Wednesday, April 16, 2014

Wealth disparity and no charity

By Mark Rollins

There are a lot of good arguments being made in the media about the inequities and perils of the growing disparity of wealth in this country and how it is wrong to make drastic cuts to food stamps, and fail to raise the minimum wage or extend the unemployment insurance for people struggling to find jobs in this dire economy.

It also has been pointed out by many smart economists how it would be good for the economy to help the poor.

I am down with all of that — as is the new pope — but I would like to add two points of science to the national discussion.
The first point has to do with research in behavioral economics about the effects of poverty on people, which helps us to understand their plight.

It shows that being poor can have the same effect as losing 13 IQ points, or being an alcoholic. It reduces cognition and impairs decision-making in various areas of a person’s life. It also impairs optimism and therefore ability to make plans to improve one’s life financially or otherwise. Poverty makes people forget to take medication or take care of their children. It makes them more prone to anger, forgetfulness and neglect of basic functions in life.

It has been shown that poverty has deleterious effects on the brain both long-term and even seasonally in one study. In other words, there was a shortage of cognitive bandwidth found in the brains of farmers before they brought in a harvest and were experiencing temporary poverty as compared with normal mental ability when their harvest brought money in and they were lifted out of poverty temporarily.

This study demonstrates that these symptoms are not making people poor. The data show that it is not the person’s fault but rather the predicament that they find themselves in, that causes the lack of cognitive capacity. It’s like being hit when you’re down.

The studies also showed that this effect is not from stress. Stress levels were monitored and were not found to be correlated.
When people are lifted out of poverty, it frees up a good portion of the executive decision-making ability in their frontal cortex of their brains. And you can think of that in terms of better collective decision-making, which has to benefit all of society.

“Benefit all of society” is the key phrase here. It seems as though only one of our great political parties want to put in place government policies that will benefit everyone. The other party gives only lip service to that notion and prefers to help only those few who don’t need any help, or make those who are already happy even more happy.

That brings me to my second observation, this one about the science of the effects of money on happiness.

The top 40 hedge fund managers in the United States brought home a total of $16 billion last year, according to economist Jeffrey Sachs. That is an average of $400 million apiece. They were taxed at only 15 percent, a much lower rate than most people. If you taxed them at a normal rate, you would have $3 billion a year in revenues to help feed the poor.

That would leave each of these managers with thousands of times more money than is required to be happy, according to a Princeton study several years ago. It found that as your income rises you become happier up to an income of $75,000 a year. Happiness does not increase with income above that.

Why do these plutocrats need 5,333 times more money than is required for happiness? Is not 4,320 times more enough for them?

It’s bad enough that the average CEO has gone from making 20 times as much as the average worker to making 500 times the average worker. But a person who is earning more than minimum wage, or $1,250 a month, is making only one-fifth as much as a person needs to be happy, or 26,667 times less than these tycoons.

Of course, my calculations here are a little tongue-in-cheek but the main idea I am putting forward is a valid one.

There is an unfortunate trend in this country, in recent years, of less philanthropy among billionaires and more and more use of obscure “charities” to help them keep vast fortunes in their families. Huge treasure troves get passed on to their grandchildren tax-free and very little is actually given to charity.

Some very well-known multi-billionaires on the Forbes 400 list are using these trust funds not just to avoid taxes but to actually get richer because the funds grow a lot faster than money is given out to charities.

Washington’s tax policies are hurting the poor and the working class. Look at the billions of dollars that the super-rich are making by hiring lawyers and lobbyists to avoid paying inheritance taxes (more than a trillion dollars a year). But after all, they have lots of grandchildren who need to have exponential happiness.

It is staggering, the amount of money that is being kept on the sidelines of the economy and forming a giant immoral bottleneck, because of our regressive tax policy for the top tiers.

The Wall Street elites, the Cayman Island tax evaders and the radical-right, anti-science, know-nothing crowd say there is no money to raise the minimum wage or extend unemployment insurance or give food stamps to the working poor, the elderly, or veterans or hungry children. And they say that affordable health insurance for all will hurt the economy.

Democrats, independents and non-radicalized conservatives know the truth. These neo-confederate insurrectionists don’t believe in these things, never have and never will, and they don’t really give one whit about the economy or the state of the union.

— Mark Rollins is a Davis resident.

Special to The Enterprise


Discussion | 8 comments

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  • MeganJanuary 17, 2014 - 3:22 pm

    Hear, hear.

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  • ontJanuary 18, 2014 - 12:40 am

    "They were taxed at only 15 percent" These hundred millionaires are pikers compared to Mitt Romney. Maybe Mitt will do a traveling seminar teaching these poor fellas how to avoid more taxes.

