It is amazing to me what passes for “economic analysis” on the left. Take the recent column by Moises Venegas. Among other claims he makes in his piece is that “for the past 40 years, wages for the working population have been stagnant.” According to Merriam-Webster, “stagnant” simply means not advancing.
Well, even according to the liberal Center for Budget and Policy Priorities, this is not true. Median incomes have increased since the 1970s as seen in the chart below:
Of course, this is only one aspect of the wrongness of his entire argument.
For starters, just because someone was poor back in the 1970s doesn’t mean they are still poor today. Since 1970, hundreds of thousands of people have immigrated to the US in search of a better life. While some immigrants have done very well for themselves, is it unreasonable to expect that they bring the median income number down somewhat?
Also, of course, there are the things that can be purchased with that money. As the Heritage Foundation points out, the number of Americans with air conditioning have increased from 36% to 83.9%, the percentage of households owning a computer is now 68%. Our society didn’t collapse when no one had a computer or air conditioning. Is Venegas saying that jealousy over inequality in distribution of these and other consumer items will?
Lastly, aside from the old saw “tax the rich,” Venegas makes no mention of how we can reduce inequality. Personally, I think that in a globalized world, there will be both more wealth and higher living standards for all, and greater inequality among Americans. There is not much that can be done (nor should there be) except to reform our education system so that more Americans can compete in the global, information economy.
The chart depicts steady growth in income until about 1970 then very slow overall growth after that. Basically we are talking a gain of about $12K over a 40 year period. How does that compare to the rate of GDP (per capita)? GDP growth per capita has rocketed upward. (http://www.stateoftheusa.org/content/measuring-economic-well-being.php) GDP per capita and median family income used to be in lock sink with each other but that changed around 1975. How about purchasing power. Although the chart depicts “real” median family income its well known prices in many areas have outpaced the CPI thus purchasing power has eroded. According to the CPI inflation over the past several years has been negligible yet commodity prices, medical, college expenses and others have continued their upward price trend. The CPI has often been criticized for failing to fully capture inflation accurately.
As to your point about the number of air conditioners and computers – the availability of easy credit works wonders. Just like our country, Americans have a spending problem and it translates to increased indebtedness.
The chart also shows who has gained greatly – the top 1%. Its often pointed out that they pay the bulk of the current tax bill. Sure, given their income share has more than doubled since the early 1980s it only makes sense they would.
The chart actually depicts a trend of steady growth in income right UP to the collapse of the dot.com bubble. The only thing showing serious volatility, in the chart, is the percentage of income share of the top 1%.
When anyone, left, right or center, attempts to suggest to you that U.S. credit expansion was the result air conditioner unit, computer, or flat screen TV purchases, just enjoy the healthful benefits of laughter and remind them of the record number of subprime mortgages, which were subsidized, insured and incentivized by Fannie and Freddie, just before these two hybrid government agency lenders went bankrupt and sank the entire U.S. economy, and the better part of the globe, into a severe crisis of frozen cash flows. Similarly, and for anyone to suggest that 1970 was analogous to the panicle of economic parity and equality, either nationally or globally, is simply ridiculous by any reasonable measure of the two terms.
What would make GDP growth per capital uncouple itself median family or household incomes showing growth through the year 2000? What is the U.S. debt per capita? Does governmental spending and resulting taxation, in all of its forms, have any effect on family and household incomes? Does it impact the top one percent’s family or household incomes? Answer: it does if the top 1% is footing 95% of the total tax burden: http://www.atr.org/top-percent-pays-more-taxes-bottom-a3619
What about purchasing power…what do we know about the purchasing power parity of the U.S. dollar relative to the Chinese renminbi? Why are jobs going to China? Relative to wage parity, who are America’s laborer’s competing against when it comes to the cost of global labor? Or, and according to current President’s current appointee to the Federal Reserve Bank Chairman position, Ben Bernanke, while analyzing the great depression; “why did the Depression last so long? In particular, why didn’t the “normal” stabilizing mechanisms of the economy, such as the adjustment of wages and prices to changes in demand, limit the real economic impact of the fall in aggregate demand (the ‘aggregate supply puzzle’)?…A central theme here is that the adjustment of nominal wages in response to declines in aggregate demand during the 1930s was surprisingly slow and incomplete. Instead of cutting wages, employers adjusted on other margins, including the length of the workweek and the intensity of labor utilization. Legislatures also resisted wage (and price) cuts, for example, by measures designed to limit competition.”
Does of any of this sound familiar? Can you say furlough days, statutory minimum wage rates, a “living wage”? Just consider the paradox of these actions and reactions when pressing for more and more government intervention and appropriation of private incomes…it’s double whammy, not only is are we throwing more and more money down a hole, but at the very same time, we are all but ensuring the inability of future generations to compete on a global basis. The world is flat!
Difficult to read your post – a lot of rambling.
You say the top 1% is footing 95% of the total tax burden yet your reference says they are footing 40.4%. (“An analysis of IRS data by the Tax Foundation shows that the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government, the highest percentage in modern history. While the bottom 95 percent paid 39.4 percent of the income tax burden.”)
The housing meltdown has multiple causes and simply blaming the GSEs (Fannie and Freddie) and the CRA is based on ignorance. Might want to read a book or two on the subject and turn off Rush.
Did I ever say we needed more govt intervention? NO.
Difficult to read your posts…lots of BS.
Did Fannie and Freddie buy and insure the purchase of record levels of this toxic garbage or not? Who were they funded buy, and bailed-out by, and controlled by?…was it Rush?
