Conservatives Very Odd and Highly Improbable Belief

Yascha Mounk has an interesting podcast on the BBC in which he traces the rise of populism along the old iron curtain in Europe.

A Polish conservative he interviews makes the most curious set of statements. First he talks about immigrants, pointing out that Poland took in a lot of Ukrainian refugees and saying that they have no problem with refugees but instead just with Muslims. The problem is, he says, that Muslims have beliefs that are too dated for Poland. Later he talks of Western Europe and how the Poles don't like their values. They're too modern.

Conservatives seem to get that norms and institutions change over time. What could get you burned at the stake in one century can become admired in another. They get that. Sort of. But in spite of the fact that they realize there are communities "behind" them in the progress of values and "ahead" of them in lifestyles and acceptance, they seem to believe that they are the only instant in time that has it just right. They don't want to return to the crude norms of the 1800s but they also don't really like these jarring norms of the 21st century.

The curious thing about conservatives is this: of all the times to be born in history, they were lucky enough to hit just the right time, the perfect mix of tolerance and tradition. It seems improbable - but obvious to them - that with thousands of years of history and thousands of years of future, they hit the evolution of society at just the right instant. It's almost like a miracle and they don't want to spoil it with change.

Fed Appointments and Trump's Tenuous Grip on Reality

Trump wanted to appoint his friend Herman Cain to the Fed. He's still pursuing the appointment of Stephen Moore.

As it comes out, Trump likes two things. He wants someone supportive of loose money policy even with unemployment under 4%. And he likes the gold standard. Those are not just two very bad ideas. They are also mutually exclusive. It's not enough that he's stupid. He's also incoherent.

How Podcasts Could Reverse the Influence of Talk Radio

During his thirty-year career, Martin Luther produced 544 separate books, pamphlets, or articles, slightly more than one every three weeks. He was responsible for over a fifth of the entire output of pamphlets by German presses in the 1520s, the master of the possibilities that the Gutenberg press had unlocked.

That changed religion in the West. The Protestant Revolution shifted power from church to state.

In 1987 the Reagan Administration repealed the Fairness Doctrine that meant broadcasters were no longer obligated to dedicate programming to public interest or to represent opposing points of view. This was a boon to conservative talk radio. Between 1987 and 1992, the number of talk radio stations in the country rose from 240 to 900, and Rush Limbaugh came along, the master of advocacy reporting.

That changed politics in the US. From 1931 to 1995, Democrats had controlled congress 30 out of 32 sessions. After the rise of talk radio, Democrats controlled the House in only 2 of 12 sessions. The 2018 election made it 3 out of 13.

The 2018 election was the first post-podcast election. It was a blue wave. Obviously there is a lot more going on than podcasts (in the same way that a lot more was going on in politics after 1995 than talk radio) but the long-form of podcasts might do for wonky politics what talk radio did for conservative politics, giving an edge to the folks who take longer than 4 minutes between commercials to make their point.

Stephen Moore and His Odd Belief in Gold

"I like the idea of a gold standard and, you know, restoring value to the dollar," Stephen Moore says in this clip.

Trump has appointed Stephen Moore to the Federal Reserve and his compliant Senate is likely to approve him.  This should worry you.

Moore has said that a gold standard for our dollar would be better than what we have now but what he really wants is a basket of commodities to drive the value of a dollar. This is to economics what the belief that the sun orbits around the earth is to astronomers.

Commodities. Sigh.

There are so many ways to highlight how absurd this is but I'll just use two.

One, commodities have marginal impact on the economy. (Obviously if we suddenly lost all grains or  water or precious metals or oil, the impact would be enormous. Our economy is built on a layer of commodities and credit and a sudden threat to either could crash the economy. There is a difference, though, between saying that we'd starve without food and saying that food production should be the basis for prices in all sectors.) In 2016, mining employed 0.4% of the population and "agriculture, forestry, fishing and hunting" employed 1.6%. So, between them, these professions that harvest commodities like silver, iron, corn, or elk employ 2% of our workforce. It would make more sense to base our currency on health care and social services (that sector employs 12.2%), letting our currency move in response to the price of medical devices or drugs rather than commodities.

