5 reasons why income inequality is a myth — and Occupy Wall Street is wrong

Discussion in 'The Study' started by Big Don, Oct 19, 2011.

  1. Big Don

    Big Don Sr. Grandmaster

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    5 reasons why income inequality is a myth — and Occupy Wall Street is wrong

    By James Pethokoukis American Enterprise Institute EXCERPT:
    October 18, 2011, 10:54 am


    Sorry, the story just doesn’t hold together. According to left-wing think tanks, columnist and bloggers—and, of course, the Occupy Wall Street radicals—the top 1 percent have been exploiting the 99 percent for decades. The rich have been getting richer at the expense of the middle class and poor.

    Really? Just think for a second: If inequality had really exploded during the past 30 to 40 years, why did American politics simultaneously move rightward toward a greater embrace of free-market capitalism? Shouldn’t just the opposite have happened as beleaguered workers united and demanded a vastly expanded social safety net and sharply higher taxes on the rich? What happened to presidents Mondale, Dukakis, Gore, and Kerry? Even Barack Obama ran for president as a market friendly, third-way technocrat.

    Nope, the story doesn’t hold together because the financial facts don’t support it. And here’s why:

    1. In a 2009 paper, Northwestern University economist Robert Gordon found the supposed sharp rise in American inequality to be “exaggerated both in magnitude and timing.” Here is the conundrum: Family income is supposed to rise right along with productivity. But median real household income—as reported by the Census Bureau—grew just 0.49 percent per year between 1979 and 2007 even as worker productivity grew four times faster at 1.95 percent per year. The wide gap between the two measures, if accurate, would suggest wealthy households rather than middle-class families grabbed most of the income gains from faster productivity.

    But Gordon explained that this “compares apples with oranges, and then oranges with bananas.” When various statistical quirks are harmonized between the two economic measures, Gordon found middle-class income growth to be much faster and the “conceptually consistent gap between income and productivity growth is only 0.16 percent per year.” That’s barely one‐tenth of the original gap of 1.46 percent. In other words, income gains were shared fairly equally.

    2. A pair of studies from 2007 and 2008 conducted by the Federal Reserve Bank of Minneapolis supports Gordon. Researchers examined why the Census Bureau reported median household income stagnated from 1976 to 2006, growing by only 18 percent. In contrast, data from the Bureau of Economic Analysis showed income per person was up 80 percent. Like Gordon, they found apples-to-oranges issues such as different ways of measuring prices and household size. But in the end, they concluded that “after adjusting the Census data for these three issues, inflation-adjusted median household income for most household types is seen to have increased by 44 percent to 62 percent from 1976 to 2006.” In addition, research shows that median hourly wages (including fringe benefits) rose by 28 percent from 1975 to 2005.

    3. A 2008 paper by Christian Broda and John Romalis from the University of Chicago documents how traditional measures of inequality ignore how inflation affects the rich and poor differently: “Inflation of the richest 10 percent of American households has been 6 percentage points higher than that of the poorest 10 percent over the period 1994–2005. This means that real inequality in America, if you measure it correctly, has been roughly unchanged.” And why is that? China and Wal-Mart. Lower-income families spend a larger share of income than wealthier families on goods whose prices are more directly affected by trade. Higher income folks, by contrast, spend more on services which are less subject to foreign competition.
    END EXCERPT
     
  2. granfire

    granfire Sr. Grandmaster

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    "Never trust a statistic you have not fudged yourself."
    A math teacher.

    So we are just imagining that we don't have the according growth in our networth as our parents experienced before Reaganomics was invented.....


    (do the studies consider that prior to 79 in all likelyhood 2 income families were the exception, compared to the norm and necessity these days?)
     
  3. Steve

    Steve Mostly Harmless

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    Don, once again, this article uses the success of the wealthiest's own PR campaign as evidence that the gap between the bottom 80% and the top 20%, as well as the gap between the top 1% and the balance of that upper quintile.

