As states cut the budget for public schools, lay off teachers, increase class sizes, fire librarians and social workers, guidance counselors and teacher aides, we hear the same refrain: Sorry, the money’s all gone.
But is it? Read this article and you will find where the money went.
Diane Ravitch's blog 
Before we have a long thread about how the owner of this blog is shrilly and stridently “fomenting class warfare,” a little perspective from someone in the know:
“It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”
Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.
“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.””
Link: http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?_r=0
Borrowing from someone who also belongs to that rarefied top 1% of 1%: there is a 98% chance that Warren Buffett got, and would still get, a “satisfactory” on his answer.
Thank you, Bill Gates!
🙂
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Apologies in advance for this rant, but I have to say that the term “the 1-percent” drives me a batty. On the one hand, I realize that it’s not meant to be literal. On the other hand, I’m really never quite sure what it’s supposed to be a shorthand for, especially when people react to the term “the 1 percent” by invoking people like Gates, Buffett, Bloomberg, etc. Leaving aside the problem of measuring “income” versus “wealth,” I ask you and anyone else, who are we talking about when we talk about the 1 percent? Are we talking about a $400k salary man with three-car garage and a summer house who may or may not wake up in the middle of night in terror at the possibility that he’s going to be fired? Or are we talking about people whose wealth literally cannot be comprehended by the human mind except through abstraction and analogy, like the way the human mind cannot conceptualize four-dimensional space or the relative scale of their lives versus universal time? This is an essential distinction in any discussion about income inequality, and particularly when the discussion is concerned with disparities in the relative power of citizens (and corporations) in a democracy. If I’m going to engage in class warfare, I at least want to know who I’m shooting at.
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It “drives me a bit batty,” that is. Or just “drives me batty.” Let’s eschew surplusage and go with the latter.
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“the relative scale of their lives versus universal time?”
You mean like the bacteria on a mouse turd in the subway in Tokyo on the third rock from the sun in our galaxy?
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More or less.
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Generally speaking, the “rich” are those that earn more than you earn. If you want to compare yourself to people who happen to live in the US, being in the top 1% requires an annual income of little over $343,000. If you want to be in the top 1% in the world, it requires an income of $52,000. Frame of reference is everything.
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FLERP, there really is a 1%. They are obscenely wealthy
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I must be even worse at explaining myself than I fear.
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The “1%” is a misnomer… but the “.01%” sounds scarier even though it more accurately reflects what is going on in our economy. As Teaching Economist points out on a global level most of the US is the 1%… but on a global INFLUENCE level it is the .01% who are controlling more and more of the capital…
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TE,
With that kind of 300+K per year, does that place someone at the bottom of the one percent? I thought 1% was on a spectrum. what do people earn when they are in the top 50% of the one pmercent?
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The folks in the top half percent earn more than $343,000. I am sure you can find the figure somewhere out on the net.
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Apologies accepted, FLERP. 😉
Actually, your questions are good ones and I’ll try to deal with them, one at a time.
Actually, it IS meant literally, at least among most people who invoke the term. It provides a good set of boundaries—however fluid and imprecise they may be, to separate the very richest part of our population from everyone else.
And yes, it DOES refer to wealth or “total assets minus liabilities” as opposed to yearly income.
While there is some difference of opinion on this, there appears to be a consensus among those who’ve studied it, that a person in the top 1% would have a minimum net worth of $14 million. (Or as it is known to Bill Gates, “pocket change”.)
However, WITHIN the top 1% there are great variations; many economists have pointed out that the top 0.1% is where the absolutely, astonishingly, audaciously WEALTHY reside.
That rarefied milieu is the home of the Ruling Elite, the top 10% OF the 1%.
And so, there is actually little to be confused or uncertain about here. There is a concentration of wealth at the very top of our society, and, contrary to what their hired apologists will tell you, their obscene share of wealth DOES create more struggles for the shrinking middle class and more pain and suffering for those households in the bottom third of income earners.
