Knowing Your Place

America is slowly slipping into a two class system: the ultra-rich and everybody else. The "everybody else" group is expected to happily become the servants of those ultra-rich. That is what the "free market" is telling us with wages and employment. So get yourself ready.

In the meantime, here is a bit from a post by Brad DeLong pointing to a comment by Paul Krugman:

Last September Paul Krugman joked:

Have You Left No Sense Of Decency?: Pretty soon, we’ll be having serious, completely un-self-conscious discussions in major magazines about the servant problem...

And soon afterwards yet another reporter called me to, among other things, claim that a New York police inspector and school principal together making $250-$300K a year were not rich. When I point out that the middle-class family making the median $50k a year in household income might disagree that he and his are in the same class as they and theirs, he said that people making the median income aren't what he calls middle class...

Yes... the fact that wages and stalled for the bottom 90% and continue to soar for those in the top 1% means that $300K/year is necessary to keep a person in "the middle class". If you are making $50K you are getting close to being priced as a maid, butler, cook, or groundskeeper for the ultra-rich.

Here's a bit of clarifying factual data for you to chew on. From Ezra Klein's blog at the Washington Post:

Click to Enlarge
Arguments over income taxes tend to get bogged down in arguments about who is really "rich." And what you hear then is that rich in Ohio and rich in New York City are different. But how different?

According to the Census Bureau, only 6.3 percent of New York City's households pulled in more than $200,000. So if you're a household making $250,000 or more, you're easily in the top 5 percent -- even in New York City.

Now, it's true that those people might not "feel" rich. There's lots of stuff to buy in New York City. It's pretty easy to construct a lifestyle where you spend $250,000 a year. In Columbus, Ohio, only 1.3 percent of households make more than $200,000, so there's less stuff for them to buy and fewer rich people for them to try to keep up with. But what you buy and whether you try to keep up with the people in the penthouse is a personal decision, not an objective economic necessity. The fact of the matter is that a household making $250,000 in New York City is making more than pretty much anyone else in the city. Being rich is more than just a feeling.

The above should give you some perspective on that NY couple making $250K-$300K/year as "not being rich". Yes, shed a tear. It is tough to be in the top 5% of incomes and feel "not rich". Luckily all those people on minimum wage are too busy to notice that they are "not rich" otherwise they might revolt. They might decide that all those "tax cuts" for corporations and "the rich" that have been touted since 1980 under Reagan "trickle down" economics as the cure for a stagnant economy just aren't working. They may decide that it is time to go back to a tax regime of the 1950s when working and middle class people actually saw improvements in their living standards each and every year.

From Wikipedia, the tax rates in the US:

Click to Enlarge
For example, between 1952 and 1960 under Republican President Dwight D. Eisenhower, the marginal tax rate for unmarried individuals in the highest income bracket was 91%. Also during this period, the United States public debt was cut in half, from almost 100% of GDP to under 50% of GDP.

Maybe Americans should try less "tax cuts" for the rich and go back to the good old days when tax rates were high and there were no deficits and the debt was being cut by the fiscal surplus that the taxes brought in. You know, back in the days when the US Interstate Highway system was built, schools for the baby boom were built, unions were strong, and wages were high enough for 80% of the population to feel like they belonged to the "middle class".