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Wednesday, November 21, 2007
Thomas Sowell :: Townhall.com Columnist
Income Confusion
by Thomas Sowell
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Anyone who follows the media has probably heard many times that the rich are getting richer, the poor are getting poorer, and incomes of the population in general are stagnating. Moreover, those who say such things can produce many statistics, including data from the Census Bureau, which seem to indicate that.

On the other hand, income tax data recently released by the Internal Revenue Service seem to show the exact opposite: People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005.

The top one percent -- "the rich" who are supposed to be monopolizing the money, according to the left -- saw their incomes decline by a whopping 26 percent.

Meanwhile, the average taxpayers' real income increased by 24 percent between 1996 and 2005.

How can all this be? How can official statistics from different agencies of the same government -- the Census Bureau and the IRS -- lead to such radically different conclusions?

There are wild cards in such data that need to be kept in mind when you hear income statistics thrown around -- especially when they are thrown around by people who are trying to prove something for political purposes.

One of these wild cards is that most Americans do not stay in the same income brackets throughout their lives. Millions of people move from one bracket to another in just a few years.

What that means statistically is that comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years.

That is why the IRS data, which are for people 25 years old and older, and which follow the same individuals over time, find those in the bottom 20 percent of income-tax filers almost doubling their income in a decade. That is why they are no longer in the same bracket.

That is also why the share of income going to the bottom 20 percent bracket can be going down, as the Census Bureau data show, while the income going to the people who began the decade in that bracket is going up by large amounts.

Unfortunately, most income statistics, including those from the Census Bureau, do not follow individuals over time. The Internal Revenue Service does that and so does a study at the University of Michigan, but they are the exceptions rather than the rule.

Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people.

Another wild card in income statistics is that many such statistics are about households or families -- whose sizes vary over time, vary between one racial or ethnic group and another, and vary between one income bracket and another.

That is why household or family income can remain virtually unchanged for decades while per capita income is going up by very large amounts. The number of people per household and per family is declining.

Differences in the number of people per household from one ethnic group to another is why Hispanics have higher household incomes than blacks, while blacks have higher individual incomes than Hispanics.

Considering the millions of dollars being paid to each of the anchors who broadcast network news, surely these networks can afford to hire a few statisticians to check the statistics being thrown around, before these numbers are broadcast across the land as facts on which we are supposed to base policies and elect presidents.

Now that the Internal Revenue data show the opposite of what the media and the politicians have been saying for years, should we expect either to change? Not bloody likely.

The University of Michigan study, which has been going on for decades, shows patterns very similar to those of the IRS data. Those patterns have been ignored for decades.

Too many in the media and in politics choose whatever statistics fit their preconceptions.

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Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.
 
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Why check stats
If Hillary says the tax cuts for the wealty means the poor are starving and she cites average household income stats to prove it why would anyone in the press question it? Neither she nor Bill would ever lie unless it was unimportant (trying to save his marriage) or was really important (trying to be elected pres). Afterall there are 35,000,000 starving Americans (70% of whom are overweight or obese)and Democrats just want to feed the hungry and make those darn rich pay their fair share. If the left wing media can't help their friends why are they in business? As the saying goes there are three types of untruths, lies, damnable lies and statistics.

Yes Dr Sowell
we know the big lie from the Communist(D) Party about the "rich" and the "poor".

What we don't know is why TH gave us Pt. II before Pt I.

While looking at the data
Make sure you check out the other set of books the government keeps so they can fudge on the tax brackets. It doesn't do much good if you're getting more but the money is worth less (no pun intended).
They don't keep track of inflation properly because they altered the Consumer Price Index (in more than one way) a number of years back. Rather than using the same market basket of goods from year to year, they said they needed to take into consideration that people may have switched from beef to chicken. (Just extrapolate that on out and eventually they'll do away with the CPI market basket altogether because people will be scrounging in dumpsters.)

The government, by using such faulty figures can then say inflation is 2% when its 10% and those increases in incomes don't mean much when you live at the bottom of the heap-especially when you're a Social Security recipient who loses it back to the state as soon as they get a COLA.

And the figures particularly don't mean much anyway if they came from Uncle Sam.

Hey S.A.M.
Heaven forbid the market basket in the CPI should change. If they had typewriters in there 30 years ago, they should keep typewriters in there. And don't forget black and white TVs.

Media responsibility
Think Dr Sowell makes an important point, that there is a huge responsibility in the media to back up and analyse data and the claims of advertisers. So many stats and facts are spun out by organisations and the media that we are now in a position where we really cannot trust what we hear, and in a confusion of conflicting, equally plausible and loudly promoted data, people become both utterly cynical about 'experts', science, the government etc. and increasingly reliant on their own prejudice.

Sgt Relic
Your point is spot on....and recently, the evidence of "market forces" effecting shotty media reporting is glaring. For example, the extremely agenda-driven liberal NYT has watched their stock drop from more than $51 in 2002, to a dismal $17 at present.

Nothing Wrong With Starting With Nothing
It used to be a mark of honor that people would start out with nothing and work hard to get into a comfortable position. Now, it seems that newlyweds expect to immediately be in the same financial position as their parents. And Democrats are telling them they deserve it.

It's the same thing with minimum wage statistics. Does anyone really believe there is some guy out there who hasn't received a raise in 7 years, and is still making minimum wage?

Statistics?
Mr. Sewell wrote: "Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people."
I've been following me for over 50 years and yes, my income has steadily increased. I have also changed tax brackets several times (as I follow me).
At best, I could be considered "upper middle" class (if class categories still exist).
Am I scrounging in dumpsters? No...Am I living comfortably. Yes, by my account, but let me tell you, there is no way that all of the financial "gains" or "upwardly mobile" tax bracket changes that I have benefited from has made me "feel" that things are better, let alone afford, without concern, housing, daily staples and health care.
And there is no way that any statistics presented by Mr. Sewell will allow me a sigh of relief regarding the ever expanding gap between those individuals that are "employed", "contributing to society" and living "comfortably" (that, I think, would be me), or those employed and contributing that are barely able to afford housing and daily staple items, not to mention health care and those that are living beyond their means. And I did not mention those that would like to, but find it difficult to find living wage employment status, or those that are "scrounging in dumpsters".
This is not a "sour grapes", whining, liberal statement (although I'm sure many readers will label it as such).
Bottom line, statistics are important, can identify trends and allow for informed strategic planning. But losing site of the actual daily lives of many Americans, and how those lives can be improved is a path that our politicians (left and right) have followed while spewing "convenient statistics" that amount only to rhetoric.

To S.A.M.
I just don't see the relevancy of your point in the context of Sowell's article. Even more, perhaps they should have kept buggy whips in that market basket of goods, too. Guess what, the "basket" HAS TO change over time to reflect current lifestyle demands. I doubt that anyone cared about the price of cable tv or laptop computers in 1975. And if it is true that more people are eating chicken than beef in the modern age, then the basket should reflect this change.

Empty conspiracy theories are worthless drivel.

Buckeye
Not sure the point you are actually trying to make in your post, but you seem to imply that politicians, through "strategic planning" can somehow ensure all Americans can easily afford all they need. This is man's greatest myth.

The government can help to ensure our protection and provide some services, but the best thing they can do is stay out of the way. In our country, those who truly want to wark hard and can delay instant gratification always find a way to succeed.

BlueBuckeye reads, learns nothing
After admitting that he has risen from lower income brackets to higher ones and that he is living comfortably, BlueBuckeye kneejerks into the standard liberal talking point of "I'm doing OK but I see other who aren't". And the standard liberal talking point about the "ever-expanding gap" between those doing well and those just getting by.

Does it ever occur to liberals that maybe those who are just getting by are in that state because of their own lifestyle and choices? Does it ever occur to liberals that if the general populace is continuously forced to bail such people out every time they make poor choices these people will never learn to make good choices and will thus become a permanent burden?

Or do liberals just flat out refuse to give GWB credit for a good economy regardless of fact, logic, and reason because they're afraid they would choke on the words if they tried to say them?

Market Forces and the MSM
It would be immensely satisfying should the market forces so distained, misunderstood dismissed and railed against by the MSM bite them back. Somehow the MSM has come to believe that ‘freedom of the press’ belongs to them, its practitioners, for their sake alone. It does not. Not any more than ‘freedom of religion’ belongs to churches and the clergy. They both belong to us. What the MSM has is the privilege and responsibility of being the free press to which we have a right; a privilege too little appreciated and a responsibility too often abdicated through their own self-aggrandizement. We all have a responsibility to the freedoms we enjoy, including not supporting those institutions which do not properly exercize their responsibilities to those freedoms.

Icedog
Ensuring our protection and providing some services can be construed in a number of ways, depending on your opinion regarding needed protection and services.
The matter is so complex, it is too difficult to address adequately in a blog like this. And trust me, I don't have the answers either.
But I strongly believe that strategic planning and objectively informed decision making CAN begin to address, not ensure, better living conditions for MOST Americans.
Lobbyists hitting on both sides of the aisle manipulate policy for narrow interest groups.
And many Americans fail to understand the required work ethic (including education) while expecting instant gratification based in large part on the marketing industry and seeing others in our society that are living with so much at their disposal (excellent point that you made).
Finally, the government "staying out of the way" can be dangerous if it impacts its ability to serve and protect.
I have to work now to sustain my mediocre lifestyle.
btw - in my previous post I wrongly referred to the very wealthy as those "living beyond their means"...my bad, sorry.

Wiseone you've hit the nail on the head!
To liberals, the term "Rugged Individualism" means "Individual Selfishness". Those who succeed in life are doing so because they are stepping on the backs of the poor, moreover, they want to create wealth and keep it to themselves. Liberals do not realize that the economy is not something static or set, like a giant pie, where only so many slices are available.

They worry that the rich are hogging the greatest majority of the non-existent pie, and the poor are left with the crumbs.

And your point that most of the poor are poor because of life choices is exactly, though not politically, correct.

The fact that liberal politicians can freely move and play games with the "lines" of poverty and wealth makes it even more difficult for people to understand why, one day they are considered below the poverty line, and the next day they are middle class, and the middle class have become rich.

I think the one thing we must all agree upon when it comes to economics, and that is, if a politician's lips are moving, he/she is lying through his/her teeth. (we must be politically correct):-}

Liberalism has succeeded in our schools.
The reason politicians, especially liberal politicians, can so easily persuade so many voters who are ignorant about economics, is the result of 50 plus years of liberal influence in our government highschools. I would say public schools, but let's call it like it is, they are government schools. Economics is simply not taught and for very good reason. A knowledge of economics by young voters would expose the lies of the liberals instantly.

I was a young liberal having been raised in a family where my father was a union man. In college I took Econ 101. From the moment I understood the theory of supply and demand, I became a conservative.

LOST IN THE NUMBERS
Most people get "LOST" in the numbers in this type exercise.Therefore,I will help cut to the chase.When you have 56% of the Wealth of a country, being under the control of LESS THAN 10% of it's people,this analysis becomes irresponsible.Especially when given by an Economist.I know you understand "PIRETO'S LAW" and the role it played in the destruction of both Rome and Egypt.I know, that some people will read your article and "HONESTLY" believe, that it is "NON-POLITICAL".NOT I!!!This is a STATUS-QUO argument and it is most unfortunate, that too few Americans have a "MASTERY" of this system, that would allow them to see the TRUTH!!But 1 DAY,this will CHANGE...

