Interesting analysis

4 Responses to “Interesting analysis”

1. 

   Definitely worth the watch.

   The first problem, of course, is best described by Thomas Sowell in Basic Economics, page 189:

   Although people in the top income brackets and the bottom income brackets — “the rich” and “the poor,” as they are often called — may be discussed as if they were different classes of people, often they are the very same people at different stages of their lives. Three-quarters of those Americans who were in the bottom 20% in income in 1975 were also in the top 40% at some point over the next 16 years. This is not surprising. After 16 years, people usually have had 16 years more experience, perhaps including on-the-job training or formal education. Those in business or the professions have had 16 years in which to build up a clientele. It would be surprising if they were not able to earn more money as a result. It is not uncommon for most of the people in the top 5 percent of income earners to be 45 years old and up.

   As for taxes, we see that, in 2001, federal receipts were the highest since WWII as a percentage of GDP. That dropped with the recession, and is on its way back up. Tax receipts have been going up in constant dollars since 2003, also. Those receipts, in constant dollars, are projected to keep going up. Some tax cut.

   So let’s look at the tax burden, so we can see whether these tax “cuts” are benefiting “the rich.” Well, looking at the data, we see that the “rich” (top quintile) are paying a greater share of the tax burden than ever before, while the burden of the lower four quintiles is going down.

   So, tax receipts are increasing, and the burden is shifting to the top quintile from the lower ones. This is called a “tax cut for the rich.”

   Finally, let’s look at the assertion that “wage earners are falling behind.” Falling behind whom? Never mind the social mobility mentioned above. Looking at the data on income distribution, we actually see the improvement in every quintile. We are, undoubtedly, getting more unequal. Why are the lower two quintiles barely moving at all, while the other three are moving well? Productivity. The productivity of the burger flippers, the furniture movers, the construction workers, etc., have not gone up. Productivity increases have been the result of the equipment these people are using. That equipment was designed by the engineers, financed by the entrepreneurs, etc. More effective divisions of labor are arranged by the managers. These people are responsible for the increased productivity, and are reaping the rewards.

   We also see a correlation with education. In a service economy, that is to be expected.

   Posted by Anon E. Mouse | Saturday, August 25, 2007, 9:52 pm
2. 

   It is also interesting that he does not have any arrows going from the government to the people. Certainly there are people (and not the rich) working for the government, either directly or indirectly, and there are many people getting benefits from the government without working.

   Where are those numbers?

   Posted by Anon E. Mouse | Sunday, August 26, 2007, 1:05 am
3. 

   I call BS on anything Sowell has to say. How, exactly, does he know that those people moved? Is he psychic?

   You know, I think it’s time for you to get your own blog and stop using mine for spewing half-truths.

   Posted by vjp | Sunday, August 26, 2007, 12:53 pm
4. 

   Sowell cites the following references:

   Data on Americans’ changing incomes between 1975 and 1991 are from pages 8 and 22 of the 1995 Annual Report of the Federal Reserve Bank of Dallas. Earlier studies indicating similar patters include Years of Poverty, Years of Plenty by Greg Duncan et al. Similar changes in individual incomes in continental European countries were reported on page 5 of Poor Statistics: Getting the Facts Right About Poverty in Australia by Peter Saunders, published in April 2002 by the Center for Independent Studies in Sydney, Australia. Similar data on incomes in Britain and New Zealand were reported on pages 32 and 33 of Poverty and Benefit Dependency by David Green, published in 2001 by the New Zealand Business Roundtable, and similar data from Canada appeared in an article titled “Time Reveals the Truth about Low Income,” which appeared on pages 24-26 of the Summer 2001 issue of Fraser Forum, published by the Fraser Institute in Vancouver, Canada.

   Posted by Anon E. Mouse | Sunday, August 26, 2007, 1:54 pm