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American middle class no longer the richest

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nevada
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Post by Idéfix Tue Apr 22, 2014 4:53 pm

http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html

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Post by confuzzled dude Tue Apr 22, 2014 10:11 pm

Conversely, rich is having a blast

CYCLE                       TOP 1% INCOME GROWTH          99% INCOME GROWTH

1993-2000 –               98.7%                                                        20.3%

2001 Recession –        (30.8%)                                                   (6.5%)

2002-2007 –               61.8%                                                         6.8%

2007 Recession –        (36.3%)                                                  (11.6%)

2009-2010  –               11.6%                                                        0.2%

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Post by Idéfix Tue Apr 22, 2014 10:17 pm

That is because the rich are married conservatives and the poor are single mother liberals. It is a conspiracy that the liberal media doesn't want you to know.
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Post by smArtha Tue Apr 22, 2014 10:53 pm

Idéfix wrote:http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html

American middle class no longer the richest Captur10

Would progressively increased tax rates on consumption(of all goods and resources of the nation) at various slabs bridge this gap better? I know of Fair Tax and VAT that are towards this taxation based on Transactions. But I'm thinking more like
a) basic flat tax of 10% across the board for all incomes above a survival threshold and b) no tax on basic necessities like minimal  quantity of food, clothing, shelter, health and education. With this background if all entities (business or individuals) that consume any resources beyond those marked as basic necessities be taxed according to the need/availability ratio of the resource being consumed then the rich automatically end up paying significantly more taxes unless they belong to the select few who hoard cash without consuming anything worthwhile.

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Post by Idéfix Wed Apr 23, 2014 2:46 am

smArtha wrote:
Idéfix wrote:http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html

American middle class no longer the richest Captur10

Would progressively increased tax rates on consumption(of all goods and resources of the nation) at various slabs bridge this gap better? I know of Fair Tax and VAT that are towards this taxation based on Transactions. But I'm thinking more like
a) basic flat tax of 10% across the board for all incomes above a survival threshold and b) no tax on basic necessities like minimal  quantity of food, clothing, shelter, health and education. With this background if all entities (business or individuals) that consume any resources beyond those marked as basic necessities be taxed according to the need/availability ratio of the resource being consumed then the rich automatically end up paying significantly more taxes unless they belong to the select few who hoard cash without consuming anything worthwhile.
The devil is always in the details with tax codes. Consumption taxes are usually regressive, because the rich spend a smaller proportion of their income on consumption expenditures than the poor have to. If you make $50k, you would end up spending more of your income than saving it, than those who make $500k or $5mn.

One of the problems we have right now is with the tax code is that wage income is tax progressively, while investment income is taxed at a low capital gains rate. This is why we have Warren Buffett paying the lowest effective income tax in his office.
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Post by truthbetold Wed Apr 23, 2014 5:04 am

What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Or capital gains tax reduction merely a pay back to fat fund donors?

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Post by truthbetold Wed Apr 23, 2014 5:05 am

What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Or capital gains tax reduction merely a pay back to fat fund donors?

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Post by truthbetold Wed Apr 23, 2014 5:21 am

Income inequality defined by national boundaries may have some limitations in e planing the past 3 to 4 decades. In the decades of 50, 60, 70s us Gdp and labor participation are intertwined. One cannot happen without the other.
Since globalization of 80s, a good chunk of labor activity moved out of Usa. The distributive power of wealth in a restrictive national border is now altered. While us middle class stagnated people of many other nations including massive numbers in China and India benefited.
Other contributing factors could technology and educational skills. Most of new technology benefits such computers and Internet benefited us middle class.in life style improvements but not in average wage earnings.
The other factor to be considered are the two massive peaks and deep valleys between 2000 and 2013. The housing employment is only 40% or so of 2007 numbers.
More later.

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Post by truthbetold Wed Apr 23, 2014 5:23 am

truthbetold wrote:What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Or capital gains tax reduction merely a pay back to fat fund donors?
read that as "increase the speed of currency?"

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Post by Merlot Daruwala Wed Apr 23, 2014 6:18 am

truthbetold wrote:What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Every economy needs capital to grow; the more attractive terms you offer, the more the capital that comes in. That capital goes towards funding new entrepreneurial ideas or expansion of existing enterprises, which creates more employment, which spurs more consumption which in turn enriches the enterprises and by extension, the providers of capital. Lower cost of capital is the essential lubricant which keeps the economy in a virtuous cycle that benefits everybody.

truthbetold wrote:Or capital gains tax reduction merely a pay back to fat fund donors?
That too.
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Post by Merlot Daruwala Wed Apr 23, 2014 6:23 am

confuzzled dude wrote:Conversely, rich is having a blast

CYCLE                       TOP 1% INCOME GROWTH          99% INCOME GROWTH

1993-2000 –               98.7%                                                        20.3%

2001 Recession –        (30.8%)                                                   (6.5%)

2002-2007 –               61.8%                                                         6.8%

2007 Recession –        (36.3%)                                                  (11.6%)

2009-2010  –               11.6%                                                        0.2%

Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
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Post by confuzzled dude Wed Apr 23, 2014 12:16 pm

Merlot Daruwala wrote:
confuzzled dude wrote:Conversely, rich is having a blast

CYCLE                       TOP 1% INCOME GROWTH          99% INCOME GROWTH

1993-2000 –               98.7%                                                        20.3%

2001 Recession –        (30.8%)                                                   (6.5%)

2002-2007 –               61.8%                                                         6.8%

2007 Recession –        (36.3%)                                                  (11.6%)

2009-2010  –               11.6%                                                        0.2%

Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
What would happen when consumer buying power stagnates or declines? I realize corporations are relying heavily on global consumer & growth potential but at somepoint global consumer will hit the ceiling as American consumer, result of corporate greed.