BlueBuckeye writes...
"I strongly believe that strategic planning and objectively informed decision making CAN begin to address, not ensure, better living conditions for MOST Americans."

... despite the objective evidence provided by history, not only in the U.S., but throughout the world.

Governmental planning has NEVER ONCE produced better living conditions than what a free market, without government interference, has been able to provide. Not once.

But Socialism is a faith, and like all faiths, it will stand up in the face of whatever contrary evidence the real world provides.

to: Killer
Killer, perhaps you should quit using your shift key so often. A point can be better taken if the writer doesn't scream. Being angry simply dilutes your point and objectivity.

It SEEMS that killer...
... is still CONGENITALLY unable to write A SINGLE POST without capitalizing WORDS AT random. This HOWEVER!!! should not come as ANY surprise, SINCE basic logic AND reason SEEM to be devoid from hiw WRITING as well. HOW SAD.

CPI reporting
It isn't eliminating typewriters or any other obsolete item or adding a new item that is popular and commonly purchased that changed the reliability.

It is saying that Steak needs to be thrown out if people can't afford it and can only buy hamburger type accounting. (if that is actually an example) It is saying that something that "works better," is lower cost than the price that went up and was adjusted down.

It is switching from home price to equivalent rent or by throwing out food and energy which the Fed seems to now thinks may need to be put back into for its consideration. There are many private study groups that track inflation for investors so that they get an accurate picture of the economy. They have to "put their money where their mouth is," and if they need that information to make money, shouldn't we be entitled to the same accuracy?

Here is a site that will give you all kinds of info on the changes that have been made and it isn't taking "typewriters" out of the basket that is important.

http://mwhodges.home.att.net/inflation.htm

The rest of the world knows more about our inflation than most of our citizens do.

Killer
Another pseudo intellectual trying to impress people with his lack of knowledge. The PARETO PRINCIPLE had NOTHING to do with the so-called fall of Rome.

The common view is that the citizens allowed their army to be comprised of the very barbarians that they were trying to keep out. In fact, the vandals were originally allies of Rome who had been paid to fight the other barbarians. I say barbarians because that is the general view.

The newest view is that European civilization was already shifting to the Middle Ages and feudalism and that Rome never did "fall". It became Balkanized and the dark ages and loss of knowledge occurred due to the little ice age and plague which caused the mass die-off.

Poh folks
By alot of standards my wife and I are poor.We make less than 40 grand a year We have to eat the same meal two days in a row.Have a car and truck that are not new.It is human nature to want more money,that is why lotteries are so popular.We started out in the 50's shortly had 4 kids(no health insurance)after many years we went out and got an extra job.sometimes working 7 days a week.Now although are income is limited we have property worth more than 200 grand.Work hard and you will eventually get ahead.GOD BLESS AMERICA

Fergus
You hit the nail on the head.

It never ceases to amaze me how "central planning" of economic activity sounds so plausible to so many, no matter how many times it has been tried and failed, and the free market remains suspect in spite of its track record of providing the highest standards of living wherever and whenever it is allowed to flourish.

Killer
Leave the economic analysis to people who actually know what they are talking about. Tossing around (and misspelling) economic principles about which you apparently know nothing might impress the leftist dolts you undoubtedly surround yourself with, but here they just make you look like a fool.

Sowell wrote:

"Too many in the media and in politics choose whatever statistics fit their preconceptions."

Sowell is a perfect example.

In measuring trends in the economy as a whole, what good is following the progress of individuals? At any given time, there are people entering and exiting the workforce. While the percentages of each such group deviates over time, they usually do so within a narrow range (granted the "baby boom" generation was larger than most). So at any given time, we have about the same percentage of people at each stage of life. So comparisons of stats like the Census Bureau does it are certainly valid for describing trends in the macroeconomy.

Sowell would like us instead to look at individuals over time. Why?

For most of us, income starts at zero when we enter the workforce. We are, by definition, at the very bottom of the income scale. Over time, as we gain education, experience, and intelligence, our incomes increase. We are promoted, change jobs, and we make investment income. Towards the end of our working lives, we have much higher income than we did when we enter the workforce. Then, when we retire, our incomes plummet.

So why would a conservative such as Sowell prefer that we compare individuals over time rather than snapshots of all workers? Let's look at a few individuals in the two years he uses, 1996 and 2005.

continued...

Vic
I would like you to read a little more about Roman history.Look at a map,you will see that Rome was in the center, "Barbarians"were always a concern.Rome was destroyed from the inside long before the Barbarians actually invaded.It was destroyed because those who were to do the fighting had NOTHING to fight FOR!!

Great once more
It seems a statistician can turn black into white with just a model and a few strokes.
My income has dropped dramatically in retirement because while I don't have as large of income my home and everything else is paid for. I put money into savings while I worked and I am comfortable with a nice paid for home watching the sunrise over the Big Horn mountains every morning. It is not big, it is not luxurious, but it suits me and I am grateful. I have good health and good insurance in case that changes. I have family close by and what more could anyone ask for?
Still according to statistics I have really dropped in my standard of living since I don't earn much money.

killer neglects to address the point
... which would be the relevance of the Pareto Principle (hint: it's not "Pireto's LAW" [emphasis mine], but rather the "Pareto Principle"... get the distinction?) to the entire question.

Are you capable of maintaining a coherent, linear argument in defense of... well, whatever it is that you are claiming?

I can't wait...
... for "BS Detector" to continue his line of BS...

It seems, dear friend, that you have entirely missed Sowell's point. You seem, basically, on track to accusing Sowell of arguing from anecdote, which is hardly what he is doing. Rather, he is making a point about *which* aggregates one should look at in the statistics. He is not talking about merely looking at individuals, but rather at looking at the aggregate of individual trend-lines, and seeing where they lead.

But figure a Leftist to miss the point... or ignore it, in favor of the larger ideological argument...

Marion
For your point, perhaps you should read Mr. Sowell's last column, "Income Confusion Part II" (which, paradoxically, got posted yesterday). He addresses the very point you are making.

...continued...
Worker A is just entering the workforce in 1996. He's working at a retail store, and working towards his bachelor's degree. He's in the bottom fifth of incomes. Nine years later, he's out of college and is a retail manager. He's moved from the bottom fifth and is close to joining the middle fifth.

Worker B was 35 in 1996, where she's a supervisor in a mid-sized corporation. She's in the middle fifth of income. Nine years later, she's an upper-mid-level manager, and has investments that supplement her income. She's moved up to the 2nd highest fifth of income.

Worker C was 60 in 1996, and was an executive with a large company. His salary and investments income put him in the top 5% of all incomes. Nine years later, he's retired, and while his investment income is significant, his overall income has fallen and he's in the 2nd highest fifth of incomes.

So Worker A, who represents the low income earner, moved up in the income scale, as did Worker B, the middle-income worker. Worker C, who represents the high-income worker, saw his income fall.

Sowell wants us to think this is applicable to the economy as a whole, or at least call into question the veracity of the Census statistics. But this is ridiculous.

The entry-level worker in 2005 isn't included in 1996, nor are people who died between 1996 and 2005. Watching individuals just can't give you a real picture of incomes across the economy over time.

Another way to think of it. Should we say that Disney's CEO makes less today than in 1997 because Michael Eisner made far more in 1997 than he does now? Of course not. As the CEO is a position in a company not always filled by the same individual, so are the income rankings in the economy filled by different people at different times.

Snapshots of the economy always contain workers at every stage of that lifetime income curve. From a macroeconomic standpoint, the individuals don't matter.

.

Cherry picking
"Too many in the media and in politics choose whatever statistics fit their preconceptions."

And so do those working for pro-capitalist think tanks like the Hoover Institute.

Ask a simple question...
...and you'll get a simple answer.

BS Producer (he calls himself BS Detector, but in general, that's what you'd better have operating when you read his posts) asks a simple question:

"Sowell would like us instead to look at individuals over time. Why? "

And I offer a simple answer:

Because liberals (like BS Producer) are trying to tell us a lie, and looking at individuals over time exposes the lie.

The liberals claim that the rich are getting richer and the poor getting poorer in the manner that afflicted 17th century France; statistics based on following individuals prove that nothing of the sort is true. Quite the contrary: the rich are getting poorer, and the poor, richer.

By the bye: Fergus is correct, as usual. Sowell's evidence would be anecdotal if it followed a few specific examples. That's not what either the IRS or the Univ of Michigan did. They followed all the individuals in the survey, and identified patterns of income change. That's how we know that, in the US economy, the rich are most likely getting poorer, and the poor richer.


wwsword
Fair enough. Sowell showed which cherry-picking he believes those in media and politics are doing; praytell, what cherry-picking do you think HE is doing.

It's the lawyers, stupid
Sgt Relic writes: Wednesday, November, 21, 2007 7:16 AM

Believing that the media has any more corporate responsiblity than Exxon or Walmart is a grave mistake.

===========

From a letter to the editor, 15 years ago.

Everyone is trying to place the blame for Enron, WorldCom, etc. Most everyone involved can share the blame, but don't forget the lawyers. Every contract for an electricity power distribution gimmick, that cost Californians millions, was created by a lawyer. Every executive of these companies had an employment contract, with salary, bonus, stock options, all spelled out by a lawyer. You don't like the off-shore companies set up as tax dodges? Lawyers created each and every one.

Not just in the financial world. A lawyer, after an airplane crash, said, “We will just sue everyone, someone must be responsible.” Cigarettes have been called “coffin nails” for a 100 years, there's a warning printed on each pack, but that doesn't mean a person is responsible for smoking. Just call a lawyer, perhaps the lawyer who sued for someone who stood on the very top of a step ladder.

Years ago when your Grandparents sold a house they signed a one page document. Now the legal cabal has determined that each house seller may be a crook. Today, those dozens of pages of documents contain a potential legal payday in each and every paragraph.

===================
Sgt Relic writes
Corporations exist only for the purpose of making a profit and it is a mistake to think otherwise.
-------------------
Not true, Corporations exist only for the purpose of finding a product or service that they can produce and make a profit. So whether on purpose or just luck, it must be a product or service that consumers have a need for.

================

This is lower case jim, don’t confuse me with upper case Jim.

BS artist
"Over time, as we gain education, experience, and intelligence, our incomes increase. We are promoted, change jobs, and we make investment income."

That's entirely Sowell's point (which you've obviously missed).

A snapshot will exagerate the number of "poor" at any given time, as it will include people like myself. I am a full-time student who has returned to school to pursue a second degree. I have very little income, as I am living off my savings, student loans, and a part-time job. But I am, in no meaningful sense, "poor." Neither is, say, a wealthy commodities broker who perhaps had a bad year and had little or perhaps even negative income. Yet both of us will be counted among the "poor" when looking at only a snapshot in time.

That is why snapshot statistics are preferred by leftists interested in painting a picture of widespread poverty that is at odds with reality.

