Somewhat off topic but: 

Does the graph reflect true federal expenditures and not mandates that the states would have to pay out of pocket. I'm not an economist but it seems federal accounting techniques allow for a lot of flexibility in terms of money actually sent to a state but counted as an expense on the federal books

Second the no child left behind program would appear to benefit systems that rid themselves of poor test takers. So are enrollment, retention, achievement and graduation improving with the presumed increased state funding, or are more dollars paying for less students

Again the question reflect my ignorance on economics and how educators count those they educate

The data are just a record of outlays -- spending.  They do not reflect any mandates attached to the grants-in-aid.  A mandate could force additional spending, but it wouldn't make much sense to give the Federal government credit for forcing states to spend more.  How effective any of the programs are is a whole different question.

Max B. Sawicky

http://maxspeak.org/mt

max@maxspeak.org

One of the hundreds of reasons I'm not a Repub is their peculiar notion that we all start out life on the same level playing field.  We're all born with the same intelligence, the same physical attributes, into same family situations so if we don't make it - hey, that's our fault.  If there's a Repub out there, do you really believe that? 

Born on third base and thinks he hit a triple?

There is no doubt the HA myth is powerful and great politics.  Take Barack Obama, for instance.  But the unfairness of privilege overruling merit, or simply taking undeserved advantage, is pretty potent as well.  How you deal with this politically I'll leave to the political geniuses.  I would like to foster a better understanding of what we're up against, on the real side.

Max B. Sawicky

http://maxspeak.org/mt

max@maxspeak.org

One of the hundreds of reasons I'm not a Repub is their peculiar notion that we all start out life on the same level playing field.  We're all born with the same intelligence, the same physical attributes, into same family situations 

With all respect you're rather addressing a strawman there.  I don't think that is really what Republicans would claim, and we don't ultimately do ourselves any favors by pretending that the arguments of our opponents are quite so easily challengable and disprovable as that.

What a Republican would more likely claim is not that everyone is born exactly equal, but that the US of A is such a bountiful land of manifold opportunities, that anyone who really makes a go of it will ultimately succeed; and that failure to overcome whatever obstacles - low birth, poor schooling, etc - faced can only be ascribed to a lack of drive or ambition.  Then, they'd point to a few people who have risen from humble circumstances, Oprah, Arnold, Janice "Sharecroppers daughter" Rogers as "proof" of what they're saying.

Now none of that is a terribly more convincing argument than what you've said but it's not so self-evidently untrue, and has at least an air of plausibility to those who have the will and inclination to believe it.

I've been thinking about that Paul Krugman column for a couple of days now, about how to explain the fact that all of the income gains are really only being seen by a tiny proportion of the population.  College grads are seeing stagnant incomes.  The only ones who've seen gains are the top 1% or so of earners. 

Krugman and Sawicky argue that this is a result of corruption and a self-reinforcing elite that abuses power for its own ends.  But they don't say HOW that happens.  The most obvious place to look is in things like tax policy.  But the tax cuts of the last few years extended to well more than just the top 1% of earners. If tax cuts explained most everything, then it stands to reason that people at the lower ranges of the income scale should have seen some gains.  But their wages are flat.

Krugman and Sawicky seem to imply that we are becoming like a third world country like Guatemala, where a tiny wealthy elite basically runs the economy for its own benefit because they own all the resources.  But the American economy is highly complex.  At the very highest reaches of the income scale - those who Krugman says have seen the most benefit in recent years - there is a diverse group of business people, professionals, artists and entertainers and others whose interests, not to mention their politics, are different.  It's hard to see how corruption or government policy can be affecting them all the same way at once.  The excecption, as I said, is tax policy, but again if it were only that, we should have seen a wider distrubution of benefits.

Until Sawicky or anyone else can explain how privilege translates into policy which translates into greater and greater income inequality, color me skeptical that that's the major factor at work here.  I'm not necessarily saying that political power is irrelevant.  Just that there are probably more important structural factors that are accelerating inequality.

In layman’s terms, there are basically two types of redistribution.

One is the "bad" type you mention, which is basically communism in simple terms. Re-dividing the shrinking pie as you put it.

The other kind is the "good" type, which is for government to deliberately counteract the accumulation of wealth which has monopolistic effects. The investor class becoming a plutocracy tends to create policies which further increase their wealth advantage leading to a society of wealthy rentiers and poor laborers.

A good analogy is a monopoly. A company may succeed due to merits and come to dominate the market. However, at some point they may become so dominant that they’re stifling competition, at which point they lose incentive to innovate and become more preoccupied with anti-competitive practices. Then dominance ceases to be merit based and the overall market is less merit based. Similarly, a hyper wealthy class has plutocratic tendencies as they buy into politics or control companies which allow them to exert undue power/force on the economy and politics. They tend to self reinforce their advantage. Another way to look at that would be they re-divide the opportunity pie to give themselves a far greater share while maintaining a poor working class. That is why progressive taxation policy for example is designed to counteract that phenomenon and is actually pro-meritocracy and pro-opportunity.