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Post by nevada Wed Apr 23, 2014 12:38 pm

But isn't that a good sign? Isn't it better if wealth is spread around and not just limited to Americans?

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Post by Idéfix Wed Apr 23, 2014 1:00 pm

confuzzled dude wrote:
Merlot Daruwala wrote:
Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
What would happen when consumer buying power stagnates or declines? I realize corporations are relying heavily on global consumer & growth potential but at somepoint global consumer will hit the ceiling as American consumer, result of corporate greed.
We may not be far from that ceiling. One possible interpretation of the 2008 financial crisis is as a result of the spending power of consumers peaking. Over the last 30 years, as the percentage of income earned by the vast majority has fallen while the rich got richer, the middle class coped in three ways: (a) more women participating full-time in the paid workforce to increase family incomes, (b) each worker working more hours, and (c) taking out more debt. Trend (a) has maxed out, and now labor force participation rates are on a decline with aging demographics. Trend (b) is severely limited with technology making several types of work redundant. Trend (c) reached a peak and crashed.

As technology continues to strengthen the hands of capital against labor, the economy becomes increasingly vulnerable to a vicious cycle: lower wages -> lower consumer demand -> lower margins -> lower wages. The pie will stop growing (or even start shrinking) and those who have the power will grab a greater slice of the pie, further worsening the problem.

This is why it is critical for governments to help keep the playing field level so that the reverse of that cycle is again possible: higher wages -> higher consumer demand -> higher margins -> higher wages. Incidentally, it is this approach that will yield higher actual profits -- although a thinner slice of a larger pie.

In another 10-20 years, it will become possible for people who have money to choose desirable attributes for their children: lower propensity for disease, greater memory, etc. As that inevitable future comes closer, if the socioeconomic system continues to be stacked in favor of the rich and against the poor, we will see a world where the rich can entrench their socioeconomic advantage into biology. Children of rich parents will be inherently healthier, smarter, better-looking, etc. - i.e. more deserving of success in a system based on capabilities -- than those of poor people.
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Post by Idéfix Wed Apr 23, 2014 1:02 pm

nevada wrote:But isn't that a good sign? Isn't it better if wealth is spread around and not just limited to Americans?
This is not about wealth, but about relative change in incomes for the middle class. If you wanted to understand whether wealth is getting "spread around", you would have to consider the richest segments of each society, where wealth is truly concentrated. The richest Americans likely saw their incomes grow as fast as, or faster than, the incomes of the richest Europeans.
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Post by Idéfix Wed Apr 23, 2014 1:04 pm

Merlot Daruwala wrote:
truthbetold wrote:What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Every economy needs capital to grow; the more attractive terms you offer, the more the capital that comes in. That capital goes towards funding new entrepreneurial ideas or expansion of existing enterprises, which creates more employment, which spurs more consumption which in turn enriches the enterprises and by extension, the providers of capital. Lower cost of capital is the essential lubricant which keeps the economy in a virtuous cycle that benefits everybody.
Those are good arguments. But arguments made for progressive taxation of income should apply to all sources of income -- whether income earned through work or income earned through investment.
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Post by Vakavaka Pakapaka Wed Apr 23, 2014 1:58 pm

Merlot Daruwala wrote:
truthbetold wrote:What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Every economy needs capital to grow; the more attractive terms you offer, the more the capital that comes in. That capital goes towards funding new entrepreneurial ideas or expansion of existing enterprises, which creates more employment, which spurs more consumption which in turn enriches the enterprises and by extension, the providers of capital. Lower cost of capital is the essential lubricant which keeps the economy in a virtuous cycle that benefits everybody.

truthbetold wrote:Or capital gains tax reduction merely a pay back to fat fund donors?
That too.
Closet Modi supporter!

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Post by Merlot Daruwala Wed Apr 23, 2014 7:38 pm

Idéfix wrote:
Merlot Daruwala wrote:
truthbetold wrote:What is the argument for capital gains beings taxed lower? Are these dollars considered multiplicative? Do they inverse the speed of currency? Do they help clean up deadwood in stock market? Do they push capital to more productive areas of economy?
Every economy needs capital to grow; the more attractive terms you offer, the more the capital that comes in. That capital goes towards funding new entrepreneurial ideas or expansion of existing enterprises, which creates more employment, which spurs more consumption which in turn enriches the enterprises and by extension, the providers of capital. Lower cost of capital is the essential lubricant which keeps the economy in a virtuous cycle that benefits everybody.
Those are good arguments. But arguments made for progressive taxation of income should apply to all sources of income -- whether income earned through work or income earned through investment.
The case for higher taxation of capital gains is based on fairness, but life isn't always fair. A fair policy will lead to a flight of capital unless all countries coordinate their tax regimes. But in an unequal world where there's such stark differences in the availability of capital, there'll always be someone more desperate for it. So no country, not even the US can turn its back to capital. And hence this unfair but necessary system.
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Post by Merlot Daruwala Wed Apr 23, 2014 7:43 pm

