Income Inequality and Politics

[mercury14]

This is a good summary.

It's a limited summary. I agree the primary focus should not be on income gap, because it's superficial.

The primary focus should be on the opportunity gap.

 

[RightField]

The Income Gap Shrinks with Accurate Accounting

By LIZ PEEK, The Fiscal Times March 12, 2012

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Are the rich getting richer? President Obama thinks so, and has made narrowing the gap between rich and poor a staple of his reelection campaign. Many on the left who decry the exorbitant payouts to CEOs and wickedly low tax rates on billionaires that presumably have led to the widening income gap join him.
In an effort to bring some facts to the table, Diana Furchtgott-Roth of the Manhattan Institute has published a study debunking the “misguided assumption that income inequality in the U.S. has increased in recent years.” Analyzing spending data from the U.S. Labor Department, she concludes that the gap between the highest and lowest income quintiles has in fact not changed much over the past 25 years.

She says some of the studies that argue otherwise are inaccurate in that they use pretax income for high earners, and do not include transfer payments such as food stamps, Medicaid and housing allowances for low-income earners. She contends that using spending –an easier number to pin down than income – as a proxy for well-being removes those distortions.

The rise in the number of two-income couples has powerfully influenced the relative wealth of the upper-end.

Furchtgott-Roth also ascribes some of the much-ballyhooed changes in income distribution, mostly measured by household units, to shifting demographics. She notes that top income quintile households typically contain more bread-winners, a number that has grown over time. For instance, in 2010 the lowest income quintile contained only 0.5 earners per household unit, as compared to 2 earners in the highest quintile. That bottom category includes the unemployed, recently graduated and single working persons as well as retirees.

Data from the Census Bureau shows that the rise in the number of two-income couples has powerfully influenced the relative wealth of the upper-end. In 1990, median income for a family with one earner was roughly $40,000; in 2010 that figure had increased by only 5 percent. However, families with two earners saw their fortunes improve, with income rising from $67,000 to $81,000, up more than 20 percent. The bottom group, by contrast, has seen the number per household shrink, in part due to a rise in single parenting and also the increased longevity of seniors living alone. Single females constituted 46 percent of the lowest income quintile compared to 4 percent of the highest.

The Pass through Tax Loop
Another change that influenced reported income distribution, according to Furchtgott-Roth, was the Tax Reform Act of 1986, which lowered the top income tax rate to 28 percent and the corporate rate to 35 percent, creating an incentive for business owners to file as individuals rather than companies. That flow of income bloated personal income tax filings, pushing up the earnings of the highest categories.

Because these demographic and tax changes distort comparisons, Furchtgott-Roth turns to spending as a more reliable indicator of how various groups have prospered. She concludes that over the past twenty years there has not been much change in comparative per-person spending between the highest and lowest income categories. Of course, higher earners spend more than those at the bottom of the income ladder – about 2.4 times, to be exact.

That difference has not shifted much over time, suggesting that income comparisons are also steady. In fact, most recently, the numbers suggest a narrowing of the income gap- a change that might also be read as the tendency of wealthier Americans to pull back during the recent recession. With a higher proportion of spending being discretionary, wealthier people have more flexibility to cut outlays in uncertain times.

The emergence of a huge new labor source in China and India has driven down wages for U.S. workers.

Others have presented different data to rebut the narrative that our income gap is due to misguided domestic policies. A study by Swedish economists Roine and Waldenstron, cited by the Hoover Institution’s Allen Meltzer in a recent Wall Street Journal piece, shows that the share of the pie accruing to the top one percent has ebbed and flowed over time – but not just in the U.S.

In fact, the fortunes of the highest-earning people here have moved in concert with the fluctuations seen in other developed countries with very different tax and wealth distribution models. He notes that the top one percent of earners (as compared to the top 20 percent of households surveyed by Furchtgott-Roth) have indeed seen their share grow in recent years, and attributes that shift to the emergence of a huge new labor source in China and India, which has driven down wages for workers.

This is undoubtedly true. In the language of economists, the “rent” paid to the various components of production shifted over the past several decades, rewarding capital (higher returns and stock prices) and penalizing labor (lower wages). Partly, this stemmed from enormous gains in productivity, as the technology revolution eliminated millions of jobs. It also stemmed from the opening of global markets, which allowed hundreds of millions of low-wage laborers in far-off places to impact our domestic workforce.

President Obama wants to turn the tide, and has proposed giving tax breaks to companies that manufacture in the U.S., and penalizing those that outsource. He wants to single out specific industries for favorable treatment – such as high-tech producers. Such measures might benefit workers but could also distort the flow of capital and, like policies that favored housing, create long-term distortions. This is a discussion we should be having in the U.S. It should be based, though, on fact and not fiction. And perhaps not even politics.

