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Wednesday, January 23, 2008
Thomas Sowell :: Townhall.com Columnist
Dangerous Demagoguery: Part II
by Thomas Sowell
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Everybody expects politicians to lie, especially during an election year. You can bet the rent money on it.

Among the many lies we can expect to hear this election year, none will be bigger or more often repeated, in the media as well as by politicians, than the lie that there is a widening income gap between the rich and the poor.

Why is that a lie, when there are so many statistics that seem to substantiate it?

Let's start at square one and take it a step at a time.

First of all, there is a fundamental difference between statistical categories and flesh-and-blood human beings.

When there is a growing disparity between one statistical category and another statistical category over time, that does not mean that there is a corresponding growing disparity between flesh-and-blood human beings over time, since human beings move from one statistical category to another.

The statistical categories in this case are income brackets. There is no question that incomes in the top income brackets have risen both absolutely and relative to the bottom income brackets.

The joker is that millions of people move from one income bracket to another.

The even bigger joker is that taxpayers whose incomes were in the bottom 20 percent in 1996 had a 91 percent increase in incomes by 2005.

Meanwhile, taxpayers in the top one-hundredth of one percent -- "the rich" or "superrich" if you believe politicians and the media -- had their incomes drop by 26 percent over those very same years.

Obviously, when millions of people's incomes nearly double in a decade, many of them move up out of the bottom income bracket. Similarly, when other people who were at the top see their income drop by about one-fourth, many of them drop out of that bracket.

When we talk about "the rich" and "the poor" we mean rich and poor human beings, not rich and poor statistical brackets. Yet politicians and the media treat people and statistical categories as if they were the same thing.

Part of the reason is that data on statistical brackets are more numerous and easier to find, whether from Census Bureau statistics or from a variety of other sources.

Data based on following actual flesh-and-blood individuals over time are, however, also available. The statistics quoted above are from the Treasury Department, which has people's income tax returns, so it is no problem for them to follow the same people over the years.

You can check out the numbers for yourself in a November 13, 2007 report from the Treasury Department titled "Income Mobility in the United States from 1996 to 2005." You can find a summary of the same data in a Wall Street Journal editorial that same day.

These are not the only data that tell a diametrically opposite story from the usual political and media story that the rich are getting richer and the poor are getting poorer.

A previous Treasury Department study showed similar patterns in individual income changes between 1979 and 1988.

Moreover, a study conducted at the University of Michigan, following the same individuals over an even longer span of time, likewise found most people moving from income bracket to income bracket over time -- especially among those who began in the bottom 20 percent.

The University of Michigan Panel Survey on Income Dynamics showed that, among people who were in the bottom 20 percent income bracket in 1975, only 5 percent were still in that category in 1991. Nearly six times as many of them were now in the top 20 percent in 1991.

There was a summary of the University of Michigan data in the 1995 annual report of the Federal Reserve Bank of Dallas, which also issued an excerpt titled "By Our Own Bootstraps."

Among the intelligentsia, it is fashionable to sneer at income mobility as a "Horatio Alger myth" -- and, as someone once said, you cannot refute a sneer. But, among people who have not yet abandoned facts for rhetoric, it is worth stopping to consider whether they are being played for fools by politicians and much of the media.

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About The Author
Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.
 
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©Creators Syndicate
Life is about decisions
When my daughter was young she asked "Daddy what is the difference between a conservative and a liberal?" I responded "A conservative believes they are responsible for their decisions and actions - a liberal believes someone else is responsible for their decisions and actions."

F1etch
Here's some help for you. From the period 1947 to date, the standard deviation, including the two outlier extremes, is $17.88 per barrel of oil. The average over this period is $32.99, he median is $24.36. The current price of oil is more than three standard deviations from the expected mean. How is it that oil prices are no big deal again? Oh yeah, using your stultified logic, they are no big deal because they are only now near the only other period of time in which it was three std dev's from the mean. Real critical thinking there.

Take out the outliers and the std dev drops to $4.50 a barrel.

Off to work.



Continued abuse of statistics
That one out of a hundred people in the top 1% made a bad investment and lost big on it is not really much of a statistical reference point.

When we simply observer the top 1% as a group (that is the common statistical reference point) we see that the top 1% increased their income by a very significant margin.

The bottom quintile increased their in come by 5% in cpi corrected terms according to census data. And anyone who believes that the cpi accurately measures _real_ cost of living increase (infaltion) is a nut case. Observing the price of food, housing, gasoline, and medical care one quickly comes to the conclusion that these people are lying throgh their teeth. That 5% gain is most likely a loss. And food and fuel consumption are not directly proportional to income (i.e. the lower quintile spends a much higher percentage of thier meager incomes on the basics).

I have no idea why people actually look at distored pieces of manure such as this article and think they have gained any knowledge of reality.

F1etch
You write "The notion that oil prices have been "remarkably stable" is nothing short of selusional."

I may be selusional (whatever that is) but you are certifiable.

Since 1879 the price of oil in 2006 dollars has only three times bounded outside the 10 to 25 dollar range. The two obvious outliers, the 70's oil embargo and the current run up, and a temporary spike after first Persian gulf war. The U.S. Average is 21.05 over that same period. That is remarkably stable.

But perhaps you can grab your textbooks and educate us on their definition of stability? Please tell me what the standard deviation of oil prices has been, and please compare it to other fungible goods in order to prove the volatility that you insist must be there. Oh yeah...that information may not be readily available in the ol' textbook.

Good day, I'm off to the salt mines for another 10 hours of workday fun.


We'll never understand this
It's clear from how frequently Dr. Sowell has to explain this to us, that we will never understand it.

We are so ignorant of economics, and our schools have done precious little to remedy that.

How much more frequently do we have to teach kids how to balance their checkbooks, instead of being able to teach them macroeconomics.

"Here you go, kid-just make sure you mark everything in a ledger, like a nice, responsible person. Pay no mind to where your money comes from."

We've been getting stupider every year, and so, we're left vulnerable to demagogues like Edwards, and the rest of the Socialists, when they pander class war to the voters.

It's going to take a civil war, to stop Socialism and its insidious effects. They will not stop, short of force.

Hillary delenda est.

DR. Sowell is right as usual
What difference does it make that a CEO,Athlete or any wealthy make. There will always be an income gap and who cares.The point is that the majority of people start at the bottom and end up higher level than they started. We are all given the opportunity to better ourselves and some take longer to get to that point than others due to a multitude of factors. For all you libs life is NOT FAIR. If you don't like you income level work harder, get a second job, sooner or later life usually gets better.

AT
In your 10:36 post you bring up ancient history and apply it to today. Of course, mistakes have been made in the formation and development of this country, the noblest ever experiment by mankind. Humanity is imperfect, this is a fact of life. However, no country, NONE, has gone to such heroic lengths to right humanity's wrongs as the American people. Everything you decry about this country, past and present, exists a hundredfold worse everywhere else in the world, past and present. You need to stop living in the past, get over your bitterness, and for a change be grateful that you are the luckiest person in history, namely, an American. The poorest person in this country is more fortunate than most people who have ever lived.

In the same vein, to answer the standard bitter-angry implications of your posts, I'll use the Socratic method on you: In what way is any poor person prevented in this country from doing the exact same things that rich people do to become successful?

mellor
"Let's face it, the majority of TH posters are white southerners with no prospects (you know what I mean). They rely on their "faith" that they are right, and have no means of expressing their frustration that Juan or Mi Ling can do their job more cheaply and more effectively other than becoming ever more strident against immigration and free trade."

Spoken like a true dipwad. I grew up in New England and live in the deep South by choice. One of the reasons is that the Northeast is full of sanctimonious idiots such as yourself. I can GUARANTEE you that I am far more educated than you. So is Fletch too, for that matter.

If there is one fact above all others that can be gleaned from reading the posts on Townhall, it is how utterly clueless you libs truly are. I can almost feel sad for the pathetic dark world you libs live in 24/7 but not really. You losers deserve it.

mellor
many who live south migrated there. Many of us who live south went for the job opportunities but given the choice of stating in either cleveland where I grew up or detroit where I went to college I would take either charleston where we spent 10 years or phoenix where we now live. BTW while in sc it was far more common to find northern transplants than native born south carolians.

Unca Alby
"You think politicians tell the TRUTH???"

"EVER??"

Some of them do, most of them don't.lol. I think people like Barack Obama and Ron Paul are pretty honest individuals. When Obama says there is a gap between the rich and the poor, I think he believes it based on the methods of calculating that type of data we have available. (Clinton and Edwards are phonies; I don't believe anything they say)

When Ron Paul says that our country is going broke because of foreign policy, nation building, and yes (Sigh), entitlement programs, anyone with a brain knows he's telling the truth. I don't agree with Ron Paul on a variety of issues, but there is no doubt that he's a pretty brilliant guy. It's a shame the republican base has completely ignored him. He would actually be an attractive general election candidate for both liberals and conservatives because of his limited government, and anti war views.

virruduh
many persons of that gnereration din't accomplish much due to lack of opportunities but unlike you they weren't parasites waiting for their next handout. It's losers like you that rely on the govt and look to them to solve your problems. My parents made not have become wealthy b ut they never took handouts, relief, welfare and unfortunately for them died before they could collect social security. But you can't wait for the missus clinton to rescue you. It's losers like you that destyroy society

Not a bad idea
"With people so gullible, it's time to institute a test before voting."

That, of course, would never be allowed. If the test covered history and economics at all, it would mean the end of the Democratic Party.

Me neither, viruddh
"I read every liberal post I can find on TH, and I have never gotten the feeling that any one of them were poor or on the outside looking in."

As the subject line says. (Oh! for angle brackets!)

Let's face it, the majority of TH posters are white southerners with no prospects (you know what I mean). They rely on their "faith" that they are right, and have no means of expressing their frustration that Juan or Mi Ling can do their job more cheaply and more effectively other than becoming ever more strident against immigration and free trade.

Forget it, Bubba. The liberals don't care about you. The Rockerfeller Republicans care less. There are only two groups who care about you: Those who would make common cause against the socialist tide (and that does not mean slowing progress in our social mores), and people trying to get your vote by pretending to care about your 'moral' concerns only to dump you at the altar. Cue: TownHall. And what's more, you even know it!

With people so gullible, it's time to institute a test before voting.

Ms.Aries
In a conversation that, by comparison, has been remarkably civil, your inane contribution (if it even deserves THAT definition) shows the intellectual impoverishment of certain posters. It is particularly ironic that - in the wake of an achievement of understanding if not necessarily agreement) between Anthony Thomas and myself (and by extension the point Sowell is making), that you would post a slur that demonstrates such incredible blindness to the actual discussion that has taken place.

Dr. Sowell graduated magna kum laude (TH forces the misspelling) from Harvard, received his doctorate from one of the most respected schools of economics in the country (the University of Chicago), is one of the most well respected economists in the country and has published more than a dozen books including a basic economics text rapidly becoming a teaching standard. He has made his way in the world due to hard work and personal achievement to a degree that you could never hope to match even in your wildest dreams.

Face it: Dr. Sowell is not responsible for your own intellectual failures. As you said, facts are stubborn things.

Rejoinders
Your position remains laughable. The notion that oil prices have been "remarkably stable" is nothing short of selusional. And I never argued that the "price spike" was due to oxygenation and product enhancements, but simply, as a matter of obvious fact, that such product changes have a cost on the marketplace that raises the product's price so that SOME of the increase, by definition, must be attributable to those changes.

You write, "Further, your assessment of history is completely inaccurate. Literally, the first action of Reagan upon entering office was the deregulation of energy prices. This not only freed up domestic production but increased the incentives to produce worldwide directly undermining OPEC's ability to keep its members compliant."

I do not rely on what was "supposed" to happen. In the wake of Reagan's deregulation of prices, US oil consumption - which had reacted as it must to higher prices in the regukated market, STEADILY ROSE over the next couple of decades even as the real price fell - a clear indication that the regulatory intervention into the marketplace had created the distortions in the first place (and an obvious refutation of your factual inaccuracies).

As for the collapse of the Soviet Union, the inability of the planned economy to meet domestic consumer needs was a fact for DECADES and was brought to a head as the Soviets further inccreased resource allocation to the public sector - specifically defense. Historians are in essential unanimity on this point - and it had NOTHING to do with oil prices.