    "The rich have been getting richer at the expense of the middle class and poor.

    Really? Just think for a second: If inequality had really exploded during the past 30 to 40 years, why did American politics simultaneously move rightward toward a greater embrace of free-market capitalism?"
    This is such a load of horse crap.

    I could use the same argument in favor of McDonalds. The above is true in the same way that McDonalds food is really good for you and won't make you fat. Just think for a second. If McDonalds food was really not good for you, why did America eat so much of it?

    Look. The rich are going to try and get richer. Everyone wants to make a good living. But before we can approach the situation and try and get our act together as a country, we have to be realistic about what's happening.

    The gap is growing. This is indisputable. It is. It's fact. The difference between the bottom 80% and the top 20% is dramatic. The difference between the top 1% and the next 19% is dramatic. But more than that, it's growing. The middle class is shrinking. It is. It's going away. The issue isn't whether or not this is happening. The debate centers around whether it's bad or not, and if bad, how bad it is.

    Once we can get past the facts and accept them as true, THEN we can start looking at what might be done. But as long as we continue to believe that the super rich are one extreme or the other, we'll get no where. They aren't all villains. While there are always people who will abuse wealth and influence, most don't. But they aren't victims, either.
     
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  4. granfire

    granfire Sr. Grandmaster

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    You are just buying into the leftwing propaganda machine!!!
    Communist!



    :D

    It's all how you skewer the stats to fit the agenda.

    And yes, considering the amounts of cash it takes to get into office, why are we surprised that money rules the political landscape.

    K, I am getting frustrated, and it's to early to pour coffee in my Bailey's.
     
  5. JohnEdward

    JohnEdward 2nd Black Belt

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    Really? Just think for a second: If inequality had really exploded during the past 30 to 40 years than WHERE HAS THAT PRONOUNCED MIDDLE CLASS GONE? Where are all those small businesses. You know those Mom and Pop shops. And that tier of middle managers that made up a good portion in companies that lead to middle class. The continued steep spike in CEO income since the 1980s, making them the super wealthy. The moving of jobs oversees and outsourcing. People like this guy who wrote this non-sense purposely ignore the facts, creating his own twist to support the most important fact that businesses are out to make the most money, the most they can for the um...the owner, the board, the top management. More money means more political influence and policy change in their favor for their own interests. When they go too far with that, they ruin the economy because they don't want balance a.k.a equality that keeps the country from ruin. A historical fact proven over thousands of years to early civilizations you have to have equality if you don't want collapse, chaos revolution etc. which leads to the wealthy being either impoverished, killed, or both -see world history. I wonder which short-sided corporation(s) is paying him to write this gibberish propaganda? Maybe the mega wealth has gone to their heads and provided a false sense of security and power where they think they are too big to fail? And that is the trickle down theory. If you know what I mean.
     
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  6. Steve

    Steve Mostly Harmless

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    It's becoming more and more clear that if you don't lick the boots of the super rich, you're a liberal, communist, socialist hippy. The poor, helpless, defenseless billionaires.

    I will never forget flipping through the local channels over 2 decades ago (probably closer to 3 decades). There was a televangelist in the area. I don't remember his name, but he had flaming red hair. Anyway, what stuck with me was when he said (paraphrasing), "And now, to further spread the word of God, I'm asking you to open your check books and donate to the ministry. And this goes particularly for you who can't afford it. You have to write the check and put your faith in God that it will clear. That you'll find a way."

    This left a very sour taste in my mouth and made a significant impression. And it's what comes to mind every time I hear someone talk about how the middle class and the lower class really just need to put our faith in the hands of the rich. They'll take care of us. We're being mean, to try and raise their taxes. We just need to trust them, have faith in them, and they'll come through for us. And we keep trusting them, even after we get burned, over and over.

    That's not conservatism. That's lunacy. It's denial.
     
  7. granfire

    granfire Sr. Grandmaster

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    Eh, go home! Nobody wants your common sense here!
     