Idéfix wrote:
confuzzled dude wrote:
Merlot Daruwala wrote:
Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
What would happen when consumer buying power stagnates or declines? I realize corporations are relying heavily on global consumer & growth potential but at somepoint global consumer will hit the ceiling as American consumer, result of corporate greed.
We may not be far from that ceiling. One possible interpretation of the 2008 financial crisis is as a result of the spending power of consumers peaking. Over the last 30 years, as the percentage of income earned by the vast majority has fallen while the rich got richer, the middle class coped in three ways: (a) more women participating full-time in the paid workforce to increase family incomes, (b) each worker working more hours, and (c) taking out more debt. Trend (a) has maxed out, and now labor force participation rates are on a decline with aging demographics. Trend (b) is severely limited with technology making several types of work redundant. Trend (c) reached a peak and crashed.

As technology continues to strengthen the hands of capital against labor, the economy becomes increasingly vulnerable to a vicious cycle: lower wages -> lower consumer demand -> lower margins -> lower wages. The pie will stop growing (or even start shrinking) and those who have the power will grab a greater slice of the pie, further worsening the problem.

This is why it is critical for governments to help keep the playing field level so that the reverse of that cycle is again possible: higher wages -> higher consumer demand -> higher margins -> higher wages. Incidentally, it is this approach that will yield higher actual profits -- although a thinner slice of a larger pie.

In another 10-20 years, it will become possible for people who have money to choose desirable attributes for their children: lower propensity for disease, greater memory, etc. As that inevitable future comes closer, if the socioeconomic system continues to be stacked in favor of the rich and against the poor, we will see a world where the rich can entrench their socioeconomic advantage into biology. Children of rich parents will be inherently healthier, smarter, better-looking, etc. - i.e. more deserving of success in a system based on capabilities -- than those of poor people.
Scary stuff. Besides government intervention, the other more potent factor could be that businesses themselves realize that depressing wages infinitely is not sustainable because it pinches consumption and deflates their markets. The way Ford increased wages so his employees could buy his cars...
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Post by Idéfix Wed Apr 23, 2014 7:58 pm

Merlot Daruwala wrote:
Idéfix wrote:
confuzzled dude wrote:
Merlot Daruwala wrote:
Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
What would happen when consumer buying power stagnates or declines? I realize corporations are relying heavily on global consumer & growth potential but at somepoint global consumer will hit the ceiling as American consumer, result of corporate greed.
We may not be far from that ceiling. One possible interpretation of the 2008 financial crisis is as a result of the spending power of consumers peaking. Over the last 30 years, as the percentage of income earned by the vast majority has fallen while the rich got richer, the middle class coped in three ways: (a) more women participating full-time in the paid workforce to increase family incomes, (b) each worker working more hours, and (c) taking out more debt. Trend (a) has maxed out, and now labor force participation rates are on a decline with aging demographics. Trend (b) is severely limited with technology making several types of work redundant. Trend (c) reached a peak and crashed.

As technology continues to strengthen the hands of capital against labor, the economy becomes increasingly vulnerable to a vicious cycle: lower wages -> lower consumer demand -> lower margins -> lower wages. The pie will stop growing (or even start shrinking) and those who have the power will grab a greater slice of the pie, further worsening the problem.

This is why it is critical for governments to help keep the playing field level so that the reverse of that cycle is again possible: higher wages -> higher consumer demand -> higher margins -> higher wages. Incidentally, it is this approach that will yield higher actual profits -- although a thinner slice of a larger pie.

In another 10-20 years, it will become possible for people who have money to choose desirable attributes for their children: lower propensity for disease, greater memory, etc. As that inevitable future comes closer, if the socioeconomic system continues to be stacked in favor of the rich and against the poor, we will see a world where the rich can entrench their socioeconomic advantage into biology. Children of rich parents will be inherently healthier, smarter, better-looking, etc. - i.e. more deserving of success in a system based on capabilities -- than those of poor people.
Scary stuff. Besides government intervention, the other more potent factor could be that businesses themselves realize that depressing wages infinitely is not sustainable because it pinches consumption and deflates their markets. The way Ford increased wages so his employees could buy his cars...
Yes, there is very little hope for government intervention to fix these problems. And if governments do intervene, it is at least as likely that they intervene the wrong way and make the problem worse. So a solution based on businesses doing this because it is good for their bottom-lines is infinitely more desirable.

Companies in nascent industries can afford to do what Ford did -- and it is in their interest to do so in order to seed demand for their own products. Once an industry stabilizes and companies start competing on price, there is a much stronger incentive to cut costs (and wages with them) than to seed demand that may be filled by cheaper competitors. The question is whether the emerging industries of today and tomorrow will generate enough upward pressure on wages to make up for the downward pressures from the rest of the economy. I wonder which way it will play out.
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Post by b_A Wed Apr 23, 2014 8:07 pm

Idéfix wrote:
Merlot Daruwala wrote:
Idéfix wrote:
confuzzled dude wrote:
Merlot Daruwala wrote:
Get used to it. The balance of power between providers of capital and providers of labor is definitely shifting towards the former as a consequence of new technologies making the latter redundant. Over time, wages will only keep falling, because more and more jobs will get automated away at a faster rate than new jobs are created. So unemployment will only go up on a secular basis.