Rejoinder for F1etch last installment
You write "Nor did it have ANYTHING to do with the demise of the Soviet Union whose planned economy was destined for failure from the outset."

You have to kidding on that one. Surely you are not that oblivious? Is this why we are seeing a resurgence in Russian power under Putin? Due to his liberalization of economic policy? Or could it be that one of the leading exporters of oil in the world is suddenly getting four times more money for a barrel of oil than when Bush took office? That is pure profit for them, as the extraction costs from their oil fields has minimally increased over the same period.

Come on. Stop gleaning your textbooks for answers and at least attempt to bolster your arguments with real world information.

Anne
I have a question and a suggestion.

"It's called CHOICES!!! It's called LIFE!!!"
What were your choices? As far as I can tell
your choices have been to post on TH nearly
24/7. I guess your choice was to find a husband
who would pay the bills.

My suggestion: Get off the sauce.


Anne
"It's OBVIOUS, after reading the leftists
posts that they just can't stand the fact that some people might always have more than they have!"

And what about those of us who have incomes
equal to the top 10% in the U.S. What are we
jealous of? Most of my friends are high income
people and I can only think of two couples in
that group who are not liberals. Oh, and
my husband.

I read every liberal post I can find on TH,
and I have never gotten the feeling that any
one of them were poor or on the outside looking
in.



Rejoinder to F1etch part deux
You write, "Further, your assessment of history is completely inaccurate. Literally, the first action of Reagan upon entering office was the deregulation of energy prices. This not only freed up domestic production but increased the incentives to produce worldwide directly undermining OPEC's ability to keep its members compliant."

Wrong again. I know what your textbook says is supposed to happen. I might have the same one from college you have. However, let’s actually look at some facts: Crude oil production in the U.S. increased by a paltry 8 tenths of a percent before the price collapse. There was no surge in U.S. production due to increased incentives. The market is way more complex than that. Oil exploration and production have very long lead times. Significantly longer than what could be explained between the years 1980 and 1983. In fact, foreign imports were decreasing at the same time. The true determinant of collapsing prices was due to decreased demand in the U.S. The combination of high prices, coupled with efficiency measures (55 mph speed limit, café standards, voluntary switch to more fuel efficient cars by consumers, etc.) and the increased production of non-opec countries led to the glut of oil, and the ensuing price collapse.
Linking Reagan’s action to end price fixing (which I agree was the right thing to do) with increased worldwide production is a stretch. That incentive was already there due to the high prices.

wildwest
Since your parents never got past 10th grade,
and hardly had any money, they must be losers too, since that appears to be the definition.

Rejoinder to F1etch part 1
You write: "Even if an average over a period as long as 60 years were of value in a discussion of conditions in an ever changing marketplace, it doesn't change the fact that, even with the short term changes in energy pricing, it has not exceeded a level reached more than a quarter century ago (at a time when leaded gas was still for sale and oxygenation hadn't been introduced so product changes account for much of the increase anyway).

That is laughable. In fact oil has been remarkably stable since about 1879, with only the 70's embargo and the recent run up as the only exceptional variations. And you are seriously attributing the price spike today on oxygenation and product enhancements? Preposterous. And I assume you have the data to show correlation between these? And of course the pricing due to oxygenation just happened to take full effect, oh, say, somewhere around 2003? Come on, don't be so facile.


Anthony
They offer fish taken from those deemed to have plenty to share. We offer fishing rods and lessons. You choose.

Anthony Thomas
There will always be some racists. I think the last one just became eligible for social security. Seriously, there will always be some racists among us. I would wager nowadays not much more percentage wise from either color. The battle is over. The war has been won.

Just because the republican party, driven by conservatism, thinks it is wasteful to continue pouring money down failed government program drains and this does not comport with the agenda of those who feel the opportunities now available cannot make up for past wrongs by people not even alive today, is no reason to cling to the democratic party's consortium of interest groups.

Put down your sword and start enjoying the rewards. Continuing to flail at the air must be wearisome. Your leaders do not wish to declare victory because it would put them out of a job.

Any black person who calls Mr. Sowell an uncle tom is truly still living in the past and clinging to their victimhood rather than facing facts.

The fact that Barack Obama chooses to keep race a non issue is commendable. If not for his leftist record and affiliation with the communist party, I could like the guy.

Anthony Thomas
"I think it's unfair for Sowell to call our politicians liars"

You think politicians tell the TRUTH???

EVER?? ??

ms aries
i see that in your pathetic world being an earner is some level of sin. Exactly how do the dims/libs socialist fight for justice and equality when they essentially enslave the great unwashed by keeping them loyal to the party with various handout programs and keeping them believing they cannot achieve any success without the dims direction. Your problem is that you dislike successful blacks pointing out the malaise the poor suffer from in not preparing themselves to achieve success and take care of their own responsibilities. Exactly who encourages the poor to make so many bad choices by the socialist dims who tell the poor they will always styep forward to save them.

Icedog
"Would you please give me an example or two. Who are these "very same citizens" who America has treated unjustly? ....and how does "America" make amends?”

I really don't want to have to go into the whole slavery, Jim Crow, theft of land, and destruction of the Native American population thing. Believe it or not, I actually get tired of referencing those things. But clearly, they are obvious examples of our countries shortcomings and unjust treatment of its citizens.

As you know, America has tried to make amends with Affirmative Action, and other social programs for the accrued wealth that was robbed from African Americans during these periods.

Thomas Sowell
Anthony Thomas is far too logical for this right-wing crowd. They aren't fond of facts that they can't manipulate, but like one of their heroes once said, "Facts are stubborn things."
For instance, it is a fact that Sowell is an authority on living off welfare. He's been living off the the Republican dole for years. He, like Armstrong Williams, Larry Elder,Herman Cain, et al, are part and parcel of the Republican plantation. Whenever they need a Black wingnut to validate their beliefs that Blacks are poor because we're stupid or lazy, they bring Sowell and/or others on stage and he does their little two-step.
Continue to live in your ivory (pun intended) tower Dr. Sowell. Continue to validate and justify racism. It's a lucretive professon. In meantime, those are us in the trenches will continue to fight for justice.

Anthony Thomas
I see your still here. I could not read all the comments here. Way too many but someone remarked about one of yours early on that made me back up and read it. About 10:18 this morning. You posted four links with evidence contradicting Mr. Sowell. I have to comment.

The first link was to U.S Census bureau data. A handy publication with Income Inequality right in the table of contents. How weird is that? They simply stated the Ginni Index (whatever that is) which measures this for this little cubby hole of our bureaucracy was unchanged from 2002 to 2003.

You follow this up with a NYT citation discussing exactly what any american knows the NYT is going to discuss when it comes to income inequality and two references to Alan Greespans's ramblings.

Is this the best you got?

Convince us why the fact that the top 1% should really matter to the rest of us. They do pay a boatload of taxes even if it is never enough for your type. How about examing how to bring those in the bottom 20% who stay there for more than a few years what they need to do to climb the ladder. Hal D mentioned that he thinks those at the bottom just need a hand and don't really want to stay there. Do you think this also? Have you ever tried to help some? Do you know how many truly stay there long term? Do you know why?

ct
you are absolutely right about how ingracious the great unwashed truly are. They neglected to prepare to take care of their own needs but still expect others to provide the big screen tv for their enjoyment. If the libs/dims/socialists were so concerned about people they would encourage and honor success rather than villify the earners. But why should the base the dims cater to concern themselves over income taxes. They don't pay any. So when they hear that earners are going to getting an extra screwing to pay for more socialist programs they probably think we have it coming to us. My parents, immigrants from europe with 10th grade educations never made much in the way of income. But they always told us that education and hard work go hand in hand. But what you earn is yours to enjoy. Taking govt handouts was an emblem of shame. In the past three years my wife and I have earned more than my parents earned in the 45 years they lived and worked. But my parents rather than being angry at how much different our lifestyle is would tell us the dream of america came true. But why is it that so many think that others owe them something. Perhaps if we closed the dims plantation of entitlement and these losers were forced to work society would take a change for the better

Anthony
Some politicians are clearly using an "apples and oranges" argument that they either can't understand or they do understand and they are simply trying to fool the public and use class warfare to increase their power. You may not like the term, "liars"...but it is either that or they are idiots....which would you prefer?

Anthony
"Historically, America has unjustly presented so many inequalities to some of its citizens in its past, that it has had to force itself to make amends to these very same citizens."

Would you please give me an example or two. Who are these "very same citizens" who America has treated unjustly? ....and how does "America" make amends? I assume you are speaking of the government when you say "America", but the government doesn't have anything to make it for any past "inequalities". It can only take resources from one person and give it to another....or it can make laws that discriminate against some in order to benefit others.

What exactly am I or thers being punished for? ....and who are these harshly treated Americans that deserve our retribution?

Icegog
“If today, every American lost everything they had (including business contacts and job skills) and was given $50K to start over.....do you think in 10 years we would still have groups defined as poor, middle class, and rich.....or do you think we would have 300 million almost economically identical Americans? Why, or why not?”

Of course we would still have a poor, middle, and rich class given that scenario. I never said that some people weren’t poor because of the type of lifestyle (sometimes immoral and irresponsible) they lead. But not everyone is poor because of those reasons. Also, as you know, all Americans haven’t started off equal in this country, which is why we have some of the government intervention that we have today. Historically, America has unjustly presented so many inequalities to some of its citizens in its past, that it has had to force itself to make amends to these very same citizens.

Fletch
"At any particular point in time, measurements of the relative positions at that point can be made, but, because the compositions of the two groups constantly change, you CAN'T fairly measure the CHANGE in any such gap over time"

Well that's a fair observation. However, I think it's unfair for Sowell to call our politicians liars for reciting that there is a growing gap between the rich and the poor. I stand by my original statement that there IS growing gap between the rich and the poor. However based on what you have offered, it is possible that the method used for calculating this data maybe somewhat flawed. This is what Sowell should have said instead of calling the politicians liars.

Anne
This is the part you forgot to add to your
equation: The highest-earning 1% of taxpayers in America make 19% of all income reported to the government, a substantially bigger share than the 13% of total income earned collectively by the lowest-earning 50% of workers.

What we can also say about that is that since
1985, the top salaried has gone from 5 billionaires to a thousand billionaires, while
minimum wage has skyrocketed from $3.35 to $7.00.

That ought to put some logic into the picture.
I have had to bring out my hankie yet for the
rich guys.

CT
"our welfare country isn't going to end anytime soon so we'll be paying for your sorry butts awhile longer. As a matter of fact, you need us conservatives so we can pay your taxes for you "

***

And don't think we don't appreciate it. I think I speak for all of us when I say thank you for pulling your own weight and ours too, and with such graciousness on top of it.

Don't worry libs,
our welfare country isn't going to end anytime soon so we'll be paying for your sorry butts awhile longer. As a matter of fact, you need us conservatives so we can pay your taxes for you so why do you keep biting the hand that feeds you?

Many Americans ARE well off...
...even if their income is low.

Do your kids HAVE to go to an Ivy League college? I guess it depends on what they want to be in life, doesn't it? If they just want a decent paying job, then many 2-year, state run or Vocational schools are perfect and still very affordable.

Why do so many families bury themselves in debt and live above their means? If you postpone a few extras, build up a decent nest egg, and spend less than you take in per month on a regular basis, fiscal golden eggs usually materialize over time.

People need to be RESPONSIBLE. The Federal government is a TERRIBLE role model as to how to manage a budget.

Spend LESS than you take in and save for your future. If you stick to that rule I bet that in the long run a majority of people will discover that they're doing much better financially than they might otherwise think.

It really bothers me that so many people are willing to just hand over so much of their hard earned money in interest. A car or a home is understandable...

But what about all those other things? Save up the money for it FIRST and then decide if you still want to buy it.

Be fiscally responsible. If you depend on politicians to do it for you then your future will not be nearly so bright.

Anthony
You never answered my question, but I'll ask every liberal here the same question:

Here's a question for you: If today, every American lost everything they had (including business contacts and job skills) and was given $50K to start over.....do you think in 10 years we would still have groups defined as poor, middle class, and rich.....or do you think we would have 300 million almost economically identical Americans? Why, or why not?

I really don't expect any of you to answer because it would shatter your beliefs on the rich and poor.

gofer writes: "The top 50% pay over 97%

of taxes..."

