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The Rich Get Richer and the Poor Get … Even Richer?

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In our industrial and social system, the interests of all men are so closely intertwined that in the immense majority of cases a straight dealing man who by his efficiency, by his ingenuity and industry, benefits himself, must also benefit others. Theodore Roosevelt

There continues to be a great deal of muttering from the left and alarmism in the media about a trend towards growing ‘income inequality’ between the rich and poor in America. Most of this originates in a series of studies by Isaac Shapiro at a left-wing think tank, the Center for Budget Policy Priorities, which has as its main objective fighting any tax reductions and redistributing income from the rich to the government. Shapiro’s work is mainly analysis of figures on household income from the Congressional Budget Office, which show a historic trend of income increasing in all income groups, but by a larger percentage in the higher income groups than the lower ones.

Income is normally broken down into quintiles, and between 1979 and 2002, Shapiro shows a 5% rate of income increase for the bottom quintile compared to a 48% growth in income for the top quintile. Basically his figures show that the more you earn, the more your earnings increased during that period. Shapiro’s conclusions seem alarming. Though everyone gained in income, the gains for the rich are so dramatically higher than for the poor that one has to be concerned. Of course, this analysis of income for huge income groups rather than individuals, and over a period of 23 years, is ridiculously simplistic and overlooks key, obvious factors which definitively invalidate it, especially as an argument against tax cuts.

First off, it’s a gross analysis over a long period of time, and it’s also based on data which is several years old. It doesn’t include the most recent data, and by taking so many years together it overlooks year-to-year trends in income growth which are very significant. If you examine the trends on a yearly basis what immediately leaps out is that the greatest growth in income disparity happened not in recent years as Shapiro implies and as the media has made an issue of, but in the very beginning of the period, in the 1980s, when taxes were at a historically very high level and economic growth was slow.

In the 15-year period from 1979 to 1994 the bottom quintile gained only 2% while the top quintile gained 28%. The next six years — the time of the high-tech boom — showed the greatest economic growth and saw the poor gain 8.1% and the top quintile gain 12.7%, much closer together. The most recent era — the Bush era of recession and tax cuts — also shows slowing growth in disparity than the 80s and early 90s, with both rich and poor losing income. The bottom quintile is down 8.5% in the last five years, and the top quintile is down 3.3% in the last five years, again a relatively close ratio. Overall during the 23-year span the ratio of income growth between the rich and poor is 9.6:1, but in the first 2/3 of the period, from 1979 to 1994, that ratio was 14:1 and, in the last five years, it was only 2.6:1. So the trend that everyone is alarmed about is actually a trend which has been declining in recent years and is only looks like a dramatic trend because of the rate of growth in wealth disparity in the beginning of the period studied.

What those who are alarmed about income disparity have latched on to is the single biggest comparison between rich and poor over 23 years, but because of how Shapiro presents the data, most who have looked at the issue miss the fact that the rate of growth in disparity is decreasing rather than increasing. The rich are actually getting rich less quickly relative to the poor than they were 20 years ago.

The next problem with the analysis of this data is that it is looking at statistical groups rather than changes in the income of individuals over the period studied. What it completely ignores is the fact that the people in the bottom quintile in 1979 are not the same people who are there 20 years later. The reality is that most of the bottom quintile is made up of the elderly, recent immigrants, and young people just entering the workforce. The last two groups move up in income rapidly and are overwhelmingly not in the bottom quintile after only a few years have passed while the first group die off also leaving the bottom quintile.

A study by the House of Representatives shows that the bottom quintile has the highest level of upward mobility of any group. In a 10-year period, 86% of the people in that quintile will have moved up one or more income brackets. What’s more, the top quintile has the highest level of downward mobility. In a typical 10-year period, 35% of the people in the top quintile will have dropped down at least one bracket.

Factoring in economic mobility totally destroys the Shapiro thesis that the rich get richer and the poor get poorer. Let’s assume that people in the top and bottom quintiles only rose or dropped one quintile in income over the 23 year period studied, which is ridiculously conservative. Based on the percentages who moved up and down, that means that, on average, the 86% of the poor who moved up actually increased their income by 274%, while 35% of the rich decreased their income by 46%. So using those figures you can adjust Shapiro’s percentages for upward and downward economic mobility and you end up with the poor gaining 236% on average, and the rich actually 27% on average. That’s pretty damned far from the rich getting richer and the poor getting poorer. Everyone is getting richer, and as a percentage the poor are probably rising farther and faster than anyone.

When people look at data they usually see what they want to see. In the world of groups like the CBPP, groups matter more than individuals so the upward movement of individuals is less important than the fact that 18-year olds working at McDonald’s aren’t earning much more now than similar first-time workers were 20 years ago. Never mind that the 18-year old they looked at 20 years ago is now earning 3 times as much and in some entirely different profession.

—-

There are some other good sources for analysis of this subject. Take a look at the overview of income mobility from Daniel Drezner, and the article from March 23rd on Economic Trends. The Heartland Institute also has a look at the subject from a different perspective, and another good article can be found at the Heritage Foundation. Those last two are right-wing think tanks as suspect as the CBPP in their own way, so look at the original data for yourself and draw your own conclusions. For the source data on income growth during this period, take a look at the tables in this Census Bureau PDF, and for trends in income mobility look at this House of Representatives Joint Economic Study.

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About Dave Nalle

  • http://jpsgoddamnblog.blogspot.com JP

    First off, I want to point out that you are critical of the liberal groups you cite in the beginning of the article, but then provide a link to the conservative Heritage Foundation. I’ll try to find a moderate one for you–after all, what’s good for the goose…

    Secondly, it’s not all muttering. The comparison I often hear is the CEO-to-average-worker ratio, which jumped from 301:1 in 2003 all the way to 431:1 in 2004. It actually peaked in 2001, at the end of the Internet bubble, at 525:1. In 1982 it was approx. 42:1. This includes stock options, incentives, etc. In 1984, Peter Drucker recommended CEO pay be capped around 20 times the average worker’s pay. In 2004, pay for the CEOs of the Fortune 500 was $5.1 billion, compared to $3.3 billion in 2003.

    I’ll grant you that Reagan’s and Clinton’s economies made significant changes in the interim, but the trend line isn’t declining. Our culture is currently rewarding greed, and even business people and investors are getting sick of paying these people ridiculously well for mediocre performance. CEO pay is a symptom of how we treat the wealthy in general. Tax policy that favors the wealthy–estate tax cuts, for example–isn’t needed when things are this out of whack.

  • http://www.elitistpig.com Dave Nalle

    JP, my links to Heritage and Heartland are accompanied by this statement “Those last two are right-wing think tanks as suspect as the CPPB in their own way, so look at the original data for yourself and draw your own conclusions”, so I made it just as clear that they’re in the same boat of partisanship as the CBPP.

    The problem with your CEO-worker comparison is that it’s kind of anecdotal and it’s a comparison of unequal parts of the population. The quintile comparisons are more fair, because they deal with comparable portions of the population. Your comparison is of one of the wealthiest groups which makes up less than 1% of the population and a very large middle income group. It’s apples and oranges.

    As far as capping CEO pay, that’s a reasonable idea, so long as it’s implemented by individual companies with the approval of their boards and stockpayers. If you impose something like that through government fiat it makes a joke of free enterprise in America.

    Dave

  • http://jpsgoddamnblog.blogspot.com JP

    Good call, my apology–looked right over that sentence apparently.

    As for CEO pay–Granted the CEO population is very small, but it’s a good example of how wealth is overly glorified and emphasized in this culture.

  • http://www.elitistpig.com Dave Nalle

    I’m not sure there’s anything wrong with glorifying wealth. What troubles me is when people receive wealth out of proportion to their actual worth or value. As a stockholder I don’t want to invest in a company which pays the CEO a ridiculous amount of money unless he somehow earns it.

    As an Apple stockholder I have no problem with whatever they pay Steve Jobs because he earns every penny of it. But I suspect he takes far less than he could in actual salary, because he profits from investment in his various companies far more than in the salary he gets. That’s what I want to see – CEOs who benefit based on the success of their company. Giant severence packages just to get rid of an incompetent CEO are the definition of what I don’t want to see.

    Dave

  • http://alienboysworld.blogspot.com Christopher Rose

    Dave, the joke is that you think that free enterprise exists in America!

    Surely it can’t have slipped your attention that the USA is a very heavily regulated and controlled society. The line about freedom is just marketing speak to fool you all. Sadly, after all this time it still works!

  • http://www.elitistpig.com Dave Nalle

    Christopher, I submit that you’re pretty unfamiliar with America if you think free enterprise doesn’t exist here more than anywhere else in the world. The regulations we do have are very focused and generally well designed to worked around by those who wanto do business with minimal restriction. Show me a country where there is more freedom for business and entrepreneurs.

    Dave

  • gonzo marx

    one word…

    China…who, incidentally is now affecting the market value of our dollars by not buying up as much of our Debt as possible any longer (they hold the second most, just after Japan)..they no longer are pegging their currency to the dollar alone….and are muttering about beginning to sell off their bond holdings….the mere rumor of which is already causing the dollar to fall (yesterday’s Marketwatch report on NPR, for those keeping score)

    nuff said?

