Wow, Mortimer B. Zuckerman managed to write an editorial that wasn't about freaking Israel. He never has anything worth reading.

Good points Tov. But wouldn't the gap be self-correcting then? That if the middle class becomes too small that the system should self-correct.

The reason the system doesn't self-correct is economic incentives. Take the very unequal Latin American countries for an example. When there's no middle class, the poor stand to gain more from soaking the rich than they do from voting for pro-growth policies. And the _rich_ stand to gain more by keeping what they have than financing pro-growth policies like basic education and healthcare, which they won't use anyway. So the two groups fight over a shrinking pie.

The government was very generous with other people's lands weren't they? I am not condemning the Homestead act, but I would not be quick to praise the confiscation of millions of acres of lands from one people to hand to another. Nor would I be quick to claim that "giving" 160 acres unearned helped the economy anywhere near what free market did.

Zuckerman should note that at the same time the government was giving away 100-200 million acres under the Homestead Act, it was giving away 175 million acres to the Pacific Railway Company for the transcontinental railroad (h ttp://en.wikipedia.org/wiki/Pacific_Railway_Acts), and about as much more to other railroad companies. Maybe he should write an article proposing massive industrial subsidies instead? But just note that the "free market" didn't create all of America's wealth without any confiscation either.

Perhaps Zuckerman should take a look at a map of the United States and look at the areas that were covered by the Homestead act.

Um... I found one in the first Google hit for "Homestead Act"... it shows that every state in the West was covered by the Act except for Texas, including California and even Ohio and Florida. (h ttp://www.nps.gov/archive/home/Homesteading%20Map.htm) Doesn't really say how big of an effect it had in each state though.

Was providing 160 acres, unearned, to settlers the cause of the economic boom of the late 1800s? Was Colorado, Wyoming, Montana (for example) the center of the industrial revolution?

Wikipedia mentions that in Wyoming, Colorado, and Montana, the Homestead Act tracts weren't big enough to make a farm, so people snapped up parcels of them and made ranches. Cattle ranching probably was one of the bigger industries in the West back then. Of course, that was kind of defeating the intent of the Homestead Act.

I'd really like to argue over the assumptions about fairness, equality, whether the economy is driven by the top 1%, whether the faster runner is ahead because he gets to choose the course, and so on, but picking away at the Homestead Act just feels much fresher and more likely to be settled within the scope of a comment thread.

This will never happen because the corporations hold the capital to influence the voting on tax reforms, but if it were to happen how would giving the lowest earners in our society some more money make us all poorer? I just don't get it. That doesn't make sense. I understand you don't just want to give money away especially to people who dont' have the drive to earn it but already the richest segment pays more then half of what they earn to the rest of us and it trickles down to these poor income earners. It isn't really the problem of just those few, because lots of upper and middle income workers are losing their jobs to cheaper and less regulated labor standards overseas. This is causing a vacuum of income as well as lost tax revenue for the country because the income of lower wages can't be taxed as much or yield as much as a higher income. Explain to me though if you give more of that tax revenue to the poor how that makes us all poorer? Cause I did take economics and I don't get it.

What should be of concern is the ability of Americans to secure a job that enables them to support their family. That is the issue.

Why is that the issue. Why is that my cocern? It is not my duty to make sure other people live within their means.

Wow, Mortimer B. Zuckerman managed to write an editorial that wasn't about freaking Israel. He never has anything worth reading.

I was thinking the same thing when I read it! For those of you who don't read US News and World Report, nearly every editorial is about Israel (in its favor).  I consider myself pro-Israel but for a page or two each week in US News and WORLD Report to be about a one foreign country is odd.

A recent survey shows that the average CEO makes 450 times the amount of the average worker. That means that in one day the CEO makes as much as the average makes in TWO YEARS of work. That is not reasonable and breads resentment! Bringing the wealth distribution into better balance is NOTHING like Communism.