You're right... and it bears repeating....

The top 50% pay over 97% of taxes.


I don't know about anybody else, but I think they're paying at least THEIR FAIR SHARE!!!


And, "the bottom 50% pay less than 3%. The bottom 1/5 pay 0 taxes since the Bush cuts."


It is absolutely beyond me how the demos think that the top earners should pay more....




NO tax liability
In 2004, 144 million people had no tax liability. The top 50% pay over 97% of taxes...the bottom 50% pay less than 3%. The bottom 1/5 pay 0 taxes since the Bush cuts.

I don't think most people are aware they got a tax cut also. Everybody did, but somehow the left feels the people who pay the most should get nothing.

Google "10 Men Went to Dinner" This is probably the best and simplest tax explantation ever.

Thanks Motley! :-)


But I'm still really annoyed (at myself) that I made some choices I made.

For example, I'm really annoyed that YOU'RE able to sit out on YOUR deck and look over the marina... And I'm sitting back here in the cold! :-)






Well said, Anne. It's called
RESPONSIBILITY!!!

It's OBVIOUS, after reading the leftists

posts that they just can't stand the fact that some people might always have more than they have!

Just like the whiney little kids who cry and complain because the neighbor kids have something they don't have.

Well, GET OVER IT!!! It's always going to be that way, and you'll probably always going to have something... or more than other people have.

It's called CHOICES!!! It's called LIFE!!!

If you're all that upset that someone else have more or better than you, than maybe you ought to take a look at your CHOICES in LIFE!!!


Jackpine, you are correct
Illicit drug use among the population making less than $9,000/yr (in 1998) is nearly double that of those in the middle class and more than double that of those making more than $75,000/yr (again in 1998). It is a serious problem very strongly linked to poverty.

Even more disgraceful is that the incentives created by our perverse Welfare state make it perfectly rational for people to choose government handouts over selecting productive employment (because, for example, the benefits lost are greater than those gained in an entry level position that may require transportation, wardrobe, childcare, etc.).

Of less concern is the huge number of young people just starting out who can, and do, quickly move up the economic ladder but make up a significant portion of the "poor" at any given point in time.

bryce and JK
"But frankly it is just plain irrational to argue that this economy is not consumer driven."

To the contrary, it is simple catallactics - human action in the marketplace - that demonstrates that the economy is not consumer driven. Wealth simply cannot be created by consumption. It is created in the competitive marketplace by individuals seeking to best anticipate the needs of consumers in the future. Wealth is created because a greater number of such individuals succeed in predicting those needs (and profit) rather than misperceive future outcomes (and experience loss).

I make the CEO no demi-god. He is nothing more than another actor in the marketplace subject to the same incentives (and desire to better his own personal position by best meeting someone else's needs) as anyone else.

It's not ideology; it's basic economics.

In the real world, the economic incentives play out in the same way reagrdless of the ROI (or any other economic irrelevancy). Investors place their funds in whichever function they perceive will yield the greatest return for the least risk regardless of whether the economy is in a boom mode (supported by too much free money injected by the Fed over the last couple of years) or in a bust mode (as the economy pays the inevitable price of such a policy or is hindered by making liquidity artificially expensive - both of which have been the case).

The exact same fundamental dynamic plays out (as it must) regardless of whether the means is an equity investment or a consolidation.

Anthony Thomas
Anthony Thomas writes: ""Jackpine Savage
"How many of the people in the "poor" group are addicted to alcohol, or drugs?

One of the biggest misconceptions is this country is that mostly poor people are addicted to drugs.""

AT, I"m not talking about Theory or Statistics here. I'm talking about living Breathing Lazy Drunks! This isn't some theoretical argument here, I see it all around me. The people who work hard and try to make their lives better eventually do just that. The ones that are comfortable being cared for by the government will NEVER do any better because they just don't care.

I have been on food stamps, I know how hard it is to try to better your circumstances because the system is set up to Punish acheivement.

Democrats Love poor people. They love them so much that they don't want them to be "Not Poor", because they will no longer need the democrats to take care of them.

I've seen it I've LIVED it. Now tell me how compassionate and caring you are.


The crux of the matter
"As I stated earlier, how would one fairly measure the gap between the rich and poor, since according to you, the 'composition' of the two groups constantly change?"

You've come to the crux of the matter. At any particular point in time, measurements of the relative positions at that point can be made, but, because the compositions of the two groups constantly change, you CAN'T fairly measure the CHANGE in any such gap over time (and call it either widening or shrinking). THAT is Dr. Sowell's point.

Being poor...take a closer look
No food for the family and no where to get it. Sickly, undernourished kids, ratty digs, a life of fear and constant despair and the chance of a better life?...none. That's what being poor is like and that's what much of the Third-World is like.
Few in America have experienced that kind of brutal existence or have much knowledge of the poorer countries such as in Africa although most of us have seen the TV pictures of black babies to weak to cry and covered with flies.
"Gross," we cry and flip channels. And we complain.
Like, "Why do you have to do community service to get welfare? Or, "The rich are taking more while the poor just get poorer! It's not fair!"
Compare that to the young old woman by the road in an African village who holds up her starved-to-death child for all to see, her eyes rolled back but dry with no tears left. "Ummm," she moans until a young male, high on Kat steps up and with a laugh, clubs her with a rifle butt...and...
here...
"Mom! Not hamburger again."

The real world
F1etch ,


It all depends on the type of business model. A smart investment group wants a ROI of north of 30% on their equity dollars. They invest in consolidators and or growth companies.

In a growth company you are right. But in a consolidation deal you are wrong.

Gotta go
But frankly it is just plain irrational to argue that this economy is not consumer driven. It's all about the ordinary Joe, not the CEO.

And frankly, the CEO as demi-god is part of what will lose the WH for the GOP this fall. People are finally waking up.

@bryce3
On equal taxes:

Please do no confuse equality with equity.

Equity is just another way to introduce a subjective judgement of fairness.

Equality is simply math. Is equal fair? That depends on your viewpoint.

Can everyone actually pay the equal tax? No. But then they will know they are on the dole and understand just how high the full equal tax payment is.

The government simply has no legitimate right to know how much I earn unless I am asking to pay less than equal.

The gap that all people have a right to worry about is the gap between those under the poverty line and the poverty line, because that is what drives and motivates the construction of the myriad government need based programs.

Start everyone at the poverty level. Eliminate all the stupid programs where the first thing you have to do is prove you are poor. If you can't pay your equal tax, then file to keep the poverty level baseline plus 75 percent of what you earn. If you pay your full tax then file nothing but the check.

You can argue about whether it is equitable. But it is efficient and it is equal. And there may just possibly be an attitude adjustment as many people understand they are not paying an equal share of the expenses of the government.

One Person, One Vote; One Person, One Tax

AT
Have you ever been poor? Do you make more now than you did 10-15 years ago? If you were poor at one time, do you think you should still be classified as "poor" today?

That's the basis of Dr. Sowell's point. The dems and MSM talk about "The Poor" as if it were a race or some designated lifelong class. When it is actually just a description of a person at one point in time.

Here's a question for you: If today, every American lost everything they had (including business contacts and job skills) and was given $50K to start over.....do you think in 10 years we would still have groups defined as poor, middle class, and rich.....or do you think we would have 300 million almost economically identical Americans? Why, or why not?

Fletch
As I stated earlier, how would one fairly measure the gap between the rich and poor, since according to you, the “composition” of the two groups constantly change?

Laziness is not a new idea


These two comments were Letters to The Editor, in the LA Times, in the early 1950s.

“What makes you think doing something worthless, is better than doing nothing at all?” This person didn’t like “Workfare” where he had to do menial jobs to get welfare money.

-----

Another letter concerned an article that said how important it was to have a very good job, and be able to do what you like to do.

The respondent said he did not like to work, had no intention of working, so why didn’t those who like to work, just give him enough money to live, and they would both be happy doing what they liked best.

I didn’t write either letter.

Jackpine Savage
"How many of the people in the "poor" group are addicted to alcohol, or drugs?

One of the biggest misconceptions is this country is that mostly poor people are addicted to drugs. When I was in college, many of my upper middle class suburban classmates were addicted to whole a lot of stuff. Their parents just had money to cover up their dirt. Poor people don’t have that security.

bryce3
Ok, American consumers buy stuff. I can't find any posts here that debate that point. However, most Americans don't want to buy "crap" and any poorly run corporation that suffers poor leadership & management and produces inferior products wll soon be out of business.

It's not consumer driven
"The money that American consumers spend accounts for 2/3 of the annual GDP."

Again, this is an economic misconception based upon the methodology for calculating GDP. In order to eliminate double-counting (that is the value of finished goods and the component parts used in their completion), the value of those intermediate goods is discounted from the calculation. As a means of determining an aggregated GDP figure, that shorthand is valuable enough, but it renders a discussion of the component parts of GDP completely invalid. The impression that the consumer products have value and the intermediate products do not is a complete fiction. If anything, the value of the intermediate prioducts vastly outweighs the value of the consumer products.

"If every CEO in the country were to resign his post tomorrow consumers would still buy whatever products were available."

True ... until they ran out. Again, the driving force behind the economy is the entrepreneurial activity IN ANTICIPATION of expected consumer demand. The time necessary to create the products that come to market is such that the owners must bet on FUTURE demand and invest in meeting those needs (creating jobs and spurring growth) TODAY.

To the extent that those expectations are wrong, the entrepreneurs experience losses, but overwhelmingly their predictions are better than that (until changes in money instigated by government throw a monkey wrench into the works as is happening now).

Anthony Thomas
One question that hasn't been asked, but is very important.

How many of the people in the "poor" group are addicted to alcohol, or drugs? When you hear conservatives like myself say that for many, being poor is a matter of choice, We don't say it because we're evil and heartless, we say it because it's the truth.

I live in one of the poorest counties in MI, (that's saying something) and most of the people that I personally know that are "Poor" and living on the dole are there because they Choose to be there! Almost to a man, they're either alcoholics, or addicted to one drug or another, (Vicodin zombies abound) and could care less about ever making their lives any better.

Now tell me how we are being "Compassionate" by supporting these people? They don't have disabilities, they're just outright Lazy Drunks.
I could take you by the hand and introduce you to hundreds of them within a few miles of my house right now.

Yet these same people envy me and call me "Lucky" because I sit in my office "Playing on my computer" and companies send me checks.
I'm not lucky, I just WORK for a living. I actually learned to use my computer for more than downloading porn and playing poker.
of course they don't want to hear that particular dirty word (work).

Some open minds should be closed for repair.


It's not that difficult
The study referenced by Dr. Sowell compares the same group of people at two distinct periods of time (apples to apples). Comparisons within that stable population are legitimate and can yield valuable insights (as, in this case, the study has). Comparisons of unlike groups based upon some gross similarity are not valid because the composition of the groups have changed.

In this case the population of the US has been subcategorized as rich and poor. So long as the composition of these subgroups remain unchanged, relative comparisons are valid. But they have changed radically and the population described as poor in 2005 is materially different from the population described as poor in 1996. As such there is no connection between the two groups of poor at different times that can generate valid comparisons between the relative positions of these incompatible groups.

If the population were sportsmen and one group was made up of baseball players and the other made up of basketball players and, ten years later, 70% of the first group had been replaced with golfers and 70% of the latter group were replaced by football players, no one would expect that comparisons of the relative positions of the two groups of sportsmen would have any real world relevance.

The change in the composition of the groups labeled "rich" and "poor" is no less drastic.

F1etch I'm back for a few
The money that American consumers spend accounts for 2/3 of the annual GDP. If every CEO in the country were to resign his post tomorrow consumers would still buy whatever products were available.

Are you kidding?
The tired old lib talking points about "tax cuts for the rich" and the dems "wanting to shift the tax burden away from the middle class". However, it's all rhetoric and ignorance. Try a few facts:

- The top 1% of income earners pay 32% of all income taxes.
- The top 5% pay 51.4%.
- The top 10% pay 63.5%.
- The top 20% of income earners pays 78% of all federal income taxes!

You libs get confused because you see somebody making $400,000 a year getting a tax cut of $4,000, and somebody making $40,000 gets a tax cut of $700. You then ask, "How's that fair?"

....although the "poorer" person actually got a bigger cut.