Currently in America about 5% controls 80% of the investment capital wealth. Taxes such as the estate-tax (which could be more appropriately renamed the empire-tax rather than the death-tax) are designed specifically to counteract that accumulation of wealth and power which leads to corruption. Some people (basically the hyper rich) rationalize the current distribution as “natural” and cite theories such as Pareto’s. However, while the phenomenon is certainly predictable, that hardly proves its merit for the good of society.

Your general argument that the investments the rich make in overall infrastructure provide great rewards for them are certainly true.  But those rich would argue, and not entirely without merit, that they or their investment bankers can make better decisions about where those investments should be targeted than government, with its lack of market impetus to make profits, and its politicization (think Mitchell Wade) and bureacratization of distribution.  So while redistribution in general may be a useful goal, there's a limit to which the government is the right agent to do it.

Second, your theory excludes an important element of how markets work: "luxury" goods propagate downward into commoditization, and that drives their price down.  Electronics is a great example of this.  I'll bet plasma TV's of some sort will be below $1000 within 5 years.

Third, I don't see anywhere in Max's or your comments the answer to Daniel's conundrum, which is: the Democrats lost people's trust in their fiscal restraint during the Johnson years and thereafter, and that quashed what limited apetite the American public had for redistribution (at least in those naked terms).  Clinton's fiscal austerity, for all its dilution of other Democratic strengths made real strides in restoring the public's trust in the Democrats as stewards of their money.  And frankly, any time you propose to give people something for free, you risk wading into the toxic waters of class, race and gender resentment (though I believe a lot of this could be ameliorated if any ramp-up in programs was accompanied by replacement of cash welfare payments with an EITC-like "negative income tax").  And though Max's story on education is compelling, Clinton was the first predident in decades to reduce income disparity. 

So let's not fight the same battles over triangulation.  Yes, the Dems need to stand for real dollars invested in education at all levels, and real programs to open meritocratic opportunities for all. But we should not forget to be cautious with our newly-restored good name in fiscal restraint.

In defense of Sawicky, this isn't a forum conducive to posting a scholarly economic theory, and his first posting, "It's Who You Know, Stupid" was commentary on Krugman's article published the other day. 

frankly, I wish more people would be angry with their politicians.  I'm still puzzling over the American acceptance of "trickle down economics" as though we're a nation of stable boys, tugging our forelocks and wiping our boots on the backs of our trouser legs and saying "yes sir, no sir" and "may I give you a leg up sir".

We're so buffaloed by this "self made man" myth, that if anyone dares to pop up and shout out that wealth is created by access to power and that more and more Americans are being shut out because they don't have the connections or the money to buy access that when someone does, they're accused of "waging class warfare" or "angry" or any of the other accusations hurled at those who dare to question the class system in this counrty - or for that matter, point out that there IS a class system.

I am sympathetic with the point that Max is trying to make.

.

He recognizes that when Democratic politicians make 'proposals', they are indirectly stating what they think The Problem is.  When DLC strategists highlight their support for investments in human capital, they implicitly communicate their acceptance of the Republican Incomes Policy Paradigm, i.e., that we should only concern ourselves with helping/encouraging individuals to 'improve their own lot' and not worry so much those who get left behind.  I believe Max's concerns are justified.

.

In the RIPP, individuals seek enhanced economic security by increasing their net worth.  The only problem is that we can't all 'get rich one day.'  Just think for a second.  What would happen if we were to all somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated 'wealth?'  We would soon discover that we actually did not possess any real wealth at all, because no one would be producing anything of value that we could buy.  Our real wealth comes from the productive efforts of others.

.

The good news is that we don't all need to be rich in order to enjoy enhanced economic security.  That's what the Democratic Party should be all about, promising real enhancements in the economic security (health care, etc.) experienced by those who work for a living.  As a society, we can provide each other with socially-generated economic security.  The individualistic crap ain't going to make it happen.

.

You're right to object, Max.

Make The American People Richer

All economic and social policy arguments these days end up taking one of two viewpoints. One is the theoretical, based upon some favorite worldview. So for some it is "trickle down," or "meritocracy," or whatever. Then there are the pragmatists. They look at the current state of affairs and worry about its effects. Some look at aggregate numbers and see a growing economy. Some look at sector by sector numbers and see growing inequality. They are both right.

Those who see the growing GDP tend to feel that this will translate into general economic improvement eventually.  Those that see growing inequality think this may lead to a future drop in GDP because of various factors like a poorly educated workforce or insufficient infrastructure development. The one thing that seems to separate the groups is the concern for the "have-nots". The optimists view the economy from 20,000 feet and see only the broad details. The pessimists see the bodies floating in New Orleans.