    Excelsior!

  • Arch Conservative

    Dave it is no use arguing with these people who insist that there is class warfare in America.

    It is so painfully obvious that they resent anyone who has done better than them. To people like Gonzo , Natalie, and Christopher anyone who has more money than them must be aggregiously ammoral and corrupt. It’s never that these people are smarter than them or worked harder for what they have.

    You are absolutely right when you claim that no other nation has the business and entrepreneur opportunites that America has Dave.

    I am so sick of the socialist bullshit propaganda regarding taxes, class, and the American economy. Guess what Gonzo and Natalie and C Rose…..there is always going to be some rich people who are corrupt and there will always be people who are poor and no amount of social engineering or economic tinkering that the left can do will ever change this. So get over it!

    America still the greatest oppurtunity for upward social and economic mobility in the world. The only catch is you can’t spend 90% of your time bitching like some on BC do and expect to attain anything. You actually have to get off your ass and do something for yourself. Imagine that.

  • http://www.elitistpig.com Dave Nalle

    Ah Gonzo, you do make me laugh with your bizarre version of reality. There’s so much free enterprise in China. Indeed, so long as you’re a red army general or a highly placed party member you’ve got all the entrepreneurial activity you like.

    It’s just like when I lived in Russia. I’ve never met anyone more free than the 1/100000th of the population who were members of the Central Committee. They were free to murder hookers in their hotel suites, drive the wrong way on one-way streets and pocket all the cash they saw lying around in the party offices on election days. They were the freest people in the world. It was just the other 99.9999% of the population who lived in constant terror and crushing poverty to pay for their freedom.

    As for any Chinese mutterings you may have heard, they’re laughable. The dollar has rebounded well from where it was vs. the Euro, back to 2002 levels, and as I’ve said a thousand times before, if China sells our bonds then there has to be someone else who wants to buy them, and it makes no difference to us whose vault they are sitting in. We pay the same interest on them.

    Dave

  • gonzo marx

    Bing…you are sadly mistaken if you think that i am of the Opinion that some folks do not earn their wealth nor deserve it

    quite the contrary..i am all for ethical business that promotes the generation of capital and improves the local economy as well as the status of those working for such corporations

    what i rail against are the unEthical corporate entities….Enron, Anderson Accounting…on and on

    those that think short sightedly about this quarters bottom line at the expense of their own employees, even of their Nation…much less their communities

    so, to you..it might appear one way…but to others it appears that some folks defend greed at all costs

    and that is what i tend to rant about…

    there IS definately class warfare going on….the megacorps who dump 10 million dollars worth of toxic waste offshore with a federal official on board, and hand them the $25,000 check for their fine as they dump into the ocean, those that offshore american jobs…including highly sensitive tech and defense jobs…just to satisfy the bottom lines (check where many of our fighter jet components are being made, China..does this make good strategic sense?)…unscrupulous CEO’s who artificially inflate their stock prices at just the right moment so they can sell their options and bail with their Golden Parachutes leaving behind an empty husk of a once thriving business…

    on and on

    if this seems ok to you, then there is not much for us to discuss

    me…i want thriving, growing, ethical businesses to grow here in America

    and i want to see the unEthical greedheads get punished for their misdeeds

    silly of me, i know

    but i can Dream, can’t i?

    Excelsior!

  • troll

    No class warfare goin’ on here…only quintile warfare

    troll

  • http://www.elitistpig.com Dave Nalle

    Corrupt corporate management is certainly a bad thing, and such cases need to be dealt with as criminal prosecutions under the law. What troubles me is that you think that attacking corporations and the wealthy as a whole is an effective way to deal with the small minority who are criminal in their abuse of wealth and position. Throwing out the baby with the bath water is never a good idea.

    Dave

  • http://alienboysworld.blogspot.com Christopher Rose

    Dave, deeply fascinating as your remarks in #6 are, they have absolutely nothing to do with my preceding comment. Thanks for the kneejerk response though.

    Myu comment addressed the fact that the majority of US citizens live in an illusion that they are in fact in a free society. The amount of state and federal legislation in the USA is massive and in no way equates to free enterprise as you originally stated in comment #2.

    How you manage to interpret that as a relative comparison with other countries baffles me somewhat, until I remember who I’m dealing with of course…

    ;-)

  • http://www.elitistpig.com Dave Nalle

    I don’t disagree with you that the US is massively overtaxed and overregulated. Even so, it’s still the best place to live if you want to have at least an illusion of freedom.

    Dave

  • http://alienboysworld.blogspot.com Christopher Rose

    Archie, you seem to have an even more extreme case of warped vision than Mr Nalle.

    Please find me a mere syllable in my comment which implied anything at all related to your impromptu and poorly thought out remarks.

    Alternatively, try pulling your head out and seeing the landscape for what it is, not what you fear or imagine it to be…

  • http://alienboysworld.blogspot.com Christopher Rose

    Dave: #14 – I’ll grant you the illusion part.

  • gonzo marx

    comment #9 sez…
    *Ah Gonzo, you do make me laugh with your bizarre version of reality.*

    i see, my vision of Reality as a working person as opposed to the silver spoon, expensive and exclusive prep-school, geted compound living, elitist pig version that you perceive?

    i’ll leave whose Vision is more bizzarre up to the gentle Readers to decide

    Excelsior!

  • RedTard

    “I don’t disagree with you that the US is massively overtaxed and overregulated.”

    We must be taxed to pay for the regulations. The illusion of freedom is created because our system makes it easy to get in a cubicle and work for someone else with few inconveniences. You don’t really understand the tangle of regulations until you’re an entrepeneur or run a business. It’s not for the feint of heart.

    I honestly believe that big business likes the red tape. It hurts small competitors who don’t have the lawyers or manpower to jump as high as the regulators (who probably used to work for the big companies) want them to. If you follow the trail of most industry regulation back to it’s source you’ll find that it often originates from the big players themselves. In essence they set their own rules, and those rules are often more anti-competitive than anything else.

  • Nancy

    Oh, absolutely, Arch & Dave: Ken Lay has earned his billions by working harder & being smarter than all the rest of us; ditto other great leaders of corporate history like Dennis Kozlowski (Tyco), Bernie Ebbers (Worldcom), the entire Rigas family (Adelphia), and most of the top brass of Arthur Anderson which encouraged their subordinates to go massive shredding sprees… should I list more? How’s about Leona Helmsley? And of course if we’re getting historical historical, there’s always John Rockefeller, the original towering monument to corporate ethics, morals, & responsibility. Lessee, now: in terms of general scandals, too many hard-working execs with more intelligence than the rest of us, there’s always the good folks at Bristol-Meyers, Halliburton, Quest, AOL/Time Warner, Global, Merck, Nicor, KMart, Fannie Mae, most recently the top execs at the Red Cross, and of couse, the ever-community-minded Scott Lee of Walmart. Yessir, these good folks all just work a lot harder & are a lot smarter than the rest of us, that’s why we’re jealous.

    What tripe! Resentment against the rich is for a reason, and all those people & corporations listed above – and I could have gone on & on for a loooooooooooooooooong while, these are just the top of the barrel – are symptomatic of the lawless, greedy-gut, arrogance of the members of the plutocratcy, and that includes most of the members of the controlling class of congress & the upper echelons of the various political administrations. As pointed out on another website, they are all interlocked in such a way that the word “incestuous” becomes pallid describing them.

    Yes there IS indeed class warfare; it just hasn’t had a chance to get open & physical yet, the way it did in 1917 Russia & pre-Maoist China. Go try & blow sunshine up someone else’s skirts convincing them how peachy & nice all those rich folks are.

  • http://theugliestamerican.blogspot.com Andy Marsh

    man, are you really that bitter?

  • Nancy

    When I look at how many good folks live in poverty, or hand to mouth, and then see how crime pays for so many ultra-rich – damned right I am.

  • Arch Conservative

    Good folks? The reality is that many of those so called “good folks” aren’t as smart or motivated as those who have more than them.

    You named four or five corrupt CEO’s and based on this you want to indict the whole capitalist system Nancy…. get a grip.

    According to Kiplinger’s financial magazine there are currently 8.9 million households in the USA that have a net worth of over 1 million dollars. Are all of these people corrupt Nancy?

    What about the millions more that make over 400K? Are they all corrupt?

    No one would deny that there are certainly corrupt and ammoral individuals in corporate America today but your broadsweeping characterization of anyone with a little money as greedy, ammoral, corrupt and uncaring is horseshit.

    Your resentment for the rich is irrational Nancy. You have consistently distorted the facts and offered outright lies with regard to taxes, wealth and class to support your tirades against all wealthy Americans.

    You’re the atithesis of the American dream Nancy. The American dream says you work hard and work smart to get ahead. You don’t rely on government handouts and entitlements. The American dream says your care for your fellow citizens but are not responsible for thier welfare. You take pride in the things you have accomplished and gained for yourself and you do not feel guilty when people like Nancy call you evil. You don’t blame people that have more than you for keeping you down.