Here's one more stat for you..."The top 1% in this country pays more than TEN times the federal income taxes of the bottom 50%!"

(CBO.gov: Effective Federal Tax Rates Under Current Law, 2001 to 2014)

Fletch
I guess I’m having trouble understanding what you mean by “the composition of the rich and poor” Can you explain what you mean by that a little more?

Hey buzzkat.

I know you signed off, but if you catch this later... my most sincere compliments on your efforts and your astute observations.

I have long since ceased trying to convince those who simply do not want to be convinced. Two examples on this thread - bryce3 and Anthony.

That someone would actually want to assert that ANYONE besides the "job-creators" who take on more risks and are better compensated are the engine of our economy... is just laughable.

Especially small to medium-size businesses who consistenly provide over 80% of all new jobs.

Like you said... when was the last time you got a real job from a poor guy?

Truly sad.


fletch
"The problem is - and this is what you can't seem to get - is that comparisons between these two distinct points in time are INVALID because the groups in the past bear little resemblance to the groups in the present."

Ok...So are you basically saying that because the definition of rich and poor has changed over a number of years, it is difficult to determine a widening gap?

You go on to say: “The pretense of a "widening gap" presumes that the composition of the rich and poor at two distinct time periods are sufficiently homogenous to support such a comparison. They unequivocally are not and thus the misuse of the data to discuss such a widening is either erroneous or dishonest”.

If this is the case, how would one fairly measure the gap between the rich and poor, since according to you, the “composition” of the two groups constantly change?

AT & Fletch
To quote from Hud: "What we have here is a failure to communicate."

I think Sowell's point, which Fletch has attempted several times to make and AT refuses to accept, is that a person in the lowest income bracket in 1996 has an almost 30 percent chance of being in the highest income bracket by 2005 and only a 5 percent chance of still being in the lowest income bracket by 2005. Or a 95 percent chance of moving up to one of four higher income brackets between 1996 and 2005. At the same time someone in the top 1 percent was likely (although Sowell didn't assign a probability) to see his income drop 26 percent in the same period.

So, if one looks at two individuals, not income brackets, one in the bottom quintile and one in the top 1 percent, in 1996 and again in 2005, there is a very strong chance (95 percent) that the individual initially in the bottom income bracket will have moved closer, not further away, to the individual in the top one percent. Therefore, the gap between them has closed, not opened.

Bryce, should you return...
I work with "financial experts" all the time having been an economist in the financial services industry for the better part of 25 years and I can tell you that consumers are not the driving force of the economy.

It's a matter of time precedence. Businesses will fail if they produce things that consumers will not buy. That's true enough. But it is not demand that begins the cycle of production. The driving force is the entrepreneurial action IN ANTICIPATION of consumer demand.

In order for that production to take place, the capital necessary to meet those future demands must be made available to the entrepreneurs or those future needs can never be met and shortages ensue. This is why rebates and one time tax breaks targeted at "consumers" or the Low to middle class have universally failed to generate any stimulus at all, while untargeted tax rate cuts that change long-term behavior and facilitate capital creation have been universally successful.

campagnolo
Ah, no.

Even if an average over a period as long as 60 years were of value in a discussion of conditions in an ever changing marketplace, it doesn't change the fact that, even with the short term changes in energy pricing, it has not exceeded a level reached more than a quarter century ago (at a time when leaded gas was still for sale and oxygenation hadn't been introduced so product changes account for much of the increase anyway).

Further, your assessment of history is completely inaccurate. Literally, the first action of Reagan upon entering office was the deregulation of energy prices. This not only freed up domestic production but increased the incentives to produce worldwide directly undermining OPEC's ability to keep its members compliant.

Thus, it actually IS Reagan that deserves the lion's share of credit for the decline of real energy prices over the long haul (and even if that were not the case, the long term prosperity that began under Reagan was not offset (as Krugman predicted) by a "tidal wave of inflation" - it was neither the result nor mitigated by purely monetary phenomena (i.e., inflation).

Nor did it have ANYTHING to do with the demise of the Soviet Union whose planned economy was destined for failure from the outset.

But, hey, thanks for playing.

I am sick and tired of campaign promises


I want a politician who has the maturity, the brains, the ability to look at the factors involved in any situation, and make the proper decision. Don’t tell me you will never bomb Toronto, because if Canada ever invades the US, I want you to bomb Toronto!

What if you tell me, “I am going to do a high-dive into that swimming pool,” but when you get to the pool you find it has no water, so you don’t dive. Now, do I call you a liar for saying you would dive, but didn’t, or do I think you are very smart for looking at the situation, and making a proper decision for the circumstances that existed at that exact time?

Same thing for campaign promises. Just convince me that you are an intelligent person who will make the right decisions at the proper time, and don’t try to persuade me that you know what you will do in a situation that may or may not exist a year from now. Convince me you are quick-witted enough to make a proper decision most of the time, whatever happens.

No, you're not getting it
It was entirely acceptable to compare the relative difference between group A (rich) and group B (poor) at some point in the past as they are two concurrent sets at a fixed point in time. It is likewise acceptable to compare the group C (rich) and group D (poor) today for the same reason. The problem is - and this is what you can't seem to get - is that comparisons between these two distinct points in time are INVALID because the groups in the past bear little resemblance to the groups in the present. There is no valid connection between either groups A and C or groups B and D, thus attempting to discuss changes between the differentials collapse due to their incompatibility.

The pretense of a "widening gap" presumes that the composition of the rich and poor at two distinct time periods are sufficiently homogenous to support such a comparison. They unequivocally are not and thus the misuse of the data to discuss such a widening is either erroneous or dishonest.

I've been Poor more than once
I've even been homeless a couple times, once from my own stupidity, and once due to losing our house in a fire.

I've been so broke I formed a psychic bond with abe lincoln rolling pennies for gas money.

For the bleeding hearts like AT, bryce3, and hal, Staying poor is often a choice. I chose Not to remain poor.

I worked hard, and got the skills necessary to move up the income ladder.
I have a lot of neighbors who made the other choice and play their favorite game "Waiting for the welfare check".

I'm disabled, and lost my career as a home builder in 1999. (same year my house burned down) We were basically left destitute.

But, I recalled the words my father pounded into my head growing up. "The fastest way to get back on your feet is to get off your A**",and I did just that.

Instead of waiting for the givernment to save us, I rolled up my sleeves and learned a new set of skills that allowed me to work at home.

I'm far from rich, but instead of being another drain on the american taxpayer, I Pay taxes (lots of 'em).

So to all you bleeding hearts that want to "help the poor" by making them dependent on the nanny state I say, Get a clue.

Excellent article as usual Dr. Sowell. 5 stars.

IT...absolutely my last post
Before I get myself together for work. Your argument is predicated on the notion that success in this country is entirely dependent on drive and ability. I argue that, for instance, when gov'ts give the greatest tax benefits to the wealthy, or give big box retailers tax breaks that give them a competitive edge against small businesses, it undermines the ability of the individual to succeed based purely on Horatio Alger model.

buzzkat
"Fletch stated the same concept with different words, as you quoted in your post. He did NOT argue, as you falsely state, "the gap isn't widening".

Yes he did. Fletch stated that Sowell was not incorrect when he stated the following: “Among the many lies we can expect to hear this election year, none will be bigger or more often repeated, in the media as well as by politicians, than the lie that there is a widening income gap between the rich and the poor. “

This is a “lie” by Sowell, or just factual inaccuracy, I’ll let you decide which. Both you and Fletch have proven this to be wrong with your own post. Sowell was wrong, just admit it.

F1etch
You write: "Similarly, energy prices (the other significant advancer over the last few years) has only now reached levels consistent with those paid in the early 80s."

I will translate this euphemism for you. Energy prices are now equivalent in real dollars with the previous all time highs, which are quadruple the 60-year average. I have a $500 VCR for sale. It’s a real bargain when compared to early 1980’s inflation adjusted prices.

Please regale us about how those oil prices were so wonderful for our economy in the late 70's and early 80's in terms of the aggregate benefit to all the income quintiles.

The biggest story never told is how the miracle of Reaganomics and the demise of the Soviet Union were in large part a result of collapsing oil prices after 1982.

Before I sign off
I defy you to identify a financial expert who does not agree that the true driving force of the economy is the average consumer. A CEOs can preside over the most innovative business models and products ever seen, but if the average consumer does not buy the product it is all for naught. We are the engine of this economy, and it is about time that we, not the rich, became the focus of tax cut policy.

Bryce, AT
I gotta go too. Enjoyed it. Best regards.

Fletch
Can't let this go Fletch

"Then, Kyle Boller and Steve McNair enter one of the rooms and Payton Manning and Tom Brady leave. You cannot assess a "widening gap" of talent because the nature of the groups has changed and you are no longer comparing like (comparable) groups"

I think I get it, but maybe not. It seems like you're almost arguing from a Darwinian perspective now. Correct me if I’m wrong, but you’re basically saying that the more talented, and I guess more hardworking people who are initially in poverty, rise out of it because of these attributes???

I still don’t see how that invalidates my argument that no matter who’s in the room that “Kyle Boller” and “Steve McNair” are in, or who lives in North Philadelphia, the South side of Chicago, or Compton, California, the paychecks of these individuals are going to be the same. Finally, these paychecks will not increase at the same rate as a Tom Brady or Payton Manning or an Oprah Winfrey for that matter. The pay gap between these individuals will continue to widen no matter who’s in the rooms that “Kyle Boller and Steve McNair” are in, or who lives in the most impoverished neighborhoods, or who doesn’t.

bryce
"I'm still waiting for someone to explain why tax cuts should not be diverted to the middle class instead of the wealthy since we are the engine of the economy?"


I'm waiting for the explanation as to how the highest achievers and producers are less beneficial, less of an engine to the economy, than lower or zero producers and achievers. Have you ever gotten a job from a poor man? (roll eyes)

Have to sign off
But again to all here, I cannot say enough about how refreshing it has been to argue disparate points of view without the attendant vitorol you usually find here and on other web sites.

A good day to all.

AT
"Sowell, and Fletch work very hard to deny the existence of certain elements in our society, because admitting their existence would require some moral examination on your part."

Ah yes, the standard lib mantra that you libs desire only good for everyone and greedy conservatives don't. Frankly, F.U. We conservatives don't question your motives. Don't disparage ours. Do the moral examinations on yourselves, as it is YOUR policies that keep the poor, that is, SOME poor, downtrodden. Conservatives believe in providing opportunity and enlarging the entire pie. Liberals believe in government theft and redistributing the same sized pie. This is the fundamental difference. The former is moral, the latter is not.

Yes, F1etch...
And the liberal, progressive, socialist, Marxist politicos know this, and their rich versus poor rhetoric is unequivocally dsigned to prey on that envy.

On tax cut for the wealthy
I'm still waiting for someone to explain why tax cuts should not be diverted to the middle class instead of the wealthy since we are the engine of the economy?

It's a simple as high school algebra
As anyone familiar with elementary high school algegra, or simple computer programming should know, in any equation involving more that one variable, for every different input there is one or more different outputs.

Just try to imagine all the different variables among different people, and they way they approach making money.
Then go figure all those that have the utopian idea that everyone should earn the same, or nearly the same as everyone else.


Open question
I am interested in any historical, economic or moral justification for the argument that an income gap (as defined as a differential between the incomes of some subset - say the bottom 20% - and some other subset - say the top 20%) represents a problem in and of itself or, in the context of different sets of "poor" and "rich" at different times, represents a problem in that such a differential appears to be rising.

Simply bemoaning the difference is not an argument. I am trying to determine if there is some reason BESIDES envy for considering this an issue worthy of scrutiny in the first place.

AT
"Now if you, Sowell and people like Fletch don’t think the widening gap is problem, that’s fine, and probably consistent with your conservative/libertarian ideology"


You just don't get it. The only way for EVERYONE in society to benefit is to have precisely this situation. If the gap didn't widen, then you end up, as I have posted before, a stagnant, oppressive, Stalinist system. This is simple economics, simple math, and has nothing to do with our "conservative/libertarian ideology", except insofar as conservative/libertarian ideology recognizes reality.