But on the other hand, people will get so much more time to spend on Facebook (or its successors) and Candy Crush.
What would happen when consumer buying power stagnates or declines? I realize corporations are relying heavily on global consumer & growth potential but at somepoint global consumer will hit the ceiling as American consumer, result of corporate greed.
We may not be far from that ceiling. One possible interpretation of the 2008 financial crisis is as a result of the spending power of consumers peaking. Over the last 30 years, as the percentage of income earned by the vast majority has fallen while the rich got richer, the middle class coped in three ways: (a) more women participating full-time in the paid workforce to increase family incomes, (b) each worker working more hours, and (c) taking out more debt. Trend (a) has maxed out, and now labor force participation rates are on a decline with aging demographics. Trend (b) is severely limited with technology making several types of work redundant. Trend (c) reached a peak and crashed.

As technology continues to strengthen the hands of capital against labor, the economy becomes increasingly vulnerable to a vicious cycle: lower wages -> lower consumer demand -> lower margins -> lower wages. The pie will stop growing (or even start shrinking) and those who have the power will grab a greater slice of the pie, further worsening the problem.

This is why it is critical for governments to help keep the playing field level so that the reverse of that cycle is again possible: higher wages -> higher consumer demand -> higher margins -> higher wages. Incidentally, it is this approach that will yield higher actual profits -- although a thinner slice of a larger pie.

In another 10-20 years, it will become possible for people who have money to choose desirable attributes for their children: lower propensity for disease, greater memory, etc. As that inevitable future comes closer, if the socioeconomic system continues to be stacked in favor of the rich and against the poor, we will see a world where the rich can entrench their socioeconomic advantage into biology. Children of rich parents will be inherently healthier, smarter, better-looking, etc. - i.e. more deserving of success in a system based on capabilities -- than those of poor people.
Scary stuff. Besides government intervention, the other more potent factor could be that businesses themselves realize that depressing wages infinitely is not sustainable because it pinches consumption and deflates their markets. The way Ford increased wages so his employees could buy his cars...
Yes, there is very little hope for government intervention to fix these problems. And if governments do intervene, it is at least as likely that they intervene the wrong way and make the problem worse. So a solution based on businesses doing this because it is good for their bottom-lines is infinitely more desirable.

Companies in nascent industries can afford to do what Ford did -- and it is in their interest to do so in order to seed demand for their own products. Once an industry stabilizes and companies start competing on price, there is a much stronger incentive to cut costs (and wages with them) than to seed demand that may be filled by cheaper competitors. The question is whether the emerging industries of today and tomorrow will generate enough upward pressure on wages to make up for the downward pressures from the rest of the economy. I wonder which way it will play out.

Am I reading that right? From a big-government-Obama supporter ?

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Post by MaxEntropy_Man Wed Apr 23, 2014 8:14 pm

b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically. the biggest expansion of govt in history occurred under dubya.
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Post by truthbetold Wed Apr 23, 2014 8:45 pm

What economics school teaches that capitalist will increase pay so that his employees can buy next version of I phone or space travel ticket?

What about demand and supply?  

Those labor skills that were not required  nor make money for the capital will be discarded.  Those skills that are required will be paid based on supply and demand. 

US capitalist has the entire world at his call. He will move a company, started by his grandfather and made money for his family for more than hundred years, to a North carolina location from central new york for the sake of few million dollars of incentives. He left 100s of families destitute because it does not make economic sense for him. 

So stop day dreaming. Capital follows profit. Social engineering is a sporadic event that will happen randomly because people can think. But it cannot replace capitalist principles.


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Post by b_A Wed Apr 23, 2014 8:46 pm

MaxEntropy_Man wrote:
b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically. the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?

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Post by MaxEntropy_Man Wed Apr 23, 2014 8:53 pm

b_A wrote:
MaxEntropy_Man wrote:
b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically.  the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?

the jury is out on that. i'd like to give it five years to judge if healthcare costs overall have gone up or down. too soon to judge. regardless of the cost question, i support universal healthcare. in my opinion it is a fundamental human right in a democratic society. find other places to trim the budget. let's have fewer nukes, fewer useless coldwar era weapons and let's tax capital gains just like ordinary income, let's cut subsidies to oil companies, and close corporate tax loopholes.
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Post by truthbetold Wed Apr 23, 2014 8:58 pm

Idefix's future is a longway off.  There is a lot of world that needs capital and lot of those people have to get decent lifestyle.  That means there is lot of opportunity for capital to make profit.  

The rise of rest of the world also provides OECD countries lot of opportunity to make more high tech parts and sell them to the growing new world. One examples is Boeing and Gulfstream (makers of airplanes). 

However the problem (as pointed above by Merlot or someone) is rate of change. The key to OECD middle class ability to transform to new world is how well they can change and acquire new technical skills and reorganize their societies to new realities.  Germany seems to be adapting well through their export oriented economic strategy. Canada and Australia have become major raw material suppliers of the world. 

Give USA few more years to see how it will change and still stay at the top of the world.

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Post by truthbetold Wed Apr 23, 2014 9:17 pm

One other thought. Ford paid the wages he had to pay to buy peace with the labor union and spun a nice christmas story.