Cherry picking II
Fergus, please, let's not play games when we dialogue; it wastes time. Sowell telegraphs his cherry picking. He likes these IRS data because he believes they support his case.

The income disparity solution is simple
AS long as the poor must deal with small cost of living adjustments and never learn enough to move to a position of being able to hold a better than entry level job, while the total value of the economy is increasing, the disparity from top to bottom will expand!

The solution is simple. Just freeze wages and tax away all high incomes. Depression will soon come and all will suffer unemployment and hunger except those that saved and still work.

The Russians perfected this approach while claiming full employment! We can do it too, but who should want to do so?

If the rich don't get richer, then we will all get poorer.

inkling:

Just because you've never been able to win an argument with me does not indicate that I've been wrong.

"The liberals claim that the rich are getting richer and the poor getting poorer in the manner that afflicted 17th century France..."

I guess I just don't follow the media, since I don't recall much of this kind of talk. I suppose some liberals make such claims (though I bet you can't find one equating us with 17th century France), just as some conservatives make claims like the rich are getting poorer. Both arguments have no merit.

"the rich are getting poorer, and the poor, richer."

And there you are, again making an argument without merit. By what measure are the rich getting poorer? Please, enlighten me.

.

wwsword
"dialogue" is a noun, not a verb.

And your deflection of the point fails; you have no argument to make, therefore you just hurl accusations.

Typical Leftist.

Let's be honest... It's simple
Finish high school. Get a job. Show up every day and perform your job well. Stay out of jail. Don't make babies till you're married and can afford to support them. Keep your attitude open to continually learning and improving your mind and skills. Don't buy nonessentials you haven't earned yet. Wait till you have the money.

With the opportunities afforded everyone in this country, if you do these things you will do fine financially. Don't waste your time and emotions agonizing about statistics and coveting what others have. Rather than resenting those who have more than you, emulate them by working hard and making wise choices. Most people with plenty of money earned on their own. Only a small minority inherited it, won the lottery, etc.

Stop coveting. Work hard. Anyone can make it in this greatest country on God's green earth.

Rock Strongo wrote:

"That's entirely Sowell's point (which you've obviously missed). A snapshot will exagerate [sic] the number of 'poor' at any given time, as it will include people like myself..."

What you aren't seeing is that at any given time, over the entire economy, the percentage of people in any given circumstance will be roughly the same. So while yes, you would be counted as low income this year (as would thousands of other people in like circumstances), at any other time there are roughly the same number of people who are in the same circumstances.

Similarly, a person who sells a house this year has atypically high income this year, and would appear higher in the snapshot than usual. But across the entire economy, the number of people with this sort of abnormally high income will be about the same from year to year.

So the point (which you obviously missed - my fault) is that comparing snapshots over time is far better for analyzing income trends across the economy, and following individuals is basically worthless for this.

"That is why snapshot statistics are preferred by leftists interested in painting a picture of widespread poverty that is at odds with reality."

A single statistic is meaningless. It's only the comparison of multiple statistics that can reveal anything.

Let me ask you something as I think you're better able to handle it than inkling (even if you did insult me). If you look at individuals' incomes over their lives, in general they plummet just as the individuals achieve maximum wealth: people retire. If Sowell's not guilty of choosing stats to bolster a political argument, why did he not even mention retirement in his column?

.

Max Power wrote

Can you cite a source for this info?

Is this not intuitively obvious to the casual observer?

.

BS detector
This comment is anecdotal of course, but I am retired and my income hasn't plummeted.

Do you want "The Truth"
Don't trust the MAIN STREET MEDIA (MSM). Another Truth; Don't trust or ever believe a Democrat.
Another Truth; Regarding GOP, Verify before accepting. GWB has violated the Conservative Base way too many times. He is no conservative, and I am sure there are alot of GOP's that feel the same way.
Another Truth; a Vote for a Demonrat is a vote for America's Enemies.
Another Truth; If you want HONEST GOVERNMENT, then all Politicians should face penalties that eliminate all their property and wealth and inprison them for life for fraud and conspiracy charges - ie, selling their votes to the highest bidder.

Statistics only have value
... because of their implications, BS Detector.

It's the implications read into statistics that make the difference to people. Hence the expression (attributed to Benjamin Disraeli) about "lies, damn lies, and statistics."

Of course it matters that the same actual people are, for the most part, not in the bottom income quintile from one decade to the next. The implication of that fact is that people in the bottom quintile are not people stuck in poverty -- most of the time. (The U. Michigan study found that only 5% of people tracked over time remained in the bottom quintile.)

If we know only that at any given time, we can group incomes into quintiles and there will be a lowest one -- well, we don't know anything we couldn't have assumed, without doing any research. The lowest income recorded could be $100K in 2007 dollars, for all we know. That there's a lowest quintile at any given time is a big DUH, right there. Here's your sign.

If the constant-dollar average in the lowest quintile declines over time, that MAY be something to be concerned about, although only in the context of a number of other factors, such as whether a whole lot of people have just gotten new jobs, at the lowest pay, and are skewing the average through their sheer numbers.

But what a declining lowest-quintile average does NOT mean is that any individual has seen HIS income decline. That's the point Sowell is making. He's right.

loco

Why? Did you ease into retirement over a number of years? Was your earned income a relatively small percentage of your income?

dyerje:

What's with the "here's your sign" business?

Granted, the income mobility issue does matter.

"But what a declining lowest-quintile average does NOT mean is that any individual has seen HIS income decline. That's the point Sowell is making. He's right."

But isn't this just a given? I guess I just give people more credit for being able to understand this.

.

Fergus
Please be advised that it is "Pareto's Law" not principle.Also,please allow me to take you and "OTHERS" into Dr. Sowell's numbers.He says that the Rich lost 26% of their wealth.If you own 56% of all wealth this comes to about 13.?%.Well according to "Pareto's Law" this 13.?% does not go to the POOR but to the next level under the "RICH".Also as this vacillation continues,eventually this same 13.?% will be returned it's original OWNERS!!This is a political argument, being shown in an Economic DISGUISE.

BS Detector:
Snap-shot statistics are not the best form of evidence. These are called cross-sectional analyses and in clinical trials where evidence based medicine is rated, these are the lowest form of evidence. The highest level of evidence is a randomized, double-blinded placebo controlled trial. It's impossible to construct such experiments in ecomonics because we would be required to randomly assign people to income brackets, but the power of the double-blinded trials is in that the same people are followed over time. THe next best level of evidence is a case-controlled trial, which is what the IRS and Michigan studies were.

Statistics are like a bikini, what they show you can be very revealing, but what they don't show you is vital.

BS Detector
"Here's your sign" (following the locution "that's a big (x), right there") = a conflation of the well-known tag lines of "Blue Collar" comedians Bill Engvall and Larry The Cable Guy (Whitney).

There, is that a suitably pedantic explanation of a humorous allusion?

Regarding the use of statistics, the mantra "the poor are getting poorer" means to many hearers precisely that individuals in the lowest income quintile are seeing their income decline -- and is often intended to.

Even when it's not, plenty of politicians and pundits misuse a decline of constant-dollar statistical averages in the lowest quintile, to imply that what it MEANS is that people whose incomes are in that quintile are less able to command the necessities of life than they have been in the past. Sowell's other column on this topic points out that there are various reasons why this implication is misleading or outright false.

Confusion between income and wealth
One problem with this argument is that the definition of income is not consistent between statistics, as in total income, taxable income, real income (after-tax revenue), inflation adjusted income (and how do you adjust for inflation?) and of course, what is really important is not followed, which is wealth.

If John Edwards decided to stop working, he still lives in one of several multi-million homes, receives investment income, most of which is tax exempt if he is as good a lawyer as he pretends, and does not show up in IRS documents. Be that as it may, the government has found a way to tax your wealth, but they have to wait until you die, and then tax the hell out of your beneficiaries with an estate tax.

If the poor only get poorer in the US...
Then why do we have so many illegal, poor, immigrants sneaking into a country that is only going to make them poorer?

The greatest social experiment
BS Defender's perfect world would be to take all wealth, liquidate it, and then equally distribute it to every American citizen. IF there isn't enough to go around, the government would just print up more.

If tomorrow morning everyone in the US woke up with exactly the same amount of money in their bank account, and all lived in the same sized home, with the same make/model car, and the same numnber of children (or parents), and all had exactly ten million dollars in net worth, the very next morning, gasoline would cost $2500/gallon, milk would cost twice that, the plumber routing out your sewer line would charge $25,000/hr, and within 10 years, the same people who were rich would be rich again because they work harder, save and invest more wisely, and those that were poor would waste what they had, become slovenly, not work hard, and we would go back to what we have now, (adjusted for the astonomical inflation that such an experiment would cause).

Be careful what you wish for
When RObert Mugavi kicked out all the rich white landowners (farmers) and distributed their wealth among the poor(?) black residents, the country went overnight from the breadbasket of sub-saharan Africa to the poorest country with an 8000% inflation rate. The poor their got poorer faster and more of them were poor than when the few wealthy but productive white farm owners were allowed to keep getting richer.

BS Detector:
I just can't believe some of your statements. Please read the column again.

Quote:

People in the bottom fifth of income-tax filers
in 1996 had their incomes increase by 91
percent by 2005.

The top one percent -- "the rich" who are
supposed to be monopolizing the money,
according to the left -- saw their incomes
decline by a whopping 26 percent.

I hope that helps you improve your understanding of the topic.

You make claims of not following the media, of not hearing the phrase "the rich get richer and the poor get poorer". These claims are neither provable or disprovable but they just don't pass the laugh test. I'll assume such claims are true, but that leads me to asking whether you should participate in a discussion when you have no perspective on it?

the flash wrote:

"BS Defender's perfect world would be to take all wealth, liquidate it, and then equally distribute it to every American citizen. IF there isn't enough to go around, the government would just print up more."

Strange, I don't remember saying this or anything from which that a rational person could infer that I thought this. Sounds like another typical conservative needing to build straw men to attack.

"Snap-shot statistics are not the best form of evidence."

Really? Never? How about if we're trying to study the percentage of income tax being paid by various income strata?

"These are called cross-sectional analyses and in clinical trials where evidence based medicine is rated..."

Relevance, please.

"...the power of the double-blinded trials is in that the same people are followed over time."

And how is this useful if one is attempting to study, for example, tax revenue changes following changes in tax rates?

"THe next best level of evidence is a case-controlled trial, which is what the IRS and Michigan studies were."

Again, does this not depend on what is being studied? If I'm studying changes in overall wage levels over time, how is a case-controlled trial better than snapshots?

Each type of analysis is useful for certain things. None is useful for everything.

.

I'm noticing a pattern
BS Detector begins his rebuttal toward me with something I'm coming to expect from liberals:

"Just because you've never been able to win an argument with me does not indicate that I've been wrong."

Ignoring for the moment that the sentence makes no compositional sense, I note that this is the third liberal in a week who has declared absolute victory over me.

There's no objective arbiter of debates in this forum, and the lefties need to thank their lucky stars that this is so, because I don't recall a single instance when any of them bested me in an argument by logic or fact. I've been out-insulted many times, but that's because I don't usually care to win those contests.

