the 90s is that a larger portion of the population now considers wealth management seriously. Stock and bond ownership is now significantly broader than it has been. Savings is not something we do well in this country and it can be encouraged in a number of ways from early financial education to increasing the limit on tax-deferred or tax-free contributions to IRAs or college savings accounts.

YKW asks,
"The Five-year results for the S&P 500 Index (going from December 6, 2006 thru yesterday) registers a drop of 152 points, or a cumulative loss of about 11 percent. While I know that keeping say, $100,000 in small bills under my mattress would have produced a better return during this period than buying a fund that replicated S&P, would I have also done better by playing casino craps with $20,000 of that money (consistently betting the pass line, double odds, and 2 numbers) over the same five year period?"
In five years, there's approximately 2,000 days. given your $20,000 bankroll, that means you'd play about $10 per day. The odds on a double odds pass bet favor the house by only .61% which means that on a $10 bet, the expectation value is $9.94, that is, you expect on average to lose about six cents a bet. Over the 2,000 days, then, you'd likely be down only $120 and have had a darn good time yelling and screaming with the other nuts at the craps table for the year which means that you would likely be better off. Not that I'm suggesting this as a long-term financial strategy...