No, it was clown named Barney and theif named Dodd who helped align the incentives for moral hazzard in the mtg. lending game of musical chairs, and I would recommend that you try reading a book, and turning off Rush…if he’s bothering you that much, try some Rachel Maddow.
If americans have a spending problem, then its with their government’s spending habits, not that of their top 1% of taxpayers.
You’re kind of defensive. Why? This is a discussion about a chart. You don’t agree with my observations which is fine. I think the only thing we agree on is the government has a spending problem.
Housing issue is off-topic and has nothing to do with this discussion. Plus its not worth the effort anyway given the tone of your posts. We’ll save that for another day.
Mark,
I’m glad that you’ve come around to acknowledging the fact that GOVERNMENT has a spending problem, which is not the fault of the top 1% of this country’s tax payers.
If you continue to do the research, then I believe that you may also have the capacity to eventually see the bigger picture with regard to the mortgage lending debacle, the GOVERNMENT installed incentives created to ensure and expand the associated unreasonable risks of the debacle, the private sector’s diversification and transfer of those same risks (globally), the ensuing financial collapse that resulted from the overexpansion of the risks, and finally, the “opportunity” that was recognized by those in the higher echelons of GOVERNMENT when viewing the resulting financial crisis for yet another attempt by GOVERNMENT to seize ever more resources and control over that of its citizenry…enter: the age of Federal Stimulus distortion and regulatory reforms as set by those who had created the mess in the first place.
Indeed, this country continues to suffer from an ongoing agency problem, and the fox continues to manage the hen house.
You’ll find that while I am always open to intelligent debate and fact based constructive criticism, I don’t apologize to those who initiate and direct any veiled or unveiled insults or pejoratives that they can conjure up, towards me, or anyone else, based on their own narrow perspectives of what they may want to believe, or have others believe, when I call it out for exactly what it is.
I don’t allow anyone to project their image on me, and by way, neither should you.
I don’t know where you got the idea that the top 1% has a spending problem. I never ever said that. Never even hinted at it given the thought doesn’t even make sense for a logical standpoint. I’ve always acknowledged that government has a spending problem which includes both Democrats and Republicans. Beyond that the only ones with a spending problem are those who live beyond their means.
Somewhere I either misstated or you misinterpreted by comments.
Excellent post, Paul. The first reply, by Mark, really doesn’t get the whole picture. And the second, by Noonballoon, has some good points – if I am interpreting the very poorly checked post correctly.
Everyone needs to learn how to proofread their stuff thoroughly before posting, and even before that they need to learn how important it is to take the time to do so!
What don’t I get?
Proofreader,
Your point is well taken, and is absolutely correct. Time may very well be the limiting factor, but it should never be saved at the cost of accuracy.
I certainly won’t waste anyone’s time by quibbling about what the definition of “is”, is, but I would recapitulate the fact that governmental spending, and its resulting taxation, does impact those top 1% of tax payers (1.4 Million folks) who are footing 40.4% of the total tax bill.
The relative comparison to the bottom 95% of tax payers (134 Million folks), those who foot another 39.4%, does demonstrate a contribution made to offsetting the total weight of the overall burden.
However, I continue to be inclined to defend both the top and the bottom percentages of folks from the oppressive nature and continually overreaching actions of government.
The total tax burden is the problem, and that is directly correlated to big brother’s spending habits.
Paul:
If you look carefully at the graph (figure 2) you’ll see that from 2000 to 2008 the Real Median Family Income has fallen by a couple thousand dollars (3-4%). I would suspect that from 2008 to present it has remained flat or fallen still more. This means that over the last 10 years the standard of living in the US has definitely decreased. This is by far the largest decrease since 1950, according to the chart.
(I’ve done the same kind of research using “adjusted GDP per capita” and it tells the same story.)
The trick here is to define and quantify the term “Real” (or “adjusted”). Income can be easily measured in dollars. But the problem is that the dollar shrinks in value over time and therefore these numbers have to be “adjusted” to reflect the true purchasing power of the dollar. This is an enormously complex task and fraught with potential manipulation, whether intentional or not.
For instance are the following items factored into the “adjustment”?
1. A person’s 401K looses $25,000 in value.
2. A person’s house looses $150,000 in value.
3. Gross receipts tax have gone up in Santa Fe about 2% over the last 10 years. Unemployment tax on employers is bound to go up soon.
4. Retail food prices have been going up probably 5-10X the rate of inflation.
5. Same goes for medical costs and medical insurance.
6. Motor fuel costs are $1.50 per gallon more than they were 2-3 years ago.
7. If you have $100,000 cash to invest you’re lucky if you can get 2-3% interest on AAA-type investments.
8. And finally, governments and their pension funds are running enormous and increasing deficits. In an accurate accrual accounting system we need to set aside some of today’s income to provide for tomorrow’s expenses that we’ve already accrued.
While Mr. Vinegas may be ignorant of the facts, the American family has seen a significant decrease in income over the past 10 years, and may see even a larger decrease in years to come.
However, it has nothing to do with the income share of the top 1%!
cheers.
John
Economists seem to have dropped a factor that they always included. That is the estimated percentage that the “gray market” would add to the GDP. They estimate 10-20% in years past. My guess is that there are more and more “off the books” dealings going on. Every one of us is a buyer or seller of something every day that is “gray market”. Did you sell some gold or silver lately? Did you buy from a street vendor? Did you buy from a farm stand? Did you buy a used car from the owner? Pay to park somewhere? Baby sit? Sell something at a consignment shop? etc-etc-etc