Two, there is nothing more real about using "hard" objects to determine price levels than "soft" objects. It's true that gold is a solid object and, say, wages or the consumer price index (CPI) are softer, more abstract things. But the fact that you can weigh the gold to a precise amount is a very different matter than saying that we can peg its value to a gallon of gasoline or 50 minutes of a therapist's time or a year's supply of an engineer's career or a house in San Francisco or Detroit. When your currency is backed by gold, your economy will get an infusion of new "money" when new gold mines are discovered and be short of money when no new gold is discovered. There is NO correlation between when you discover new gold and when your economy needs to grow because of new population, new technologies or new products. The intuition that gold is "real" and that CPI is not is akin to the intuition that the sun orbits around us.

Trump is all folk tales and fear, loud noises and intimidation. For this, Moore is a perfect fit for his worldview and policies. For our modern economy, though? Not so much.

Entitlement without Taxation

The notion that immigrants are a threat to your job has a few elements, just one that I want to explore here.

If an immigrant is a threat to your job it means that if you were to swap places with that immigrant, you would lose money. That is to say, the immigrant has an incentive to come here to take "your" job because it pays more than "his" job back home. And if you moved to his town to replace him, you would make much less.

So that suggests that there is a wage premium for living here in the US.

Curiously, the voters who assume that they are making more money for living here are also the ones who don't want to pay additional taxes to live here because "they earned it." It's an odd kind of recognition of a system they're reluctant to support.

The Random Ten Percent

Universities have standards they use to judge whether applicants deserve to join.
We have elections to decide who should serve on city council or in state legislatures.
Venture capitalists and banks have criteria for deciding whether or not to fund a startup or business.

Given that all of those processes can be gamed and all of those processes depend on judgement against a set of criteria that may turn out to be a really poor predictor of success, we should set aside 10 percent of all slots for a randomly chosen group.

This would have a host of benefits.

One, given these people would be randomly chosen from the population, they would be more representative. Right now, more than 90% of money venture capitalists give is given to men. Blacks and Hispanics are under-represented at universities. The folks who win elections tend to be good looking. The processes we use are skewed and a random process would help to partially offset that.

Two, it would be a chance to test the null hypothesis. All of these institutions have theories about what predicts success. Inevitably those theories have flaws. One way to discover those flaws is to compare the success rates of those randomly chosen with those intentionally chosen. To the extent that unpredictable things happen, it will be a chance to update the choice algorithm, throwing out criteria that turn out to be unrelated to success and adding criteria that - surprisingly - turns out to be very predictive.

Three, it would be an experiment to test the notion that access to these institutions will improve anyone's life, and not just the lives of those carefully chosen. Perhaps 4 years of Harvard will improve the life of a kid with a 2.4 GPA at least as much as it will a kid with a 4.2 GPA. Perhaps the community will be improved as much by the startled bartender or civil engineer who learns she or he has been chosen to serve in the state legislature by lottery as any politician capable of getting big financial donations. Institutions are powerful and it is important to better understand how much of the benefit they yield comes from their careful selection of who gets access to them vs. who those people are. That is to say, we need to understand when the goal should be to widen access to these institutions as a means to improve everyone's life or when we should narrow access to make sure that only people with a certain potential should be given access.

Everyone Gets to Be Offended (even if we're only offended that people take offense at the things that strike us as innocuous)

"I'm [angry, outraged, offended] so you have to take my idea seriously."
"No. Your idea needs to be serious to be taken seriously."

Right now, there are folks getting upset because Joe Biden is too physical. I find this Biden (and before it the Al Franken) thing so frustrating. if you can't tell the difference between rape, molestation, sexual harassment, misogyny, a fumbling sexual advance, a dumb joke, and someone who is demonstrative ... or worse, if you can tell the difference but think they should all be treated the same, you should just leave society. Seriously. Because this world is not pure enough for you and never will be. 