First off, you're full of crap. The mean salary for a CEO is not over $13 million. Not even close.  the survey you are discussing is the average PUBLIC company CEO which is a very very big difference sinice public companies make up a tiny minority of CEOs.

Secondly, said public company CEOs have their salaries set by the stock holders. So shame on those stock holders (or maybe not) if they're paying CEOs more than they're worth.

Third, why should anyone care if salaries breed resentment.  Are you suggesting that "the masses" will resort to violence? My answer would be to that: Go ahead make my day. You take away the mega producers and "the masses" will be back doing sustanance farming.

Any GOVERNMENT action is action that is backed up by guns. And government action that involves confiscating my property to give to another by force out of some undefined sense of "fairness" is an awful lot like Communism.  What if I refused to hand my earnings in the name of fairness? What would happen? Men with guns woudl take me away and be sent to a Gulag (prison).

 

Take the very unequal Latin American countries for an example. When there's no middle class, the poor stand to gain more from soaking the rich than they do from voting for pro-growth policies. And the _rich_ stand to gain more by keeping what they have than financing pro-growth policies like basic education and healthcare, which they won't use anyway. So the two groups fight over a shrinking pie.

Are you suggesting that most Latin Americans countries are approaching Laissez Faire?  Seems to me that most Latin American countries are far more socialist than what we have in the United States.

Latin American countries cannot be compared to the United States for a number of reason -- least of all because of the corrupt governments involved.

I would fully expect that if there were fewer regulations on the US economy that the gap would continue to grow wider and wider between the richest and the poorest.  The question though in my mind is whether the poorest would be worse off in absolute terms (as opposed to relative terms).

Despite the gaps we have today, the biggest health problem facing the poor of America is obsesity. I think that says something about how the "poor" in the US are doing in absolute terms.

I'd really like to argue over the assumptions about fairness, equality, whether the economy is driven by the top 1%, whether the faster runner is ahead because he gets to choose the course, and so on, but picking away at the Homestead Act just feels much fresher and more likely to be settled within the scope of a comment thread.

I'd suggest making a blog about the Homestead act. I agree with you that the Zucker drew the absolute wrong conclusions from that act.

This will never happen because the corporations hold the capital to influence the voting on tax reforms, but if it were to happen how would giving the lowest earners in our society some more money make us all poorer? I just don't get it. That doesn't make sense. I understand you don't just want to give money away especially to people who dont' have the drive to earn it but already the richest segment pays more then half of what they earn to the rest of us and it trickles down to these poor income earners. It isn't really the problem of just those few, because lots of upper and middle income workers are losing their jobs to cheaper and less regulated labor standards overseas. This is causing a vacuum of income as well as lost tax revenue for the country because the income of lower wages can't be taxed as much or yield as much as a higher income. Explain to me though if you give more of that tax revenue to the poor how that makes us all poorer? Cause I did take economics and I don't get it.

We already suffer because of the taxes we have. We just don't know it because it's impossible to name all the things that didn't come into being because the people who would have created the unmade marvels didn't have enough capital to do so.

In every society, the mega producers will find a way to make sure they're fine. The government, however, can stifle how much the benefits created by the mega producers reach everyone else.

Let's use the example you provide:

"It isn't really the problem of just those few, because lots of upper and middle income workers are losing their jobs to cheaper and less regulated labor standards overseas. This is causing a vacuum of income as well as lost tax revenue for the country because the income of lower wages can't be taxed as much or yield as much as a higher income."

The question is: How did this happen?  The answer is that the government made it happen with its policies and the mega producers adapted.

Here's how: The federal government created free trade agreements and lowered tarrifs. I support this.  However, taxes and regulations and legal costs and insurance and so forth stayed in place.

Therefore, American companies suddenly have to compete with countries from overseas whose workers don't have that overhead (such as India, China, etc.).

American companies either:

a) Go out of business

Automate low-skilled jobs

c) Start hiring the same work force their competitors are using (i.e. out source)

When this starts to occur, what do the same people who favored this sort of thing in the first place propose? Raise minimum wage, Increase health costs on the producers to cover the uninsured (universal healthcare), increase unemployment benefits.