I do recall having my facts corrected once or twice, and I've admitted error when I've made it. But it's been quite a while since that's happened.

I guess the liberals have learned a new tactic (first time that's happened in 50 years.) Now, when they get demolished, they loudly declare victory.

And again, a liberal who can't read
BS Detector's entire "rebuttal" of my post from 12:02 PM is lie about his intent (as liberals always do), and then ask a single question:

"And there you are, again making an argument without merit. By what measure are the rich getting poorer? Please, enlighten me."

If BS Detector were willing to read, he would have found that measure in Dr. Sowell's column, in the 2nd and 3rd paragraphs:

"...income tax data recently released by the Internal Revenue Service seem to show the exact opposite: People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005.

"The top one percent -- "the rich" who are supposed to be monopolizing the money, according to the left -- saw their incomes decline by a whopping 26 percent."

The argument is far from being "without merit."

I'll address his lie in the next post.

inkling_revival
Kinda like Baghdad Bob declaring we had not invaded Baghdad, as our tanks rolled in....or like Saddam erecting the "Hands of Victory" as a symbol of his win against the US and Kuwait in the Gulf War....

Your last sentence was dead on!

inkling
A minor adjustment to your analysis would be that the left-leaning seem to declare not so much that they have won, as that YOU have LOST.

Or, even more "non-disprovably," that you have FAILED TO WIN.

This line of argument bears a remarkable resemblance to the left-wing line of commentary on Bush and Iraq, among other things.

I've found BS Detector to be engageable on a serious level, though, at least sometimes. A reader who followed his posts and those of his respondents would come away with a superb elucidation of the premises and arguments of both sides.

The regrettable "Did not!" "Did too!" "You're a stupid a-hole!" style of argument that is all too common at these websites gives one a lot less.

BS detector tells a lie
(cont)

As to BS' lie, here's how their game goes: they make a claim in which there is only a fragment of an argument: vis, "the rich are getting richer, and the poor are getting poorer." Then, others fill in the unspoken parts of the argument in order to illustrate why they're wrong. Then, the liberal objects to how the other fellow filled in the unspoken parts -- ignoring the fact that if those parts are NOT filled in, the liberal's original position makes no sense. They can do this because their arguments are emotional, rather than logical.

"The rich get richer, and the poor get poorer," is an emotion-laden phrase that bemoans a static, stratified society: the ones who are rich, STAY rich, and increase their power, while the ones who are poor STAY poor. The phrase has no emotional meaning otherwise.

And this turns out not to describe 21st century American; in current America, the poor this year will be the rich 10 years from now, and the rich tend to become the middle-class. (I do understand we're talking about income, not assets, but that doesn't really change the argument much.)

But of course, BS, being a liberal, will deny that's what he meant, because here I am, proving that that's not so. Liberals are never honest about what they're arguing.

So, when I said ""The liberals claim that the rich are getting richer and the poor getting poorer in the manner that afflicted 17th century France..." BS Distributor disingenuously lied, pretending he meant nothing like that. But of course, the claim liberals always make about the disparity between rich and poor increasing deliberately evokes exactly that image, and the argument makes no sense otherwise.

There's something about the psychology of liberalism that makes otherwise bright folks incapable of either honest or linear reason. I was a liberal once, too, and I was just as dishonest then as BS is today.

BS Spreader and obfuscation
A pattern I've seen here is to make silly claims like having never heard phrases like "the rich get richer and the poor get poorer". These statements are ludicrous distractions.

Obfuscation is a classic way of deflecting debate, as is steering the debate off topic. Making specious arguments and then claiming they must be disproven is another good tactic.

Pretending that the world at large doesn't exist also works, as if this forum were a high school debate. Every statement must be backed up by referencing some URL, otherwise it can be ignored.

BSer says....
" "The liberals claim that the rich are getting richer and the poor getting poorer in the manner that afflicted 17th century France..."

I guess I just don't follow the media, since I don't recall much of this kind of talk. I suppose some liberals make such claims "



Apparently you follow neither the Mainstream Media nor your Democrat Party. Admittedly I have never seen mention of 17th century France, but the "rich are getting richer and poor are getting poorer" mantra lie is the CENTRAL PLANK of every liberal Democrat running for every office for the past half century. This kind of crap is all you hear from Hillary Barack Edwards, Inc.

SHEESH!!

BSer fallacy
"What you aren't seeing is that at any given time, over the entire economy, the percentage of people in any given circumstance will be roughly the same. So while yes, you would be counted as low income this year (as would thousands of other people in like circumstances), at any other time there are roughly the same number of people who are in the same circumstances. "


In other words, at any given time there will be five quintiles of income category. Well, DUH. What you fail to realize, BSer, is that the circumstances in a given quintile DO change over time. 50, 100, 200 years ago EVERY quintile was poorer than it is today in terms of living standards. What in the heck point are you trying to make? The FACT you blatantly ignore is that the American standard of living has increased non-stop ever since this country's inception for every single income class.

Another liberal economic fallacy
This one is particularly irksome. Another standard liberal mantra is that the gap between rich and poor is getting greater. The bottom base for the poor is ZERO income; it can't get any lower! Contrarily, there is no upper limit to income. Therefore, if a society is becoming wealthier in the aggregate, an increasing gap between zero income and the highest income is PRECISELY what will happen, and can only happen in a free capitalist society that is enriching itself. Yet scumbag dem/libs persist in foisting their fallacy on an economically illiterate voting populace.

As has been pointed out by economists with integrity such as Sowell, this is an upwardly mobile society for every income class. The overwhelming majority of Americans migrate to higher income levels and it is only at the very upper levels that this trend gets reversed.

Sadly, too few Americans understand Economics 101 principles. If they did, the liberal version of the Democrat Party would go extinct overnight.

Evoking the memory...
dyerje wrote: "A minor adjustment to your analysis would be that the left-leaning seem to declare not so much that they have won, as that YOU have LOST.

Or, even more "non-disprovably," that you have FAILED TO WIN."

You've evoked the memory of King Arthur fighting the Black Knight in "Monty Python and the Holy Grail." Arthur whacks his arm off and then kneels to thank God for his victory, but the Black Knight kicks him. "Your arm is off!" says Arthur. "No it isn't," retorts the knight. "It's just a flesh wound." So Arthur whacks off the other arm... and the Black Knight continues to dance and weave, and try to kick Arthur. "You can't beat me," cries the knight plaintively. "I'm INVINCIBLE." "You're a loony," muses Arthur...

I feel like Arthur often enough here on TH, right down to the last epithet.

inkling
"There's something about the psychology of liberalism that makes otherwise bright folks incapable of either honest or linear reason. I was a liberal once, too, and I was just as dishonest then as BS is today."


Exactly! In order to be a liberal "thinker" one needs to be 1) intellectually lazy, and 2) intellectually dishonest. There is no middle ground.

Exactly!
... inkling... and continuing the Holy Grail references: I tend to think of certain of the recurring, predictable, inevitable posters to these boards as the Knights Who Say Nyaah-Nyaah.

Which reminds me of a fantastic editorial cartoon from the '70s. I still have it somewhere. It depicts American presidents going back (I think) to JFK, each one in boxing shorts, gloves, and a tough fighting stance. The last one is Jimmy Carter, leaning forward like a petulant little playground pest and obviously squealing "neener neener!"

buzzkat
Much as it pains me to disagree with you, I feel I must:

"In order to be a liberal "thinker" one needs to be 1) intellectually lazy, and 2) intellectually dishonest."

I would say that it can be an either/or proposition. For example, the level of intellectual dishonesty required to be a Leftist can often be more work than simply giving in and admitting the truth required by the evidence.

Conversely, I have known Leftists who were intellectually quite honest, but too da**ed intellectually lazy to follow the evidence to its logical conclusion.

Let's change the terminology a sec
I make $50k. I get a raise to $75K. That is a 50% increase. Joe makes $5mil. Joe gets a raise to $6 mil. That is a 20% increase.
I am better off according to the terms of the discussion that Mr. Sowell would use.
Yet somehow I find all that a bit offputting that I got $25k more and Joe got a million more and I am better off that Joe.
It just don't sit right despite the factual accurracy.
Then there is one other factual calculation that isn't make. Gas, housing, food, healthcare take a larger chunk of my pay, percentage wise, since that is the comparative parameter Sowell wants to use, than is does for Joe. Gas has tripled since 2000. Housing has doubled. Food, maybe 50% more. Healthcare... who knows? And they're all rising at a pretty good clip, save housing, and if you read the happy Kudlow's of TH, housing is only bad in come geographic sectors (not so, but I'm using thier own claims against them).
So you can make a solid case I am better off than Joe because my % wage increase has been more than his. But the % increase in the cost of living has pretty much far exceeded my income growth. In Joe's household I for one can't imagine him having even second thoughts about the basic cost of living. Lucky for you, Joe. I begrudge you, whoever you are, not a dime of it. Just don't go agreeing with Mr. Sowell that I'm better off than you are or that I'm even better off than I was before. The wage increases have been eaten up and then some by increases in everything else I need to buy. UP a quarter, down six bits.
Them danm statistics. They get in the way.

The media lied, freedom died!
Others in these posts have pointed out that the media need to review these statistics better, when the report, or use this index or that index, and explain the numbers better. But don't count on that.

It fits their view of the world, which is informed by Marxism, to say that the rich are getting richer, with more wealth (and therefore, control) gathered in ever fewer hands, and that the poor are getting poorer and more numerous. That fits the Left's template of reality.

They will never change this; there is a definite bias. Since the members of the media won't acknowledge that it's even possible to have a bias, they cannot be cured of it. (Doesn't an alcoholic have to admit that he is one and needs help, before he can be helped?)

It really will take a civil war, to settle the difference between the Left and the rest of us.

Hillary delenda est.

The media lied, freedom died!
Others in these posts have pointed out that the media need to review these statistics better, when the report, or use this index or that index, and explain the numbers better. But don't count on that.

It fits their view of the world, which is informed by Marxism, to say that the rich are getting richer, with more wealth (and therefore, control) gathered in ever fewer hands, and that the poor are getting poorer and more numerous. That fits the Left's template of reality.

They will never change this; there is a definite bias. Since the members of the media won't acknowledge that it's even possible to have a bias, they cannot be cured of it. (Doesn't an alcoholic have to admit that he is one and needs help, before he can be helped?)

It really will take a civil war, to settle the difference between the Left and the rest of us.

Hillary delenda est.

The media lied, freedom died!
Others in these posts have pointed out that the media need to review these statistics better, when the report, or use this index or that index, and explain the numbers better. But don't count on that.

It fits their view of the world, which is informed by Marxism, to say that the rich are getting richer, with more wealth (and therefore, control) gathered in ever fewer hands, and that the poor are getting poorer and more numerous. That fits the Left's template of reality.

They will never change this; there is a definite bias. Since the members of the media won't acknowledge that it's even possible to have a bias, they cannot be cured of it. (Doesn't an alcoholic have to admit that he is one and needs help, before he can be helped?)

It really will take a civil war, to settle the difference between the Left and the rest of us.

Hillary delenda est.