IT, bryce
IT, while I am familiar with the tactic, I don't believe that bryce was doing more than asking what he believed was a related point and afforded the opportunity to address the point on its own merits.

bryce, one other point. While there are few very small exceptions due to the vaguaries of the tax code, the taxes in the United States are overwhelmingly progressive even when FICA, unemployment, Medicare, state, sales, usage and property taxes are included. The progressivity in the federal income tax is more than enough to offset the regressivity in the payroll tax.

AT
"Dr. Sowell's position (particularly on the widening gap) is just flat out factually wrong. Your own post stated that. You said "As I said, such gains are ALWAYS disproportionate", you also stated, "the gap between relative income groups as each improves but not proportionally". But then you want to turn around and argue that the gap isn't widening and Sowell is correct in this assertion."


Maybe the problem is that you don't understand basic English. Here is Dr. Sowell's statement:

"There is no question that incomes in the top income brackets have risen both absolutely and relative to the bottom income brackets."

Fletch stated the same concept with different words, as you quoted in your post. He did NOT argue, as you falsely state, "the gap isn't widening".

Come on, man, the concept really isn't that difficult to understand! Stop pulling a Krugman and lay aside your personal ideological bias!

buzzkat
"An economy consisting of differing income levels becomes wealthier in the aggregate over time. Would you agree that this is the desired outcome for an economic system? "

Yes.


"the lower bound is ZERO (people don't make negative income), whereas there is NO limit at the upper end of the income spectrum. Therefore it follows that in a healthy economy becoming wealthier overall, there MUST be an increasing gap between rich (no upper bound) and poor (ZERO lower bound"


Besides the side shots at Dems/lib, I don’t disagree with anything you say. In fact, you prove my point when you say “ there MUST be an increasing gap between rich (no upper bound) and poor (ZERO lower bound")” Not only does your “zero bound” analysis prove that there is a widening gap between the rich and poor. But also Fletch’s statements of gains being “disproportionate" prove me correct, and Sowell incorrect on his initial assertion of the “widening gap” being a “lie”.


Now if you, Sowell and people like Fletch don’t think the widening gap is problem, that’s fine, and probably consistent with your conservative/libertarian ideology. But please don’t try to deny the existence of the increasingly widening gap between the rich and the poor. To do so is just factually inaccurate. It seems like people like you, Sowell, and Fletch work very hard to deny the existence of certain elements in our society, because admitting their existence would require some moral examination on your part. But that’s just my opinion.



Age remains irrelevant
In fact, if it turns out that some huge percentage of the "poor" are really just young people starting out (which, as it happens, is the case) it merely highlights the point Sowell is making that no one is actually falling behind.

As for the "widening gap". Consider, you've got two rooms full of NFL quarterbacks and you assess the talent of these two groups. Then, Kyle Boller and Steve McNair enter one of the rooms and Payton Manning and Tom Brady leave. You cannot assess a "widening gap" of talent because the nature of the groups has changed and you are no longer comparing like (comparable) groups. It is logically invalid to pretend that the rich and poor at any given point in time is sufficiently similar to the rich and poor at a substantially different point in time to warrant such comparisons as are made when discussing the "widening gap".

That the effects of economic changes are experienced disproportionately is not predicated upon such comparisons being necessary (let alone possible). EVERY policy has such effects.

Buzzrat you are spot on
About gov't interference. My point is that said gov't interference is heavily weighted towards the wealthy, and consequently they have been the greatest beneficiaries of economic growth.


bryce
"All the figures you relate are based on the income tax which all workers(Hedge fund operators being a notable execption) pay. What about the payroll tax?"


Not at all. The figures I provided are for ALL federal taxes paid (top 1% paying a record 27.6% of all federal taxes). The top 1% pay a record 38.8% of federal INCOME taxes today.

Whichever figures you choose to use, the inescapable fact is that the SHARE of taxes paid by the rich has been increasing for the past quarter century and the SHARE of taxes paid by the bottom half, including payroll taxes, has been decreasing. The Bush tax rate cuts struck thousands if not millions of workers completely off the income tax rolls, more than offsetting the incremental increases in payroll tax rates that began at least during the Clinton administration. (Let's not forget that Clinton instituted taxes on Social Security benefits, double taxation, in other words. A real champion for the elderly, eh?)

Bryce
I will even agree with you that Social Security is a scam. In fact, it is by far the largest economic scam ever perpetrated in history. Of course there is nothing free market about the program, it is ripoff Communism pure and simple, exacerbated by the fact that mathematically Social Security is a pyramid scheme. The only solution is to replace the S.S. system with a free market retirement system where the INDIVIDUAL has control of and OWNS his money. It is the greedy, stalinist dem/libs who resist implementing the solution.

As for Big Business vs small businesses, there are two sides also, one positive and one negative. The positive side of sweetheart deals with local politicans by big businesses benefits the particular local economy. On the other hand, if government favors big business, is it the corporations' fault or the government's, i.e. greedy politicians? Neither Fletch nor anyone else makes the claim that the American economy is a true free market economy. It isn't. Lots of government interference exists, and the general effect of this government interference is to the detriment of consumers and the economy as a whole. Put the blame where it belongs!

Georgetwin
Screeching on these posts?
You jump to conclusions.
There seems to be little screeching and unlike
many other comment boards the discussion is about
the article with skeptics and supporters making
cogent arguments and asking important questions
imo.

Good job, THers!

F1etch
Be careful that you don't fall into the trap these people seem trying to lay. Everytime you address an apples to apples point, they go off on some tangent: E.G. "Why should a hedge be afforded the economic advantage of paying the capitol gains rate and not the income tax rate when he has no personal risk involved?" etc.

To bryce3: While this and the other questions that follow in your last post may be legitimate concerns, they have nothing to do with the point of the thread.

And to the rest of you, who keep trying to say Dr. Sowell is wrong:
To say that the rich get richer, is one thing, but what the good doctor is pointing out is that, to add that the poor are getting poorer, as the social demagogues try to convince us, is untrue at best and a damnable lie at worst.


Hogwash Buzzcat?
All the figures you relate are based on the income tax which all workers(Hedge fund operators being a notable execption) pay. What about the payroll tax? Again, every penny the 100k and under earner makes is subject to payroll taxes. Earnings above that amount are exempt. That gives the wealthy an enourmous gov't sanctioned advantage.

Further, you have not addressed the basic issue that the current disproportionate gains of the rich are due in large part to the advantages affored this group by current economic policy.

Fletch
“The whole point is that the claims of a "widening gap" are based on a (deliberate) misconstuction of statistics.”

What "deliberate misconstruction of statistics" are you talking about??? It's a nice phrase, but what does it mean? Once someone rises out of poverty, they're no longer considered impoverished. What's misconstrued about that? Oprah Winfrey grew up in poor south, would it be accurate to include her as an example of the "poor"????

“As the data sets are incompatible, there can be no such "widening" determined between the two data points.”

What data points??? You language is becoming increasingly ambiguous.

"That position (Dr. Sowell's) is consistent with logic and the proper use of language."

Dr. Sowell's position (particularly on the widening gap) is just flat out factually wrong. Your own post stated that. You said "As I said, such gains are ALWAYS disproportionate", you also stated, "the gap between relative income groups as each improves but not proportionally". But then you want to turn around and argue that the gap isn't widening and Sowell is correct in this assertion. I mean, come one.

Fletch we're just going to have to just agree to disagree. You're a little too much spin for me.

It Will Get Statiscally Worse
As the baby boomers retire the statistics as they are represented in these studies will get a lot worse. That is because the income measured in this and other similar studies is based on WAGES. As the boomers retire and as they live on a combination of Social Security and 401K withdrawls they will statistically fall into lower and lower income groups. They will begin to be measured as poor when indeed their real incomes may even grow. In addition, for the true low wage earners, these studies do not consider income from earned income tax credits or other government programs for the working poor.

I know, I recently retired and now have no measurable wage income, but can still generate income very near my working career from social security, pensions and savings. They need to look at total family income from all sources, not just wages, for an accurate study. But, this will not happen because it does not fit the political goals of these studies.

Georgetwin on Sowell
Can't you offer an answer to the questions I posted earlier? No one else seems to be willing.

Bryce hogwash
"If the average consumer is the engine of the economy, and tax cuts a necessary component of stimulus, why aren't these ordinary workers the primary beneficiaries of tax cut policy rather than the rich."

Since 1980, the share of federal taxes paid by the evil rich has been constantly going up, while the share paid by the bottom 80% has been on a steady downward trend. In 1980 the richest 1% paid 15% of all federal taxes, now they are paying a record 27.6% of all federal taxes, while earning only 17% of all income. The top 1.1 million households (the evil rich) pay a greater share of the income tax burden than the bottom 90 million households combined.

This data comes straight from the Congressional Budget Office. (All of the Dem class warfare candidates have access to the same information). Look it up.

Another fact: the Bush tax RATE cuts (NOT tax cuts) have resulted in record revenues to the federal government.

The problem is NOT "fewer" taxes paid by the rich (a blatant lie) nor is it even the tax rates, which are still too high. The problem is unchecked spending on domestic giveaway programs by the politicians bribing the voters. Both political parties are guilty of this, although the all time champs remain the dem/libs. Forget the Patriot Act and similar idiotic fetishes the dem/libs have, it is the increasing Big Government socialization of our society and economy by the greedy politicians that is undermining our Constitutional freedoms.

Same Stuff Different Day
Thumbsucking, Liberal, Bedwetters screeching that Dr. Sowell is wrong, he's a racist and other stupidity.

Thomas Sowell could FART and he would sound smarter than a LIBERAL!

Buzzrat
Please see the questions I posted at 12:36. I could accept your argument if all things were equal, but they are not. I will say it again. Current economic policy has been designed by elites to the advantage of elites.

AT
You simply seem incapable of understanding certain fundamental concepts. Sometimes you almost get it, then cannot follow the premise to its logical conclusion.

Consider: An economy consisting of differing income levels becomes wealthier in the aggregate over time. Would you agree that this is the desired outcome for an economic system? What are the upper and lower income bounds for such a system? The answer is obvious: the lower bound is ZERO (people don't make negative income), whereas there is NO limit at the upper end of the income spectrum. Therefore it follows that in a healthy economy becoming wealthier overall, there MUST be an increasing gap between rich (no upper bound) and poor (ZERO lower bound). This is simple algebra, in other words.

Now you yourself have admitted that the SAME people do not remain poor, i.e. at the zero or lowest quintile. Therefore there is no contradiction between the two statements "increasing gap between rich and poor" and "the poor are getting richer". This is precisely the way a capitalistic economy works. If you don't have these conditions, you have Stalinist Russia, where a few elites - the same ones! - remain rich and privileged, and the bulk of the populace - the same ones! - remain mired with no increases in income.

Much as you dem/libs refuse to admit the fact, American society is an upwardly mobile society, with the upward mobility greatest at the lower levels. The only thing that a society owes its citizens is OPPORTUNITY, that is, the PURSUIT of happiness, not the guarantee of happiness, which is what dem/lib entitlement spending essentially is. The further crime in you dem/libs' concept of income redistribution is that these policies have the effect of suppressing the very people they are supposed to help.

well now
wrote: "Yes, there is MORE to buy that is considered 'necessary' than there used to be:
computers, cell phones, gagetry of all sorts.
Health products that didn't exist. "


If you looked at the figures, the latest report showed that the 'high' inflation rate was due almost exclusively to energy and food. Computers and most other technology products actually showed a deflation in cost (due to production efficiencies, tech improvements).

Second, although some of these things are considered 'necessary' - how many of them actually are? I know there are some folks hurting out there, but how many of them are complaining about others making scads of money while they watch the news report on their flat panel screen, hooked up to a Wii, playstation, surround sound stereo, etc.?

And as others have pointed out, some prices are outrageous not because of inequalities, but because of foolish policies and practices - making ethanol from our corn is foolish, subsidizing college education has dramatically increased the price and reduced quality (as does ANY SUBSIDY - just ask Mr. Sowell or any truthful economist). So the next time you hear someone complain about the high cost of education and ask for more money from the government to pay for it, you'll know you've encountered an economic fool.

F1etch on questions unanswered
Again in the name of tax equity and stimulus:

Why should a hedge be afforded the economic advantage of paying the capitol gains rate and not the income tax rate when he has no personal risk involved?

Why should the earnings workers making less than 100k have full exposure to the payroll tax while earnings above that level are exempt? Another major gov't sanctioned advantage.