    Nancy and Gonzo like to whine about trust fund babies but what they seem to ignore is that there are millions of American citizens with poor or middle class backgrounds that have through thier own hard work and know how bettered themselevs financially to the point that the would be considered wealthy.

    You’re an anooying, deluded, whining, excuse making, propagandizing, loser Nancy and I find it hard to believe that anyone other than Gonzo can take you seriously.

  • gonzo marx

    Bing sez…
    *The reality is that many of those so called “good folks” aren’t as smart or motivated as those who have more than them.*

    let me say right out front that this stated opinion is pure unadulterated horseshit…

    there are plenty of smart, hard working poor/middle class folks and there are plenty of dumb, lazy rich folks…generalities such as those spewed in the quote are not worth the electrons spent transmitting them

    that being said, and since Bing is so nice to call me out on this personally…let’s Dance…shall we?

    Bing sez…
    *According to Kiplinger’s financial magazine there are currently 8.9 million households in the USA that have a net worth of over 1 million dollars.*

    those are nice, upper middle class folks…not even considered “rich” by today’s standards…straw man number 1 exposed…

    Bing sez…
    *The American dream says you work hard and work smart to get ahead*

    as opposed to inheriting, staling, or utilizing unethical practices to gain your wealth…correct?

    Bing sez…
    *You don’t rely on government handouts and entitlements.*

    as opposed to the multi-billions of dollars spent on corporate welfare or tax breaks for corps to offshore american jobs….correct?

    Bing sez…
    *Nancy and Gonzo like to whine about trust fund babies but what they seem to ignore is that there are millions of American citizens with poor or middle class backgrounds that have through thier own hard work and know how bettered themselevs financially to the point that the would be considered wealthy.*

    you confuse “rich” with “wealthy”

    rich is one of those athletes or actors who make tens of millions a year for a while…

    wealthy are the folks that pay them and never notice the missing pocket change

    example: Michael Jordan is rich….Bill Gates is wealthy

    got it?…good

    now, as for your tastelss personal attacks against Nancy for stating her Opinion in these matters, allow me a moment to speak out…

    if it is needed for someone to launder the greasy stain of your hateful, opinionated spewings from the soiled underwear of BC, then refer to me as Maytag…

    nuff said?

    Excelsior!

  • Nancy

    Thank you, Gonzo; you have a lot better grip on figures & where to get them than I have. I just go to Forbes.com, but of course, they wouldn’t have a clue as to how shiftless, evil, or corrupt rich people are, would they?

  • Arch Conservative

    Nothing like 2 whining, socialist, dolts patting themselves on the back.

  • zingzing

    and one lying, conservative fool with his fingers up his ass.

  • http://theugliestamerican.blogspot.com Andy Marsh

    well, all I can say is, if I had a milliion dollars…I’d consider myself rich, not upper middle class. If a mil is upper middle class then I must be a fucking dirt farmer or something. I haven’t even made a million in 46 years! and Michael Jordan is wealthy. Pick somebody else…I dunno…somebody that doesn’t have Michaels’ kind of endorsement deals. You gotta find someone like Dorsett…somebody that actually had millions but was to fucking stupid to invest any of it and ended up broke. Guys like Michael and Tiger have more money than they can spend.

  • Nancy

    So what’s YOUR stake in all this, Arch? You wealthy & feel you’re being slandered? Or are you also a trust fund baby?

  • gonzo marx

    for Andy…when i say “rich” i’m talking about folks with millions of dollars…wealthy are the folks who can’t spend it faster than they make it…

    MC Hammer was “rich”…so was Mike Tyson…look at them now

    but i digress…

    for Bing the bitter…let me give ya a clue here when ya call me a “socialist”

    i’ve been working and supporting myself since i ws 13…including time in the military, owning my own profitabl business for over 9 years, and now working for a multinational corporation in a highly technical field

    so much for “socialist”

    as for “dolt”…well..we can compare IQ scores at your leisure…but allow me to introduce a bit of our own history here

    you once asked what folks did to “support the troops” in Iraq…and even tho my positrion is well know to be in oposition to pre-emptive invasion, i gave you a long list of my own spending, and local as well as work related drives to get those folks what they needed, or what could help them make it through…from phone cards, to sanitary napkins to line their helmets to gold bond powder for terminal desert jock itch…

    when i asked you what you did you said “i vote…”

    so….again, i leave it up to the gentle readers who lives what they say, and who is the whining hypocrite?

    Excelsior!

  • Nancy

    I don’t mind people who earn it honestly. Note the words “EARN” and “HONESTLY”. Bill Gates earned his. More or less honestly. I don’t resent ol’ Bill, even if he is the richest man on the planet. I DO resent those whose money is gained thru conniving, cheating, stealing, lying, selling out their fellow citizens, etc. etc. Which judging by the information in Forbes over the years (not to mention the Wall Street Jnl, NY Times, & other radical left news sources) seems these days to encompass most CEOs of most large corporations. Not my doing, I just judge by what I read, and what I read (the indictments, that is) indicates they’re all corrupt as hell & all covering for each other as much as possible in an extremely interconnected plutocracy. You don’t like my opinion? Eat it.

  • gracefulboomer

    Dave, I have just spent the last two hours going over your first two posted references, even downloading and reading the full pdf. report and I can not find your statistical reference point-
    “The most recent era – the Bush era of recession and tax cuts – also shows slowing growth in disparity than the 80s and early 90s, with both rich and poor losing income. The bottom quintile is down 8.5% in the last 5 years, and the top quintile is down 3.3% in the last 5 years, again a relatively close ratio.”

    Since I have no strong set in stone viewpoint unlike the other spirited posters here, I am merely perplexed as I can not find large swaths of your posting.

    Also, you seem to imply that your statistical data from the House of Representatives-Dick Armey- ‘Mobility and Economic Opportunity’ tracks concurrently with your other posted sources. I am sure that this is an oversight on your part as the self published paper of Dick Armey is from 1992 and contains only one sourced back document which … was also published by Dick Armey. His study references sampling collected by the Treasury Dept from 1979-1988, with only a passing reference and only one graph of the three presented in his paper as you “quote” ‘ten year study’ period between 1979-1988. You are aware of course that Armey’s self published paper was based on limited sampling, and states that quite clearly?

    I do thank you for Today’s little chuckle from your link at danieldrezner.com.
    This little tidbit from the link is amusing.-
    ‘Income resentment is not a strong emotion in much of America….If you earn $125,000 a year and live in Manhattan, certainly, you are surrounded by things you cannot afford. You have to walk by those buildings on Central Park West with the 2,500-square-foot apartments that are empty three-quarters of the year because their evil owners are mostly living at their other houses in L.A.’

    ‘But if you are a middle-class person in most of America, you are not brought into incessant contact with things you can’t afford. There aren’t Lexus dealerships on every corner. There are no snooty restaurants with water sommeliers to help you sort though the bottled eau selections. You can afford most of the things at Wal-Mart or Kohl’s and the occasional meal at the Macaroni Grill. Moreover, it would be socially unacceptable for you to pull up to church in a Jaguar or to hire a caterer for your dinner party anyway. So you are not plagued by a nagging feeling of doing without.’

    Simply priceless!

  • http://midtopia.blogspot.com Sean Aqui

    Dave, I was going to dive in and start checking your data, but gracefulboomer saved me the trouble. I await your response to him.

    The other point I would make is that income disparity between quintiles is a problem even with upward mobility. If 20% of the population earns an ever shrinking percentage of the pie, then at any given time you have 20% of the population getting by with an ever-shrinking percentage of the pie. Make that percentage small enough, and they may not be patient enough to let upward mobility work its magic.

    You also don’t address the flip side to upward mobility — downward mobility. What percentage of the second quintile slip back into the bottom quintile?

    Also, how many move up to the third quintile? Median income in the U.S. is about $26,000, so even being in the second quintile isn’t living in the lap of luxury. I think you may miss some larger trends by focusing simply on the top and bottom quintiles. At the least you will exaggerate things, since the bottomdwellers have nowhere to go but up, and the rich have nowhere to go but down.

  • Howard

    All of you guys are too absorbed in reported studies and opinions of “experts,” many of whom have their own agendas. Just look at your own situation as compared to your parent’s lifestyle when they were at a similar point in their lives.

    I live in one of the smallest homes in Sun City, Texas, so most of my neighbors appear to have more wealth than I. My little home is so far superior to what my parents had, comparisons are difficult. Air conditioned just like most of the residents of the United States. In 1950 only the very wealthy lived in air conditioned homes.

    I have been retired for 15 years. My father didn’t live long enough to retire. Most of his generation made it into retirement for only a few years, and the living was tough. How long do you expect to live in retirement? 25 years? And what will be your lifestyle in retirement? Only the very wealthy thought of retirement a few generations ago.