That said, I suspect this is one of those instances in which we're the victim of algorithms. The algorithms that maximize attention and response drive these sort of stupid issues up to the top of the list because they do offend everyone: from the purists who think that Joe being demonstrative is offensive to the rest of us who think that taking offense at that is offensive. Everyone is offended and the "how do I maximize hits?" algorithm wins. Even blog authors write a post about it.

Dee Hock, the Creator of Digital Money Is Now Generating Digital Thoughts

Dee Hock fascinates me. He knew that money had been many things over time, from tobacco leaves to gold bits to pieces of paper - and realized that with the advent of the computer it could be digital bits. As VISA's founding CEO, he dreamed up a system that could turn digital bits into money. VISA became the first organization to ever hit a trillion dollars in transactions in a year. A trillion. Dollars.

He understands business and finance as well as anyone and he's quite the critic of it.

He turned 90 a couple of weeks ago. And I just found out that he tweets. He sounds at turns like some mystical guru and old curmudgeon, self-righteous at times and insightful at others. But always provocative.

Here are a few of his tweets:

• Watching Trump trying to play President is like watching a walrus trying to play a piano.  
• Simple purpose and principle give rise to complex, intelligent behavior. Complex rules and regulation give rise to simple, stupid behavior. 
• When observing the rich and powerful, take care not to confuse cunning with intelligence, avarice with ability, and notoriety with merit.
• 1st manage yourself, 2nd manage superiors, 3rd manage peers. Hire good people and induce them do the same. Only then do you become a leader.
• Capitalists invest their money in commercial corporations. Employees invest their lives. Which deserves the greater return?
• Philosophy of unrestrained capitalism:
• As few as possible, should take as much as possible, from as many as possible, as often as possible. 
• Dogma has this to recommend it; the believer is relieved of the struggle for knowledge, understanding and wisdom.
• Every life is subjectively epic and objectively trivial.
• The universe is constantly wanting to play with us. Why we greet it with such a grave demeanor, long face, and furrowed brow is difficult to fathom.

You can scroll through his tweets here. It's a deep well.

https://twitter.com/deewhock 

Age is Just a Number. Then Again, So Are the Votes You Need to Win

Our last four presidents were all baby boomers.

Clinton, Bush, and Trump were all born within a year of when Japan's surrender ended WWII. Fittingly, the impulsive Trump was born a mere 9.5 months after.

Obama gets lumped in with that generation by demographers but was born 16 years after WWII ended. Less boom than echo.

Clinton, Bush and Trump time traveled together, hitting all the major events at the same age.

It is not just that the 2020 candidates include what could be the first Jew, black, woman, black woman, or gay to be president. It also includes members of the silent generation, baby boomers, gen x, and a millennial. These candidates have hit major events at very different stages of life and would bring a very different perspective to them. Bernie Sanders was 4 when Japan surrendered and the horrors of World War II would have been relayed to him as fresh stories by family members when he was a little boy rather than as distant history as it would have been for Pete Buttigieg who will be younger when he's sworn in than Sanders was when Buttigieg was born.

Here is a way to think about the age of the candidates in terms of where they were when historic events happened. (And obviously for the candidates, the age when "sworn into office" assumes that they would actually win the 2020 election.)

Oh, and yes. I know that Ocasio-Cortez is too young but I thought it was interesting to put her there for comparison. And she's too young for 2020 but she'll be old enough by 4 months to run in 2024.

Trump the Roman Leader - Sacrifice is For Suckers

With Trump's on-going attack on dead John McCain last weekend one thing is clear: the GOP has officially become the anti-sacrifice party.

Trump's criticism of McCain for his failure to thank him for the funeral Trump "authorized" is another instance of Trump's lack of civility. It's worse than that, though.

I used to marvel that the GOP who readily called on soldiers to make the ultimate sacrifice of a life for the country were so outraged that they might be called on to pay 40% tax rate on income over $250,000 rather than 35%. "You're upset about sacrificing another 5% of your income over a quarter of a million but think it both natural and good to sacrifice a life for one's country?" I wondered.