If the average consumer is the engine of the economy, and tax cuts a necessary component of stimulus, why aren't these ordinary workers the primary beneficiaries of tax cut policy rather than the rich.

Another question regarding free markets. I wonder how many people realize that the sweetheart deals given to big box retailers often result in these companies keeping the local sales taxes they collect from the consumers. Let me say that again. Because of these deals consumers are required to pay up to 6% in excess of the price of an item, the retailer then puts those collections in their back pocket, adding to their bottom line. Small businesses receiving no such gov't subsidy can hardly compete and are forced out of business leaving fewer options for the consumer. Please explain to me how that is a free market at work.

My point, again, is that the whole Horatio Alger/free market myth is in fact just that, a myth. The fact is that economic models are designed to benefit the very folks doing the designing.

If you can tell me the age I can tellyou
if there is anything to this good news.

But if a large % of the lowest income, again were
student filers between the ages of 18-23 I believe
that these stats will be repeated every time a
study is done of this sort.

I could be wrong. If I am, please tell me why.

If anyone knows the age demographic in each group
that would also help me a lot.

Huh?!?!
OF COURSE "Age is not factored in."

That would completely invalidate the study. The exercise was designed to address the relative income mobility of a given population over a specifically determined period of time. Age in, therefor, inherent in the data.

It is, by definition, an apples to apples comparison of like groups because the specific population has been identified and retained. This is materially different from making comparisons of the relative standings of two groups: A (the "rich") and B (the "poor") when over the course of time only a third of those in either group remain there at the end of the period. Such comparisons yield no useful data (which is why it is mere demagoguery to rely upon them).

the study, the press release, my 2 cents
the study:
http://www.treasury.gov/press/releases/reports/incomemobili tystudyfinal.pdf
the press release:
http://www.treasury.gov/press/releases/hp673.htm

There is nothing about age so imh estimation
whenever you study whose poor by income over 10
years you will see a rise from top to bottom.

You know the kid who graduates in May and gets a
job in June or September will be at the bottom -
most likely but will rise in 10 years.

Also college students who only work on weekends
and during the summer and the like will also rise.

This study imo proves less than comparing the
brackets which tell the story Sowell doesn't
want to believe.

bryce
Fair enough.

As I said, such gains are ALWAYS disproportionate. In actuality, however, what has happened is that recessions have a far greater impact on the wealthy than the poor. Now, before you argue the point, I am NOT talking hardship so much as the reduction in incomes as equity wealth and investment in capital take the hit (the rich guy can still eat fillet mignon but he can take a 26% drop in income easier than the poor guy can take a 15% hit).

Thus, any policy that leads to an economic turnaround (tax RATE cuts are always stimulative - even ill advised ones) will tend to result in a greater rebound among those with such investments. It is the productivity that ultimately results (as opposed to the drive of consumers - an economic error) in the greater need for more and better workers, higher employment. higher incomes, etc.

Checked the report
Age is not factored in.

Thus I have to agree with the demagogues on this
one - a comparison of category to category is just
as valid as what Sowell does.


To the contrary
The whole point is that the claims of a "widening gap" are based on a (deliberate) misconstuction of statistics. As the data sets are incompatible, there can be no such "widening" determined between the two data points. That position (Dr. Sowell's) is consistent with logic and the proper use of language.

"That’s just your opinion..."

I have hundreds of years of economic history to back it up. The operation of free market capitalism has been the greatest force for improving the lot of the poor than any other system conceived by the mind of Man.

Part of the problem is you confuse the incredibly rare, economically microscopic examples of Enron, Worldcom, etc. as indicative of the economy as a whole. The very premise is absurd. Of course, if you had a grasp of economics, then you would never vocie the complaint about outsourcing (which, in actuallity results in more and better paying jobs in the US).

The argument entirely without basis is the assertion that "the disproportionate growth in wealth for the elites is hardly just a matter of hard work and market forces". That statement is, in fact, contrary to observable reality. No administration can alter the underlying economic forces that determine success or failure in the marketplace of such a large group.

Such growth is ALWAYS disproportionate when only the top tier is looked at because the barometer of success is always rising - as I said, always a good thing.

Tommy
"It is incumbent upon you, Mr. Thomas to demonstrate that it is a bad thing that some individuals become disproporationately wealthier than others as Fletch wrote"

I never said it was a bad thing or good thing in any of my post. I just said Sowell was incorrect when he said the gap between the rich and poor wasn't widening. He's wrong

F1etch some great arguments
It is so refreshing to actually have a civil disagreement here! You have prompted me to do a lot more research, thank you.

I'd appreciate your reaction to the points I made about current economic policy being designed to benefit the wealthy disproportionately thereby ensuring their disproportionate gains.

Same here
Started off making $2.10 an hour in 1976, now pulling in almoat $30.00 an hour.

11h

Tommy On Income Gap
The point is that the wealthy have made disproportionate gains because this administration's economic policies have ensured that result.

In addition
...as the study didn't use differential groups from one period to the next and, instead, relied upon the same taxpayers in 1995 and 2006, the issue of late filers is irrelevant as anyone not filing in time in 2005 would be removed from the initial data set. This is statistically valid and completely refutes the complaint about ate filers skewing the data.

Second, and I hadn't realized this initially, the study captured social security benefits as reported on returns within the sample (so it would be far, far less than aggregated benefits paid out) and supplemented the 1996 data with SSA benefits forms. The difference between the data sets due to this sampling error is negligible.

The Walras/Johnson piece - as expected of such slanted liberal drivel - is completely wrong.

To: Anthony Thomas
It is incumbent upon you, Mr. Thomas to demonstrate that it is a bad thing that some individuals become disproporationately wealthier than others as Fletch wrote. Pointing out the fact that some people cheat does not do this. The fact there are dishonest people in the world is not a legitimate weakness of capitalism. There are dishonest people living under socialism and communism too, taking advantage of those systems in any way they can. And Fletch makes a good point, as does Sowell, about people moving between income groups. The mere fact that so many people are able to do this, reduces the importance of any "gap" itself to a fairly low level.

Fletch Makes Great Point
EVERYONE in the US has gotten richer over the past many decades. Our lifestyles, rich and poort, are way higher than what they once were. So the rich are getting richer, so are the poor. The fact that this does not occur proportionately is no indication of a societal problem, except to left wing types who see the world as a static pie. The fact that people do indeed move between income groups is just icing on the cake. The liberal class warfare myths just do not hold water. There is little or no evidence of socialism working to the benefit of society as a whole. It curtails imagination and initiative; it restricts personal freedoms and it discourages achievement.

F1etch gap a good thing?
My argument is that the disproportionate growth in wealth for the elites is hardly just a matter of hard work and market forces.

The Bush administration has never made any attempt to hide the fact that their policies were designed to offer the most benefits to the top earners.

You yourself admit that growth has been disproportionate, well of that is in large measure because the Bush economic policies have targeted the rich and as a natural consequence they have enjoyed the largest benefits of economic growth.


Fletch
"Actually, no. Dr. Sowell's entirely accurate point is that the members of group of "poor" captured at one point is almost entirely different from the group of "poor" captured at another point, so there can logically be no "widening gap" demonstrated as the sample has changed"

What??? Ok now you’re just spinning. Sowell stated this: "Among the many lies we can expect to hear this election year, none will be bigger or more often repeated, in the media as well as by politicians, than the lie that there is a widening income gap between the rich and the poor."

That is not a lie. As I stated earlier, the economic gap is widening between the rich and poor, REGARDLESS WHAT INDIVIDUALS are in these two categories. Once an individual makes enough money to increases their quality of life, they are no longer apart of the "sample", because they aren’t poor anymore. Surely you understand this.


“That the level that some individuals can achieve has gotten disproportionately higher is an unmitigated good thing indicative of a robust economy and ultimately makes that growth of the poor possible”

That’s just your opinion, you have no facts to back that up. CEO’s and stock holders have operated against the interest of employees and the American economy as a whole with insider trading, inaccurate bookkeeping, and the outsourcing of jobs for their own personal profit. Have you ever heard of Enron, Arthur Anderson, Worldcom,???

Subject matter
As I read the article, the "poor" (in 1995) are richer by 91% (2005). The "rich" are poorer by 26% in the same time frame.

As has been expressed here, if you want to make more money, WORK for it. Don't wait for the Gov. ( Dems ) to steal it for you.

Lib irrelevancies
"Excuse me, but one can hardly compare the routine benefits of the ordinary worker...medical, dental, vacation or pay...with something like a company paid penthouse facing Central Park East."

So what?!?! It has no bearing on the issue of whether or not thge economic conditions currently in place have made workers (including low income workers) better off.

There is no basis for a complaint about how much some third party is making, when the conditions of everyone are improving, beyond bald ugly envy.

Anthony Thomas
"If a person is makes 20,000.00 a year in one year, and then 10 years later they’re making 35,000.00 a year, that is an increase and an example of a person getting “richer” from your perspective. However, this increase does not equate to a CEO making 250,000.00 in one year and 10 years later that same CEO making 10 million dollars in a given year."

True as this may be, please explain to me how the life of the guy making $35k would be improved if the CEO were making less? I know I don't speak for everyone (certainly not envy-driven liberals), but my happiness does not depend on how much Bill Gates does or does not earn. In fact, I consider myself richer as I benefit from the products of his ingenuity.

Further
Stock options and dividend payments are ALSO part of total compensation - not that it has any relevance to the discussion. In economic parlance the term "real" with regard to wages/compensation simply means "adjusted for inflation". In that context, total compensation is inarguably the more accurate indicator of worker wellbeing as it reflects the total outlay to employees including the covering of expenses that otherwise would be incurred by workers that are a key factor in the height of the inflation calculation.

I am familiar with Greenspan's and Buffet's arguments on these points (and had already read the articles provided). They simply do not bear scrutiny. Greenspan operates from a demand-based economic outlook that is (thank God) on the way out because it doesn't work (and is behind the Fed policies that fueled the last recession and may well take us into another one).

Buffet's political stances simply don't meet a basic math test. He has largely been out front opposing cuts in a tax (the estate tax) that neither he nor his heirs will ever be subject to (hence, contrary to his defenders, he is not working against his own interests for the benefit of others).

Still, it doesn't change the fact that the "gap" is a complete non-issue based on comparisons of incompatible groups at different and irreconcilable time periods - which is Sowell's (entirely valid) point.

F1etch on benefits
Excuse me, but one can hardly compare the routine benefits of the ordinary worker...medical, dental, vacation or pay...with something like a company paid penthouse facing Central Park East.

Herein lies another of the fallacies offered by the elites, that compensation is a reflection of the marketplace. While that may be true for ordinary working people, the packages CEOs and the like enjoy are determined by compensation committees comprised of other elites.

Anthony Thomas is incorrect
"You’re playing word games now. Your statement is actually correct. However you avoid the fact that the rich and poor have gotten 'richer' at disproportionately different rates, hence widening the gap between them, proving Sowell incorrect."

Actually, no. Dr. Sowell's entirely accurate point is that the members of group of "poor" captured at one point is almost entirely different from the group of "poor" captured at another point, so there can logically be no "widening gap" demonstrated as the sample has changed.

But the real error here is in looking at irrelevancies. That the rich have gotten richer and the poor have gotten richer is the ONLY relevant point. That the level that some individuals can achieve has gotten disproportionately higher is an unmitigated good thing indicative of a robust economy and ultimately makes that growth of the poor possible. The "gap" is as much a real economic problem as the possiblity that the Great Pumpkin will murder Santa Claus leading to weaker holiday shopping season.

F1etch
Actually I stand corrected, you did reference the disproportionate rate when you said "What is invalid is the entirely unfounded concern about the "gap" between relative income groups as each improves but not proportionally” However by doing so, you yourself prove Sowell incorrect. Because obviously if the rich are increasing their wealth at a faster and higher rate, the gap is going to widen. That's just basic logic and Sowell is incorrect.

Income Inequality
Hey, we used to work our way up. My grandfather had a tiny store (today we would call it a "convenience store"). My dad went to night school and eventually became an engineer. He wasn't very successful, but I went to engineering school during the day (on scholarship money, back when scholarships were awarded by test scores). Then I decided to go to law school-four years at night, four nights a week with a full-time job, commute and National Guard on weekends. Look up "tired" in the dictionary for that one! Been successful enough to have a standard of living vastly superior to what my father could have imagined, and to consider leaving a nice legacy to my alma mater. However, when I asked how the night program was doing, the reply shocked me-it died due to lack of students. Don't tell me that you can't get ahead if you are willing to work.

