Bob Cropf

2010 Budget

In 1 on February 26, 2009 at 9:17 PM

The NYT has a brief article about the newly released 2010 budget.

There was something that caught my eye:

Before becoming Mr. Obama’s top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners.

Reminiscent of Okun’s Leaky Bucket, only I would bet that bucket isn’t that leaky… which has prompted another thought, what happens to the money “leaked” from said bucket. Borrowing from Stone, one person’s inefficiency could very well be another person’s job. So, that being said, the administrative costs of collecting money means employment for IRS agents, sales for computer companies, office suppliers, etc. How much of that actually gets funneled back into the pockets of the wealthy through those very mechanisms – computer sales, office supplies; and how much might actually continue to trickle down – a decent clerical or janitorial job for low-income, high school graduate or a secure stable job for a middle-income college graduate? Would the answers to these questions affect how much “leakiness” is deemed acceptable?

-KC

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