Well, apparently the GOP heard that and decided that I was right. But they resolved that in a direction I hadn't predicted. They continue to believe that only suckers pay taxes and now also believe that only suckers go to war to be shot or captured. Accused of not paying taxes, Trump claimed "That makes me smart." Questioned about his criticism of John McCain, Trump said that McCain was not a hero. "I like people who weren't captured," he said, casually dismissing POWs as people we should respect.

Frans de Waal has written extensively about our closest relatives, the chimpanzees and bonobos. Terry Gross interviewed him recently and here's a fascinating excerpt about alpha males within chimpanzee communities. I suspect that group support for leaders in human societies is not that different.

The alpha male has many duties. ... A good alpha male breaks up fights and defends the underdog — not the winners, usually, but the losers. And the alpha male also is the consoler in chief, [who] goes to individuals after a fight to console the ones who have lost and sit with them and groom with them and hold them and things like that. And so the consoler-in-chief role is extremely important, and an alpha male who is good at that, he is also usually kept in power for longer.
In a chimpanzee society, [there are] always ... challengers to the top male. And it's almost as if the group is waiting [to see] if the male is a bully [or if] they don't like him. ... If it's a good alpha male who keeps order and is protective and is not abusive, then they try to keep that male in power.

And curiously, the chimps are considered violent in contrast to the bonobos and yet this matter of empathy is so crucial to their acceptance of leadership. In this sense, a chimp troop is probably more developed than is the US right now.

What has happened to the Republican Party under Trump? They have made official the position of contempt for sacrifice for others. Trump is less anti-Christ than pre-Christ, a man whose morality is very Roman. For him the question of morality is a question of what one can get away with, his sense of civic duty defined by a quest for power rather than any sense of service. Greed is good and sacrifice is for suckers.

Oh Those Greedy Rich and Lazy Poor

I like Elizabeth Warren. Until she lapses into the reasons for raising taxes on the rich. "A government that caters to the rich is corrupt," she says.
I like certain friends who find Elizabeth Warren appalling. I like them until they get tight-lipped and talk about "You think it's right to take money from people who worked hard enough to get rich? That's wrong!"

Taxing the rich more than the poor is not a morality issue. The rich are no more likely to be rich because of corruption than the poor are to be poor because they are lazy. It's true that some people are rich just because of their grandpa or because they know how to game the system. It is also true that some people are poor because they have no common sense or because they chose not to work when they could have.

But here is the thing: morality has nothing to do with tax and welfare policy. We tax people making $10 million a year at a higher rate because they have more money and we give aid to people making only $10,000 a year because they don't have enough. It's no more complicated than this. You don't have to make claims about how the poor are lazy or the rich are greedy or how the poor are so incredibly unfortunate in spite of their noble efforts or how the rich who are worth 10X as much put in 10X as much effort. You don't have to morally impugn or praise the folks who are in tails of the distribution of wealth and income. Their morality is no more an explanation of where they are in the distribution than is the location of folks in the middle.

But maybe politics depends on a sense of outrage at someone's greed or laziness to work.

One Thing I'm Looking for in a 2020 Candidate

It hit me that the candidate who could win me over in 2020 could do that with a promise to fund our public broadcasting at the same rate that the UK funds their BBC. So I looked it up. 

Adjusted for GDP, the BBC gets 100x what the Corporation for Public Broadcasting gets. 100x.

Now I don't know the extent to which the CPB makes up total public budgets. ('m guessing it is closer to 50% than 5%, which suggests that the contrast between the UK and US is still stark but perhaps closer to 50x?).

The numbers:

UK GDP $2622 billion. (Less than California now.)

BBC spending $6.42 billion.

As % of GDP 0.245%

US GDP $19390 billion

CPB spending $445 million

As % of GDP 0.002% of GDP

Ratio: 107 to 1.

I would be relieved - but surprised - to learn that the CPB budget is only a fraction of what we spend around the US for public TV and radio, which would make this contrast less jarring. Perhaps even make it comparable. That seems optimistic, though.

It would be great not to be subject to fundraisers or "sponsor mentions" that are essentially bad ads while listening to public radio. It would be nice if we took public broadcasting even half as seriously as the UK.