    Even if you drive a Ford Focus, your automobile is vastly superior to a 1960 Cadillac in comfort, economy, and safety. My memory of the times is that Cadillacs were only for the wealthy.

    I did not eat in a restaurant until I left home and had my own job. Even then a meal away from home was a big deal, certainly less than once a week. Only the wealthy could eat in places we now consider ordinary.

    Comparing our current lifestyles with the not so long ago, we’re living like the wealthy used to live. The good news is that fantastic change is just the beginning of an unbelievable era. Watch the reports of increased productivity that come each month. We are the beneficiaries of that increase through lower prices for better products. Only government meddling through regulation or taxation can take it away from us.
    Enjoy!

    Howard

  • Baronius

    I haven’t researched Dave’s numbers, but I’ve seen similar ones from the 1980’s.

    I never understood why a CEO’s wages should matter to me. It affects the company’s profitability by a couple of million dollars. The warehouse space leasing policy affects profitability too. Other than that indirect effect of his salary, what do I care if he earns 400x what I earn? If he gets 500x next year, it doesn’t turn my Mercury into a used Subaru.

    Nancy is right about one thing: a CEO’s actions can destroy a company’s reputation. That’s why we should prosecute the heck out of them when they commit crimes, and we should fire them when they fail the company. We should also reward them when they serve the company well.

  • http://www.elitistpig.com Dave Nalle

    Dave, I have just spent the last two hours going over your first two posted references, even downloading and reading the full pdf. report and I can not find your statistical reference point-…I am merely perplexed as I can not find large swaths of your posting.

    I guess I should have included a page number. The table I’m referring to is on pages 48-49 of the report. I recommend downloading the PDF rather than viewing it in your browser as it’s in rather small type and you need to zoom in and rotate the page to read it properly. The numbers I am using are the median income figures for each quintile, which are better for estimates like this than the raw figure in the first set of rows.

    Also, you seem to imply that your statistical data from the House of Representatives-Dick Armey- ‘Mobility and Economic Opportunity’ tracks concurrently with your other posted sources. I am sure that this is an oversight on your part as the self published paper of Dick Armey is from 1992 and contains only one sourced back document which … was also published by Dick Armey.

    This is not strictly speaking Armey’s paper. It’s unfair to categorize it that way. This is a report from the Joint Committee on the Economy which he chaired, so it’s mostly the work of committee staff and bipartisan in nature.

    His study references sampling collected by the Treasury Dept from 1979-1988, with only a passing reference and only one graph of the three presented in his paper as you “quote” ‘ten year study’ period between 1979-1988. You are aware of course that Armey’s self published paper was based on limited sampling, and states that quite clearly?

    From what I’ve read elsewhere the results are typical for more recent periods, and I didn’t find any which were much more recent easily accessible so I chose that particular report because it had nice charts for easy reference. You can find the same sort of data which is much more recent at the Treasury Department,. In looking for more data in response to your question I found a great study by Laffer and Associates which breaks down income mobility in more detail and shows how many people from each group moved into each other specific group over 10 year periods and longer periods and includes somewhat more recent data. It’s really great stuff, because it shows things like the percentage of people from the lowest quintile who moved into each different quintile, not just out of that quintile. Check out table 15 for relatively recent data which isn’t quite as good as what was in the HR report, but still shows almost 50% upward mobility for the lowest quintile in a 10 year period. This is less upward mobility than in the other report, but the Laffer report also shows more downward mobility (about 50%) than in the other report. So that changes the figures in the article a bit, though the ratios remain similar.

    I’m going to amend the article to represent the changed figures, because using more current data is probably a good idea – although both the House report and the Laffer report fall within the period of the Shapiro study. But for now, if you go back and reread the paragraph on income mobility, replace 274% with 169% and replace 236% by 145% so the poor got richer by less. then replace 27% with 16% because the rich got richer by less too.

    Of course, none of this changes the basic point of the article, which is that when you factor in income mobility the idea of the rich drawing rapidly away from the poor in income growth is erroneous.

    I do thank you for Today’s little chuckle from your link at danieldrezner.com.

    I thought the anecdotal elements of that article were rather enjoyable but also informative.

    Dave

  • http://jpsgoddamnblog.blogspot.com JP

    Yes Dave, per your earlier point I am mainly concerned, as an investor, with CEOs paid well more than their worth. But if you figure the CEOs are getting 10 times the ratio of CEO-to-Average wage, wouldn’t it make sense that a similar (if less dramatic) increase in the ratio of CEO-pay-to-profit has also gone up? (especially for those companies losing money or making very little and still paying their CEOs ridiculously high salaries)

    I’m not convinced *all* corporations are evil, but I did find The Corporation enlightening. Corporate personhood does provide *somewhat* of a legal buffer zone, although as you can see Ken Lay etc. are still getting their comeuppance. It’s interesting to investigate how corporations use and abuse power to make an extra buck for the shareholder.

    And Baronius, I see that you’re not bothered by CEO pay except for how it affects the company. I hope the company sticks up for you as long as you stick up for it. Personally, my interest is people.

  • http://www.elitistpig.com Dave Nalle

    Nancy and Gonzo like to whine about trust fund babies but what they seem to ignore is that there are millions of American citizens with poor or middle class backgrounds that have through thier own hard work and know how bettered themselevs financially to the point that the would be considered wealthy.

    Just to back up Bing’s earlier statement quoted here, while going through the Laffer report which I referenced in the last comment I found that between 14.5% of those in the lowest two quintiles in 1974 had moved into the highest income group by 1991. What’s more, if you look at the bottom 4 groups, which constitute all of the poor and middle class, almost 50% had moved into the highest quintile in that same 27 year period. That’s serious upward mobility, folks.

    Dave

  • http://www.elitistpig.com Dave Nalle

    You also don’t address the flip side to upward mobility — downward mobility. What percentage of the second quintile slip back into the bottom quintile?

    Actually, Sean, I did address this. I adjusted the top income bracket to take downward mobility into account. Now that I have the Laffer data I can do this in a much more thorough way and answer some of the questions you raise.

    Downward mobility from the highest to lowest quintile in a 10 year period averages just over 1%. Downward mobility from the top quintile into any other lower quintile averages 17% in a 10 year period.

    Dave

  • http://www.elitistpig.com Dave Nalle

    Howard, regarding #33- we’re almost neighbors. But I mainly wanted to comment that I find your attitude refreshing. It’s nice to see someone who acknowledges that so much of the change we’ve gone through in the last few decades has been positive for everyone.

    Dave

  • Bennett

    “I’m going to amend the article to represent the changed figures, because using more current data is probably a good idea”

    When in doubt, baffle ‘em with bullshit. Or write an entire post based on it.

    Carry on.

  • http://www.elitistpig.com Dave Nalle

    Bennett, please point to the ‘bullshit’ in this article.

  • Baronius

    JP, I never thought of it as sticking up for the company, although that is something I believe every employee should do. I’m sticking up for the right of every man to bring home as much money as he can convince his employer he’s worth. Also, from a religious perspective, I worry about a society that spends so much time coveting its bosses’ goods.

  • http://jpsgoddamnblog.blogspot.com JP

    Baronius, from a religious perspective, I worry about a society that cares so little about each other.

  • gonzo marx

    “it is easier for a camel to pass through the eye of a needle….”

    but i digress

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    “…than for a poor man to get into a good country club.”

    Dave

  • gonzo marx

    and THAT shows the difference betwixt an average american and an elitist pig…

    nuff said?

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    Exactly. An elitist pig has a sense of humor.

    Dave

  • gonzo marx

    a “sense” i will agree with…but your humours are what remain in Question…

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    JP, I never thought of it as sticking up for the company, although that is something I believe every employee should do. I’m sticking up for the right of every man to bring home as much money as he can convince his employer he’s worth. Also, from a religious perspective, I worry about a society that spends so much time coveting its bosses’ goods.

    Good perspective. And perhaps let’s add the right of every American to have the freedom to work his way up the ladder of success without the government swatting him down through wealth redistribution programs.

    Dave

  • gonzo marx

    now who is living in fantasyland?

    it is more the corporate structure which holds folks back than it is the government

    nice straw man tho

    keep working at it, someday you may even convince yourself

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    So long as one is free to change jobs and move around the country the corporate structure cannot hold you back. You aren’t owned by your employer, and if you work hard and develop skills you can always change companies if your current employer isn’t advancing you fast enough.

    Gonzo, you’re not being held down by ‘the man’, you’re being held back by your own flawed world view.

    Dave

  • http://alienboysworld.blogspot.com Christopher Rose

    Employees should only stick up for a company to the extent that it is worth sticking up for, not simply because it employs you.

    Dave, go get a job working for somebody else for the next five years, then come back and tell employees what to do. You are the man, but not in a good way!

