The great thing and the hard thing is
to stick to things when you have outlived the first interest,
and not yet got the second,
which comes with a sort of mastery.
Janet Erskine Stuart
Image of the Day
Rand Paul Finds His Voice on Foreign Policy
Facebook Corner
(Citizens Against Government Waste.) IRS pays a premium for support of outdated Microsoft software
It's not just Microsoft software and not just the IRS.
Political Cartoon
 |
| Courtesy of the original artist via IPI |
Meat Loaf, "Bat Out Of Hell"
In the Final Year of the Obama Tribulation
Jonah Goldberg on Obama's Final Year
What will President Obama try to accomplish during his final year as president?
Posted by The Daily Signal on Friday, October 16, 2015
Putting People in a Cage Without Criminal Intent
Mens Rea in 60 Seconds
Ahead of our Advancing Justice summit, we're taking a look at the most pressing issues of criminal justice reform, including mens rea and the intent to commit a crime.
Posted by Charles Koch Institute on Saturday, October 17, 2015
Is the Middle Class Disappearing?
THE MIDDLE CLASS IS DISAPPEARING!
THE MIDDLE CLASS IS DISAPPEARING!Recently, in the presidential debate, Vermont Senator Bernie Sanders exclaimed, "The middle class, in this country, over the last 40 years, has been slowly disappearing.” [1]It's understandable why people believe this is a valid concern. Even Alan B. Krueger, Chairman of the Council of Economic Advisers, published work showing the decline of the middle class. [2] That being said, this is actually quite a disingenuous claim. Per economist Scott Winship, Fellow in Economic Studies at the Brookings Institution, using the same underlying data as Krueger, “the share of households with income that puts them in the middle class OR HIGHER was 76 percent in 1970 and 75 percent in 2010—two figures that are statistically indistinguishable.” [3] In other words, the middle class only declined because part of it moved into a higher class.• Want Another Perspective?Per a National Bureau of Economic Research study entitled "A Second Opinion on the Economic Health of the Middle Class," there exists several key variables researchers often fail to properly adjust for when analyzing class incomes. [4] They are as follows:1. Pre-Transfers vs Post-Transfers2. Pre-Tax vs Post-Tax3. Changes in Household Size4. The Monetary Value of Healthcare"The inclusion of taxes and transfers, in addition to the value of employer provided health insurance benefits, Medicare and Medicaid, further impacts the observed trend in resources available to the middle class." [4] In other words, to not include these benefits as a measurement of household resources is entirely disingenuous. Other researchers agree with that assessment. Per an OECD paper researching income inequality and growth, "What ultimately matters for people is their income AFTER TAXES AND TRANSFERS, which largely frames their consumption possibilities. The best and most comprehensive available income measure is household disposable income that has been ADJUSTED for household SIZE and for publicly-provided in-kind transfers, such as public spending on education and HEALTHCARE." [5] Once applying the aforementioned controls and adjusting for inflation, here are the TRUE results regarding income growth from 1979-2007: [4]The Bottom 20% Grew: 26.4%The 2nd Quintile Grew: 25%The Middle Quintile Grew: 36.9%The 4th Quintile Grew: 40.4%The Top 20% Grew: 52.6%"Growth was substantial in ALL quintiles once the influence of government tax and transfer policy as well as the shift in compensation from wages to health insurance provided by employers and the shift to increased in-kind health insurance by government is more fully recognized." [4] Specifically, as you can see, the middle quintile INCREASED rather than decreased.• Want Another Perspective?Consider class mobility. When individuals increase their incomes past a certain point, they actually change quintiles and therefore no longer show up in the lesser one. Their measured benefit is then observed only as an increase to the higher quintile, rather than as an increase experienced by people from the lower one. To an untrained observer, this would simply look like wealth increasing for the higher classes and thus lead to many false implications. But evidence that this upward mobility occurred has been established by Census data as well as the American Enterprise Institute and others:"The share of lower-income families fell over time by 4.2 percentage points, from 22% of all US families in 1967 to only 17.8% of all US families in 2009, while the share of middle-income families decreased by 18.6 percentage points during that period, from 61.8% in 1969 to 43.2% in 2009. So where did those 22.8% of families go that disappeared from the lower income and middle income categories in the 42-year period between 1967 and 2009? They “disappeared” INTO the upper-income category of incomes above $75,000, which increased by 22.8 percentage points, from a 16.3% share of American families in 1967 to a 39.1% share in 2009. Whereas “middle class” families were so numerous that they outnumbered “upper class” families by a ratio of almost 4:1 in 1967, so many American “middle class” families have moved by the 2000s to the “upper class” by income, that those two groups have been almost equally represented for their shares of the total number of US families over the last decade." [6]In fact, when shown as 2009 U.S. dollars, from 1967 to 2009, "the share of American families earning incomes above $75,000 more than doubled, from 16.3% to 39.1%." [6] (In our video, we also reference graphs from Thomas Sowell to help illustrate this point [7])• Want Another Perspective?Even when re-defining lower income to be anything under 50 grand, middle income to be 50-100 grand, and upper-income to be anything over 100,000 a year, we still see undeniable movement of U.S. households out of the “lower-income” category and into the upper-income one. [8]• Want Another Perspective?This is confirmed again with prime-age households. "The middle class is shrinking but not because the bottom is dropping out; it is because more people are better off. From 1979 to 2005, the percentage of prime-age households earning over $100,000 in 2005 dollars grew 12.7 percentage points, while those earning between $30,000 and $75,000 shrank 13.3 percentage points." [9]• Want Another Perspective?Would you trust the Congressional Budget Office, who indicated that "for households in the three MIDDLE INCOME quintiles (from the 21st through 80th percentile) incomes actually grew 40% from 1979 to 2007. [10] (denoted as after-tax income)• Want Another Perspective?This conclusion - that households have actually drifted upward - is supported by raw data from the U.S. Census, which you can verify for yourself on page 31. Per this data, from 1967 – 2013, the percentage of households falling in the bottom half, that is, those earning less than $75,000 a year, declined. NONE of the lower segments increased in share of households, yet ALL of the higher segments DID increase in share of households. [11]CONCLUSION:No matter how you approach it, the TRUE reason why the middle class is arguably disappearing is NOT due to shrinking incomes pushing people into lower classes but due to INCREASED incomes pushing people into HIGHER classes. This should not alarm anyone.--------------------Sources:[1]https://goo.gl/HDca4S[2]http://www.slideshare.net/whitehouse/the-rise-and-consequences-of-inequality-in-the-united-states-charts[3]http://www.nationalreview.com/agenda/288306/guest-post-scott-winship-obama-administrations-questionable-mobility-claims-reihan [4]http://www.nber.org/papers/w17164.pdf[5]http://www.oecd.org/eco/public-finance/49417295.pdf[6]http://www.aei.org/publication/yes-the-middle-class-has-been-disappearing-but-they-havent-fallen-into-the-lower-class-theyve-risen-into-the-upper-class/[7]http://issuu.com/ngisaigon/docs/0142 (page 140)[8]https://www.aei.org/publication/census-data-on-income-distribution-reveal-evidence-of-rising-income-levels-for-a-rising-share-of-american-households/[9]http://content.thirdway.org/publications/57/Third_Way_Report_-_The_New_Rules_Economy_-_A_Policy_Framework_for_the_21st_Century.pdf[10]https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/10-25-HouseholdIncome_0.pdf[11]https://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf
Posted by We Are Capitalists on Saturday, October 17, 2015