F1etch
I made it simple for those like Hal.

I worked in Fl. some 40 yrs. ago. The foreman of the paint crew was from NY.

He was a superintendent of an apt. building. He tried to give a job to the husband of a family.

The man told him to shove the job. "They" would lose money (assitance) if he worked!!!

The first mistake
...is regarding Walras as a generally reliable source. I am not otherwise familiar with Patricia Johnson, but comments like "How did they manage to come up with a report that contradicts what is a known fact, that the economic policies put forward by this administration have dramatically increased the wealth of the rich?" don't exactly help her credibility. And complaining about the change in the cutoff for the top 1% as if it is inflation related is blatantly dishonest.

The second is relying upon Buffet's back of the envelope calculations as revealing anything. One of the great distortions of the left has been that American workers are falling behind because real wages have fallen. The reality is that wages have fallen in real terms since the 1960s (though that's changed this decade) ONLY because a much greater percentage of compensation has been paid in benefits. Total compenation (across income quintiles) has continuously grown making workers better off.

Before making the complaint that benefits shouldn't count, it must be remembered that the cost of those benefits has been a HUGE component of the inflation rate which is used to adjust wages to determine the "real" rate.

Pudge on taxes
In your last paragraph you refer to people paying their equal tax. Therein lies the problem, tax equity.

For instance, the traditional defense of lowering the capitol gains tax rate is that these are the risk takers who are fueling economic growth. Why is it then that a hedge fund manager who is taking no personal risk has his earning taxed at the capitol gains rate, not the income tax rate?

Also, as one of the vast majority of under 100k earners every penny I am paid is subject to payroll taxes. Even if that same hedge fund operator were subject to income tax rates, the potential millions he earns above that magical 100k is exempt from those taxes.

Which brings me to extending the Bush tax cuts. Two of constant refrains we hear from the economic pundits are that ordinary consumers are the engine of the community, and that tax cuts are a necessary component to economic growth. Given those arguments, does it not make sense to shift the emphasis from things like capitol gains taxes, estate taxes, subsidies for highly profitable energy companies, etc...and instead focus cuts like a laser beam on the ordinary Joes/Janes who keep this economy rolling?

In closing, look at the pundits, which side of the 100k divide they are on? I suspect that elites like are quaking in their boots over the current populace trend for the simple reason that their days of gorging themselves on the Bush gravy train for the rich may be ending.

Fletch /No Sowell is incorrect
"Setting aside the reliance upon anything presented at commondreams.org"

The article on the cite was from the New York Times, and I also provided Census data. .

"the rich have gotten richer and the poor have gotten ... richer (in real terms and in regard to total compensation), Dr. Sowell's point about actually understanding the statistics remains valid."

You’re playing word games now. Your statement is actually correct. However you avoid the fact that the rich and poor have gotten "richer" at disproportionately different rates, hence widening the gap between them, proving Sowell incorrect. Like Sowell, your argument is intellectually dishonest. You refer to “real terms’ and “total compensation” clearly ignoring the fact that CEO’s make their money not just off those things, but stock options and dividend payments as well. Greenspan actually addresses these things in the article had you actually taken the time to read it. Warren Buffet has also discussed these things in explicit detail as well in regards to his own finances. It’s very simple. If a person is makes 20,000.00 a year in one year, and then 10 years later they’re making 35,000.00 a year, that is an increase and an example of a person getting “richer” from your perspective. However, this increase does not equate to a CEO making 250,000.00 in one year and 10 years later that same CEO making 10 million dollars in a given year. Maybe a CEO’s increased “compensation” hasn’t caused this dramatic increase in wealth, but the perks (stock options, dividends, foreign investments, etc) that a CEO gains from his position does. You cleverly ignore this in your argument. Sowell is incorrect, the gap is widening.

Wrong Gap
When you hear someone say they are concerned about the gap between the poorest and the richest, you have a pretty good idea you are about to hear why the government should take something away from the richest.

The gap we should be concerned about is any citizen beneath the poverty level and the poverty level.

All of us above the poverty level should work together equally to help those below the poverty level. Either you believe it is a moral obligation, in which case you probably agree it is not right for the mob to steal from the richest, or you realize that equal taxation to support everyone to the poverty level is efficient.

At first blush it might seem expensive to support all citizens to the poverty level, but once all citizens are at the poverty level as a minimum, all need based (and with the exception of WIC wasteful) government income qualification programs can be terminated and we can let the free market and individual choices drive efficiency.

Then those who have paid their equal tax are free to choose their own charities, and if you can legally earn more it becomes obvious no one should try to steal it from you.

aurorawatcher and Joe Kennedy Sr.
aurorawatcher wrote: "We all grew up watching the Kennedys (born with the proverbial silver spoon) and forgot that Joe Sr. started out poor."

Bad example! Though he thought it made good press to have people believe he grew up poor, Joe Kennedy Sr. was born into great wealth and was catered to by maids and butlers at his family's vacation homes in Maine and Florida.

His father, PJ Kennedy, started out as a saloon keeper but - well before Joe Sr. was born - had became a Democrat ward boss, state representative, state senator, and exercised awesome power and control over his part of the city of Boston as part of the "Board of Strategy", the group which selected candidates for political office. PJ expanded his ownership to numberous saloons, wholesale liquor, coal, and banking! PJ used his enormous wealth & power to advance the career of his son, Joe Sr.

Like most myths promoted by the Kennedys and their flunkies, Joe Sr.'s "humble roots" are utterly bogus.




F1etch on Sowell and Income Mobility
Where do you arrive at the apples to apples comparison? The figures for 1996 did not include late fillers, 2% of returns, the 2005 do include the late fillers.

On your second point, I have no response since I have not done research on how these brackets are determined. In fact I would appreciate anything you can share on the topic.

Regarding ss benefits, I would hardly call the inclusion of half a trillion dollars to the 2005 figures immaterial to the results.

Sowell is correct
Setting aside the reliance upon anything presented at commondreams.org or the concerns of a former Fed chair whose policies fueled a boom-bust business cycle while he was there and the continuation of those policies that have created the current "credit crunch", the fact remains that a) the rich have gotten richer and the poor have gotten ... richer (in real terms and in regard to total compensation), Dr. Sowell's point about actually understanding the statistics remains valid.

What is invalid is the entirely unfounded concern about the "gap" between relative income groups as each improves but not proportionally. There is absolutely no basis for any economic concern on this point in a capitalistic economy - that is one in which income mobility is possible (and, as it happens, frequent) and there is a burgeoning middle class. The dynamic here is entirely different from countries have only the very rich and the very poor.

And the libs go off the deep end, again…
Rock and Hal begin the parade with a couple of ad hominem attacks in large part because those are the only attacks available. You do a marvelous job of demonstrating the final paragraph in Dr. Sowell’ column.

Rick, I didn’t mention your earlier comment, but it deserves comment in light of another response. While your take is perhaps over simplistic, it DOES have a rather large kernel of truth. In fact, because of the transfer payments not included in aggregate income in the statistics, those living below the poverty line actually spend in the neighborhood of twice their official income figure without going further into debt. That the perverse incentives of the Welfare state actually discourage some from moving up the economic ladder is a very real problem.

Bryce, the complaints are fuzzy. First of all, the issue of late filers is endemic in the data for each year examined and thus the comparisons are on an apples-to-apples basis. Second, the determination of “high income” is predicated upon a percentage of the population as a whole (not inflation) and is entirely valid on that basis (thus Buffet's complaint is entirely specious). Finally, while SS income is handled differently (and this is clearly noted in the study) it is not of sufficient materiality to alter either the conclusions of the study or Dr. Sowell’s comments on them.

And yes a significant percentage of the "poor" are young people starting out.

Sowell is incorrect p2
Also, Sowell’s argument seems to be predicated on the fact that Americans move from one income bracket to another over the course of their lifetime, usually moving up. But his assertion does not disprove the fact that those classified as “poor” have grown economically at a slower rate, than those classified as “rich”, hence, widening the gap. It doesn’t matter what individuals occupy these categories that facts remains that when politicians say there is a widening gap between the two income groups, they are telling the truth. Now if Sowell believes not enough attention is paid to people who move out of poverty and into another income bracket, that’s a legitimate argument. But this argument does not mean that there is not a widening income gap between individuals who are classified ” rich” and individuals who are classified “poor”, to suggest otherwise is factually incorrect.

Sowell is incorrect
Sowell hasn't proved his argument. His argument is that politicians lie when they say “there is a widening income gap between the rich and the poor." However there is much statistical evidence that suggest that there is a growing gap between the rich and the poor. The following links below are fair analysis of the subject. One link is a US Census report that provides statistical evidence of this growing gap, the other, is a New York Times article discussing how the Bush tax cuts have further widened this gap, and finally I have provided two articles about Alan Greenspan and his growing concern about this widening gap. In one article he states “As I've often said... this [increasing income inequality] is not the type of thing which a democratic society—a capitalist democratic society—can really accept without addressing.” - Alan Greenspan, June 2005

http://www.census.gov/prod/2004pubs/p60-226.pdf

http://www.tompaine.com/articles/2005/11/07/alan_greenspan_ egalitarian.php

http://www.federalreserve.gov/boarddocs/Speeches/1998/19980 828.htm

http://www.commondreams.org/headlines05/0605-01.htm



The diff between poor and broke
We grew up without much in the way of material goods; Daddy didn't get a 'regular job' until I was 8 (and I had 3 sisters by then) and we lived on what he could make stock car racing. But Daddy always said that we were not Poor (or as he always put it, "Poh"); we were broke. Broke, he explained, meant that right now you don't have any money. Poor, on the other hand, was forever.

In other words, Poor is a mindset, not a fact. You may be broke today, but tomorrow you will have money. If you are Poor today, you will be Poor tomorrow.

This was of great assistance to us as we worked our various ways up the ladder of success as we perceived it. My housewife sister stuck with her husband as he gave up the dream of minor pro hockey and went back to night school to learn accounting -- and worked his way up to Executive Vice President of a major insurance company. Along the way they paid cash for everything they bought and he made sure each step on the ladder was a firm one before he took the next one. We are not all wealthy, and some of us are, from time to time, broke. But we are all sure that tomorrow will be better and we know we have to do something to get there.

Wow, that was quick
Googled his report looking for a critique of it
and here is what I found:

"A cursory review of this table basically tells you everything you need to know about this report. The 1996 income cutoff for the top 1% was $284,603, but increases by $179 thousand dollars for 2005 to $463,615.

If you continue to raise the bar on what is considered the top income in this country, of course taxpayers are going to fall into a lower category. The income level cutoff point for all income quintiles indicated has increased at rates far exceeding inflation.

. . .

He [Warren Buffet] stated that in 1987 it took $220 million to make the Forbes 400 list, while in 2007 it took $1.3 billion to make the list, or a 6-1 increase. While the total wealth of the listing was $220 billion in 1987, it ballooned to $1.54 trillion in 2007 or a 7-1 increase, basically due to tax law changes benefiting the rich.

Buffet then compared the median income of the average American worker - $26,061 in 1987 to $48,201 in 2007 and stated the increase in wages for the average American was almost exactly the same as the increase in the CPI (Consumer Price Index) during that same period. . .

Using the CPI inflation formula to calculate you'll note the current median income is actually higher by about $875.00.

. . .

The fact the median income is actually slightly higher than the inflated CPI by $875.00 is a sad state of affairs, due to the fact that increases in food and energy prices are not included in consumer price index calculations.

In other words the median income of American workers over the past 20 years has not even kept up with inflation, when food and energy costs are included."

http://ezinearticles.com/?The-Income-Mobility-Trail-of-Lies &id=838826

Useful arguments
by Sowell.

I'm not sure the people who say there is a growing
split between poor and rich can't agree with
Sowell's stats. And still say what they do.
One does not negate the other. Both sets of
statistics are true.

I would like to know who is in the bottom 20% -
does it include college students? how many
people under 30?

My point is it would be better to look at people
over the age of 30 in the bottom 20% and how they
changed in the 10 year study. College students and recent grads are going to make a lot more in
10 years on average and imho are not reflective
of the "demagoguery" Sowell is speaking of.