  • gonzo marx

    to comment #51….

    i was not speaking from my own experience, try not to assume so much

    again..i will stake my world view and it’s accuracy against that of a silver spoon fed, prep-school, gated compound living individual anytime…

    note..i am not making any kind of judgement value on your circumstance…nor denying that you may have honestly earned it, good for you….nor is your circumstance the type of thing i rail against

    think more the Enron, Adelphia, WorldCom kind of thing…

    if i was still single i woudl gladly bet my house that if we were both dropped in a strange city with the clothes on our backs and $100 in cash…no bank accounts, credit cards…nada..

    come back in a year and see who is doing better…

    ah….naught but a Dream however…

    Excelsior!

  • gracefulboomer

    Thanks Dave, for taking the time and making the effort to correct your earlier data point references.
    We will have to agree to disagree on Dick Armey’s published paper’s bi-partisanship. The year was 1992 and Armey served as the ranking Republican on a Joint Economic Committee in which the GOP was in the minority.
    Miracles have happened and it could be that Dick was thinking of something other than setting up a basis for resistance to the sweeping legislative changes proposed by the new administration of Clinton & Co, in particular a counterpoint to the increasingly vocal calls at that time for increasing the minimum wage.

    In a related topic to your posting the NYT has released the first figures available on the effects of the Bush Administration tax cuts on investment income.
    This data comes from the Internal Revenue Service and the figures speak for themselves.
    How these figures will affect the economy, impact growth, change tax revenues, and possibly change your quintile data in the future is interpretive but the figures are informative and will hopefully add to the postings here. New Data.

    Some little tidbits as food for thought.

    ‘Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.’
    ‘These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.’

    ‘Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.’

    ‘The savings from the investment tax cuts are expected to be larger in subsequent years because of gains in the stock market.’

    The full article with quotes from those both supporting and against the Bush tax reforms are at the bottom of the article here.

    ‘Big Gain For Rich Seen in Tax Cuts For Investments’

  • gonzo marx

    well done graceflbloomer

    /golfclap

    and plenty of factual data for chewing on

    of course, some may not enjoy the way this info trends…

    but objects in mirror are closer than they appear

    Excelsior!

  • http://theugliestamerican.blogspot.com Andy Marsh

    Rather than see the numbers of what they may have saved from the tax cuts, how about some numbers that show what they actually paid? My wife tells me how she saves when she goes shopping ’cause shit’s on sale. My question is always how much did she spend.

  • gracefulboomer

    Andy, nice parable which would apply if you added a scenario- Act Two- in which your wife would buy an item on sale, tell you she is saving you money, and then you sent the amount she saved to another person’s wife as a bill to paid in full with interest accruing from the time the item was originally put on the shelf for display. And some economic playwrights would push that timeline back even more to the date the item was manufactured. Just an interesting thought in comparables.

  • gonzo marx

    awww Andy, the numbers are out there…

    the top 10% own over 95% of the wealth, and pay just over 60% of the taxes

    that help?

    Excelsior!

  • http://theugliestamerican.blogspot.com Andy Marsh

    no

  • gonzo marx

    damn Andy…all ya can do is go monosyllabic on me?

    sorry if the Facts don’t fit the hype you get fed, but yer a big guy, and i know ya can take the Truth when yer hit with it

    Excelsior!

  • http://theugliestamerican.blogspot.com Andy Marsh

    depends on how hard you hit me gonzo!

  • http://absent-mind.blogspot.com/ Jet in Columbus

    To quote Hawkeye Pierce, “I always go for the popcorn when they get to the mushy part”

  • gonzo marx

    bah…ya read “the Hymn of the Pearl” on the gnostic site and Heinlein’s “the Moon is a Harsh Mistress” yet?

    slacker!

    Excelsior!

  • http://theugliestamerican.blogspot.com Andy Marsh

    there you go…trying to chase me away again with homework!

    No, I haven’t and I haven’t wrote my book report yet either…although, I really did enjoy “Stranger…” I wasn’t sure if you were estill talking to me after the one comment you made that I disappointed you…

  • gonzo marx

    oh Andy..i’ll always talk to the homeboy…

    my disappointment was merely that you missed an obvious Trick…

    not important really….but hence the “homework”

    the “Hymn of the Pearl” can take a lifetime of study…whereas “the Moon is a Harsh Mistress” is a great short read…and will teach you much about american politics as well as an awesome Story in and of itself

    Excelsior!

  • http://theugliestamerican.blogspot.com Andy Marsh

    when I make it back up to Maine, you and I will have to have a beer together gonzo.

  • http://absent-mind.blogspot.com/ Jet in Columbus

    I’ve said it once, and I’ll say it again!

    To quote Hawkeye Pierce, “I always go for the popcorn when they get to the mushy part”

  • http://theugliestamerican.blogspot.com Andy Marsh

    :P Is that the symbol for sticking your tongue out at someone? If it is…it’s for you Jet!

  • http://absent-mind.blogspot.com/ Jet in Columbus

    Close, but I always thought it was :6

    all in fun my friend, all in fun

  • http://theugliestamerican.blogspot.com Andy Marsh

    same here…same here. You sure about that? guess I’m gonna have to check my yahoo smileys on this one…

  • gonzo marx

    bah…my ASCII is greater than yours…

    {8^P~~~~~~~~~~~~

    bronx cheer

    Excelsior!

  • http://absent-mind.blogspot.com/ Jet in Columbus

    Great Gonzo! After I turned my head sideways, I nearly fell out of the chair laughing!

  • Nancy

    Gonzo has that effect on people.

  • http://www.elitistpig.com Dave Nalle

    if i was still single i woudl gladly bet my house that if we were both dropped in a strange city with the clothes on our backs and $100 in cash…no bank accounts, credit cards…nada..

    come back in a year and see who is doing better…

    Gonzo, I’ve done this a couple of times – or something very much like it, including living in England for a year with just a very limited amount of money I’d saved and no job or access to additional funds or the ability to even get a job, because you’re on a student visa. You try a year in a foreign country on less than $5000 and see how you do. I still have unpleasant memories of crackers and spam.

    You don’t quite get the fact that I’ve had a job since I was 14 and have lived independent from my parents financially since I was 18. In the scenario you describe it’s all about your skills. I’m qualified to teach multiple subjects in high school, can type 120wpm, can write html off the top of my head, have extensive database language and unix experience, can frame a house, build a PC from parts and lay cement. I’m pretty sure I’d be able to find some way to keep myself alive almost anywhere.

    You seem to operate from the erroneous assumption that I’m some sort of trust fund baby, but that’s not the way things work in my family. Whatever old money is left – and I don’t think there is very much – is tied up in trusts which aren’t distributed until the last member of a generation dies. So I’m not likely to see any inherited money until I’m in my 60s. Yes, I’ve had the advantage of education and opportunity, but I also had parents who grew up in the depression and didn’t think that anything should come easily or be wasted and valued self sufficiency.

    Dave

  • http://www.elitistpig.com Dave Nalle

    Thanks Dave, for taking the time and making the effort to correct your earlier data point references.
    We will have to agree to disagree on Dick Armey’s published paper’s bi-partisanship. The year was 1992 and Armey served as the ranking Republican on a Joint Economic Committee in which the GOP was in the minority.
    Miracles have happened and it could be that Dick was thinking of something other than setting up a basis for resistance to the sweeping legislative changes proposed by the new administration of Clinton & Co, in particular a counterpoint to the increasingly vocal calls at that time for increasing the minimum wage.

    There’s nothing about the report which suggests it isn’t bipartisan, and it indicates that it was issued by the committee. As you point out – and I didn’t realize earlier – Armey wasn’t even chairman of the committee yet, so that makes it even more bipartisan. But regardless, the data is accurate. It matches the figures from the Laffer report for the same period and it’s consistent with the general trends of mobility throughout the last three decades.

    In a related topic to your posting the NYT has released the first figures available on the effects of the Bush Administration tax cuts on investment income.

    Thanks for making me aware of this. It will be interesting to see how thye slant it. Everything I’ve seen shows that their previous claims of ‘tax cuts for the rich’ have been 180 degrees wrong, but in the case of things like the estate tax they may be on firmer ground.

    As I’ve stated before, I think that regardless of whether they make some rich folks richer, putting more money into the pool of capital and investment can only help the national economy.

    ‘Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.’

    It’s nice to see them acknowledging in a backhanded kind of way that the income tax cuts they previously claimed went mostly to the rich, were in fact NOT directed primarily at the rich. As for these investment tax cuts going mostly to the more wealthy, that’s not surprising since they have more investments. Of course we’re also living in an era of the highest individual investment in stocks of any time in history, with more people of modest income owning stock than ever before, so while these cuts may still go 43% to millionaires, that’s less than would have been the case a few years ago.

    But I will be checking out the whole article. On the whole it sounds like good news.

    Dave

  • gonzo marx

    to comment #74

    you are a bit mistaken, as i stated previously…i have no doubt of your ability, nor skills…nor the fact that you have honestly earned what you have acquired

    my “experiment” was just that…a desire to compare what two intelligent individuals with various skillsets and quite divers backgrounds woudl achieve under the set environmental circumstances

    note the difference….i know you have worked sine you were 14…whereas i helped my single mother(waitress) support a house(mortgage) and 4 sisters since i was 13…while going to public highschool…difference between choosing to make some cash…and literally keeping a roof over one’s head

    i meant no denigration towards you personally…merely pointing out that the self professed advantages you acknowledge color your perspective at least as much as mine do

    human nature and all

    which goes a long way to explaining why i am a gonzo, and you are an elitist pig…

    heh

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    the top 10% own over 95% of the wealth, and pay just over 60% of the taxes

    I think you got your numbers just a little off there, The top 10% earn 43% of the income and pay 66% of the taxes. This according to data from the IRS.