A Doubling of the Rich This Century (And We're Only 17% of the Way In)

I find it helpful to tease through data just to calibrate perception. You may as well, so I'm sharing something I was teasing through this week.

Between 2000 and 2017, the number of Americans reporting income to social security (so this only includes wages), making more than 

• $100k more than tripled (up 236%), going from about 3% of the wage earners to nearly 10%
• $1 million doubled
• $10 million doubled

In 2017, 147,754 wage earners made more than a million. Studies suggest that there is a lot of turnover in this group, though, more people with one-off transactions (selling a business, for instance) than Manny Machado type contracts for that much money steadily paid over years.

What does this mean for a place like San Diego? Assuming San Diego's portion is the same as the average for the country (and I think that given San Diego's median household income is 24% higher than the national average, that's pretty conservative), San Diego city's population would have about

70,000 individuals who make more than $100k,

644 who make more than a million, and

16 who make more than ten million.

-----------

The social security data from which this comes is in current dollars, so does not adjust for inflation. That said, I don't think that people who reach one million in income in 2015 say, "Yeah but that is actually just $997,000 in 2014 dollars." 

Change in Deficits From Reagan to Trump

Here is a chart showing the change in deficit from the first year of a president's term to the first year of his successor's term, the difference between what he inherited and what he left. It covers a span of 36 years. A negative number means that the president made the deficit smaller and a positive number means that he made it larger.

Reagan inherited a deficit of $419 billion and left George H. Bush a deficit of $252 billion. The deficit was $167.2 billion smaller by the time George took office, hence the -$167.2 in the graph above for the first bar.

Bush 1 turned the $252 billion he inherited into a $365.8 billion legacy for Clinton, increasing the deficit by $113.8 B.

Clinton turned this deficit into a surplus for his successor, reducing the deficit by half a trillion.

George W. Bush turned that surplus into the biggest deficit in history, a swing of nearly $1.6 trillion.

Obama whittled down the $1.4 trillion deficit he inherited into a still sizable $590 billion.

Trump is projected to increase that $590 billion into nearly $849 billion this year.

3 of the last 4 Republican presidents have increased the size of the deficit and both Democratic presidents have reduced it, suggesting that if you actually care about deficit reduction, you would not vote for Republicans. You can hate big deficits or love Republicans but you can't honestly do both.

Cohen's Testimony On the Penultimate Day of February

I watched parts of the Cohen hearing. The theme with Trump always seems the same: someone who once defended or worked with or was married to Trump suddenly realizes that he's a train wreck of a human being. Only years after normal people had that same realization. Like when someone is surprised that the guy with the "Poor Impulse Control" tattoo on his forehead turns out to make bad decisions. "I was so shocked."  

The other weird thing is that the Republicans didn't seem to realize that Cohen was them in the future. They were attacking the guy who said that his attacking people to defend Trump was the worst thing he ever did. It's like the ex trying to warn the new wife. For now the new wife simply has too much invested in the ex being wrong.

The most telling thing in that opening statement was the claim that Trump never expected to win. He makes clear with every utterance what idiots he thinks we Americans are and yet even he didn't think we'd be stupid enough to vote for him.

My Argument For an Inheritance Tax And Against a Wealth Tax

It’s hardly surprising that in the wake of the first billionaire’s presidency we would have a backlash against billionaires and talk of a wealth tax. 

Trump transforming the White House into a home theater dedicated to Fox News is less indictment of billionaires, though, than an affirmation of the need for a much higher estate tax. 

Trump’s pride in having turned a half a billion from his father into $3 billion in half a century is like a rabbit breeder taking pride in having transformed a herd of two rabbits into a herd of three in a year. He's not good with capital. He's no Warren Buffet. There are three ways be an old rich guy.  The first is luck. The second is to start with little or nothing and earn and invest well. The other is to start rich and then end rich. Trump chose the third door, which as it turns out doesn't so much open onto a path as a lovely room.