D**n'd template is messed up again!
Argh! This @#$%^&*! posting template is messed up, and posts don't appear right away after saving.

"Done but with errors on page" ought to be the motto of TownHall.com!

Oh, this is precious! I opened the IE error window (lower-left corner, click the icon) and the error is "Invalid argument". Even Internet Explorer has an opinion here. I am humbled!

Hillary delenda est.

D**n'd template is messed up again!
Argh! This @#$%^&*! posting template is messed up, and posts don't appear right away after saving.

"Done but with errors on page" ought to be the motto of TownHall.com!

Oh, this is precious! I opened the IE error window (lower-left corner, click the icon) and the error is "Invalid argument". Even Internet Explorer has an opinion here. I am humbled!

Hillary delenda est.

Another Factor
In looking at the five quintiles and the movement between them we have a kicker in the mix. We have about twelve million illegal immigrants that entered the work force in the bottom quintile and most have probably not moved much because of lack of education and communication skills. Their presence here has dampened wage pressure on employers that hire mainly those in the lower quintile. If you graduated from college you don't have to worry about an illegal messing up your opportunities but try the world after getting a mediocre education in the inner city. It is hard to push the man for more money when Jose is willing to do your job for less than you are being paid now.

Trulib
[ LoyalDemocrat ]

Well the answer to that is simple: we let Unions demand higher wages of employers, and we institute a Minimum Wage to enforce those higher wages. Problem solved!

[ /Loyal Democrat ]

Test
Just trying something, for future reference...

<test>

Income is meaningless
Net worth is a much better measure of what's going on than income. It's possible, through capital increases, to not have much income, but net worth skyrockets nonetheless. To see the rising inequality of wealth, one only need look at changes in mean and median net worth. In 1995, mean net worth was 260K, and median 71K. In 2004, the mean was 448K, vs. 93K. Mean net worth rose 72%, whereas median net worth rose half that: 31%.

The problem is the dysfunction of the federal government. It increasingly reduces capital gains taxes, and increases income taxes. Those who have wealth already are protected, whereas those who need to earn it are punished with the yoke of the massive appetite of the federal government.

I believe this started under Ronald Regan, in which Alan Greenspan and Patrick Moynihan changed social security to "pay" for the baby boomers. All that money went into social services. Wealthy taxpayers have gotten a free ride and the middle class has paid and paid. This was a devil's deal between democrats and republicans.

At one time a single earner would pay for a family. Now it takes two earners, and the children and country are paying the price.

I say people like Bill Gates and Warren Buffet have the right idea for this country. It's OK to give your children a good start, even a head start. But let's get rid of the dynasties. Let's keep recycling the power of change, money, to the new generations as they come up so the whole country benefits.

Impact
Combines the best features of advancing a Strawman Theory and the polished art of the cheap shot. When gas prices and fuel oil shot up, they were taken off the list. Now what do you think impacts the life of poor people more than gas and fuel oil? Yachts? Produce has doubled. Same for milk. Bread. Meanwhile the COLA takes a giant leap of .023%. I am retired and live on a fixed income. My only financial vulnerability is the kind of inflation in the Carter Administration and the government lying about the cost of living COLA, year after year! I know I am destined to die poor, if I live just a few more years!

JefferyP
Wow, you folks have been busy. I'll start with JefferyP.

Sounds like you're using this column as evidence that "the rich are getting poorer." Here's what Sowell said.

"The top one percent -- "the rich" who are supposed to be monopolizing the money, according to the left -- saw their incomes decline by a whopping 26 percent."

Sowell would like us to think from this that the incomes of "the rich" -- as a class -- are declining. And you're only too happy to buy it, perhaps because it fits with your world view.

But this statistic is based on the top 1% of the individuals in the study as of 1996. Astonishingly, Sowell doesn't even mention that the retirement of some of these individuals between 1996 and 2005 would have a big negative impact on their income. It's also true, as stated previously, that in any one year, there will be some with abnormally high and low incomes. In this case, perhaps some of the people included in the top 1% in 1996 were there because of a windfall profit. Obviously, chances are much higher that these people's incomes would have fallen dramatically by 2005. If I could find the study, I'd provide specifics, but I can't.

You're also wrong to use this column as evidence for your assertion that "the rich are getting poorer" since, as others have pointed out, income and wealth are not synonymous.

Then you say “A pattern I've seen here is to make silly claims like having never heard phrases like 'the rich get richer and the poor get poorer.' These statements are ludicrous distractions... Obfuscation is a classic way of deflecting debate...”

First off, I never said I hadn't heard the phrase. I said that I didn't recall hearing liberals saying such things. I still don't, but perhaps I'm just immune to such ridiculousness.

Secondly, was there something addressed to me to which I had failed to respond? Anything at all?

cont...

...continued, including important link

“Every statement must be backed up by referencing some URL, otherwise it can be ignored.”

I guess you haven't seen me around. I'd say that I back up my statements more than almost anybody else here. Since what I've said to this point has been based purely on theory and common sense, references are irrelevant.

By the way, below is a news release about the U. of Michigan study that Sowell mentions in his column. Now why do you suppose he didn't cite this one?

ANN ARBOR, Mich.—The rich really are getting richer and the poor are getting poorer, a new University of Michigan study shows.

The study—the most recent available analysis of long-term wealth trends among U.S. households—is based on data from the Panel Study of Income Dynamics, conducted by the U-M Institute for Social Research (ISR) since 1968.

Over the last 20 years, the net worth of the top two percentile of American families nearly doubled, from $1,071,000 in 1984 to $2,100,500 in 2005. But the poorest quarter of American families lost ground over the same period, with their 2005 net worth below their 1984 net worth, measured in constant 2005 dollars.

The poorest ten percent of families actually had a negative net worth—more liabilities than assets. The poorest 5 percent of American households had a negative net worth of a little more than $1,000 in 1984, compared to nearly $9,000 in 2005.

"These findings show that the wealth gap is increasing steadily," said Frank Stafford, a senior research scientist at ISR and director of the Panel Study of Income Dynamics, which is funded primarily by the National Science Foundation and the National Institute on Aging.

- http://www.ns.umich.edu/htdocs/releases/story.php?id=5981

.

Disingenuous
BS Producer writes:

"Then you say “A pattern I've seen here is to make silly claims like having never heard phrases like 'the rich get richer and the poor get poorer.' These statements are ludicrous distractions... Obfuscation is a classic way of deflecting debate...”

First off, I never said I hadn't heard the phrase. I said that I didn't recall hearing liberals saying such things. I still don't, but perhaps I'm just immune to such ridiculousness. "

There are only two possibilities here: either you are telling the truth here, or you are lying.

If you are telling the truth, then you are so completely oblivious to what is going on in the world that your opinion is worthless. No one doing any amount of paying attention to the claims and arguments of modern "Liberalism" can plausibly claim to have missed the yammering of Leftists like Edwards, Pelosi, Murtha, Obama, and Klinton about how the "rich are getting richer, and the poor are getting poorer."

If you are lying... well, that just makes you a garden variety Leftist.

Either way, I am really not certain why we should still be paying any attention to you.

inkling wrote:
“BS Detector begins his rebuttal toward me with something I'm coming to expect from liberals:

"'Just because you've never been able to win an argument with me does not indicate that I've been wrong.'"

"Ignoring for the moment that the sentence makes no compositional sense..."

Sure it does. Would you like me to diagram it for you?

"I note that this is the third liberal in a week who has declared absolute victory over me."

So neither grammar nor reading comprehension are your strong suits, eh? Note that I never "declared absolute victory" over you; rather I said that you had never had a victory over me. I said nothing about situations with neither a winner nor a loser. In the argument, that is.

This is something I've come to expect from conservatives; an inability to parse the English language, and a tendency to either misrepresent assertions or create them out of thin air and assign them to others.

"Now, when they get demolished, they loudly declare victory."

I wonder who you're talking about, since this certainly doesn't apply to me here, or elsewhere.

“BS Detector's entire "rebuttal" of my post from 12:02 PM is lie [sic] about his intent...”

Actually, you attacked me, saying “...liberals (like BS Producer) are trying to tell us a lie, and looking at individuals over time exposes the lie.”

I chose to respond to this attack (the first thing you said to me in this thread, BTW) by highlighting your ridiculous statement that liberals try to equate our economy and society with that of 17th century France. I then said that I haven't taken note of liberals saying this, which you're now saying is a lie. How you would know this, I don't know. I then asked my simple question, hoping you would answer it as you did.

continued...

continued...

“If BS Detector were willing to read, he would have found that measure in Dr. Sowell's column, in the 2nd and 3rd paragraphs.”

And as I said above to JefferyP, the IRS data do not show that the rich, as a class, are getting poorer, and the fact that you are taking it as such shows that Sowell is as guilty as those he accuses.

Then you say “As to BS' lie, here's how their game goes...” and then spend two paragraphs describing nothing attributable to me. Then you say that “the poor this year will be the rich 10 years from now,” which is simply laughable on its face, and the rich tend to become the middle-class, which I would argue with, as they likely retreat no further than the second-highest fifth quintile.

Then you say I “disingenuously lied,” and that the claim “about the disparity between rich and poor increasing deliberately evokes exactly that image [of rich individuals getting richer and poor individuals getting poorer], and the argument makes no sense otherwise.”

But of course, I've been making EXACTLY that argument – the one that makes no sense to inkling. Why? Because it's intuitively obvious to the casual observer that individual workers, even poor ones, will make more money over time, until they retire. That this income mobility exists isn't very interesting. Now, if we can look at how this income mobility changes over time, that gets interesting. But that's not what Sowell does, nor does he indicate that this is important. He wants us to take from the normal lifetime income curve described in the IRS statistics that the poor (as a class) have gotten richer in the last decade and the rich (as a class) have gotten poorer.

continued...



The emotional argument makes no sense? So what? I don't make emotional arguments. My argument in this case was that Sowell is doing exactly what he accuses others of doing. Where's the emotion in that? And so, I ask you the question I thought you couldn't handle:

If Sowell's not guilty of choosing stats to bolster a political argument, why did he not even mention retirement in his column, when it's so fundamental to the eventual decrease in the income of the “rich”?

Or, better question. I haven't looked at the data, so I don't know. But how does Sowell pull the data he wants from the IRS study, while the Michigan folks reach the exact opposite conclusion?

.

BS Propagator
"If Sowell's not guilty of choosing stats to bolster a political argument, why did he not even mention retirement in his column, when it's so fundamental to the eventual decrease in the income of the “rich”?"

Because he dealt with that issue in a second part to this column, which somehow ran a day early.

Sowell frequently breaks his longer pieces up into two- and three-parters. Which you would know if you paid any attention. But I forget; you're a Leftist who has somehow never heard a Leftist claim that "the rich are getting richer, the poor are getting poorer." Clearly, keen observation and attention to detail are not your forte.

Carry on.

Fergus wrote:
“He is not talking about merely looking at individuals, but rather at looking at the aggregate of individual trend-lines, and seeing where they lead.”