    You may be thinking of the top 50% who earn 86% of the money and pay 96% of the taxes.

    Dave

  • http://www.elitistpig.com Dave Nalle

    you are a bit mistaken, as i stated previously…i have no doubt of your ability, nor skills…nor the fact that you have honestly earned what you have acquired

    my “experiment” was just that…a desire to compare what two intelligent individuals with various skillsets and quite divers backgrounds woudl achieve under the set environmental circumstances

    All too hypothetical for me. But you might be able to market it as a reality show. At the end of a year you’d be managing a Radio Shack and I’d be managing a FedEx/Kinkos and the ratings would be in the toilet.

    note the difference….i know you have worked sine you were 14…whereas i helped my single mother(waitress) support a house(mortgage) and 4 sisters since i was 13…while going to public highschool…difference between choosing to make some cash…and literally keeping a roof over one’s head

    Very admiriable. Like something out of Horatio Alger and all.

    i meant no denigration towards you personally…merely pointing out that the self professed advantages you acknowledge color your perspective at least as much as mine do

    In some ways necessity IS an advantage, especially when it comes to developing a work ethic.

    which goes a long way to explaining why i am a gonzo, and you are an elitist pig…

    But at least I only want to wallow in filth rather than have sex with chickens.

    Dave

  • gonzo marx

    part of the problem is that you may perceive that i think of folks such as yourself as the Problem in my little rants…

    not so

    as i stated elsewhere…think Enron, WorldCom, Adelphia…

    or Scooter Libby, Robert Novak, Abramhoff…

    those are the “windmills” i tilt at…

    nuff said?

    Excelsior!

  • http://www.elitistpig.com Dave Nalle

    Yes, I understand that you think you’re talking about Ken Lay and his ilk, but the fact is that when you use them as your standard for setting the rules, you harm every honest businessman who has not committed the outrages they have. Government policy is a cannon loaded with grapeshot and when you use it to smash a gnat you harm everyone around the gnat as well.

    Dave

  • gonzo marx

    your analogy is flawed

    the Laws are fairly clear, i just want them enforced as vigorously for these white collar types that steal billions as they are for the street person with a $20 rock of crack getting a 10 year mandatory

    but i guess that’s the problem with this mode of communication, what is intended is not always what is perceived…

    i will strive even harder to be more clear when i elucidate my Thoughts

    fair enough?

    Excelsior!

  • troll

    *You may be thinking of the top 50% who earn 86% of the money and pay 96% of the taxes.*

    which means that half the population has to make do with 14% of the doe re me…mobility or no – that’s fucked up

    what a great economy

    troll

  • Bliffle

    “As I’ve stated before, I think that regardless of whether they make some rich folks richer, putting more money into the pool of capital and investment can only help the national economy.”

    Except, perforce, when it is thereby taken away from some other Worthy Endeavor. Such is the failure of naive economic thinking. One might well argue that we should surrender all our wealth to whatever brigands demand it, reasoning that thereby they would spend it (though perhaps in charnel houses) and in the course of events it would filter down to us in turn and enrich our lives. But, somehow, I think the syllogism is flawed. Don’t you?

    In Gigondas veritas.

  • Dave Nalle

    which means that half the population has to make do with 14% of the doe re me…mobility or no – that’s fucked up

    what a great economy

    Troll, i believe you’ll find that this is LESS income disparity than most countries in the world and most past eras in history.

    The question isn’t really what percentage of the total money pool goes to the bottom half, but whether they have enough to live on and live decently. And given the wealth of our nation, even 14% divided among half the population provides the people in the bottom half a median income of around $25,000 per person per year. It’s not a hell of a lot, but it’s certainly enough to live decently on or to raise a family if you combine two incomes.

    Dave

  • Dave Nalle

    Bliffle. Brigands don’t spend the money they steal. They horde it or bury it somewhere.

    Dave

  • gonzo marx

    bah…the Brigands in DC spend money they don’t even have

    another bad analogy

    Excelsior!

  • gracefulboomer

    Dave, your reference that since more people than ever are in invested in the stock market so .. more people will reap the benefits of the investment tax cuts is simply erroneous. Seriously, nothing personal but that is just not true.
    Employee 401and 457K’s matched and sole provider plans are treated as deferred wage income.
    Not investment income.
    Quarterly returns on the myriad of plans do not get reported to the IRS.
    Quarterly losses on the myriad of plans do not get reported to the IRS, either.
    You have mixed apples and oranges, unfortunately.
    That is why among many reasons there is such a hefty fine for withdrawing funds from those plans before the minimum age of 571/2 years old, because in essence the employee is allowed to take off the top of his gross wages whatever he contributes to his plan.
    In turn he will be taxed when he starts withdrawing his funds near retirment… at the prevailing taxable rate on earned income, not investment income.
    The theory being that the funds will start to be withdrawn at a time when earned income will decrease (wages)
    Dave, please think, there are millions of American workers who can not avail themselves of the Bush investment tax cuts because of funding rules in the 401 and 457K plans.
    I am sure that this was just a temporary oversight on your part. But it is the essential flaw to your post.
    This is fact, so again I just can not find a source which matches your figures because of the above.
    “Of course we’re also living in an era of the highest individual investment in stocks of any time in history, with more people of modest income owning stock than ever before, so while these cuts may still go 43% to millionaires, that’s less than would have been the case a few years ago.”-Dave
    Dave, you can not get around the simple stated fact that even with more people owning stock – it is not- as you stated treated as investment income. So, where is the change coming from.. ?
    Honestly, I think it is illogical when you ‘breeze over’ this central and essential point.

  • gonzo marx

    gracefulboomer sez…
    *I think it is illogical when you ‘breeze over’ this central and essential point.*

    Quoted for Truth

    nuff said?

    Excelsior!

  • troll

    Dave says – *this is LESS income disparity than most countries in the world and most past eras in history.*

    true – historically most economies have supported a ‘master quintile/slave quintile’ distribution of wealth not wholly unlike ours today…but so what – ?

    *The question isn’t really what percentage of the total money pool goes to the bottom half, but whether they have enough to live on and live decently.*

    actually IMO the question really is what percentage of the total money pool goes to the bottom half –

    *And given the wealth of our nation, even 14% divided among half the population provides the people in the bottom half a median income of around $25,000 per person per year.*

    (is this correct – ? isn’t 25Gs the median of the total – ?)

    in any case – I wonder what percentage of the *wealth of our nation* is based on the labor of this half of the population

    ho hum…

    troll

  • http://www.elitistpig.com Dave Nalle

    Boomer, you may be the one doing the breezing over here. The truth is that in addition to the retirement accounts you mention, more Americans than ever before are maintaining individual stock portfolios. A side effect of encouraging retirement investment is increasing awareness of the opportunities in the stock market. In addition, the growth of discount brokers has stimulated personal investment.

    But putting all that aside, the more there is invested, the more benefit to the economy as a whole from a cut in taxes on investment income and profits, and that increase in effective profits means more money reinvested and spent, and that means more jobs and more capital for companies to expand.

    Dave

  • http://www.elitistpig.com Dave Nalle

    *And given the wealth of our nation, even 14% divided among half the population provides the people in the bottom half a median income of around $25,000 per person per year.*

    (is this correct – ? isn’t 25Gs the median of the total – ?)

    No, the median of the total is around 45G. I found my 25G by averaging the medians for the bottom two quintiles and half the median for the middle quintile.

    in any case – I wonder what percentage of the *wealth of our nation* is based on the labor of this half of the population

    Less and less all the time, as the nation evolves increasingly towards a higher-earnings, more entrepreneurial model.

    Dave

  • http://alienboysworld.blogspot.com Christopher Rose

    Dave, in this story reported by the vile communists of the BBC on the Israeli economy, they make this remark without going into more detail:

    “Israel now ranks second after the United States in the table of inequality in developed countries”

    If true, it kind of conflicts with your assertion in #84 but the BBC aren’t to be believed of course.

  • troll

    (Dave – median income of households = $44,386(link…we seem to have a conflict of data here)

    *in any case – I wonder what percentage of the *wealth of our nation* is based on the labor of this half of the population

    Less and less all the time, as the nation evolves increasingly towards a higher-earnings, more entrepreneurial model.*

    that is – as the actual activity of production is moved out of the country and into the global economy where the median income is…

    long live the lumpen proletariat

    troll

  • troll

    here’s an interesting comparison…get a load of the US (small print below the charts)

    troll

  • gonzo marx

    i luv troll…

    Excelsior!

