Robert Shiller: Address Income Gap, Tie It To Tax Rate (Video)

The US might be in the midst of a second housing and financial bubble, according to economist and Yale Professor Robert Shiller. Shiller and Financial Times commentator Martin Wolf were interviewed by Fareed Zakaria Sunday.

Zakaria asked Shiller and Martin to weigh in on the topic of executive pay at bailed out banks. Both agreed that they were "annoyed" and "irritated" with the issue.

Shiller warned that if the income gap is not addressed, it could do major harm to the US and create a country that even rich people don't want to live in. The professor proposed a tax tied to the income gap.

Shiller, an economist who foresaw the financial crisis, questioned sharp increases in urban housing prices and admitted that he's not entirely sure about what's fueling with the economic recovery.

According to Shiller, the US recovery is not purely because of the stimulus. Shiller believes that the recovery was spurred by "spontaeous" public confidence in the US government's response to the crisis--not necessarily the scope or quality of the response, but confidence that the crisis was being addressed.

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Comments

[StickMarket]

Why is education & health care still so expensive for so many, especially in the 'most prosperous nation on earth'? WHy are there no jobs? Why no unemployment extension?
good articles; http://financeopinionss.blogspot.com

[seanseamour]

Come again, we should ponder America's outcome without Reaganomics,
what would have happened without the phenomenal concentration of wealth amongst the few,
what wealth and vibrancy of our economy without the S&l /Enron/current crisis,
with conservative versus hyper-inflated home values gone bust with the life savings of so many,
with a stronger community minded versus poorer scratching middle class,
I could go on with the legacy of corporate oligarchy that has perverted our institutions, finally the righteous hubris that led us to Iraq for oil...
Save reform on all fronts the disaster continues, only the blind deny it.

[PunxatawnyPhil]

You nailed it.

[seanseamour]

Shiller is right in the sense that many Americans do not or may not wish to live in our country in the future, a reality today that in effect suits the extreme fringe of haves who wish just perpetuation of greed is good, wannabes who think there are still coattails leading to the pinnacle, finally perhaps the most obtuse, frontier dreamers that believe the Indian war parties are still roaming and need to keep their guns ready and prepped.
A sad state of affairs where, because of a feeling of hopelessness that America might change many prefer to leave, where the lack of perspective and understanding of societal advances elsewhere to emulate or to encourage positive activism is branded, labeled, denigrated. We are so insular we rather revel in the ugliness of word and form, the truth be asserted by the loudest and often most shortsighted, most definitely the most self serving.
Obviously reverse immigration will not breach the floodgates, there are insulatory alternatives for the few from gated communities to sectarian followings, for the many by simple lack of opportunity. I fear the notion of too big to fail may be misplaced, we are rapidly reaching that paradigm as a nation, then again, perhaps it is the solution. America dwells on the misplaced belief of best in everything, as long as that stays insular the rest of the world will just pass us by, our and their only fear is waking the extremes in quest of a calling.

[dart79]

Shiller does not understand why the market is doing well because the game is rigged He is totally right that if inequality continues there will be a revolution.

[CDCtrading]

Economic policy needs to change. For the past 30 years only the top 1% of earners have been the major beneficiaries of economic recoveries while everyone else lags. We need policies and programs that will hlpe low and middle income people. More shovel ready projects. Universal health care

good articles; http://financeopinionss.blogspot.com

[givesflack]

There is a crisis of denial and evasion to the point of national psychosis perpetuated by the extreme Right Wing Free Market forces who are running this country into the ground. They are doing this by bankrupting the nation because of Free Market policies and not otherwise. These have been the only policies in place since Reagan. Ask Greenspan and Bush and Goldman Sachs how that worked out. Just look at all the loons on the right controlling the GOP coming out of nowhere because these are the nut jobs who have been the driving forces in this country for the last 30 years and behind our economic debacle. Worse than the to_wers coming down the pillars of Democracy were sold to the too big to fail bidders of Wall Street for recycling and forged onto the pirate ships', the USS Neo_con, hull. Go Republicans! until you are outlawed forever. I'm still thinking of moving away from crazy land still however...

[Levonsky]

This is what I know.

When Bush and the gop ran through the tax cuts for his rich buddies my property taxes doubled.
When I asked my county commissioner why they doubled my property taxes he said they had to compensate for the loss of federal revenue.

The tax burden was shifted lower down the income scale.
Mission accomplished.
Lesson over.

[Peter007]

Federal revenue to the states remained the same. Property taxes went up because home prices went up and people didn't mind paying higher property taxes as long as they were making lots of money on their homes. No body cared about spending more on property taxes. All the money from property taxes went to local government salaries and benefits. Income for local and state government workers went up more than the private sector workers. When the economy contracted, private workers had to cut back but government workers don't want to. Job loses at state and local government levels are almost non existent.. Thats why the stimulus bill was basically free money to state and local governments so they could maintain their lifestyles.