 

[RobDownSouth]

The Income Gap Shrinks with Accurate Accounting

<derp snip>
She says some of the studies that argue otherwise are inaccurate in that they use pretax income for high earners, and do not include transfer payments such as food stamps, Medicaid and housing allowances for low-income earners. She contends that using spending –an easier number to pin down than income – as a proxy for well-being removes those distortions.
<derp snip>

Yeah the "income gap" shrinks if you change the primary measurement to how much people spend instead of how much they earn. Get a title loan on your car? Income gap narrows! Pay some by credit card? Income gap narrows!

Some serious intellectual dishonesty in that article.

No surprise, then, that Right Field posted it.

 

[RightField]

The much lower rate of divorce amongst college educated couples with two incomes contrasted with lower income families with high divorce rates (and single parent households) is driving a lot of the divergence in income and the false democratic narrative that middle class income is stagnating.

Another factor is that a very few people on the very high end of the income charts (Bill Gates, Peyton Manning, any number of top basketball players) have skewed the top .001 income levels.

A third factor is the transition of business owners from using business tax rates to personal tax rates after accounting changes in the tax laws in 1986.

The first issue has ominus ramifications for the future with more and more kids growing up in single-parent households. While there are many fine single parents, statistically across a broad sample, the kids who grow up in these circumstances have less educational achievement and higher rates of incarceration from crime.

Do you have any counterpoints or are you just going to whine and engage in name-calling?

 

[RobDownSouth]

The orange crop is expected to set all sorts of records this year, if we adjust figures to include apples as oranges. This is fair because in many states in the United States it's too cold to grow oranges, therefore reclassifying apples as oranges allows us to look at the Unites States as a whole, instead of giving undue emphasis to certain southern states.

 

[Sean Renaud]

The much lower rate of divorce amongst college educated couples with two incomes contrasted with lower income families with high divorce rates (and single parent households) is driving a lot of the divergence in income and the false democratic narrative that middle class income is stagnating.

<snip>​

The first issue has ominus ramifications for the future with more and more kids growing up in single-parent households. While there are many fine single parents, statistically across a broad sample, the kids who grow up in these circumstances have less educational achievement and higher rates of incarceration from crime.

Do you have any counterpoints or are you just going to whine and engage in name-calling?

So can you see any reason why we would want to fund schools better and get more people in a position to take college courses? Even if it means that top 1% has to get by with a little less? Or are you going to continue down the cut, cut, cut I never saw a government program I liked road?

 

[RightField]

So can you see any reason why we would want to fund schools better and get more people in a position to take college courses? Even if it means that top 1% has to get by with a little less? Or are you going to continue down the cut, cut, cut I never saw a government program I liked road?

We've been throwing money at education for years and years with very little in the way of positive results. Washington DC has some of the very highest spending per student in the nation .....and some of the worst results. Michelle Rhee, a prominant Democrat, was making some pretty decent changes there, but was chased out of town because she dared to stand up to the school unions.

I believe that we need to take actions to help schools get better, but I don't believe it necessarily involves more spending.

As far as college courses, we already have a very well funded infrastructure of state schools, both AA/S and BA/S levels. The problem seems to be finding enough qualified and capable students which brings us back to K-12.

If you've read any of my posts, you know I'm staunchly in favor of equal opportunity and I think good schools are an important factor in that. I think there are other factors too that should be addressed. This trend of more single-parent households, many of which are much poorer than the average, causes some additional challenges as well.

As far as spending, I'd rather see us make better choices before we start talking additional taxes. If more money is needed for schools, lets take some away from somewhere else before we start adding more taxes (because more taxes will slow the economy further and keep unemployment high).

It seems that both parties are tripping overthemselves to give more money, entitlements and other goodies to elderly people because they vote so reliably. Maybe we spend a little less on the elderly (the 2nd richest group) and spend a little more on schools.

 

[Sean Renaud]

We've been throwing money at education for years and years with very little in the way of positive results. Washington DC has some of the very highest spending per student in the nation .....and some of the worst results. Michelle Rhee, a prominant Democrat, was making some pretty decent changes there, but was chased out of town because she dared to stand up to the school unions.

I believe that we need to take actions to help schools get better, but I don't believe it necessarily involves more spending.

As far as college courses, we already have a very well funded infrastructure of state schools, both AA/S and BA/S levels. The problem seems to be finding enough qualified and capable students which brings us back to K-12.

If you've read any of my posts, you know I'm staunchly in favor of equal opportunity and I think good schools are an important factor in that. I think there are other factors too that should be addressed. This trend of more single-parent households, many of which are much poorer than the average, causes some additional challenges as well.

As far as spending, I'd rather see us make better choices before we start talking additional taxes. If more money is needed for schools, lets take some away from somewhere else before we start adding more taxes (because more taxes will slow the economy further and keep unemployment high).