Ummm, so? How is this any more meaningful? Is he trying to show that in general, people's income increases throughout their careers until they retire? This is an expression of the delicate genius you guys so adore? Did you not already know this, as everyone does, from personal experience? As I said, perhaps if we look at those trends over time to see how they change, then we have something interesting.

And again, this is beside the point. Sowell's point is that the common talk about growing income disparity is not just wrong, but that the people who say such things are either ignorant of reality or fundamentally dishonest. My point is that Sowell's choice of data – and the choice not to provide any explanation of WHY the Top 1% saw a decline in income (he describes why the bottom's income climbed) is exactly the same crime of which he accuses others.

“But figure a Leftist to miss the point... or ignore it, in favor of the larger ideological argument...”

If I'm a leftist, you're either Mickey Mouse or a fascist. Or maybe a fascist Mickey. Oh, and a pot.

“There are only two possibilities here: either you are telling the truth here, or you are lying. If you are telling the truth, then you are so completely oblivious to what is going on in the world that your opinion is worthless.”

I think that your view of my opinion remains unchanged regardless of the answer to this question, as does how much I care. But please, go ahead and quote some folks who've said this that the poor are getting poorer. I'm eager to see who's been saying it.

continued...

continued...

“No one doing any amount of paying attention to the claims and arguments of modern "Liberalism" can plausibly claim to have missed the yammering of Leftists like Edwards, Pelosi, Murtha, Obama, and Klinton about how the "rich are getting richer, and the poor are getting poorer."

Direct quotes, please.

“Either way, I am really not certain why we should still be paying any attention to you.”

Maybe because I'm right about my central point, which is that Sowell's just as bad as those he criticizes.

No? I'm very interested to understand how Sowell could say "The University of Michigan study, which has been going on for decades, shows patterns very similar to those of the IRS data,"
when the director of the Michigan study said "these findings show that the wealth gap is increasing steadily."

.

Sorry, Fergus continued...

“Because he dealt with [retirement] in a second part to this column... Sowell frequently breaks his longer pieces up into two- and three-parters. Which you would know if you paid any attention. But I forget; you're a Leftist who has somehow never heard a Leftist claim that 'the rich are getting richer, the poor are getting poorer.' Clearly, keen observation and attention to detail are not your forte.”

Wow, such anger. Oh, and also, such weak reading comprehension. In his part II, Sowell does not continue part I, but but rather makes an argument that is related to the first but does continue it. Neither the IRS nor Michigan studies are mentioned. Is the context of part 1 necessary to understand part 2?

And by the way, do you really think that Sowell is such a poor columnist that he's unable to get what he wants into a single column? Seriously? How long has he been doing it?

The fact remains, he is quite careful to explain why the IRS bottom fifth shows an income increase, and does not provide any similar information about why the top 1% showed a decline. Why? Why one and not the other?

.

Let's Talk Turkey
Since it's now Thanksgiving (and let us all be thankful that we can disagree openly without fear of retribution).
So I kept thinking...a 91% increase for the bottom fifth of taxpayers.
A 26% decrease for the top 1%. And a 24% increase in real income (1996 - 2005) for the average taxpayer.
If I made 50,000 in 1996, I would make 62,000 in 2006 (if my terrible math skills allow accurate computation of a 24% increase).
I then reviewed federal income limits (used to establish eligibility for many HUD funded programs).
See: http://www.huduser.org/datasets/il.html if you have any interest.
These figures vary by area within and among individual states.
In Northeastern Ohio, the median income in 1996 was $44,600 (family of four), and in 2005 it was $60,200 (roughly a 36% increase, I think).
The poverty threshold in 1996: $16,036(family of four), and in 2005: $19,971 (roughly 25% increase).
The wealthiest? I know the figures are NET WORTH, but I couldn't easily find annual earnings for these folks. But as near as I can tell there are approximately 278 billionaires (2004), and of the top 400 wealthiest Americans, the wealth range tops at 48 billion for Mr. Gates and bottoms out at number 400, Mr. Norman W. Waitt Jr. at 750 million.
What's a 26% decrease amount to?
Beats me, but 26% of $1 million is $260,000. So, down to $740,000?
What does all this mean?
I don't know, let's change the subject.
Bur seriously, what's the point? There are those that believe that free market, capitalism is the only way to go. And government should stay out of the way of this efficient machine that has led to a dynasty of sorts.
Then there are those that believe that government assistance is needed for many Americans that simply are unable to meet basic needs.
We get our jollies snipping at each other with a belief that we each know more than the other.
My question, How can we collectively reach some form of consensus?
Is it possible?
Happy Thanksgiving to all of you.

buzzkat wrote;
“What you fail to realize, BSer, is that the circumstances in a given quintile DO change over time. 50, 100, 200 years ago EVERY quintile was poorer than it is today in terms of living standards.”

I have no idea how you can reach this conclusion. Not once have I said that “the poor are getting poorer.” The point I've been making is that Sowell's chosen statistics seem to indicate what he wants you to believe, which is that the rich as a class are getting poorer. How many people in this thread have said as much?

“The FACT you blatantly ignore is that the American standard of living has increased non-stop ever since this country's inception for every single income class.”

Well, I didn't ignore any such thing, and also, you're wrong. During recessions, real GDP declines, and so therefore does standard of living (real GDP/population). You might want to stay away from absolutes like "non-stop."

continued...

continued...
“Another liberal economic fallacy. This one is particularly irksome. Another standard liberal mantra is that the gap between rich and poor is getting greater. The bottom base for the poor is ZERO income; it can't get any lower! Contrarily, there is no upper limit to income. Therefore, if a society is becoming wealthier in the aggregate, an increasing gap between zero income and the highest income is PRECISELY what will happen, and can only happen in a free capitalist society that is enriching itself.”

No. In reality, the zero value is irrelevant, since nobody works for zero; there is a minimum which will increase over time, whether through market forces or government mandate. In addition, these “income disparity” stats are generally discussed in percentage rather than dollar terms, such as the CEO makes x-times as much as the entry-level worker. While nominally the income of the top sections will always increase more, in relative terms they may not. It is certainly possible for the low income sections to make greater gains, on a percentage basis, than the high income ranges, thus closing the “income gap.”

So you see, you should make sure you get everything right before you get such an attitude. You just look like a bigger fool when you're shown to be wrong.

“Yet scumbag dem/libs persist in foisting their fallacy on an economically illiterate voting populace.”

There's plenty of (a) scumbags and (b) economically fallacious propaganda on both sides.

.

ipact writes:
"Hey S.A.M.
Heaven forbid the market basket in the CPI should change. If they had typewriters in there 30 years ago, they should keep typewriters in there. And don't forget black and white TVs."

The CPI's market basket of good consists of goods and services. I don't think television sets are a part of the equation. I don't think the human diet is as optional as much as our entertainment options. Get real.

Edwardo wrote:

“[The federal government] increasingly reduces capital gains taxes, and increases income taxes. Those who have wealth already are protected, whereas those who need to earn it are punished with the yoke of the massive appetite of the federal government. I believe this started under Ronald Regan...”

Two points.

1. Capital gains have almost always gotten preferential treatment in individual taxation; this goes back almost as far as the income tax. This provides the appearance that capital income, of which the wealthy by definition have more than the non-wealthy, is taxed at a lower rate than other income. This is not so.

2. Capital income is taxed at the corporate level and then at the individual level. The tax rate on large corporations is 35% of their profits, before dividends are paid. Then, when the owner(s) of the company are paid, either through dividends or appreciated stock sales, the profit is taxed again. Assuming the taxpayer is subject to the current top rate of 15%, in this example the total capital income tax is 45%.

For earnings, the top rate occurs when taxable income is higher than $77,100, but gross wages are less than $97,500. Here, the marginal income tax rate is 28%, and the employee's share of payroll taxes is 7.65%, for a total marginal federal tax of 35.65%. If the employer's share of the payroll tax is included, then the tax is 42.21% of wages+employer's payroll tax.

.

SAM wrote:
"The CPI's market basket of good consists of goods and services. I don't think television sets are a part of the equation. I don't think the human diet is as optional as much as our entertainment options. Get real."

Of course they are.

http://www.bls.gov/cpi/cpifaq.htm#Question_7

"The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups...

"Each month, BLS data collectors... visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month representing a scientifically selected sample of the prices paid by consumers for the goods and services purchased."

.

BS Detector misses the point

Social security is an income tax that when taken with medicare is 15% of income of middle class America even before the other income tax hits you.

Second, for someone who claims to detect BS, you shovel it out yourself in your claim that 35% corporate plus 15% capital gains is 45% (really 50%). Capital gains are only taxed when the gain is realized, so the money could sit there forever at 35% corporate rate.

Corporations are taxed on profits only. If I need $x to raise my family or develop my family, I don't get a tax write off except under those situations deemed acceptable by the government. I have my kids in private school, for example, in an attempt to better develop them. No tax write off. While corporations are taxed on profit only, I'm taxed across the broad spectrum of my income.

But all of this is besides the point. The point I'm making is a fact. The Federal government has moved away from taxing wealthy individuals and corporations, and has moved to funding itself from middle America.

This country is setting itself up to have an increasing number of dynasties sucking off the labor without producing anything. That's wrong.

A lot of people ask "Am I better off than my parents." Consider that 40 years ago middle America could afford to buy a home and raise a family from a single earner. Not so today. I don't know how much of this is due to the changes in tax law and the increased disparity of wealth, but given yearly productivity increases and increases in GDP I have to believe it is a significant factor.

Only the Facts, Dr. Sowell
Until 1954, Corporate taxes were nearly as significant a source of revenue for the federal government as income taxes. 29B income taxes, 21B corporate. Then, Social security only "contributed" 7.2B to the kitty.

In 1970, income taxes were 90B, corporate had risen only to 32B, and social sec was 44B.

Now estimates for 2007 are 1T individual income taxes, 251B corporate, and 878B social security almost the same as individual income taxes.

Who pays the social security taxes? lower and and mostly middle America.

This isn't about personal responsibility. It's about a disaster of titanic proportions. Keeping down the middle class prevents the growth necessary to keep this country moving forward.

Note, this particular site, http:/gpoaccess.gov/usbudget/fy06/hist.html doesn't break out the capital gains nor inheritance taxes, but with looking you can find they too play a decreasing role in funding the massive federal budget.

Ronald Reagan made a devil's pact with the democrats. They wanted their big government, but Reagan took the rich off the table. You can have it, but you have to take the money from middle class America.

Middle class America isn't organized like Corporate America, and the result is massive growth in the federal government, and a descending middle class.

How about some facts
Home ownership has increased dramatically since 1900 all over the U.S. Trying to throw in a "single" worker factor in the mix is a red herring. Up until the 1950s the majority of the U.S. was involved in farming where one could not really differentiate who was a worker and who was not, the entire family worked. Here are the real numbers and home ownership has doubled.

http://www.census.gov/hhes/www/housing/census/historic/owne r.html

BSdetector is definitely missing
my point - entertainment systems are optional - eating is essential.



Eduardo says I missed his point....

...perhaps. Let's take a look.