[Levonsky]

Uh, excuse me, local and state governments are cutting back, furloughing and laying off people all over the place.
Your statement has more the substance of ideology than fact.
Government bad? Is that it?

[truthmatterstoo]

It is just easier to cut private employees income than it is government

[platanoman]

I don't know. I think we are really early to say we are on a bubble.

[Troubledwawa]

This last quarter, the GDP rose 3.5% as I'm sure you know. However, the dollar index declined a little over 6% in that same time period. The economy still lost value. The Fed is going to have to defend the dollar. Like Martin Wolfe said, it's not a matter of "if" interest rates go up, it's a matter of "when". And I'm not talking about one or two small increases either.

Considering other factors such as unemployment, shadow inventories, the foreclosure moratorium coming to an end, increased debt, etc, etc, we should be able to see just how solid this "real estate bottom" really is.

That could be the bubble.

[WhyAreThingsThe]

The only winners from this economic recovery are Goldman ...great country we live in
hat tip to http://financeopinionss.blogspot.com

get the know

[Enid]

Checkout the Delaware tax haven larger than any other country. That's country not state.
The lawmakers in Delaware have crafted laws allowing for tax havens and banks and their card services complete freedom too rob us all. Delaware needs to be taken apart or laws in other states need to challenge them on usury and the IRS on its tax haven status.
We need help with this NOW.

[wittgene]

Finally someone who has courage to speak truth to power. This opinion is different from others, like Larry Kudlow, who say, "Wage earners are not successful people". Great job Mr. Shiller!

[Jenny4546]

So the government articifially kept the housing market inflated instead of allowing the free markets to correctly adjust and we will pay for it in the future. Huh, imagine that......

[susanava]

Omg, you free-market fanatics are like Christians after the millenium--Ok, we said the world would end and it didn't, but that's bc God had mercy, or we had the wrong date, or, the calendar is wrong, or, or-- In short, is there no amount of evidence that will lead you to reevaluate the validity of your philosophy? Is there nothing that will persuade you to question your theories?
One thing the crisis should have confirmed unequivocally is that there is no such thing as a free market, and not bc of any gov't involvement. Ppl and corporations in power manipulate the rules to protect their interests. Didn't we all see it play out bf our eyes? Securization, back-dating, credit default swaps--the gov't didn't institute any of the things that contributed to the crisis. But gov't's inability & failure to regulate them did.
Please, recognize that your god has failed and help us find the truth.

[hopeforchangenow]

I concur.

[RTIII]

Fareed has improved SO MUCH as an interviewer - I _almost_ like him now...

Still, he's a bit too far to the right for my taste - at least on fiscal matters.
.

[JAS23]

Many people in America take America for granted. Especially rich people who don't want to pay taxes. America is the platform where the rich made their money; this country provided them the opportunity to freely create their own wealth.

The only reason why they are rich is because America provided the opportunity to get rich. They should be GLAD and GRATEFUL to pay their fair share of taxes on their millions of dollars of yearly income; giving back to the platform which created their wealth.

[sonoffestus]

You are absolutely correct.

[givesflack]

I think we need an amnesty program for people who have lost their homes and lost their jobs and a facing financial ruin not just lowered credit scores. I'm staying in the sytem to fight the bull_shit and make these banks pay for their corruption. They change the rules on us and make them harder, we allow them to make their own rules and make it easier to rip us off. Where in the F$%# am I?, this is a nightmare man

[karen1p]

I am one of those in financial ruin. I am thinking of moving from the US. I have worked within the building industry, which I don't see coming back for 10 years or more. I cannot wait 10 years to make money.

[batmancw]

Sorry to hear of your situation karen. I know some folks in your industry who maxed out their credit and left the US because of similar reasons. I'm not at that point, but I'm close to having to decide between paying my mortgage or the mobsters at Chase. Needless to say, it's an easy choice. Good Luck to YOU!!

[sonoffestus]

Good luck to you. MY wife and I were luckier than many. We saw the crash coming and got out by the hairs on our chinny,chin,chin. We sold out nearly everything and moved to Canada in 2005. We regrouped and are in a pretty good spot. As I am now in my late 50's an my wife mid fiftes, affordable healthcare goes along way to making our lives way more stress free. We would never have ben ble to keep up with the ever rising HC costs. We didn't escape it all however as our 25 yer buisness is about 8 to 10 months away from failing. Our 25 year client base is shrinking fast as many of our clients have filed for bankruptcy. Many others are circling their wagons , not investing and hoping it all blows over. All and all it would have been nice if we could have had a few more good years, but as it stands we can't complain considering how many, many others are doing. All the best to you. If you can move, just do it. There's a whole new life out there, if you're open andwilling to try.

[nomoredead]

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