It seems that both parties are tripping overthemselves to give more money, entitlements and other goodies to elderly people because they vote so reliably. Maybe we spend a little less on the elderly (the 2nd richest group) and spend a little more on schools.

Firstly we really aren't throwing that much money at it, not in comparison to any of our other big ticket items. Washington DC's payment doesn't mean a damn thing. California has the second highest paid teachers in the nation, we also have the highest paid burger flippers in the nation. Isolating a city/state that has an extremely high cost of living and then pointing out how they aren't getting results is something the misinformed or dishonest do. I like you and assume this time that it's the former not the latter.

Taxes high or low don't have as big an effect on employment as you claim they do. If they did we would have had attrocious unemployment after WW2, or under Clinton. Taxes have continued to go down and unemployment hasn't changed. Still I don't mind re-arranging what's spent. I want good government I don't much care about it's size one way or another.

You wanna start cutting back on those single parent households? I know it runs contrary to your core beliefs but maybe we should broaden who can get welfare and under what circumstances a tad. You know enough so that men aren't doing the "right" thing for their children by not being their so their mother can collect a check. I understand what the intentions were of not giving money to able bodied males but the actual effect was a stunning failure that drives men from their families and is a vital part of that downward spiral you note of single parent families tend to be produce drop out children with low income who become single parents who's children drop out of school. It also might make some sense to wean people off welfare instead of dropping em like a bad habit the moment they even start pulling their own weight. Again I understand that the logic is to have as few people draining the system as possible but when going to work functionally lowers your income it's a bit of a disincentive. I don't pretend to have all the answers but I know where several of the unaddressed problems lie.

 

[JAMESBJOHNSON]

No one ever answers the question, MORE MONEY FOR WHAT, EXACTLY?

 

[mercury14]

No one ever answers the question, MORE MONEY FOR WHAT, EXACTLY?

Lower student-teacher ratios for one. How about resources like teacher assistants to give the struggling kids one-on-one attention?

 

[mercury14]

The Income Gap Shrinks with Accurate Accounting

By LIZ PEEK, The Fiscal Times March 12, 2012

Your article suggests that we shouldn't use income as a factor when analyzing the income gap.

 

[RightField]

Firstly we really aren't throwing that much money at it, not in comparison to any of our other big ticket items. Washington DC's payment doesn't mean a damn thing. California has the second highest paid teachers in the nation, we also have the highest paid burger flippers in the nation. Isolating a city/state that has an extremely high cost of living and then pointing out how they aren't getting results is something the misinformed or dishonest do. I like you and assume this time that it's the former not the latter.

Taxes high or low don't have as big an effect on employment as you claim they do. If they did we would have had attrocious unemployment after WW2, or under Clinton. Taxes have continued to go down and unemployment hasn't changed. Still I don't mind re-arranging what's spent. I want good government I don't much care about it's size one way or another.

You wanna start cutting back on those single parent households? I know it runs contrary to your core beliefs but maybe we should broaden who can get welfare and under what circumstances a tad. You know enough so that men aren't doing the "right" thing for their children by not being their so their mother can collect a check. I understand what the intentions were of not giving money to able bodied males but the actual effect was a stunning failure that drives men from their families and is a vital part of that downward spiral you note of single parent families tend to be produce drop out children with low income who become single parents who's children drop out of school. It also might make some sense to wean people off welfare instead of dropping em like a bad habit the moment they even start pulling their own weight. Again I understand that the logic is to have as few people draining the system as possible but when going to work functionally lowers your income it's a bit of a disincentive. I don't pretend to have all the answers but I know where several of the unaddressed problems lie.

Thank you. I think the money is a less important factor and the biggest factor is the parents attitude. I don't know how to fix that. I don't know what to do about single family households either, but I'd like to see leadership in our society start talking more regularly about the importance of kids and giving them every opportunity for a good education. Maybe some encouragement from leaders for parents to try to keep their kids in mind when making family decisions such as marriage, divorce and abandonment would we helpful too (by leaders I mean national, state and local in politics, medicine, spiritual and other).

The welfare side of it deserves attention too. In the past, as you mention, its turned into a negative incentive but if that could be fixed, I'd be supportive. I think there'd be a lot less welfare needed if more families stayed intact though. I know it's a cliche, but kids are our future.

There's another side to it also though. There's the old adage that you can bring a horse to water but you can't make him drink. Some people just don't have the disposition for school and they shouldn't be penalized for it. If we had a more vibrant economy, there'd be more spots for people who don't really care about school. Not everyone is cut out to be a brain surgeon.

There are also late bloomers, people who goof off during K-12, punch around for a few years and then decide that they want to go to school. I'm glad that we have community colleges and other opportunities for the late bloomers. I know a guy who who is now working on a PhD who was a dropout his first time around. I know another who is a brilliant software programmer, who decided to stop his formal education after the 6th grade.