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Policy and Government

Visual Capitalist gives us the largest acquisitions of the “big five” tech companies.

Study: Dictators are bad for economies.

Michael Hobbes at HuffPo attacks the cronyism (the antithesis of capitalism!) endemic among American elites with a hard-hitting column The ‘Glass Floor’ Is Keeping America’s Richest Idiots At The Top: Elites are finding more ways to ensure that their children never run out of chances to fail.

America has a social mobility problem. Children born in 1940 had a 90% chance of earning more than their parents. For children born in 1984, the odds were 50-50.

Most accounts of this trend focus on the breakdown of upward mobility: It’s getting harder for the poor to become rich. But equally important is the decline of downward mobility: The rich, regardless of their intelligence, are becoming more likely to stay that way.

“There’s a lot of talent being wasted because it’s not able to rise, but there’s also a lot of relatively untalented people who aren’t falling and end up occupying positions they shouldn’t,” said Richard Reeves, a Brookings Institution researcher and the author of “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.″

“If we were becoming less of a class-bound society, stickiness at the top should have gone down,” Reeves said. “But the evidence shows that it’s gone up.”

Harvard, Stanford, Yale and Princeton admit only a tiny number of students each. In 2016, the University of Washington enrolled more low-income applicants than the entire student bodies of all four colleges combined. Among the nation’s top 10% of income earners, fewer than 1 in 20 attended the tiny number of “Ivy-plus” universities. Even if those elite schools enrolled low-income students exclusively, America’s abysmal social mobility statistics would barely budge.

The more important engine of elite entrenchment is the group of selective colleges that sit one rung lower in the rankings. More than half the children of the top 0.1% of income earners attend these schools, compared with fewer than 1 in 50 poor children.

In 2016, researchers sent hundreds of résumés to high-end law firms. They were identical in degrees and grade-point averages, but researchers tweaked the extracurricular activities to make some candidates seem rich (sailing, classical music) and others seem poor (track and field, country music). At the end of the study, upper-class men had been invited to 12 times more interviews than lower-class men. 

Other studies have found similar class-based sorting practices in elite professions. In a 2012 survey, more than half the hiring managers in corporate law and finance firms said “cultural fit” was their No. 1 criterion for assessing candidates in job interviews. Some human resources managers screened out qualified candidates who had the “wrong” extracurricular activities. Others admitted to throwing out applicants without elite college credentials. 

There is also the question of diversity. If social mobility continues to fall, America’s ruling class will become increasingly insular, considering almost exclusively the perspectives of wealthy heirs and elite college graduates. Already, 90% of families that earn over $118,000 per year are white. Of the 102 new senators and representatives elected in 2018, more than half attended the most selective colleges in the country. Eight of the nine Supreme Court justices graduated from just two law schools.

“There’s a fixed number of people who will be upper class in the future, and elites have the tools to make sure that their children are among them,” Fishkin said. “But the more power they have and the more they’re worth, the more damaging it will be to everyone else.”

Monetary

Jeff John Roberts at Fortune Magazine writes about the Committee’s own Stephen Moore and Ralph Benko in Trump’s Former Fed Pick Stephen Moore Announces Cryptocurrency to Compete With Central Banks.

TheStacker provides a brief pictorial history of gold, the gold standard, and which countries have the most.  (Spoiler Alert:  The USA has the most gold, by a country mile — or more.)

Coindesk reports on Stephen Moore’s new stablecoin venture.

Tax

Michael R. Strain, at Bloomberg, explains exactly how “The Rich Really Do Pay Higher Taxes Than You: By any measure, the overall U.S. tax system is progressive.”

For Democrats, the Overton window — the range of ideas that are not considered extreme — has shifted markedly to the left in the last few years. It now seems that the window for discourse about economic reality is moving as well.

Take the headline on David Leonhardt’s recent New York Times column, summarizing the research of economists Emmanuel Saez and Gabriel Zucman, who are advisers to Elizabeth Warren: “The rich really do pay lower taxes than you.” No, they do not.

“Contrary to the narrative that seems to be forming on the political left, the U.S. federal tax code is very progressive. According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available.

“This is half of the story. When assessing the progressivity of the U.S. federal system, it makes sense to look at both taxes and the means-tested transfer payments — Medicaid, food stamps and Supplemental Security Income — that those taxes fund.

“If you subtract these payments from federal taxes paid, the tax rate for the top 20% of households (including the top 1%) is unchanged, as those households don’t receive means-tested benefits. The tax rate for households in the middle 20% drops considerably, from 14% to 9%. And the rate for the bottom 20% of households plummets to minus 70%. Those households receive $49 in transfer payments for every $1 they pay in federal tax.”

Erica Sandburg at City Journal explains why San Francisco’s adding $250M-$300M in new taxes on companies with revenue of $50M/year (doubling its homelessness budget) will simply pad the pockets of social workers who currently make $175,000/year. It will not help the ~10,000 homeless; the vast majorities are on the street due to addiction or mental illness. A tax on revenue, not profit, will drive successful business elsewhere, contracting the city’s tax base and compounding its problems.

The Blog’s Editor in Chief, Ralph Benko, writing at The Capitalist League explains why capitalism is antithetical to cronyism and praises Michael Hobbes at the HuffPo attack on the cronyism endemic among American elites. He presents a hard-hitting column headlined The ‘Glass Floor’ Is Keeping America’s Richest Idiots At The Top: Elites are finding more ways to ensure that their children never run out of chances to fail, which in turn draws the work of Richard Reeves, a Brookings Institution researcher and the author of “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.″