What people don't understand is that the ones who really control the economy are the people who create stuff. Governments don't create stuff. They're really only good at confiscating -- looting -- from the people who create stuff. 

The people who create stuff in the world (not just the "rich" but EVERYONE who is a producer) will always have control over their lives. How much they create determines how wealthy they are. But all net producers (rich or poor) will nearly always find a way to survive just fine.

So when you target the producers, they will find a way to adapt but those adaptations will likely have negative conseqences. Because THEY are not going to sacrifice themselves. 

The result is that if you start confiscating too much from the "rich" (mega producers) the result will be that those people will either:

a) Find some other way to survive which will likely have very negative results for those who depend on them directly (i.e. lay offs, out sourcing, plant closures, etc.)

or

They will opt-out entirely and stop producing more than what they and their families need. And we all suffer from not benefitting from the things they create (unless you yourself invented your own cell phone, TV, car, computer, etc. you probably are -- like me -- relying on the fact that other people out there invented great things with the expectation that they would benefit).

The key point: Governments don't make things. They don't create value. (these are broad generalizations, there are isolated exceptions).  PEOPLE make things. PEOPLE create value.

In other words, it is not in the government's power to make everyone equally better off.  It is only in the government's power to make everyone equally worse off.

The objectivist philosophy of Ayn Rand being applied to economic policy has been proven a mistake in theory and in practice. Even when it is correctly interpreted. In fact, the rest of this post reads as if Draginol was basing his economic opinions on the Vonnegut short story "Harrison Bergeron" http://instruct.westvalley.edu/lafave/hb.html more than Rand's social Darwinist tome.

The assertion is made that the only possible result of trying to reduce the gap between the very rich and very poor will result in "everyone" being poorer. The self-contradictory nature of this statement has apparently gone unnoticed. How does improving the standard of living among the poorest segments of a society make "everyone" poor? If we just improved the well-being of someone, are they not richer?

If there is anything in science or politics that is not black and white, it is economics. Here Draginol gives us an either-or, black and white description of an issue most certainly not amenable to such simplistic descriptions. Luckily we don't have to base our opinions on novels, short stories, or blog entries.

We have actual real world evidence of how well these differing approaches to balancing social well-being and the free market work. Jeffery D. Sachs writes in the November 2006 issue of "Scientific American" http://www.sciam.com/article.cfm?chanID=sa006&colID=31&articleID=000AF3D5-6DC9-152E-A9F183414B7F0000 on this very subject.

Comparing the economies of developed, industrialized, first-world countries, we can see the two approaches in action. In the primarily English speaking countries, such as Canada, the U.S., and the U.K. the economic policy since WWII has been in pretty close keeping with the one Draginol advocates--lower taxes, fewer and less funded social programs, and laissez-faire competition. Other democracies, the Nordic states of Denmark, Norway, Sweden, and Finland, for example, have adopted since WWII more progressive economic and social policies.

It's been 60 years, give or take, let's check in on these economies and societies and see how they are doing. Have the Nordic nations collapsed into some economic pit, where "everyone is poor", as Draginol states _must_ happen? Have the more timid policies of the English speaking nations made them stable economic powerhouses (with still plenty of poor people)? No. As Jeffery D. Sachs remarks,

[The Nordic countries] combine a healthy respect for market forces with a strong commitment to antipoverty programs. Budgetary outlays for social purposes average around 27 percent of gross domestic product (GDP) in the Nordic countries and just 17 percent of GDP in the English-speaking countries. On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP. The Nordic countries maintain their dynamism despite high taxation in several ways. Most important, they spend lavishly on research and development and higher education. All of them, but especially Sweden and Finland, have taken to the sweeping revolution in information and communications technology and leveraged it to gain global competitiveness. ... The Nordic states have also worked to keep social expenditures compatible with an open, competitive, market-based economic system. Tax rates on capital are relatively low. Labor market policies pay low-skilled and otherwise difficult-to-employ individuals to work in the service sector, in key quality-of-life areas such as child care, health, and support for the elderly and disabled.