I wrote in response to claims that the government continues to decrease capital gains taxes and increase income taxes (since capital gains tax is an income tax, this statement is a bit self-contrary, but whatever), and that this started under Reagan. Perhaps the point I missed is that capital gains and dividends taxes have been reduced twice in the last 11 years. That's fair. However, I thought some context was needed.

“Social security is an income tax that when taken with medicare is 15% of income of middle class America even before the other income tax hits you.”

Not exactly. First off, you probably meant 15.3%, but this is a bit misleading. I think if we're going to count the employer's share of payroll taxes on the tax side of the equation, it should also be included in the income side. So the tax is (7.65 + 7.65) / (100 + 7.65) = 14.21%. I know that some people disagree with this method, and that some people just can't wrap their brains around it, so it's not worth arguing.

“Second, for someone who claims to detect BS, you shovel it out yourself in your claim that 35% corporate plus 15% capital gains is 45% (really 50%).”

Again, somebody who can't do basic math starting with an attitude. See if you can follow along, genius: $100 of income taxed at 35% leaves $65. $65 taxed at 15% leaves $55.25. So the total tax rate is 44.75%, not 50%. Got it?

“Capital gains are only taxed when the gain is realized, so the money could sit there forever at 35% corporate rate.”

And over time as the share appreciates in value, the gain will be greater. So what? There are some legitimate arguments to be made here, but I doubt you're knowledgeable enough to make them.

“Corporations are taxed on profits only.”

Right – that's why it's called an “income tax.”

continued...

eduardo continued...
“If I need $x to raise my family or develop my family, I don't get a tax write off except under those situations deemed acceptable by the government.”

Bad examples. Are these not expenses that you choose to have? Could you earn your income without these expenses?

“I have my kids in private school, for example, in an attempt to better develop them. No tax write off.”

Right – another bad example. This is unrelated to the cost to you of generating your income.

“While corporations are taxed on profit only, I'm taxed across the broad spectrum of my income.”

Right – both are taxed on INCOME.

“But all of this is besides the point. The point I'm making is a fact. The Federal government has moved away from taxing wealthy individuals and corporations, and has moved to funding itself from middle America.”

Well, in a word, no. First off, over the period 1959-2005, cumulative individual income was on average more than nine times more than cumulative corporate income. So naturally, individual income tax will bring in far more revenue than corporate income tax.

Now check out figure 1.2 here: http://www.cbo.gov/ftpdoc.cfm?index=3089&type=0&sequence=2 . You will see that the effective federal tax rate on the middle quintile of income, which pretty much by definition is “middle America,” fell under Reagan's '81 tax cut and then remained fairly steady from 1979-1997, while the same rate for the top quintile fell during Reagan and then rose during Clinton. By 2004, the rate on the top quintile had again been lowered, though not as low as under Reagan. But the rate paid by the middle quintile had been slashed from more than 17% to less than 14%, which is a dramatic drop from the 19% rate of 1981 (http://www.businessweek.com/the_thread/economicsunbound/archives/2007/04/_surprising_ans.html).

...continued...

eduardo continued...
If, as you say, the government's moved the burden more towards the middle, the only way this is possible is that the middle is making much more of the nation's income than it was before. But this is not true either. The real answer is that the burden has been moved from today's taxpayers to tomorrow's through increased government borrowing.

“This country is setting itself up to have an increasing number of dynasties sucking off the labor without producing anything.”

Whatever that means.

“A lot of people ask 'Am I better off than my parents.'”

The answer is far more likely to be “yes” than “no.” Between 1985 and 2005, real GDP per capita increased close to 50%. Between 1965 and 2005, the increase was more than 125%.

“Consider that 40 years ago middle America could afford to buy a home and raise a family from a single earner. Not so today. I don't know how much of this is due to the changes in tax law and the increased disparity of wealth, but given yearly productivity increases and increases in GDP I have to believe it is a significant factor.”

Consider that 40 years ago there was no such thing as a cell phone, cable or DirecTV, or internet service. Computers didn't sit on your lap, they filled a room. Televisions weren't flat – hell, they weren't even color. Most people did not own washing machines. Families did not have more than one car. Eating out wasn't close to as common as it is today. New houses were much smaller, and people didn't fill them with as much “stuff.” What's changed? Has life gotten so much more expensive? Life has gotten more expensive, but much more, we have come to demand much more from life. And, surprise, demands cost money.

I can't wait for your next insult.

.

Taxation On Distribution Of Incomes
I'm described as being in the top 1% of net worth
taxpayers. It still pains me to give 40% of my income to the IRS. Taxation filling is so complex for me that I have to have a certified tax planner do it for me. But I'm a saver and have kept brillent uncirculated siver dollars and brillient uncirculated half dollars since the early 1940's. I love the brillence of these coins. I also bought up BU $20 gold coins for $48 dollars in 1960. So I understand Dr Sowells arguements completely. Oh, by the way, I started at the $0 dollar level. But now I'm old and cannot enjoy my accomplishments because of medical conditions that have sapped my zest for even living. My enjoyment this Thanksgiving was spending it with Family.

eduardo

Geez, I thought I was done.

“This isn't about personal responsibility. It's about a disaster of titanic proportions.”

Look out! The sky is falling! The sky is falling!

“Keeping down the middle class prevents the growth necessary to keep this country moving forward.”

Why destroy your own argument? IF the middle class is being “kept down” as you claim, then how do you explain real GDP growth of 3.5% per year from 2004-06 -- higher than the average over the last 45?

“...[capital gains and inheritance taxes] play a decreasing role in funding the massive federal budget.”

From 1976-1983, capital gains made up 4-5% of individual income tax receipts. They spiked to 11% in 1986-7 following the '86 tax reform, and again increased to 10-12% of receipts from '97-'01, following the '97 reduction in capital gains rates and along with the tech bull market. Following the crash of the tech market and the further reduction of rates, the percentage fell to 6-7% of individual tax revenue during 2002-2005, which is still higher than the 76-83 period. (source: CBO Budget and Economic Outlook)

As for the estate tax, in the post-WWII period it has NEVER been more than 3% of federal revenue. It peaked in 1972 at 2.6%, and since 1977 it has ranged between 0.8% and 1.3% of all federal receipts. (Source: http://www.irs.gov/pub/irs-soi/ninetyestate.pdf)

So once again, the data don't support your assertions.

“Ronald Reagan made a devil's pact with the democrats. They wanted their big government, but Reagan took the rich off the table.”

Sorry, can't blame big government on the Democrats. Congress approved less spending during the Reagan administration than the administration asked for in its budgets.

“Middle class America isn't organized like Corporate America, and the result is massive growth in the federal government, and a descending middle class.”

The sky is falling! The sky is falling!

.

SAM joined the crowd...
...saying I missed his point too. Let's see:

I'm guilty of sloppy pasting. I took this whole paragraph:

"The CPI's market basket of good consists of goods and services. I don't think television sets are a part of the equation. I don't think the human diet is as optional as much as our entertainment options. Get real."

I should have cut my quote off where you said "I don't think television sets are a part of the equation." My point - of course they are, and then I tried to illuminate just how expansive the definition of CPI is.

.

Corporations contribute less
First, I do concede the point you make regarding the social security tax being 14.61%. Regarding corporate profit tax rate, I do agree it is more complex than at first blush.

"Well, in a word, no. First off, over the period 1959-2005, cumulative individual income was on average more than nine times more than cumulative corporate income. So naturally, individual income tax will bring in far more revenue than corporate income tax."

So what? The definitions for income for corporations and individuals are different. For instance, if a corporation is in a high rent district, it gets to write the extra cost off against its income. Not so for the individual.

I don't get to write off the cost of my car, my gas to and from work, the cost to develop my children into good earners. I can't find it on a quick web search, but I'm willing to bet corporations get to deduct expenses related to employee development.

Now, what I said is corporate taxes make up a decreasing amount of the overall tax burden (I include social security with this, incidentally). In 1954, corporations paid over 30% of the overall tax receipts for the Federal government. 2007, it is expected to be only 11%.

Just yes or no.

Capital gains Estate declines
In 1940, the percentage of the federal government receipts from estate taxes was 6%, in 2004 it was 1.3%.

Looks like a decline to me.

Regarding capital gains rates, the numbers were at 25% in 1954, peaked at nearly 40% 1976 - 1978, and have been on the decline ever since. Today they are at 16%. http://www.treas.gov/offices/tax-policy/library/capgain1-2 006.pdf

Ascendancy of Social Security
Meanwhile, under a deal cut with the democrats under Ronald Reagan, Greenspan and Patrick Moynihan created new legislation to make social security increasingly pay for the federal government.

In 1980, Social security was 30% of the federal receipts (up from 10% in 1954). In 2004, it makes up 38% of federal receipts.

Specific BS points:
"If, as you say, the government's moved the burden more towards the middle, the only way this is possible is that the middle is making much more of the nation's income than it was before."

Obviously the tax burden has shifted away from the wealthy to the middle class. In 1954, Individual taxes were 51%, Corporate 36%, Social Sec 12.4% relative to each other.

In 2004, the numbers are Individual 47%, Corporate 11%, and social security 42%.

So how about if we just agree, yes, there is a trend towards the middle class paying more of the burden of the government.

Meanwhile, my argument continues to be that it's not income that matters, but wealth. Wealth disparity is increasing. Dr. Sowell makes an argument it's hard to know whether capital is being collected or not. I look at the taxes, there is a good indicator that's exactly what is happening.

"Why destroy your own argument? IF the middle class is being “kept down” as you claim, then how do you explain real GDP growth of 3.5% per year from 2004-06 -- higher than the average over the last 45? "

There are some large trends. Sure GDP is growing, but how? One way is two workers per household. A stay at home parent is important, in my view, to raising the next generation of Americans. Corporations are outsourcing really important functions, like design and development, to other countries. One reason is a decline in available Americans to take the jobs. I attribute this to the breakdown of the family, and part of that I believe is due to two worker families, and other deleterious trends.


The main point
Now, one more time, since you seem impervious to arguing the main points, but focus on nits and bits.

There is a rising inequality in wealth in the US:

"To see the rising inequality of wealth, one only need look at changes in mean and median net worth. In 1995, mean net worth was 260K, and median 71K. In 2004, the mean was 448K, vs. 93K. Mean net worth rose 72%, whereas median net worth rose half that: 31%."

Setting up dynasties by concentrating wealth is not healthy for this country, since it warps and impedes capital flow, which should go to the most creative and capable people, and can ultimately leave the vast majority of wealth in a stagnant group that lives off the labor and creativity of everyone else.

eduardo

"I don't get to write off the cost of my car, my gas to and from work..."

If you are self-employed, you do.

"...the cost to develop my children into good earners."

Children are hardly analogous to employees, especially since companies have no legal responsibility for the employee's well-being.

"I can't find it on a quick web search, but I'm willing to bet corporations get to deduct expenses related to employee development."

Of course they do, as it's a business expense. Corporations can deduct almost all of their expenses, because almost everything they do is designed to increase their profits. How does paying for your children's education increase YOUR income?

Note, corporations also don't get the equivalent of a standard deduction or deductions based on the number of dependents.

"Now, what I said is corporate taxes make up a decreasing amount of the overall tax burden (I include social security with this, incidentally). In 1954, corporations paid over 30% of the overall tax receipts for the Federal government. 2007, it is expected to be only 11%."