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Post by Idéfix Wed Apr 23, 2014 11:11 pm

b_A wrote:
Idéfix wrote:Yes, there is very little hope for government intervention to fix these problems. And if governments do intervene, it is at least as likely that they intervene the wrong way and make the problem worse. So a solution based on businesses doing this because it is good for their bottom-lines is infinitely more desirable.

Companies in nascent industries can afford to do what Ford did -- and it is in their interest to do so in order to seed demand for their own products. Once an industry stabilizes and companies start competing on price, there is a much stronger incentive to cut costs (and wages with them) than to seed demand that may be filled by cheaper competitors. The question is whether the emerging industries of today and tomorrow will generate enough upward pressure on wages to make up for the downward pressures from the rest of the economy. I wonder which way it will play out.

Am I reading that right? From a big-government-Obama supporter ?
Yes you are. I don't believe in big government any more than the Republicans did between the '40s and '70s -- the best time ever for the US economy. I believe the market is one of the most important and powerful institutions invented by our species. I prefer market-based solutions wherever they make sense. But I don't believe the market is perfect, just like people are not perfect. That is where the role of government comes in. I am not for unbridled, laissez-faire capitalism, and I am not for a government-controlled economy. I am for a market-driven, well-regulated economy.
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Post by smArtha Wed Apr 23, 2014 11:16 pm

Idéfix wrote:Those are good arguments. But arguments made for progressive taxation of income should apply to all sources of income -- whether income earned through work or income earned through investment.

In general, people have a higher entitlement towards their income (often tag it as earned it with their own sheer hard work and intellect/wisdom) and thus resist (through all 'acceptable' legal/lobbying or other mechanics that can work) any attempts towards a more equitable distribution. So taxing incomes always divides the capable and the 'less' capable with the former protecting what they think is their 'fair and just' right. Even when they partake some of it they often display a charity mind set for such an act. 

However, in reality, just think of any avenue of value/wealth generation, be it the ancient agriculture/farming, medieval small or large scale industry or even the modern high tech ones, it is virtually impossible to generate any value or worth purely out of intellect and hard work without directly or indirectly consuming existential resources. These resources, be they in any form/variant of the five elements,  are not created by any human or his ancestors and by definition every creature (and definitely all humans) have equal proportional rights on. And the Govt. which is the custodian of such resources, can demand either fair equity for committing such an essential investment on behalf of its citizens or extract the worth via some progressive pricing/taxation tied to the resource availability and its consumption by the entity (person or business) concerned. And this is the basis for my consumption based taxation. 

It is high time we change the direction of debate from - I'm the smart guy or worked my ass off to , to what is the relative value/worth produced w.r.t to the resources consumed. There are no free lunches and you or me or anyone should not be giving away our fair/proportional share of these resources 'freely' without a guarantee of continued returns to any corporate or individual. If I own a piece of land, I may not be capable of generating any value with it by myself, but the very fact that I commit that to a builder implies I'm entitled to a fair share on the returns. And this holds true for any or all of the resources of the nation or world at large.

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Post by Idéfix Wed Apr 23, 2014 11:18 pm

b_A wrote:
MaxEntropy_Man wrote:
b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically.  the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.

Obamacare was a market-based solution to the huge problem of uninsured patients in this country. The solution was developed by GOP-affiliated think-tanks and first demonstrated in action by Mitt Romney. If it was "big government," Romney would not have touched it with a barge pole.
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Post by Idéfix Wed Apr 23, 2014 11:24 pm

smArtha wrote:
Idéfix wrote:Those are good arguments. But arguments made for progressive taxation of income should apply to all sources of income -- whether income earned through work or income earned through investment.

In general, people have a higher entitlement towards their income (often tag it as earned it with their own sheer hard work and intellect/wisdom) and thus resist (through all 'acceptable' legal/lobbying or other mechanics that can work) any attempts towards a more equitable distribution. So taxing incomes always divides the capable and the 'less' capable with the former protecting what they think is their 'fair and just' right. Even when they partake some of it they often display a charity mind set for such an act. 

However, in reality, just think of any avenue of value/wealth generation, be it the ancient agriculture/farming, medieval small or large scale industry or even the modern high tech ones, it is virtually impossible to generate any value or worth purely out of intellect and hard work without directly or indirectly consuming existential resources. These resources, be they in any form/variant of the five elements,  are not created by any human or his ancestors and by definition every creature (and definitely all humans) have equal proportional rights on. And the Govt. which is the custodian of such resources, can demand either fair equity for committing such an essential investment on behalf of its citizens or extract the worth via some progressive pricing/taxation tied to the resource availability and its consumption by the entity (person or business) concerned. And this is the basis for my consumption based taxation. 