So, no matter how strongly held, or strongly worded the opinion, the facts are that responsible taxation, beneficial social programs, and successful business are not mutually exclusive.

Draginol tries to fend off actual real world evidence:

Latin American countries cannot be compared to the United States for a number of reason -- least of all because of the corrupt governments involved.

I tend to agree here. It is unfair to compare Latin American governments with a government that starts a war then gives multi-billion no-bid contracts to a corporation formerly run by the vice-president. Do these Latin American countries have medical assistance programs that pander to insurance middle-men? If not, this would be a poor comparison indeed. Do the governments of these Latin American countries INTERVENE on behalf of pharmaceutical corporations when consumers find an avenue for cheaper medications? I am not aware of any of them doing such a thing.

But, we don't have to compare to the U.S. if we don't want to. We can just find somewhere that operates under the kind of conditions Draginol advocates, and see how well things are there. I can't think of less regulated economies than those of many African countries. Some of them have no government at all, to speak of, to restrict and tax corporations, and certainly only the weakest of social programs to improve education and reduce poverty. These are countries where true laissez-faire capitalism is ongoing. I personally wouldn't particularly want to emulate them.

How does improving the standard of living among the poorest segments of a society make "everyone" poor? If we just improved the well-being of someone, are they not richer?

Your logic is failing.  But this screamed out for response.

first, we have empirical evidence that it does not work.  USSR?  ANY communist regime?

Second, we have intuitive evidence.  If I produce a Million dollars, and you then take all but subsistance wages, why should I produce the rest?  for what?  Altruistic purposes?  I think not.  If I am not to enjoy the fruits of my labor, then I will not produce.  I can be a bum and be as well off as the bums!  So the producers stop producing and then there is nothing to give to the non-producers since all are non-producers.

Please, for your sake, take Econ 101.  You really need it.

The assertion is made that the only possible result of trying to reduce the gap between the very rich and very poor will result in "everyone" being poorer. The self-contradictory nature of this statement has apparently gone unnoticed. How does improving the standard of living among the poorest segments of a society make "everyone" poor? If we just improved the well-being of someone, are they not richer?

It is ironic that you made your response immediately following my comment that addresses this very issue.

Have the Nordic nations collapsed into some economic pit, where "everyone is poor", as Draginol states _must_ happen? Have the more timid policies of the English speaking nations made them stable economic powerhouses (with still plenty of poor people)? No. As Jeffery D. Sachs remarks,

So what was the last thing you purchased that came from a Nordic country? What great strides in human achievement are coming from Nordic countries? 

In reality, the Nordic countries aren't impoverished because they are able to benefit from the achievement in producer-countries.  Their workers work at corporations based in producing countries (with the exception of say Nokia).

Nordic countries -- and all of Europe for that matter, can afford their parasitic economic practices as long as the bulk of the developed world (United States, Japan, and increasingly China) are moving the state of human existence forward.

I can't think of less regulated economies than those of many African countries. Some of them have no government at all, to speak of, to restrict and tax corporations, and certainly only the weakest of social programs to improve education and reduce poverty. These are countries where true laissez-faire capitalism is ongoing. I personally wouldn't particularly want to emulate them.

If you are going to do sloppy strawman arguments, do it elsewhere. Have I ever, in the 4 years you've been on JU, argued fo ra laissez-faire economy policy? Even once? No.

Government needs to be strong enough to enforce contracts, provide security, and play the role of referee between corporations and citizens.  I have no where suggested that I'm an objectivist.  But I do believe that the consequences Rand ascribes to over-regulation are largely true.

Latin American countries, African countries fail because their government doesn't meet the basic criteria of providing a stable environment for business and commerce to even begin.