One (of many) advantage(s) the US had over the USSR is that it left the allocation of most capital to individuals and institutional investors (like mutual fund managers or private and public corporations). The way that wealth works is this: the better you are at getting a return on capital, the more of it the market gives you. If Warren Buffet gets 13% return on a billion, he has two billion to invest in 6 years. The guy who gets a -2% "return" on his billion will have only $890 million in 6 years.

It is true that variation in the ability to invest leads to wealth inequality. It is also true that the market ruthlessly gives more capital to the folks best able to create more capital and takes capital from those who destroy it through bad investments. It's true that luck plays a role in returns but it is also true that - just as with ability to play basketball or write poems - different people have different levels of ability in investing. A smart community likes the idea of good investors having more capital than bad investors.

I don't think the kind of wealth tax that Elizabeth Warren is proposing is a bad thing, I'm just not real excited about it. I'd much rather see an inheritance tax of 50% (or more) for amounts over $10 million than a wealth tax. Why? I don't believe in aristocracies.

Michael Jordan was an amazing player. His sons also played basketball but did not make it to the NBA. It's rare that a child inherits the gifts of the parent. This is likely true of Warren Buffet's children as well; it is highly unlikely that they have their father's genius for investment. Just as there is no reason to give Michael Jordan's sons the ball to play in the NBA, there is no reason to give Warren Buffet's kids billions to invest. They can't do anything special with it.

Just from a perspective of "How do we create the most wealth," question, we should let great wealth builders keep their wealth and then tax that wealth when it passes from one generation to the next. Obviously the next generation might preserve a fortune if they get it, but it's not obvious that the next generation will get returns any higher than average. There is no argument for accumulating great wealth over generations. That is the definition of an aristocracy, and one of many reasons that aristocracies are associated with stagnant economies is because they are about protecting wealth, not creating it. Entrepreneurs have an impulse to disrupt the status quo; aristocrats have the impulse to protect it. 

Billionaires help to create - and are created by - dynamic economies. As they build companies and invest capital, they add to a communities wealth. Billionaires are a natural companion to dynamic and healthy economies. Aristocrats are not. And that is the reason I think inheritance tax is a good idea and a wealth tax is only a mediocre one.

Randomly Fascinating Economic Numbers on 2 19 2019 (a number that looks like a repeating series, which is kind of randomly fascinating)

Looking for numbers to help inform a few arguments, I've run into or created the following recently. I know I obsess over these kinds of things more than most but you might find these useful as more data points for painting a picture of this continually evolving, messy, massive economy.

In December the US economy created 5.9 million jobs and destroyed 5.5 million. Protecting jobs isn't really an option but as long as the entrepreneurship and innovation that creates jobs runs at a faster pace than the automation that destroys them, we're good.

In 2018, the American economy passed two big milestones.
Annual GDP is now over $20 trillion.
Federal Spending is now over $4 trillion (although with current tax laws and projections, it won't be until 2022, when spending passes $5 trillion, that govt receipts will pass $4 trillion).

If you're interested in median incomes rising, you should do what you can to attract immigrants and create billionaires. Median household income and the percentage of immigrants and billionaires seem to move together. I think one reason people are threatened by immigrants and billionaires is because they represent a threat to the status quo. And that's true, of course, but the same thing can be said about progress.

And finally, this interesting and (I think) important quote.

“Capitalism has hundreds of parameters that you can change like the estate tax [and] the capital gains tax and it is still capitalism as long as you have market-based pricing, let people create new companies very easily and intervene where you don't see competition."
- Bill Gates

Two Questions That Drive Economic Progress

Creative answers to these two questions drives progress.
1. How do we automate jobs in order to obsolete lower-paying jobs and increase productivity and profits?
2. How do we create new, higher-paying jobs through entrepreneurship and innovation?

The answers to this question include money spent on research and development, education, healthcare, and incubators, policies that enhance financial markets and private property rights and encourage investment and savings, and a culture of win-win rather than win-lose. There are layers to the creative answers to these questions pursuing such answers would drive a great deal of progress.