Last point, what does this article have to do
with yesterday's article?
Especially since Sowell admits that these claims
can be substantiated?
That's not demagoguery any more than this article
is.

There is ALWAYS a better job
There is always a better job available for anyone who is willing to take responsibility for their own future.

You start out in an "entry level" job. Of course the wages are low -- you don't know much and you haven't proven anything so you aren't worth much. So you live on ramen noodles and peas. No big deal, you're young and you can handle it.

You work hard in that job, get some experience, prove that you are willing to work and you'll either be promoted or you'll be able to hunt for another, better-paying job.

Repeat until you've hit the level you're aiming at.

My DH has changed jobs every 3 years on average as he either hit a wall (the top employee in a family business with intense commitment to nepotism can only go so far), been involved in buyouts, seen poorly-managed companies succumb to competition, and so on. He's never taken a backward step.

Recently, when his company had internal conflicts between partners he received 3 job offers from competitors the moment the strife became known. But instead he's teamed up with several co-workers to reach the ultimate goal -- owning his own business.

There's been difficult times and temporary set-backs and, indeed, its a little thin right now as things build. But a person who is willing to do what it takes (we moved 9 times in 13 years and then again 4 years later in search of better jobs and a more affordable cost of living), comes out on top.

bryce3
My example is not fuzzy math but real life as is the examples of many people that I know. I also know people, my neice, that continually complain about everything and not having anything but are too lazy to get off the government t*t.

What about?
What about the fact we are all getting worse off together.

We are all losing our infrastructure, buying power, respect in the world, etc.

We are all living in a nation where personal, city, state, corporate and federal debt is spiraling out of control.

We are living in a nation where government spending as portion of national income has risen from 12% in 1921 or 21% after WW II to 44%. We have "C" "D" and "F" ratings on sewer systems, water systems, (some cities still have lead pipes in their older city systems), bridges, power grids, airports, health care system, etc.

Yes, we focus too much on a mythical wage gap expansion but, those in lower incomes whether moving up or not, are worse off than the generation before them in whatever level they are in. For a senior to have the same buying power with his social security check as a senior spending his 20 years ago, it would have to be 50% higher. For a person who has risen enough to "invest," he can stay ahead of inflation better but, he is still worse off than his counter party 20 years ago would have been.

We focus on the wrong things.

It is so easy
...to blame someone else for our failings. I am so tired of articles about unequal pay. They never compare the same job for the same company for a man and a woman. Instead of wasting time on inequality, I wish the media would concentrate on the need for education and training.....plus being willing to work and sacrifice to get ahead.
Another excellent column.

Sowell argues with fuzzy math
Sowell and others love to refer to the Treasury's Mobility Report. Three major flaws in its' methodology.

First, the figures from 1996 do not include tax returns submitted after April 15th. These late filings were included in the 2005(?) figures. This represents approx 2% of returns filed, usually by higher income earners.

Second, the 1996 figures do not include SS benefits as a source of income, the 2005 figures does include SS benefits.

Third, the 1996 figures use 285,000k as the break point for what it calls high income earners. The 2005 figures use 455,000k as its' break point for high income earners, which does not jibe with upward adjustments for inflation.

Again, Sowell's argument is based on a study whose methodology is hardly sound.


One possible objection...
to what I just said is, "My boss is a jerk," or, better yet, "There's no room for promotion at my company."

Well, successful people find ways to do things. One way to earn a promotion is to outshine everyone else with your work ethic so another company with room for you at the top will hire you. Another is to go into business for yourself. America is one of the best places to do that.

Rick C
"Why would you want to get out of the bottom when the "STATE" gives you what you need?

Rent money
Food stamps
Child credits (from SS money)
Medical care

And an Assortment of othere "free care"? "

Ahh so you are there? If not please get rid of ALL your assets including credit ratings and relationships and try it

In a nutshell...
"All you can do is all you can do, but all you can do is enough."

The problem is that some people think that all they can do is sit at a desk or stand at an assembly line for 8 hours a day while their employer pays an hourly wage and "benefits," then gripe and groan when someone else who "sucks up" to management (otherwise known as doing a little bit extra) earns a promotion and a big pay raise while they stay stuck where they are with annual, less-than-inflation raises.

I've been studying the habits of successful people in an effort to become successful myself. Some common traits are:

1. They work harder than the average person for little compensation up front, and earn big rewards later--sometimes years or decades later.
2. They stay focused on their goals, no matter what happens.
3. They are always first to arrive, and last to leave.
4. They never expect others to take care of them. When food prices go up, they say, "I'm going to earn more money," not, "I'm demanding a pay-raise from my boss."
5. There are lots of other traits, but you get the idea.

LMAO
Thomas you had to reach far and high to get that one out. Reminds me of what a command sargeant major said just yesterday: Sir, like the bible, I can find permission in Army regulations to do anything if I look hard enough. But thanks again for proving the dismal science still has outbreaks of humor LOL.

Well, now
Your concern is (largely) unfounded. The devaluation of our currency that has been continuing unabated for a century now IS a real casue for concern (albeit there is no hyperinflationary disaster just around the corner), but the concern about the cost of essentials is misplaced.

While the Left keeps bemoaning falling real wage rates (and even that has been largely silenced because they have risen since the beginning of the decade), the real story is that total compensation (reflecting payments for benefits whose cost rise is included in the inflation figure) has consistently increased over the last several decades at each income level.

Similarly, energy prices (the other significant advancer over the last few years) has only now reached levels consistent with those paid in the early 80s.

Thus, on average (and remember that's about all you can say with aggregated statistics), the average individual in the lowest income quintile (that bottom 20%) is paying LESS for those essentials than the comparable individual in the 70s.

I'm another proof
My grandfather was a farmer. My father was a teacher. My brother and I are both engineers. And within the last 15 years we've gone from the statistical lower class (recent grads) to the middle (my case) and upper (my brother) classes.

Grandma is delighted, and says that in the old country we would all still be farmers. Ain't freedom of social movement great?

Bottom 20%
Why would you want to get out of the bottom when the "STATE" gives you what you need?

Rent money
Food stamps
Child credits (from SS money)
Medical care

And an Assortment of othere "free care"?

Sewell vs Soundbits

Now we just need to find a way to boil this down to a sound bit.

Another 5 stars, what a surprise!
Unfortunately, Dr. Sowell knows all too well why the politicians lie to us. Read his book, "Applied Economics, Thinking Beyond Stage One" and he will explain it in detail. Ethanol is a perfect example of only thinking in stage one. Produce ethanol and reduce dependancy on oil, done. Stage two and beyond brings us to increased food prices not just because of the extra corn going to ethanol, but it raises the price of feed corn that pigs and other livestock need to eat. That raises the price of the livestock and viola! the price of pork, beef, chicken, etc go up as well.

I too started in the poor range in the 70's making less than 10k/yr. I have moved up from there to middle class just nicely. Could I do more, yes, if I want to get rid of the TV and work harder, but I choose to be comfortable with where I am now.

Not fools, good doctor.

No, Dr. Sowell... the politicians and the media are not playing us for fools.

They are playing us... for absolute dolts.

The great tragedy is that class warfare works every time it's tried, because...

...it plays right into the emotions of envy and resentment,

...it steers us away from our own responsibilities,

...it allows us to point fingers at others,

...and it falsely sets pols and the media up as saviors.

And still, we fall for this tripe...???

Sad.




Vic writes
"Dr. Sowell is correct". Now what was your first clue? :-D

Your point on ethanol is pertinent and terribly overlooked by the envirowhackos. Political correctness is powerful, but it can't repeal the laws of thermodynamics, cause and effect, or even the human nature that drives the market.

Every once in a while...
...we get a report from a third world country,usually from a missionary or a reporter,who tell us how astounded the poor people of that country are when they are shown what "poor" in America means:

A house to live in???!!! Amazing!

Three meals a day???!!! Incredible!

A color TV???!!! Fantastic!

They own a car???!!! Who ever heard of such a thing!

It seems that the poor of the world would give anything to be poor in America.

In any society you are going to have a bottom third,a middle third,and an upper third.It will not and cannot change.

DR. Sowell is correct
but he leaves out one part of this Lamocrat mantra. They say that all of this is a result of GWB's tax cuts for the rich. If you look at every economic recovery that has gone on since we started keeping tack of these things, the upper income brackets increased faster than the lower income brackets during the recovery. Of course, during the downturn, the upper brackets decrease faster than the lower brackets also.

And those of you complaining about the high cost of food should start E-mailing your Senator and Congressman complaining about the stupid ethanol program.

Been there, done that
I have been in the bottom income tier and in the top 10% and every tier in between. Even when I was poor, I never even considered asking, much less demanding help from the government.

Dr. Sowell intellectully describes
the machinery behind America's incredible economic performance, but one does not have to understand his work to agree with him in the most important way. Ask the folks doing desperate things to get here, or try to persuade even the most disgruntled citizen to leave. Left wingers who bleed over the "poor" in America have no idea what poor is, say stupid nasty things about our economic engine, but few move to those countries more like what they propose for us. Wouldn't it be nice if they would?

As a flesh-and-blood human...
...I can attest that Dr. Sowell is correct. I am one of those who has moved out of the bottom income bracket, and I'm now in the middle fifth. The change began when I stopped blaming others for my rotten luck and took a good hard look in the mirror. This led to two decisions: I quit drinking and got rid of my TV. It's absolutely astounding how much more productive I've become as a result of those two changes. Do I envy those who make many multiples of what I make? Absolutely not. I'm grateful to them; they're the ones who provide all the cool products I can now afford to buy!

What bothers me about all this:
I've seen the rising cost of food. Those who are NOT 'comfortable' pay much more (%) for those essentials than do those who ARE 'comfortable.' (And I don't mean those precut just bake cookies - I mean flour, sugar, etc.) (I also know that this has always been pretty much true, but seems more clear now.)

Yes, there is MORE to buy that is considered 'necessary' than there used to be:
computers, cell phones, gagetry of all sorts.
Health products that didn't exist.

But, it seems to me that the "average" family spends a lot more of those 70s dollars to put almost the SAME things on the table as they did.

aurorawatcher -- working
"The problem seems to be that today most of us are allergic to hard work."

Hey, I got nothing against hard work.

I can sit and stare at it for hours.

Mythology of the downtrodden poor
People are only stuck in their life circumstances if they aren't willing to work themselves out of it. One of the wealthiest families in my town is descended from a Yugoslavian miner who trekked into the Alaskan range in about 1902. Illiterate in English when he came to this country, he taught himself to read and write by the woodstove in his cabin in the Rainbow Mountains. He prospected, he hunted, he chopped wood, he went hungry sometimes and he was vexed when he couldn't afford tobacco. Then after five years of hard-scrabble living, he found gold -- a rich vein that some of his family still mines today. He bought and established businesses, purchased land, planned for the future. His family isn't Rockafeller rich, but they have a nice legacy in rents and dividends from his good planning. They have to work if they want a nice lifestyle, but one granddaughter who is disabled manages just fine on the income JH left.

That's one example in millions of people who started out poor who became rich through hard work. The problem seems to be that today most of us are allergic to hard work. As a friend put it in describing his lazy teenagers -- "they don't want jobs, they want positions and they can't understand that nobody hands a 16-year-old kid a position unless he's got some job experience."

Unfortunately, it seems like a lot of 26-year-olds, 36-year-olds, etc. haven't figured this out yet. Most people start out poor unless they have a rich daddy. Even people who grew up middle-classed start out poor. Then they become middle-class by working hard to improve their income. Some work hard enough to become rich. I don't know, maybe we all grew up watching the Kennedys (born with the proverbial silver spoon) and forgot that Joe Sr. started out poor.

the truth
Dr. Sowell is one of the few people that make sense 100% of the time. Even if I don't agree, his reasoning is amazing. In this case, I am glad that someone can cut through the rhetoric and demonstrate what is really happening with American families.

Facts
Liberals never let facts get in the way of their line. Dr. Sowell, I am one of your statistics. In the early 70s I was making less than $10,000 a year. Now, my wife and I make over $100,000. We did it with hard work and I know many other people that have done the same thing. My neighbor is only a high school graduate but makes over $150,000 a year. Back in the 70s I can assure you he was making far, far less than he is today.
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