It is high time we change the direction of debate from - I'm the smart guy or worked my ass off to , to what is the relative value/worth produced w.r.t to the resources consumed. There are no free lunches and you or me or anyone should not be giving away our fair/proportional share of these resources 'freely' without a guarantee of continued returns to any corporate or individual. If I own a piece of land, I may not be capable of generating any value with it by myself, but the very fact that I commit that to a builder implies I'm entitled to a fair share on the returns. And this holds true for any or all of the resources of the nation or world at large.
Centuries of economic theory arguments have been had on this specific question of resource rents. I think it is a good idea to introduce more transparent costs of resource usage, including carbon impacts. If done right, it would incentivize the right behaviors (generating value) and penalize the wrong ones (using scarce resources, creating pollution). But I am not optimistic about the political prospects of such a scheme succeeding. Oil & gas companies won't like it, and agribusiness companies will hate it too -- each group for its own reasons. When those two get together, they can kill any bill in Congress.
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Post by Idéfix Wed Apr 23, 2014 11:45 pm

truthbetold wrote:Idefix's future is a longway off.
I wouldn't be so sure. Check this out: http://www.ted.com/talks/harvey_fineberg_are_we_ready_for_neo_evolution

truthbetold wrote:However the problem (as pointed above by Merlot or someone) is rate of change. The key to OECD middle class ability to transform to new world is how well they can change and acquire new technical skills and reorganize their societies to new realities.  Germany seems to be adapting well through their export oriented economic strategy. Canada and Australia have become major raw material suppliers of the world. 

Give USA few more years to see how it will change and still stay at the top of the world.
Yes, the rate of change is key. As technological change accelerates, education becomes that much more important. Germany seems to be adapting well because it has excellent higher education with a high degree of public funding. Students at the best German universities pay less than $1,000 a semester in tuition. This is made possible by higher tax rates than in the US -- the top marginal tax rate there is 45%.
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Post by Idéfix Wed Apr 23, 2014 11:49 pm

truthbetold wrote:One other thought. Ford paid the wages he had to pay to buy peace with the labor union and spun a nice christmas story.
The unions were not so strong yet. Unions picked up strength only during the Great Depression under FDR. The real reason was that he wanted to reduce turnover and keep his production line working with people who were motivated to work -- so he consciously decided to offer a wage that was twice what a man could hope for elsewhere in town.
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Post by Idéfix Thu Apr 24, 2014 12:16 am

The 2008 financial crisis and the subsequent recession have often been compared to the 1929 crisis and the subsequent depression. Six years after the 1929 crash, the balance between capital and labor was corrected by Congress with the passage of the National Labor Relations Act of 1935. The act gave labor the right to bargain collectively, and required employees to bargain with unions. Prior to this act, employers could legally discriminate against union members, and could bust union activity.

The 2008 crash is about six years behind us now. There is nothing similar on the horizon to correct the imbalance now.
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Post by Idéfix Thu Apr 24, 2014 12:20 am

Idéfix wrote:
truthbetold wrote:Idefix's future is a longway off.
I wouldn't be so sure. Check this out: http://www.ted.com/talks/harvey_fineberg_are_we_ready_for_neo_evolution

truthbetold wrote:However the problem (as pointed above by Merlot or someone) is rate of change. The key to OECD middle class ability to transform to new world is how well they can change and acquire new technical skills and reorganize their societies to new realities.  Germany seems to be adapting well through their export oriented economic strategy. Canada and Australia have become major raw material suppliers of the world. 

Give USA few more years to see how it will change and still stay at the top of the world.
Yes, the rate of change is key. As technological change accelerates, education becomes that much more important. Germany seems to be adapting well because it has excellent higher education with a high degree of public funding. Students at the best German universities pay less than $1,000 a semester in tuition. This is made possible by higher tax rates than in the US -- the top marginal tax rate there is 45%.
Another interesting thing about Germany: organized labor has a much stronger voice in German capitalism than it does in its American counterpart.
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Post by Kris Thu Apr 24, 2014 2:20 am

Idéfix wrote:
smArtha wrote:
Idéfix wrote:Those are good arguments. But arguments made for progressive taxation of income should apply to all sources of income -- whether income earned through work or income earned through investment.

In general, people have a higher entitlement towards their income (often tag it as earned it with their own sheer hard work and intellect/wisdom) and thus resist (through all 'acceptable' legal/lobbying or other mechanics that can work) any attempts towards a more equitable distribution. So taxing incomes always divides the capable and the 'less' capable with the former protecting what they think is their 'fair and just' right. Even when they partake some of it they often display a charity mind set for such an act. 

However, in reality, just think of any avenue of value/wealth generation, be it the ancient agriculture/farming, medieval small or large scale industry or even the modern high tech ones, it is virtually impossible to generate any value or worth purely out of intellect and hard work without directly or indirectly consuming existential resources. These resources, be they in any form/variant of the five elements,  are not created by any human or his ancestors and by definition every creature (and definitely all humans) have equal proportional rights on. And the Govt. which is the custodian of such resources, can demand either fair equity for committing such an essential investment on behalf of its citizens or extract the worth via some progressive pricing/taxation tied to the resource availability and its consumption by the entity (person or business) concerned. And this is the basis for my consumption based taxation. 

It is high time we change the direction of debate from - I'm the smart guy or worked my ass off to , to what is the relative value/worth produced w.r.t to the resources consumed. There are no free lunches and you or me or anyone should not be giving away our fair/proportional share of these resources 'freely' without a guarantee of continued returns to any corporate or individual. If I own a piece of land, I may not be capable of generating any value with it by myself, but the very fact that I commit that to a builder implies I'm entitled to a fair share on the returns. And this holds true for any or all of the resources of the nation or world at large.
Centuries of economic theory arguments have been had on this specific question of resource rents. I think it is a good idea to introduce more transparent costs of resource usage, including carbon impacts. If done right, it would incentivize the right behaviors (generating value) and penalize the wrong ones (using scarce resources, creating pollution). But I am not optimistic about the political prospects of such a scheme succeeding. Oil & gas companies won't like it, and agribusiness companies will hate it too -- each group for its own reasons. When those two get together, they can kill any bill in Congress.