We are All Uprooted Now

Anomie, noun Sociology. a state or condition of individuals or society characterized by a breakdown or absence of social norms and values, as in the case of uprooted people.
from dictionary.com

The new, entrepreneurial economy is disruptive. It is not just entrepreneurship that will be popularized, the emergence and disappearance and transformation of companies and entire industries destroying, creating and relocating jobs, careers and people. Social invention - the emergence of new kinds of marriages, schools, businesses and government - compounds the feeling of dislocation.

"The past is a foreign country: they do things differently there," wrote L.P. Hartley.

Anomie is the sense that what you knew of social order has been reset. It's like what happened to American natives after the European arrived with his devastating diseases, weaponry and culture.

Anomie is what an uprooted people feel. We are all uprooted now.

Income Inequality and Income Growth - Fairness and Progress

There are two dimensions to improving lives. The first has to do with income transfer from rich to poor, the second with raising real median wages. Those initiatives are not at odds with each other but they are separate.

There is so much talk about income inequality and stagnating median income in ways that suggest the speaker thinks they are the same thing. They are not.

Alleviating Poverty
Most people agree that the rich should help the poor. There can be arguments about who is rich, who is poor and how much help they should provide. Those are important arguments.

For instance, I believe it's absurd for someone in the top 49th percentile to help someone who is in the bottom 49th percentile. Someone making $60k shouldn't have to give $500 to someone making $55k. There has to be a middle ground of 30%, 50% or even 80% of people who are neither expected to help others or expect to be helped. (At least formally through income transfer in the form of taxation and welfare. Obviously everyone helps and needs help just to get through the day.)

Should only people making $200k help only those making less than $10k? Or should even households making $100k help households making less than $35k? The first choice would leave about 87% in the middle class who neither got nor gave help. Do you make more than $10k a year? Don't expect any help. Do you make less than $200k? Don't worry about being taxed to help the poor. The second (tax above $100k and subsidize below $35k) would leave about 43% in the middle class who neither got nor gave help.

In the last 100 years, the top marginal tax rate has ranged from a low of 28% to a high of 94%. Even within the same country, the consensus about what constitutes a fair rate of taxation varies over time. To illustrate how unsettling this change is, Starbucks founder Howard Schultz came out this week to say that he was running for president. One reason? He hate this absurd talk of a 90% marginal tax rate. Asked who is favorite Democratic president was, he said FDR. Under FDR, marginal tax rate was 94%.)

[You can find data on median income and what percentage of Americans make more or less than certain amounts here.]

You can argue about the cutoff point for who pays additional tax for the poor and who is poor enough to benefit from that tax. Ultimately, though, voters will decide what is fair. There is no magic formula for that.

By definition, though, you can never raise the average wage through income transfer. In theory you can raise the median wage through income redistribution but that strikes me as funky; it essentially means that you would tax enough people in the top 49th percentile at high enough rates to lift the income of everyone in the 50th percentile on down.

To define someone making the median income as poor is odd. It's like defining a 5'10" man as short. Income transfer is compassionate, practical and yet does nothing to raise median income. For that you need a completely different set of policies.


Raising Median Income
The usual suspects to raise median income? Investments in infrastructure and education, research and development, childcare and healthcare. These all help to raise incomes. These are essential. We're not doing enough of them or even doing them enough. That said, the biggest boost to an economy is moving into a new one.

In the century after the US was founded, median wages rose as we created an industrial economy that gradually supplanted the agricultural economy. Last century, median wages rose as we created an information economy and workers moved from factories into cubicles. This century, median wages will rise as we create an entrepreneurial economy. The median wage in Santa Clara County - home to companies like Google, Intel, HP, and Apple - is $107k, nearly double the $58k for the US. This will become a norm as more regions adopt and adapt the entrepreneurial culture that defines Silicon Valley. And there is so much more we can do to popularize entrepreneurship. Redefining work to become more entrepreneurial will do as much to raise productivity and wages as any previous change.

The question of how to alleviate poverty through income transfer is an important one and needs to be defined in a way that voters think is fair. The question of how we move into a new economy to create more for everyone is even more important. How a community answers the first one defines how they pursue fairness. How a community answers the second one defines how they will pursue progress.