  • Dave Nalle

    Dave – median income of households = $44,386(link…we seem to have a conflict of data here)

    I said that the median income was about 45K. The figure I gave of 25K was the median income for the bottom 50% of wage earners, not for all wage earners. No conflict at all.

    that is – as the actual activity of production is moved out of the country and into the global economy where the median income is…

    That would be exactly not what I’m saying.

    here’s an interesting comparison…get a load of the US (small print below the charts)

    The GNI figure is grossly misrepresentative, because it merely measures relative levels of income between top and bottom without considering the range inbetween or upward mobility. To do well on that chart your best bet is to make sure your country is totally impoverished and all the wealthy people have been driven out.

    The thing about the US is that our rich are richer than the rich of most nations and our poor are richer than the poor of most nations and we also have more people spread through the upper half of our income range than other nations.

    And yet again I have to stress that you don’t help the poor by punishing the rich unless your goal is to equalize people by making everyone poor.

    Dave

  • troll

    households Dave – generally that’s more than one individual

    troll

  • Dave Nalle

    Actually, Troll a household can be any number of people from 1 to infinity if they live in the same house. And the figures I’m referencing are indeed for households, not for individuals only. I believe we’re talking about the same figures here.

    Dave

  • MCH

    What about those who live in compounds?

  • Baronius

    Baronius, from a religious perspective, I worry about a society that cares so little about each other.

    JP, a person’s willingness to take something from you is hardly a measure of his virtue, even if he gives it to someone else. There’s nothing inherently moral about capping a CEO’s salary. There is a whole commandment against coveting a CEO’s salary. There are even two deadly sins, envy and greed, that feed on our national obsession with the other guy’s paycheck.

    This article’s statistical argument about the unimportance of income inequality is solid. A moral argument on the subject is, if anything, stronger.

  • Dave Nalle

    What about those who live in compounds?

    I guess that would depend on how we file our taxes. But right now only one family is living inside the fence, so we’re a household.

    We do try to earn compound interest whenever possible.

    Dave

  • troll

    so – in your opinion median household income = median individual income

    in my opinion we have now entered la-la land

    in my opinion your numbers grossly underestimate the relative poverty experienced by the ‘lower half’ in our country

    if you’re going to be an international cutthroat pirate best to share the booty pretty equitably with your crew lest you end up with your own throat slit

    troll

  • Dave Nalle

    So – in your opinion median household income = median individual income

    No. All along I’ve been talking about household income. I don’t think I intentionally ever referred to individual income. All the figures in the original article are based on households, that’s for sure.

    Dave

  • Dave Nalle

    I did say person in #84 instead of household. Slip of the finger. Should have been household.

    Dave

  • troll

    so – anyone know the median individual income in the US – ?

    troll

  • troll

    how about the actual median indivdual income of the ‘lower half’ – ?

    troll

  • troll

    * And given the wealth of our nation, even 14% divided among half the population provides the people in the bottom half a median income of around $25,000 per person per year. It’s not a hell of a lot, but it’s certainly enough to live decently on or to raise a family if you combine two incomes.*

    Dave – this argument goes beyond slippery fingers

    troll

  • Alec

    You are right that the current fetish that some liberals have about “income inequality” sometimes paints and misleading picture of the economy, and right again to note that many analyses about the economy under-estimates the effect of income mobility in painting a static picture of “the rich” and “the poor,” but you are incorrect on the fundamentals. It is not true that “income is normally broken down into quintiles” – this is just one way of measuring incomes, and is not necessarily the best or the most accurate measure. You are dead wrong to say that the bottom quintile is made up of the elderly and others. Thanks to a strong lobby, Social Security, and a tax system which gives numerous breaks to seniors, a sizeable number of the elderly are actually better off than others, especially those who have sheltered or deferred much of their retirement income. And of course, since a considerable number of immigrants are paid under the table or otherwise derive income from “black market” or “grey market” activities, assigning them to one quintile or another is a matter of guesswork, not hard analysis. The point here is that there is not much point in making oracular pronouncements about who is benefiting the most from the present economy based on any single measurement, and certainly not from any data based on averages.

  • Dave Nalle

    so – anyone know the median individual income in the US – ?

    Yes, for individuals the IRS puts it at around $35K.

    how about the actual median indivdual income of the ‘lower half’ – ?

    That would be the $25K per household I calculated earlier.

    Dave – this argument goes beyond slippery fingers

    Let’s call it mental slippage then. I had been working with household figures all along, and then slipped mentally and began thinking in terms of individuals. My bad.

    I’ll see if I can dig up more detailed information on individuals, but they may not be as well documented.

    Dave

  • Dave Nalle

    In looking for answers to the last question I think I hit the motherload over at the census bureau. It’s an obscure directory page which focuses on income inequity. The page is here.

    One of the tables shows a very clear trend of individual wealth in the higher quintiles increasing while the lower quintiles decrease in wealth – very slowly in both cases. The data is only through 2001, though.

    This doesn’t invalidate my thesis that upward and downward mobility make the wealth changes of the quintiles somewhat irrelevant, but there’s lots of good data to draw all sorts of conclusions from.

    It also breaks the figures down by race, and I discovered that while the white poor are getting poorer, the black and hispanic poor are getting wealthier – i bet that’s also represented in them rising faster into other quintiles too.

    Dave

  • http://www.elitistpig.com Dave Nalle

    This page is also worth checking out. It shows median incomes by state broken down by number of household members, and the numbers are much higher than I’ve seen in other figures. Two earner families in the high 60Ks, single earner families around 40K.

    Dave

  • Alec

    Dave – The census sources you cite are indeed very useful references. But a few cautions: You do realize that when you talk about median individual incomes and household incomes that you are comparing apples and oranges? But also let me give you an example of how rises in income can mask larger problems. In California, we are beginning to see the decline of the middle class as the industries that previously fed the economy decline or wither away (aerospace, manufacturing, banking and big retail). So take a family where both the husband and wife have been downsized or laid off from successive jobs, receiving a lump sum buyout at one point, severance at another. They later sell their house, which had appreciated in value, and cash in their IRAs. The temporary bulge in their income move them up in the wealth quintiles, but in reality, they are falling further behind. In addition, since they are older workers, their ability to make up for their loss in earnings – and earning power — over time has declined sharply, and they must compete with immigrants and younger workers in a tight labor market.

  • Howard

    Hang in there, Dave. Your post makes the very interesting point that the poor of yesterday may not be the poor of today. I learned, probably before you were born, I could never win an argument with those who believe in a redistribution of wealth. While I had none as a youngster, I could see an opportunity to acquire a little wealth for myself.

    The economic system established in the United States is unique. That makes it relatively new and the subject of necessary “tweaking.” Excesses in business operations do occur and our government (read that the voting citizens) was established to protect society from, among other things, those excesses. So we, hopefully, talk about tweaking a marvelous system, not destroying it. Your post addresses the perceived problem of disparity in levels of income of individuals or households.

    In the redistribution of wealth arguments, just how much redistribution would satisfy the opposition? The truth is always, “all of it.” When one feels he is “entitled” to a part of the earnings of another man, he has adopted the tenants of a thief. A mugger doesn’t take just 15% or 40%. He has admitted to himself and the world he is a thief so he takes 100%. “Tax cuts” are the reduction of taxes paid out of a man’s earnings. In my 77 years of life, the chorus of “increase the tax” has been constant. They will never cease until the tax is 100% and to every man is distributed enough to provide for his needs. That economic system has been tried and found wanting. Please leave this one alone.

    Howard

  • troll

    the issue has little to do with the redistribution of wealth through the tax system…the issue is how labor is valued and compensated from out front

    the invisible hand of what the market will bear does not lead to a just system of distribution…and without justice there will be no peace

    troll

  • http://www.elitistpig.com Dave Nalle

    Dave – The census sources you cite are indeed very useful references. But a few cautions: You do realize that when you talk about median individual incomes and household incomes that you are comparing apples and oranges?

    Yes, Alec. We discussed this for a series of about a dozen posts right before you pointed it out.

    But also let me give you an example of how rises in income can mask larger problems. In California, we are beginning to see the decline of the middle class as the industries that previously fed the economy decline or wither away (aerospace, manufacturing, banking and big retail). So take a family where both the husband and wife have been downsized or laid off from successive jobs, receiving a lump sum buyout at one point, severance at another. They later sell their house, which had appreciated in value, and cash in their IRAs. The temporary bulge in their income move them up in the wealth quintiles, but in reality, they are falling further behind. In addition, since they are older workers, their ability to make up for their loss in earnings – and earning power — over time has declined sharply, and they must compete with immigrants and younger workers in a tight labor market.

    This is the point at which they need to move to Arizona or North Carolina or Texas or somewhere that has much lower cost of living and virtually no unemployment, where they are virtually begging for experienced managers and people with skills.

    Back in the 1950s and 1960s the average American moved once every 3 years in pursuit of better job opportunities. That has now slid to once every 7 years because people have become complacent and are willing to sacrifice quality of life and income for convenience. Their drive and ambition is lower than it was 40 years ago.