>>>I have to admit this is one area where the classical supply/demand model comes up short. It is true that in the long run the market could work all this out, but as some wag (an economist?) weighed in once, in the long run we are all dead. Here is the dilemma though: who is going to bell this cat? Just as there are lobbyists who are looking out for #1 on the right, there is an equal and opposite segment on the left which cannot be entrusted with powers, given its power-hunger/incompetence/both.

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Post by truthbetold Thu Apr 24, 2014 3:35 am

Kris
http://en.m.wikiquote.org/wiki/John_Maynard_Keynes.
Keynes said "in the long run we are all dead".

Yes. Human action is required to bring out of control situations to restore balance to supply and demand.

Yes. Globalization will require Usa to find a different model of wealth distribution. Acquiring new technical skills is a major key.
Nimbleness of institutions is another.

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Post by truthbetold Thu Apr 24, 2014 4:04 am

Idefix
http://www.forbes.com/sites/drucker/2013/05/14/would-ford-double-wages/
Fact: ford has to hire 60000 labor to retain 10000.
Henry ford was a crazy guy who did things his own way. He was a dictator. But at the recommendation of an economist he decided to go for this high wages of his day.
I am sure ford was also smart to recognizr that it will also help him sell his product better. But that is not the primary motivator.
However in reality it was a game changing event.
Note that wages were very high for silicon valley technically skilled people. Why?
My other argument is the current wage information is not representative of long term trend. It has a significant distortion due to lack of recovery from 2008 recession in Usa.

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Post by truthbetold Thu Apr 24, 2014 4:16 am

Ide
yes. The globalization, technical skill paucity and knowledge oriend economy growth has made us workers more expandable and less able to demand higher wages across the board.
Us economy needs to address that trend but it has not yet found an answer.
My point is govt policies play a role but this strategic shift is bigger than just Bush tax cut policy. It cannot be solved only by tinkering with taxes although that is a start.
It needs the us to acknowledge a different culture suitable for knowledge oriented societies. A more education driven approach. Some kind of mix between tiger mom in learning and silicon valley entrepreneurial approach in capital usage.

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Post by truthbetold Thu Apr 24, 2014 4:24 am

Ide
http://www.thedailybeast.com/articles/2014/01/06/henry-ford-understood-that-raising-wages-would-bring-him-more-profit.html

Read third paragraph of then prevailing labor conditions.

What ford did was bold and forward thinking but it is based on ground realities.

Ford deserves credit for improving wages whether he did it intentionally or not. But he is major contribution to humanity is the successful demonstration of continuous production lines at ford.

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Post by confuzzled dude Thu Apr 24, 2014 8:02 am

truthbetold wrote:Kris
http://en.m.wikiquote.org/wiki/John_Maynard_Keynes.
Keynes said "in the long run we are all dead".

Yes. Human action is required to bring out of control situations to restore balance to supply and demand.

Yes. Globalization will require Usa to find a different model of wealth distribution. Acquiring new technical skills is a major key.
Nimbleness of institutions is another.
Not sure I followed it. Do you think corporations will stop bringing people over on L-1 visas if American middle class steps up and acquires IT skills? Do you think iPhone which was designed in the US, help create jobs for American middle class?

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Post by truthbetold Thu Apr 24, 2014 11:06 am

Cd,
good question.
the era of iphone manf. jobs in usa is over.
i am talking about 1970 Pittsburgh, its steel milos, life long jobs and stable neighborhoods. and then rust belt story and now 2014 Pittsburgh with clean air, high tech jobs etc.
more detail later.

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Post by b_A Thu Apr 24, 2014 1:04 pm

Idéfix wrote:
b_A wrote:
MaxEntropy_Man wrote:
b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically.  the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.
I don't mean the expansion under Dubya but I understand obamacare eased the eligibilty rules for medicare and expanding it to cover more people.

Idéfix wrote:
Obamacare was a market-based solution to the huge problem of uninsured patients in this country. The solution was developed by GOP-affiliated think-tanks and first demonstrated in action by Mitt Romney. If it was "big government," Romney would not have touched it with a barge pole.

LOL. That's such a Rashmunesque argument.

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Post by Idéfix Thu Apr 24, 2014 2:00 pm

b_A wrote:
Idéfix wrote:
b_A wrote:
MaxEntropy_Man wrote:
b_A wrote:
Am I reading that right? From a big-government-Obama supporter ?

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically.  the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.
I don't mean the expansion under Dubya  but I understand obamacare eased the eligibilty rules for medicare and expanding it to cover more people.
Did it? Any references to back up your understanding of easing of eligibility rules for Medicare?

b_A wrote:
Idéfix wrote:
Obamacare was a market-based solution to the huge problem of uninsured patients in this country. The solution was developed by GOP-affiliated think-tanks and first demonstrated in action by Mitt Romney. If it was "big government," Romney would not have touched it with a barge pole.