"Just yes or no."

No.

continued...

eduardo continued

What you said was "[The federal government] increasingly reduces capital gains taxes, and increases income taxes. Those who have wealth already are protected, whereas those who need to earn it are punished with the yoke of the massive appetite of the federal government. I believe this started under Ronald Regan [sic]...”

I contested the notion that capital gains taxes began to decline under Reagan, and provided some context for capital income taxation which is not generally understood.

Now, you've changed your argument from "Reagan" to "1954."

I also wouldn't use expected future numbers, but would stick with known numbers, like 14.7% of federal revenue in 2006.

From 54-06, certainly capital gains revenue as a percentage of federal revenue has declined. But is this necessarily indicative that the middle class burden has increased? No. Between 1959 and 2005, personal income increased faster than corporate income. [EROP B27, B90] Not enough to account for all of the difference, but a bit.

You also claimed an increased burden on the middle class, but haven't provided support for that assertion.

"In 1940, the percentage of the federal government receipts from estate taxes was 6%, in 2004 it was 1.3%. Looks like a decline to me."

Are you expanding your timeframe again because your original argument fell to pieces? So why di you pick 1940? Why not 1915, 1920, 1925, or 1930? Why didn't you use the "40 years ago" bit you used elsewhere? Maybe because between 1935 and 1942, the estate tax made up more of federal revenue than it ever did before or since?

And your statement about the estate tax was that it followed the same pattern you were claiming for the corporate tax, and that's simply not true.

...continued...

eduardo concluded...

"Regarding capital gains rates, the numbers were at 25% in 1954, peaked at nearly 40% 1976 - 1978, and have been on the decline ever since. Today they are at 16%."

But you're looking at the maximum rate on long term gains, which is not sufficient, since it is individual, says nothing about the income level at which this rate starts, how much was taxed at this rate, or how much was exempted by other provisions in the tax code.

Much better is the average effective tax rate, which was 14.1% in 1954, peaked over 25% during the Clinton adminstration, and fell to 14.7% in 2004. Looks like it's not a decline to me.

"Meanwhile, under a deal cut with the democrats under Ronald Reagan, Greenspan and Patrick Moynihan created new legislation to make social security increasingly pay for the federal government."

Okay, this is just a moronic conspiracy theory. Social Security in the early 1980s was in more a more dire funding situation than it is in now. The Greenspan commission basically said that to avoid insolvency, especially due to the coming retirement of the baby boom, Social Security had to significantly increase its revenue, which was accomplished by a large increase in the Social Security tax (a tax increase, by the way, that conservatives never want to include in Reagan's record).

But they did this to fund the government? Hogwash. The fact that the Social Security trust fund must be invested in federal government securities indicates no such thing.

"In 1980, Social security was 30% of the federal receipts (up from 10% in 1954). In 2004, it makes up 38% of federal receipts."

Um, yeah. And this is completely understandable, given the deficits this program is expected to run starting in not too many years.

Now, if you want to argue that the burden for social security should be moved so that high-income taxpayers are more invested, I'm right there with you.

.

don't put words in my mouth
You are putting two paragraphs together when you say I all these trends on Ronald Reagan's doorstep. "This" refers to the Patrick Moynihan and Alan Greenspan rework of social security so that it pumped in an extra Trillion into the federal government on the backs of the middle class. Not well written, I agree, but this isn't the best medium for perfectly constructed arguments.

What I'm saying is that the trend is to fund the government from middle class dollars. Sometimes 1954 is a good time to start because the spreadsheets I find on the net start then, some start in 1934. I do agree that a serious analysis of this would take a very large amount of time and effort, which is why the major changes are important as they bring the trends into high relief.

Now what I said is that Corporation's contributions make up a declining part of the federal budget. In 1954 they paid 30%, and most recently are approaching single digits. You say corporation's contribution as a percentage of the overall budget hasn't declined. How can I have an intellectually honesty discussion with denial like that?

Too Funny
"Um, yeah. And this[increasing social security tax dollars] is completely understandable, given the deficits this program is expected to run starting in not too many years. "

I would agree if they had invested the money, but the government used it for programs.

They could have:
1. Cut programs.
2. Increased taxation.

Instead they stole middle class dollars to support the massive federal government.

Social Sec
"
Now, if you want to argue that the burden for social security should be moved so that high-income taxpayers are more invested, I'm right there with you. "

I personally want to move away from social security and to personal retirement accounts. Keep the money out of the hands of the government.

It's going to become an even bigger rip-off of the middle class as they means test it.

eddie

"Now what I said is that Corporation's contributions make up a declining part of the federal budget. In 1954 they paid 30%, and most recently are approaching single digits. You say corporation's contribution as a percentage of the overall budget hasn't declined. How can I have an intellectually honesty discussion with denial like that?"

First you tell me that I've put words in your mouth, and then you say this. Since I don't believe I wrote that, how can I have an intellectually honest discussion...

"I would agree if they had invested the money, but the government used it for programs."

First off, as I said, they can't invest it except in government securities. Secondly, if Social Security wasn't funding it, somebody else would have. The government didn't need to expand Social Security collections to fund the rest of the government. It had to expand them to ensure future benefits.

"It's going to become an even bigger rip-off of the middle class as they means test it."

I disagree, but I'm weary of this.

.

BS Detector, my point in my first post
Rather than using the same market basket of goods from year to year, they said they needed to take into consideration that people may have switched from beef to chicken.

The government cant' do what it wants
"First off, as I said, they can't invest it except in government securities."

They can do whatever they decide to make into law.

I'm tired of this too. The trends are obvious, disagree if you will, but you just ignore the facts.

BS Detector Do You See How You
Missed it now or do you still believe that eating is "optional"?

Okay, people want to fight, that's fine.

Eduardo: I contested specific statements you made. If you have a problem with that, make sure that in the future that your claimed evidence of the "obvious" is actually true.

SAM: You started your posting with "make sure you check out the other set of books the government keeps," which gives you an above-average "whack-job conspiracy theorist" score. Then you claim that "they" somehow changed the CPI "a number of years back" (nice specifics).

You somehow have a problem with the idea that people eat more chicken than they used to, and less beef, which you would likely find to be true due to health and cost considerations - if you bothered to research any of your assertions. Then you said "I don't think television sets are a part of the equation," which is where I came in.

Then, shown that you had no understanding whatsoever about how CPI is determined, you changed tacks, claiming that I was missing your point. Fine - same thing to you as eddie - try not to make patently absurd claims when supporting your point.

"And the figures particularly don't mean much anyway if they came from Uncle Sam."

They mean an awful lot more than ones coming from Uncle S.A.M. Oh, wait, I forgot - you don't have any figures.

.

BS Detector if inflation is determined
by the cost of beef going up, you can't tell by pricing chicken.
I may not recall the year it was done, but I do remember what they did.
The double sets of books is based on my experience and research with the subject matter. Anyone who pays attention to government salaried workers and Social Security recipients would notice that inflationary increases for government workers are higher than they are for SS recipients.

which UM study?
I tried to find the study Professor Sowell mentioned and ended up at a University of Michigan website that had a press release dated August 2007 saying the rich are getting richer and the poor are getting poorer.
http://www.ns.umich.edu/htdocs/releases/story.php?id=5981

SAM wrote:

"by the cost of beef going up, you can't tell by pricing chicken. I may not recall the year it was done, but I do remember what they did."

1. It's called consumer choice. Since the government got out of the beef pricing business, beef prices have gone up. And - shocker - people eat less of it.

2. It's called the Internet - support your claims by doing research. If you remember what they did, you should be able to find support for your assertion.

"The double sets of books is based on my experience and research with the subject matter."

Research? You've done research? But seriously, what exactly did you find? Do the heads of all the agencies have a second set of books, hidden in the safe like in "The Shawshank Redemption"? You're ridiculous.

"Anyone who pays attention to government salaried workers and Social Security recipients would notice that inflationary increases for government workers are higher than they are for SS recipients."

And anyone who's taken even a cursory glance at the cost of living in the Washington DC area (where a large percentage of federal workers live) would know that it's gone up a hell of a lot faster than the average in the U.S.

And, more to your point, so what? Have you done the comparison between government workers and private sector workers? Because believe it or not, the federal government has to compete with private enterprise. So if salaries in general are going up more than the Social Security COLA, you can be sure that government compensation will track closer to competitive compensation increases. It's called a market economy.

.

BS Detector
"Since the government got out of the beef pricing business, beef prices have gone up. And - shocker - people eat less of it."

What on earth are you talking about? The CPI formerly measured inflation by using the same market basket of goods. It's the only honest measurement of inflation. You don't measure the cost of transportation (automobiles) by switching to how much horses are going for do you?
The double standard isn't just about DC employees; it also applies to city, county and state workers, teachers, etc.
I did my research once and I don't care to do it again; you'll learn better by personal experience anyway (I suggest you get your hands on the US Government Manual, you'll need it).
I stand by my research-which I did the old fashioned way - calling the offices in DC like OBM, DHHS (back then DHS).
Working for the government is called "public service" (emphasis on the service). Any government that pays its employees more than its comparable private sector job cannot continue to stand.

BS Detector
A few more offices you'll need to contact: GAO, Census Bureau, perhaps the Dept of Commerce and Bureau of Economic Analysis. And listen to Ron Paul.

BS Detector, something wrong with your
reasoning:

"And anyone who's taken even a cursory glance at the cost of living in the Washington DC area (where a large percentage of federal workers live) would know that it's gone up a hell of a lot faster than the average in the U.S."

The Social Security recipients that live in DC don't get any higher COLA because of where they live, do they?!?!

SAM wrote

"The CPI formerly measured inflation by using the same market basket of goods."

Sure, and they updated the base year periodically. And this was WOEFULLY inadequate as technology change at the consumer changed. Using the old method, tell me, what sort of computer was in the basket in 1982? Perhaps an IBM PC XT, with an 8086 processor and 64KB of RAM and a monochrome monitor? Look! Prices are falling, since that particular computer which ran a grand or two is now worth nothing at all! In fact, due to the heavy metals in the monitor, it's worth negative - you have to pay to dispose of it.

The plain facts are that the old method of generating CPI was simply outmoded by modern life. Sorry.

"Working for the government is called 'public service' (emphasis on the service). Any government that pays its employees more than its comparable private sector job cannot continue to stand."

And of course, I didn't say it did. But if the government were to compensate people less than the private sector, it would not be able to hire people. So if private sector wages increase, government wages must keep up, or the better people will leave or never join the government.

So forget the comparison of government salaries and SS COLA. Compare SS COLA with salaries in general.

"something wrong with your reasoning... The Social Security recipients that live in DC don't get any higher COLA because of where they live, do they?!?!"

I don't know. But, what percentage of SS recipients live in the DC area, compared to what percentage of federal employees? And for the SS recipients, do they not have options regarding where they choose to retire? But this is irrelevant.

Look at private sector wage inflation - this should match up well with public sector wage inflation. Now look at price inflation - this should match up well with SS COLAs. Why should retirees get raises in excess of inflation?

.
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