  8. crushing

    crushing Grandmaster

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    :roflmao:

    Sorry, the fact that there were more 'Thanks' for this snarky comment than the actual 'common sense' post to which it was referring had me laughing.
     
  9. Sukerkin

    Sukerkin Have the courage to speak softly

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    This is a report on the growth in income inequality published by the LSE (London School of Economics) for the British government.

    Be warned that the foreword is by Harriet Harman but don't let that put you off {:lol:} and that it is quite detailed and comprehensive. That means it can't really be bullet-pointed on some media pundits web-site and so you might actually have to spend some hours to read it and do some thinking:

    http://eprints.lse.ac.uk/28344/1/CASEreport60.pdf

    For a Scottish perspective on this topic:

    http://www.scotland.gov.uk/Topics/Statistics/Browse/Social-Welfare/IncomePoverty

    The title of this site shows their focus so this might be less unbiased source of data:

    http://www.poverty.org.uk/09/index.shtml
     
    Last edited: Oct 19, 2011
  10. Flying Crane

    Flying Crane Sr. Grandmaster

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    :rofl:

    more silly propaganda. Keep the chuckles coming!
     
  11. Sukerkin

    Sukerkin Have the courage to speak softly

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    As an aside, it makes a change for the Right-Wing contributors here to quote an economist I have actually heard of :faints:. Robert Gordon did some work on incorporating the Rational Expectations Hypothesis with the Phillips Curve - it was a long time ago but it is a technique still used by quite a few.

    If he's descended into false-flag economics in his elder years I can't say but he's not besmirched by any disreputability {made up word :D} that I have heard of. So I'd be interested in reading the methodology he employed to massage the statistics to get the result that we're not poorer than we used to be (when we most self-evidentially are ... at least in my life we are).
     
  12. granfire

    granfire Sr. Grandmaster

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    Because they know my sarcasm!

    :angel:
     
  13. Steve

    Steve Mostly Harmless

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    Snarky? I took it as an attempt to be light hearted. I usually take "snarky" to mean something negative.
     
  14. crushing

    crushing Grandmaster

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    While I may agree with JohnEdwards' post and think he made some good points in it, I wouldn't purposefully poison the well or disparage anyone that may have a different perspective as lacking common sense. Or, maybe I just misunderstood the attempt at being light hearted? I likely have misunderstood a great many attempts that were meant to be light hearted, but came off as insults. I know I have been misunderstood in this way on occasion. Maybe even in this thread.
     
  15. granfire

    granfire Sr. Grandmaster

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    Yes you did

    ^_^

    But it's all good.

    (You missed the tiny fact that I left my 'thanks' under the post I commented so snarky about) :D

    But actually it was not so much an attempt to be cute (I don't have to attempt, my cuteness is overwhelming), as a reflection on how sensible ideas and arguments are dealt with these days.
    If more people actually listened to the smart people and less to the figure heads, we would not be in such a mess.

    But the climate has been such that if you don't parrot popular sound bits, you must certainly be un-american at best, or worthy of a trip to Gitmo at worst.
     
  16. crushing

    crushing Grandmaster

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    Ah, another misunderstanding. I didn't mean that your light hearted snarky comment was directed at JohnEdward, but at anyone that lacks the common sense to agree with JohnEdward.

    Or, at the very least, if they don't agree with you, they lack common sense. ;)
     
  17. RandomPhantom700

    RandomPhantom700 Master of Arts

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    I see what you did there. :rofl:
     
  18. SensibleManiac

    SensibleManiac Black Belt

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    All this talk of an "economy" that's based on waste and inefficiency, doesn't sound like much of an economy to me...
     
  19. Big Don

    Big Don Sr. Grandmaster

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    Two things:
    It is NEVER too early.
    Finally, someone else who understands the proper ratio!
     
  20. CanuckMA

    CanuckMA Master of Arts

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    You need to thank the Canadians for the invention of time zones, and the concept that it is 17:00 somewhere.123
     

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