But since you feel justified in treating my perspective with scorn, let's see your credientials rabidrobot. What have YOU produced?  You act as if I have no idea what I'm talking about even though I deal with these economic facts every day as part of my job of running a multi-million dollar corporation that I founded by myself from scratch without a penny of outside investment.  So if you wish to point us all to your achievements, this would be the time.  Otherwise, put forth your evidence rather than a bunch of arrogant proclaimations.

Because this kind of thing doesn't cut it:

If there is anything in science or politics that is not black and white, it is economics. Here Draginol gives us an either-or, black and white description of an issue most certainly not amenable to such simplistic descriptions. Luckily we don't have to base our opinions on novels, short stories, or blog entries. We have actual real world evidence of how well these differing approaches to balancing social well-being and the free market work. Jeffery D. Sachs writes in the November 2006 issue of "Scientific American" http://www.sciam.com/article.cfm?chanID=sa006&colID=31&articleID=000AF3D5-6DC9-152E-A9F183414B7F0000 on this very subject.

Summary of above quote: Personal insult on my intelligence and then a link to an article by someone else which does an apples and oranges comparison (comparing a mono-cultural urban country with a multi-cultural contintent spanning country would be like us comparing the policies of say Orange county with the policies of Montana and arguing that therefore, we should do everything Orange County is doing because they're better off than the average person in Montana). If you want to write your own article on how Nordic countries are the policies we should follow I will happily comment and poke holes in that article.  

Heck, Bill down the road beats his wife but makes more money than Bob. Maybe if Bob started beating his wife he too would make more money.

Use your own words to argue how the specific things I have written are incorrect in your opinion:

Explain in your OWN words how confiscating property from those who earn it to those who have not earned it will make us perform better.  Explain how such a policy has made Nordic countries perform better than "English speaking" countries. 

Jeffery D. Sachs writes in the November 2006 issue of "Scientific American

Jeffrey D Sachs is hardly an authority on economics.  Much less reality.  Try quoting some Nobel winners in that category.  like Friedman, Williams, Rapp,  et. al.  Ones who have MADE a difference, not opined gibberish.

Are you suggesting that most Latin Americans countries are approaching Laissez Faire? Seems to me that most Latin American countries are far more socialist than what we have in the United States.

"No middle class" doesn't equal "laissez faire." I was saying, look at some countries that have gone socialist (because the poor took over) or oligarchy (because the rich held onto their control) and look how much better off they would have been if they'd had a middle class to provide a broad base of support for pro-growth policies.

Part of the reason I mentioned Latin America was so when I called "basic education and healthcare" pro-growth policies, you would think of literacy and vaccines instead of college and prescription drugs, which are more luxuries than investments.

I wouldn't blog about the Homestead Act on my own. I only care about it in the context of this article.

Jeffrey D Sachs is hardly an authority on economics. Much less reality. Try quoting some Nobel winners in that category. like Friedman, Williams, Rapp, et. al.

Or Paul Krugman? Sachs doesn't seem to be in the mainstream of economics, but it's fair to quote him as an authority. Time magazine ranked him as one of the world's most influential people.

Second, we have intuitive evidence.  If I produce a Million dollars, and you then take all but subsistance wages, why should I produce the rest?  for what?  Altruistic purposes?  I think not.  If I am not to enjoy the fruits of my labor, then I will not produce.  I can be a bum and be as well off as the bums!  So the producers stop producing and then there is nothing to give to the non-producers since all are non-producers.

Some years back, when I worked in the factories, I had this discussion with a coworker. I busted my ass to produce as much as I could, while he paced himself to make quota, and not much more. When I pointed out the difference in production, he looked me in the eye and said "and I made the exact same wage you did".

It didn't stop me from putting out my best effort, but it did make me think long and hard about the "fairness" of equal pay for unequal output.

Or Paul Krugman? Sachs doesn't seem to be in the mainstream of economics, but it's fair to quote him as an authority. Time magazine ranked him as one of the world's most influential people.

Paul Krugman is a political hack, not an economist. And as for time, again I challenge anyone to look at the ones that walked the walk (accomplished things in the field) and not just talked a talk. Time is no more an authority than my Aunt Ida.