    As for California, it’s probably the single worst place in the nation to live if you’re in the middle class. Others here on BC have commented on this in other threads – ask Steve S. about it. Because of the insanely high housing prices and long commutes your options there are very limited unless you are poor and willing to live a very reduced lifestyle or super rich.

    Dave

  • http://www.elitistpig.com Dave Nalle

    Wow, troll. Nice socialist cliche there. Here’s a clue. Justice is not forced or imposed equality. From each according to his ability, to each according to his needs is a formula for oppression, not justice.

    Justice means everyone being given an opportunity to work hard and do well for their efforts without unfair persecution or impediments to success. However, if someone is not terribly bright or ambitious or makes bad decisions, it is not justice to hold down those who work harder and make better decisions so that the failure-prone individual can move forward.

    The great thing about a relatively open labor economy is that everyone eventually finds the niche that fits their abilities, their drive and their willingness to accomodate themselves to deprivation.

    Dave

  • troll

    communist cliche Dave – you know…’the withering away of the state’ and all

    not looking for a fascist/totalitarian socialist state here to institutionalize injustice – that’s what we’ve got already under the silk glove

    as for the rest of your comment – nice sentiment

    troll

  • http://jpsgoddamnblog.blogspot.com JP

    Baronius, you and I see this differently – you refer to “taking” in horror that the government collects taxes. Taxes are part of the social contract, in exchange for services etc. The commandment you refer to about coveting, and moral arguments against greed, apply just as well if not more to CEOs who collect far more than their fair share compared to the people they employ.

  • Nancy

    And is it justice, Dave, when greedy CEOs & executives can shaft thousands of employees who have worked hard for the company all their lives, by getting the courts to simply ‘cancel’ their retirement contracts, a la the airlines – and then award themselves big bonuses & retirement benefits? Is it justice when CEOs & executives can lie to employees that everything’s hunky-dory with their ENFORCED company investments, while they themselves are bailing out on the sly in order to save their own millions? Is it justice to send the jobs of millions overseas to save operating money – and having displaced all these lives, to then award yourself big, fat bonuses with obscenely humongous golden parachutes, because you CAN, and because corporate law is so written at this juncture that none but the biggest, most major stockholders (all of whom are fellow corporate hogs) can object to all this self-aggrandizement at investors’ expense? Is it justice when the very persons who are most able & supposed to defend ordinary working citizens from this kind of gross abuse, the congress & administration, are in fact the ones most closely bedded with these abusers & miscreants, and the ones who most brazenly aid & abet the abuse by looking the other way, or even defending it?
    It’s not, and you know it’s not, and it never will be.

  • Dave Nalle

    And is it justice, Dave, when greedy CEOs & executives can shaft thousands of employees who have worked hard for the company all their lives, by getting the courts to simply ‘cancel’ their retirement contracts

    That’s certainly not justice. But when things like this and the Enron debacle happen, the people involved should be punished. It’s not fair to punish everyone who is successful just because they fall in the same income bracket with the criminals. That kind of practice in warfare is prohibited under the geneva convention. Imagine if we started locking up all african americans because a disproportionate number of black teens commit crimes. That’s exactly the same type of excessive and unfair reaction. It’s like the Nazis killing 1 in 10 french villagers at random whenever a partisan killed a nazi soldier. The innocent should not have to pay for the sins of the guilty just because they fall into the same class of people.

    Dave

  • troll

    this chart shows the concentration of wealth in the hands of the ultra rich over time clearly

    and see here (pdf) pg 7 where it is estimated that median income of all one person households in 2003 was about 22Gs (including money and alternative income) well below Dave’s 35Gs

    troll

  • troll

    here’s another pdf of interest…measures are presented to address the question ‘are the rich getting richer’ (1947 – 1998 data)

    troll

    ps in order to avoid a pointless argument – the 22G figure that I pointed out in #121 undoubtedly underestimates individual median income overall

  • Alec

    Dave – Re: the idea that some Californians just need to pick up and move to Arizona or North Carolina. Your citation of “the average American” moving once every three years in the 1950s and 1960s is an overstatement, but also fails to take into account the age of the people moving. Younger people without deep roots or responsibilities have an easier time of moving than do older people. And the great postwar migration of people into California was again of younger people, veterans and others, who largely stayed put (or limited later moves to the Western states).

    Also, the problems that California is experiencing may soon envelope other states. There are systemic problems here, not just issues of people not taking advantage of opportunities.

    Troll – The table you link to absolutely DOES NOT “show the concentration of wealth in the hands of the ultra rich over time clearly,” but only shows how useless some tabular data is without context. First of all, as Dave and I have variously suggested, you cannot assume that the richest families in 1947 are the same richest families of 2001 (or even of 1948 for that matter). Without taking income mobility into account, it is pointless to keep harping about some monolithic group known as “the rich.”

    Also looking at this table alone you cannot see the unprecedented post WW II economic boom in America or the influence of unions which saw large and steady increase in the earnings of American workers and the development of a prosperous middle class.

    One thing that is interesting, and unexplained, is the jump in the top quintile’s share of income beginning in the early 1990s or the decline in incomes of the second fifth over the same period.

    Lastly, redistributing wealth does not redistribute productivity, jobs or earning ability. It is little more than a futile “feel good” gesture that will create far more harm than good.

  • troll

    correction – try this link for the pdf of interest

  • Baronius

    Dave, what if Nancy is right?

    All my life I’ve been a fan of capitalism because I believe it’s the best system for generating wealth. It provides goods and services, employment and investment, wages and dividends for billions of people.

    But if Nancy is right, and the whole thing is just a front for the rich to exploit the poor, then count me in. Because that would be cool too. I mean, if money is made off the backs of the poor, why didn’t anyone tell me? OK, Bill Moyers said so a bunch of times, but I just couldn’t stay awake. So I figure that I’ve put in my time (I helped cover up the Fla election) so I’ve earned it. Please put in a call and get me a factory in Michigan and an account in the Caymans. I’ll do my part to aid multinational corruption.

    Thanks.

  • troll

    Alec – quite true that statistics abstract from the ‘real’…and true again the composition of {the rich} changes over time as does the composition of {the poor}…and true again the process of wealth/capital concentration is cyclical

    but this: *Without taking income mobility into account, it is pointless to keep harping about some monolithic group known as “the rich.”* – doesn’t follow

    *One thing that is interesting, and unexplained, is the jump in the top quintile’s share of income beginning in the early 1990s or the decline in incomes of the second fifth over the same period.*

    the change in the data collection techniques in ’93 pointed out in the pdfs above might explain this

    *Lastly, redistributing wealth does not redistribute productivity, jobs or earning ability.*

    sure it does as ‘outsourcing’ shows in graphic fashion

    troll

  • http://www.elitistpig.com Dave Nalle

    this chart shows the concentration of wealth in the hands of the ultra rich over time clearly

    Yes, I linked to that chart earlier. It does seem clear that the top two income groups are advancing and the bottom three are declining – by very small amounts. But it’s not an accelerating pattern and it hasn’t been caused by any recent tax cuts. It’s a trend that goes back 30 years or more and it’s very gradual.

    And the point remains that upward mobility exceeds downward mobility and that more than counterracts the trend you point out. In addition, the GINI is a relative figure, so while relative wealth may go down, absolute wealth for everyone is going up, which means that the poor are more likely stable in wealth rather than declining.

    and see here (pdf) pg 7 where it is estimated that median income of all one person households in 2003 was about 22Gs (including money and alternative income) well below Dave’s 35Gs

    You do understand that this report you link to uses alternative methods of figuring income? I can go to that report and find even higher figures than those I quoted earlier, as well as lower ones, depending on which of the various methods of classifying people and defining income they’re using.

    here’s another pdf of interest…measures are presented to address the question ‘are the rich getting richer’ (1947 – 1998 data)

    This confirms what I said all along, that everyone is gaining wealth, the rich are just gaining it faster and more, which is why it’s good that the poor are moving up into higher income brackets on a regular basis.

    Dave

  • http://www.elitistpig.com Dave Nalle

    One thing that is interesting, and unexplained, is the jump in the top quintile’s share of income beginning in the early 1990s or the decline in incomes of the second fifth over the same period.

    My assumption has been that this was the result of the tech boom. In any economy where there is rapid growth people benefit from that growth proportional to the level of wealth they already have. Those who have money make money fast in a good economy. Those who don’t have money just stay stable or benefit very moderately through trickle-down and wage inflation. Thus the gap between rich and poor grows. Not at the expense of the poor, but because the rich can benefit more from a strong economy.

    Dave

  • http://www.elitistpig.com Dave Nalle

    But if Nancy is right, and the whole thing is just a front for the rich to exploit the poor, then count me in.

    As far as that goes, Nancy may be right to a certain extent. The poor exist to be exploited by everyone else. But so long as the system allows the poor to advance out of poverty through hard work and enterprise, then the exploitation is relatively innocuous. When it comes down to it, in a capitalis system everyone exploits everyone else all the time or is trying to.

    Dave