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  • Jim LeonardJanuary 19, 2014 - 8:05 am

    I love this article--so refreshing to see so much truth in one place. A relevant question, appropriate but left unasked, is "to what extent are these rich the leading edge of species-suicide?" The danger is real. A solution for really solving the problem, unfortunately, has not occurred to me yet.

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  • greg johnsonJanuary 19, 2014 - 10:21 am

    There are a lot of points made here, some of them good, others not so much. In the study referenced here, I would like to know how they measured "stress", and the idea of poverty and its effect on the brain sounds like a conclusion that a reasonable science person would not make. Things associated with poverty (poor nutrition, danger, lack of stimulation and poor family support, etc.) may have a negative influence on the brain. I believe poverty is much more about dysfunction, dissatisfaction, and hopelessness than about money. There have been many people who have grown up poor, but with good parents, love, support, encouragement, and done very well. I believe that most people who emerge as successes from poverty have this background. The author is basically making a case for a more socialistic society. This is not a criticism but just an observation. The classic economic argument put forth is that the marginal dollar in a society would give more benefit to a poor person than a rich person, and this makes complete sense. On the other hand, many believe (including Warren Buffett, a current champion of the left) that capitalism is the reason for the great success of America. I believe, like the author (and Warren Buffett) that more aggressive taxation on the extreme wealthy, and an increase in the minimum wage, would be more just and probably would be good for the economy. However, I strongly disagree with the author that either party is more noble, or that growing the government is good for anybody. The war on poverty has spent 15-20 trillion dollars and accomplished little. The war on drugs has spent a trillion or two and things have gotten worse. A simpler tax code, a higher minimum wage (maybe $10), an aggressive progressive tax on million a year plus earners, and a smaller government would probably be good on all fronts, and all wars.

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  • SteveJanuary 19, 2014 - 8:21 pm

    Excellent article... until the phrase "working poor". This implies that the unworking poor are undeserving. Not everyone can work, or get hired. This is why raising the minimum wage is a BAD idea (something the brilliant economist Milton Freedman understood). By REDUCING the minimum wage, you create MORE jobs -albeit at a lower level. But this does help those of us which would rather have a job paying $5/hr (say) than no income at all. For me to make $10/hr. is the same increase as a person making $10/hr. going to $1000/hr. (I earn about ten cents an hour scavenging cans out of dumpsters).

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  • MLJanuary 20, 2014 - 11:26 am

    Socialism fails wherever it is tried. Raising the minimum wage will hurt more people than it will help. Only a small percentage of people make the minimum wage, and most of those are young people under 22 working their first or second job. The minimum wage is really a 'training wage'. Besides, those wealthy people can't take the money with them... they invest, build houses, buy cars, buy toys, which all generate jobs at a far better and more efficient pace than the government redistribution.

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  • Greg JohnsonJanuary 20, 2014 - 1:03 pm

    I too am a strong believer in capitalism. However, I think we are in an unusual situation at this point in our history where the extremes are too extreme and the system has frozen up. I believe this is due to demographics and too much wealth at the very top. Also, Obama's policies are blocking risk taking and expansion, and radical monetary policy has, I believe, created a big bubble in the stock market. I think minimum wage earners can get as much or more by doing nothing and that is a problem. Also, I think pushing more money into the middle would have a thawing effect on this freeze. Of course, I believe Romney would have been much better at doing this as well. Like you (I think), I do have a concern of the risks involved with government redistribution policies.

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  • SBJanuary 21, 2014 - 9:44 am

    "Socialism fails wherever it is tried." And yet, the most successful (meaning fewest in poverty), the most educated, the most healthy and the most happy countries in the world are the Scandinavian countries, all socialist democracies. Compare the U.S. vs. any of these *socialist* countries in any developed marker (education completion, math and science test scores, violence and murder rates, health/illness rates, birth rates, etc.) and the almighty U.S. falls short in every category. Somehow, these societies have been able foster an organic and sustaining civic responsibility into their people that is virtually absent in the United States, all while paying a minimum wage you can actually live on. I'd like to see any armchair QB in this forum survive on $5/hr or less as you wish for. "But," you say, "they pay 50% in taxes!" So what? After they pay back 50% in taxes, they still take home more than you do BEFORE you pay taxes on your federal minimum wage. AND they don't have to scrounge around depleted public coffers to attempt to access healthcare, education, etc. as that is all included. The greed at the top in this country, and the political and media systems that prop this up is grotesque and disgusting. When an entire faction of people is 100% preoccupied with the most basic survival while dealing with continuing threats from the top to whatever meager subsistence they can scratch out and whatever slim opportunities that may remain, it is no wonder they (as a whole) remain uneducated, unhealthy and poor. This problem will solve itself in due time. When the Industrial War Machine's harvest of the poorest results in a cadre of recruits that don't meet any minimum standard of health or education, the Machine will have to do something about it. After all, in the U.S., we know what we're #1 at... War, Violence, Guns, etc. Go USA!

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