LOL. That's such a Rashmunesque argument.
Haha, it does sound like that. But it is a fact that the heart of Obamacare was invented by the Heritage Foundation.

http://www.forbes.com/sites/theapothecary/2011/10/20/how-a-conservative-think-tank-invented-the-individual-mandate/

Attacking Obamacare as "big government" is a convenient political lie on the part of the conservative extremists who have taken over the GOP. Obamacare was a conservative idea that the Democrats decided to embrace as the price they needed to pay in order to get millions of uninsured Americans into the system. The "big government" alternative to Obamacare is a single-payer, government-run healthcare system like the one that prevails in Canada and much of Europe.
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Post by b_A Thu Apr 24, 2014 3:17 pm

Idéfix wrote:
b_A wrote:
Idéfix wrote:
b_A wrote:
MaxEntropy_Man wrote:

this is such a canard that the so called conservatives like to push. the question is why you are accepting it uncritically.  the biggest expansion of govt in history occurred under dubya.
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.
I don't mean the expansion under Dubya  but I understand obamacare eased the eligibilty rules for medicare and expanding it to cover more people.
Did it? Any references to back up your understanding of easing of eligibility rules for Medicare?
Eligibility determinations by state for Medicaid and CHIP also increased since the launch of Obamacare exchanges, according to data released Friday.

From October through January, 8.9 million people had been determined eligible for Medicaid and CHIP. That tally grew to 11.7 million as of February, according to CMS.

http://www.cnbc.com/id/101555492


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Post by Idéfix Thu Apr 24, 2014 3:47 pm

b_A wrote:
Idéfix wrote:
b_A wrote:
Idéfix wrote:
b_A wrote:
Well, dubya set the bar so low in all aspects (except preventing another 9/11) that it is not a valid comparison.
Is the obamacare and medicare expansion not considered govt expansion ?
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.
I don't mean the expansion under Dubya  but I understand obamacare eased the eligibilty rules for medicare and expanding it to cover more people.
Did it? Any references to back up your understanding of easing of eligibility rules for Medicare?  
Eligibility determinations by state for Medicaid and CHIP also increased since the launch of Obamacare exchanges, according to data released Friday.

From October through January, 8.9 million people had been determined eligible for Medicaid and CHIP. That tally grew to 11.7 million as of February, according to CMS.

http://www.cnbc.com/id/101555492

As I already said upthread (see bold above), that is Medicaid not Medicare.
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Post by b_A Thu Apr 24, 2014 4:00 pm

Idéfix wrote:
b_A wrote:
Idéfix wrote:
b_A wrote:
Idéfix wrote:
Medicare expansion (I assume you mean Part D for prescription coverage) was under Dubya. Obamacare is based on private insurers underwriting coverage. The government only runs a market -- the health insurance exchanges where consumers can buy from the full range of available plans. If you are thinking of the Medicaid eligibility provisions of the ACA, that is not a federal program, but limited-time funding for an option for states to enroll more people into existing, state-level programs.
I don't mean the expansion under Dubya  but I understand obamacare eased the eligibilty rules for medicare and expanding it to cover more people.
Did it? Any references to back up your understanding of easing of eligibility rules for Medicare?  
Eligibility determinations by state for Medicaid and CHIP also increased since the launch of Obamacare exchanges, according to data released Friday.

From October through January, 8.9 million people had been determined eligible for Medicaid and CHIP. That tally grew to 11.7 million as of February, according to CMS.

http://www.cnbc.com/id/101555492

As I already said upthread (see bold above), that is Medicaid not Medicare.
But isn't Medicaid a government program too ?

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Post by Idéfix Thu Apr 24, 2014 4:49 pm

b_A wrote:But isn't Medicaid a government program too ?
It is not a federal program, but a state program. Obamacare does not expand the program, but gives state governments the option to expand the program with some limited-time funding support.

The bigger point is that Obamacare is not a "big government" approach to healthcare. A "big government" approach to healthcare would have resulted in a single-payer system controlled by the government. Like most industrialized countries do it.
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Post by Idéfix Thu Apr 24, 2014 5:12 pm

More about the conservative, market-driven principles of Obamacare. The article is written by a fellow at a prominent conservative think-tank.

http://www.nytimes.com/2012/09/30/opinion/sunday/why-obamacare-is-a-conservatives-dream.html?pagewanted=all&_r=0

... the architecture of the Affordable Care Act is based on conservative, not liberal, ideas about individual responsibility and the power of market forces.

This fundamental ideological paradox, drowned out by partisan shouting since before the plan’s passage in 2010, explains why Obamacare has only lukewarm support from many liberals, who wanted a real, not imagined, “government takeover of health care.” It explains why Republicans have been unable since its passage to come up with anything better. And it explains why the law is nearly identical in design to the legislation Mr. Romney passed in Massachusetts while governor.

The core drivers of the health care act are market principles formulated by conservative economists, designed to correct structural flaws in our health insurance system — principles originally embraced by Republicans as a market alternative to the Clinton plan in the early 1990s.

... The individual mandate recognizes that millions of Americans who could buy health insurance choose not to, because it requires trading away today’s wants for tomorrow’s needs. The mandate is about personal responsibility — a hallmark of conservative thought.
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Post by Merlot Daruwala Thu Apr 24, 2014 8:42 pm

speaking of the growing inequality between labor and capital, here's an essay that nicely summarizes how various economists have analyzed the issue: http://google.com/newsstand/s/CBIwrOSVrxo
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