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TE, I know they earn more than that. The question is how much more and how does it change as you go up each percentile?. . . . That was my question.
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I don’t have the specific numbers, but I recall seeing them in the past. My memory is that the graph looks like an exponential curve, with income increases going essentially vertical as they approach the 100th the percentile. Which is why the term “the 1 percent” is useless for conceptualizing real financial or political power. The wealthiest people are to “the 1 percent” as a black hole is to the laws of physics. Anyone who doesn’t appreciate that is grossly underestimating how much wealth and power are concentrated at the top.
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Oooooh, dat’s so scary!
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Is that a Count Scary reference?
If so, all calculations courtesy of my Crew of Fine Boys.
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Because they own the lawmakers.
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They own everything! The kids say they are going to use hood economics and stop giviing them their $
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Not sure if everyone saw the Forbes report, but in case you missed it, Microsoft Corp. co-founder Bill Gates is still America’s richest man, taking the top spot in the Forbes 400 list for the 20th-straight year with a net worth of $72 billion. The Koch brothers, the Walmart heirs and Mayor Bloomberg enjoy being with him in the top ten list. Seems the billionaire boys club made even more money this year. Wonder why?
Just think what even a small portion of their combined money could do for children and schools if it was used positively.
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Bill Gates’ wealth could increase public school spending by a little over 10% for a year. Add in Warren Buffet’s wealth and you might get a 9% increase for another year.
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TE, Gates uses his wealth to leverage failed and failing ideas? What a waste!
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I was responding to a post about all the good that could be done with a small fraction of the wealth owned by those who earn over $343,000 a year. The country spends over $640,000,000,000 a year on public education. A billion here or there gets lost in rounding.
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Hey TE, you’re being typically disingenuous here, trying to sidestep the obvious. Who said anything about Gates liquidating ALL of his assets and using it for public education?
Who is the clueless one—or the crafty one—in this instance?
If Gates is going to receive high praise—and he does, almost always—for his donations to various causes, projects and charities, then why couldn’t he take THAT money and put it to better use?
Why can’t he spend the hundreds of millions every year helping the schools IN HIS COMMUNITY, for instance? I can guarantee you, Mr. “Economist”, that a “paltry” $100 million would NOT be a mere “rounding error”, here in Western Washington, or, I suspect, any school district in the state.
Even as a one time only contribution, it would VASTLY improve the quality of education for thousands of students for years to come.
Is that to be scoffed at as well?
Bill Gates only spends money on “education” if it advances his political and ideological agenda. That’s it. He’s quite willing to lay out close to $8 million dollars to PURCHASE a law through paid signature gatherers and constant—and mendacious—TV ads to impose charter “schools” within our state, but he rarely does something for education unless there are Big Strings attached.
I wonder if Bill Gates is planning to send HIS children to one of these “fantastic” charters, if one ever actually opens in this state. (Most people think they never will, given the pending court challenge on its constitutionality, and the growing backlash from parents and taxpayers.
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I will try and find a more recent figure for Washington state, but in 2008 the state spent $9,331,539,000 on public schools (http://nces.ed.gov/pubs2010/2010326.pdf, table 2). The $100,000,000 dollar increase you talk about would represent a little over a tenth of one percent increase in spending fo a year.
Of course if that were to go to a single school district it would have a much larger impact on the budget and the inequality of funding across school districts.
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I think Gates has been losing wealth since the late 1990s. Heck of a decade for Bloomberg, though.
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I saw this list today. This gives new meaning to “Race to the Top”. It’s more like “Can you top Me $$$?”
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I believe that this post purports to be about the connection between the recent increases in the income of the top 1% and state education budget shortfalls. I read the article and the underlying study it cites, but neither explains what connection is, or where “where the money went.”
Other things being equal, income inequality is a bad thing overall. I believe that. But it’s not obvious to me how the *distribution* of income from 2009-2012 (the period cited in the article) has affected state education budgets, or state budgets generally. And the linked article has nothing to offer on that topic either.
