[quote=davelj][quote=CA renter]Like I’ve suggested before…I’m sure most public workers would be happy to roll back their compensation to 1995 levels. But in order for them to maintain their ~1995 purchasing power, we’d have to see asset prices fall to 1995 levels. That means “the rich” would take some pretty significant losses. Not only that, but we should restore ~1995 tax rates in order to correct all the imbalances as well.
In other words, let’s ALL go back to ~1995 levels.
Would you agree to those terms?[/quote]
Well, how about we use 1998 just because I have the stats at my fingertips (and there was no meaningful Bubble Action between 1995 and 1998, so this shouldn’t make a big difference).
The CPI has increased by 2.4% since 1998. The S&P 500 has returned 4.1% (nominal) annually since January 1998. So, where stocks are concerned – a pretty big asset of “The Rich,” I think you’d agree – going back to 1998 wouldn’t be a huge drop from here (in fact, it would be about a 22% decline from current levels – which would be healthy, frankly). But I think you’d agree that this 1.7% annualized real return for The Rich from stocks is nothing to brag about (but certainly better than nothing).
Rents have increased by 3.6% (nominal) annually since 1998, or 1.2% greater than the overall inflation rate. U.S. housing – not adjusted for increased average size – appears to be about 13% higher in real terms (see graph below) than it was in 1998, but two caveats: (1) again, the average home is larger today, which isn’t captured in the graph, and (2) as one of Rich’s graphs (House Payment-to-Income Ratio) illustrates, the actual cost of ownership (here in SD) is lower today than it was in 1998 (and well below 1995 levels).
So, when you say, “Let’s ALL go back to ~1995 levels,” I don’t think we’re that far off in real terms (yes, I’ve used 1998 as my base year).
So, I don’t think most public workers’ purchasing power is too far off of mid- to late-90s levels, but I’ll grant you that it probably hasn’t improved much over the last 13+ years. But, recall, that wasn’t your argument… you said they’d be happy roll back to that level of purchasing power parity, and I think they’re very close to being there now. They just don’t like the fact that it hasn’t gotten any better. (And a lot of these folks have probably gotten into debt keeping up with the Joneses over the last many years – that is, it *feels* like they’re struggling more – and that’s not the taxpayers’ fault.) But that’s a separate argument. An argument could be made that with the stability of a government job comes little in the way of real (as opposed to nominal) wage gains. I’m just sayin’…[/quote]
So, there was “no meaningful Bubble Action between 1995 and 1998”? What about the stock/internet bubble?
You mention stocks, as if that’s all that the wealthy own. How about bonds, gold, real estate (foreign and domestic — HUGE run-ups in foreign RE this past 10-15 years), foreign currencies, commodities, foreign stocks, etc.? THAT is where much of the wealth belonging to “The Rich” has been going this past 10-15 years. I’m quite sure the return has been a tad over the 1.7% annualized real return you quoted for the stock market.
So, let’s go back to 1995 levels. EVERYONE gives up all gains made in wealth and income since then, and all asset prices (not just stocks, but **everything** people own today) go to 1995 levels. How well do you think that would go over with “The Rich”?
See, that’s the problem. In order for The Rich to keep their gains, somebody else has to lose. The union members understand who their opponents are, and it’s NOT Joe Sixpack who’s been brainwashed into thinking he’s one of “The Rich.” The unions are not going to back down on this, nor should they. At least they’ve **earned** their income over the years, unlike “The Rich.”
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Since almost 75% of the income for the top 400 comes from capital gains and dividends, it’s not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay.