What is needed is a set of initiatives that will affect those in immediate distress. When shown specific examples the people always respond generously, but when it is framed in terms of abstract statistics the distress loses its power. One of the reasons these discussions are taking place at all is because the US federal budget is out of whack. Half is spent on militarism. This has the effect of keeping taxes high, which breeds resentment, while providing little in the way of social services for the taxes collected. A graph of the budget:

Federal Pie Chart 

Notice that in places like Sweden where the tax rate is more like 50% they don't have libertarian or social Darwin arguments. People see what they are getting for their taxes: free child care, health care, retirement security, high education, etc. Ignoring the 800 lb gorilla of militarism is what allows these sorts of academic discussions to spin along without resolution.

--- Policies not Politics
          Daily Landscape

Sorry, but the examples you cite are not very convincing.  As I mentioned in my previous comment, while tax policy in recent years has benefited the super wealthy disproportionately, it didn't ONLY benefit the super wealthy.  In addition, changes in the tax code happen every few years, yet the growth of income inequality has been continuous over the last few decades, including those periods when tax policy has reversed itself and NOT benefited the wealthy.  You may recall that in 1993, the first Clinton budget raised taxes on top income earners. Yet the inequality continued through the 1990s.

The other explanations you cite also do not add up.  It's certainly not clear how deregulation would contribute to income inequality.  And the asset bubbles in stocks or housing don't contribute to increases in income levels (not to mention the fact that 50% of households own stock and about 60% own their own home).  You are confusing wealth, which is affected by asset inflation, and income, which isn't.  Finally, you still have to account for the fact that the asset bubbles are a relatively recent phenomenon - within the last ten years or so.  The trends being talked about have been around for much longer than that.

It certainly SEEMS like there's some story to tell about how privilege and corruption are leading to greater inequality.  But I haven't heard a convincing explanation of the mechanism.

DINO charges help no one except the GOP.

I disagree. Some throw it around a bit to easily, but we do have a problem with too many Nader types and whiners generally whose MO is to piss all over and erode morale.

There is a fine line between positive criticism and trouble making fifth columns. As a party we need to broaden the party among those who will compromise and work for positive change together, and amputate trouble makers and those burdensome drags unwilling to compromise.

I am bothered by the chart Max showed of "Federal outlays for education and training".  It seems to prove that Bush 1 and Bush 2 were generous to Education while Clinton was miserly.  I don't believe it!  But I have enormous respect for real data and the chart seems to prove the point.

So I spent the last few hours trying to understand what's going on here.  I got the Tables and, indeed, the numbers are real, and they mean SOMETHING, but what?  So I looked closer.  Over half of the trends are due to grants to states for public education, employment training and social services.  I guess some of this follows a formula based on the economy, but I didn't investigate further.

I do know that one US expenditure is interest rate guarantees on school construction bonds.  That would be almost free in the low-interest 1990's and start to cost real money as the rates went up in the past five years.

Almost half of the trends are due to direct Federal money for higher education.  I believe this is almost entirely loan guarantees and tax breaks for college.  Loan guarantees enter the budget only if and when the ex-student defaults.  I found that the default rate dropped every year of Clinton's presidency, because of the good economy, and it has certainly started to go up since. 

It is real money.  Student college loans are well over $100 B each year, and the lowest default rate was over 5%.  I think this is a major factor in Sawicky's graph.

Tax breaks for college took off big under Bush. Billions in new tax breaks, but I don't have the real numbers.  That's another major factor.

So I believe that Sawicky's graph (while interesting) is primarily due to the economy and to the Bush tax breaks.  It doesn't exactly correlate with commitment to education.

I think the argument Max is attacking is the notion that the increase in income inequality since the late 1970's can be fixed by improving skills & training.  It's the corollary of the thesis, still popular among mainstream economists, that attributes growing income inequality to technological changes -a thesis that has been ably demolished by (among others) Max's colleagues at the EPI and TPMCafe contributor James K. Galbraith.

Also, I don't want to speak for Max, but I don't hear him calling on Democrats to launch an all-out attack on meritocracy[*] and Horatio Alger.  Rather, it's for Democrats to avoid endorsing frameworks with reactionary implications.    For example, if Democrats were to start saying things like, "We want an government that ensures equal opportunity, not equal results", they may reap some political gain in the short-term, but it also establishes a reactionary framework in the long run (i.e. ignoring how inequal results guaruntee inequal opportunity).   

[*] By the way, for an argument against meritocracy as an ideal to strive for, I strongly recommend that everybody read Michael Young's The Rise of Meritocracy:

To be fair, it can be although not nearly to the extent that we have it, nor is our lack of charitability to the poor ethical or enlightened.

Not everyone is born equal, and not everyone will be equally successful at picking the right strategy in various aspects of life, which monetary wealth is only one of although one of the most powerful.

Having said that, yes Republicans and especially the Wall Street elite types, are generally much more supportive of plutocracy, Pareto's theory, etc. And imo they're simply greedy.

But just because their position is so simplistic and rationalized and wrong, doesn't mean going 180' in the opposite direction the right course either. Hyper wealthy Republicans generally do the most to stifle meritocracy and accumulate empire. The solution is to build a better democracy and meritocracy, get corruption and Big Money out of government, and to build a better infrastructure which spreads opportunity and cushions the landing for the unlucky and u