Using a city rather than a state example, here’s a comparison of the revenue that NYC raised in various segments in 2009 and 2012:
* Real estate taxes — $12.8 billion in 2009, increased to $18.2 billion in 2012
* Sales taxes — $7.2 billion in 2009, decreased to $6.6 billion in 2012
* Personal income tax — $7.2 billion in 2009, increased to $8.7 billion in 2012
Would NYC have had greater revenue in these categories if there were less income inequality? If all we have in mind is income redistribution (i.e., we assume the same overall income growth but with less of that pie going to the top 1% and more going to the 99%), then the answer is “certainly not” with respect to personal income taxes (because you’d be moving income from higher tax brackets to lower tax brackets) and “probably” with respect sales taxes (because people with lower incomes spend a higher percentage of their income than people with higher incomes do). Those are the easy answers. Real estate taxes is a tougher one: on the one hand, greater income distribution could lead to higher home ownership rates; on the other hand, the super-rich may be driving property valuations higher in a way that has a bigger impact on the city’s tax receipts.
I’m not making a “trickle-down” argument here. I’m saying that the connection between income inequality and state/local education budgets is not clear to me. Is it clear to anyone else?
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Further to my comment about shifting income from higher to lower tax brackets, I should note that unlike the feds, NY and NYC tax capital gains as ordinary income. (I’m positive that’s true about NY. I’m almost positive it’s true about NYC, too. That I’m not absolutely certain about that is a good indication of how nonexistent my capital gains income is.)
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And what percentage IS that, FLERP?
The REAL gain, for ALL US citizens, would be if and when the FEDS start taxing this guys at a fair rate. Given that they “made” their money in a totally unproductive way and that it is more like gambling, they should probably be taxed in the 70 to 80 percent range, like all non-productive gamblers should.
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Top bracket is about 9% for NY state, and a little less than 4% for NYC.
70%-80% may risk some serious unintended consequences. I think most people underestimate, by a lot, the extent to which their own good fortune relies on the perpetuation of the pyramid scheme that is the modern economy. This is one of several things that keeps me in a state of near-debilitating panic and/or depression.
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FLERP, I’m not sure what your point is. The GINI Index (income) for the US is very high, at 45 percent, but if you look at the GINI wealth index, its EVEN HIGHER, at an absolutely mind-blowing 80 percent.
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1 is complete inequality; 0 is complete equality.
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it’s, of course, not its
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If you’re referring to my 6:25 pm post, I’m just raising the question of what the relation is between income inequality and state education budgets. The post notes that states are cutting education budgets and promises that the linked article will explain “where the money went,” implying that income inequality has created state budget shortfalls. But the article has nothing to say on that question. I find the question interesting though.
In case I wasn’t clear, I’m not questioning whether there is income or wealth inequality or whether those measures are growing. I understand the answer to all those questions is yes.
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My apologies, FLERP. You make a superb point there.
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Please correct me if I’m just being really stupid (artsy here, & can’t even read a financial statement– I’ve tried). My answer would be that we fund our public school system with property taxes. Income inequality means the top end can provide itself with excellent schools, the middle can barely manage adequate schools, and the bottom end cannot afford education at all.
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Instead of splitting hairs,let’s get to the heart of the matter. Excellent article by
Greg Palast, my hero. He hones in on our recently appointed Secretary of Commerce, fairy godmother to Barack Obama, Penny Pritzker’s role in all of this.
Let’s see who is really making the decisions for our corner of the world. Please read:
http://us4.campaign-archive2.com/?u=33e4ec877eed6a43863a4a92e&id=60e22b06aa&e=47c3c95e9a
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Great read! a refreshing slap in the face after a week of watching an-ordinary-guy-like-you ‘Hank’ Paulson peddle his non-apologia round the networks.
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“Instead of splitting hairs. . . ”
Do I smell pedantry lurking around here???
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Maybe this graph will help those visualize what the 1% is: http://www.economist.com/blogs/dailychart/2011/10/income-inequality-america
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