I Know The Feeling

The NY Times never published my letters, and the cat got bored listening to my tirades, so I started this blog lo these many years ago.  Somewhere out there I sense a bored cat and a future blogger.  From a reader, straight to the NY Times round file and my blog:

To the Editor: According to “Among the Wealthiest One Percent, Many Variations,” published in the NYT on January 14, “there is no doubt that the troubled economy has focused anger on the fact that the rich have grown richer and the middle class, over the last decade, has lost ground.” 

The notion that income inequality is on the rise is pervasive, reinforced by the recent Congressional Budget Office report on income distribution. Former chair of the Council of Economic Advisers Laura D’Andrea Tyson summarized the CBO’s findings as follows: “Rising income inequality is a long-term trend that began in the late 1970s and strengthened during the last two decades.” (http://economix.blogs.nytimes.com/2011/11/18/tackling-income-inequality/)

 

Inconvenient truth: the distribution of income in the U.S. is basically the same as it was a quarter-century ago—and the middle class has gained ground over the last decade.

 

The CBO report only goes through 2007, despite the fact that it was released in late 2011. It tracks income distribution using a Gini index, which ranges from 0 to 1, with higher values signaling a more unequal distribution. The index indeed rose from 1979 to 2007, although almost all of the increase occurred over the periods 1979–1986 and 2002–2007.

 

But a Gini index calculated on the basis of IRS data, which extends through 2009 and which closely tracks the CBO Gini index (the average yearly difference over the period 2000–2007 is only .0023), shows that almost all of the increase from 2002 to 2007 was wiped out in 2008 and 2009, the years of the Great Recession—which the CBO report does not address. (See “Slamming Income Inequality: Not a Slam Dunk,” by Ronald Schmidt of the University of Rochester’s Simon School of Business.) (http://kudlowsmoneypolitics.blogspot.com/2011/12/slamming-economic-inequality-not-slam.html)

 

In other words, most of the reported rise in income disparity since 1979 had already occurred by 1986, and there has been no significant trend since then.

 

There’s more. From 2000 to 2009, tax filers with adjusted gross income of at least $500,000, who represented the top 0.5 percent of all returns in both years (similar in spirit to the CBO report, which looks at the top 1 percent of households), saw their average adjusted gross income decline by 15 percent and their average after-tax income decline by 11 percent. All other filers—the 99.5 percent—saw average increases of 15 percent in AGI and 17 percent in after-tax income. The middle class has not “lost ground” over the last decade.

 

The ubiquitous references to rising income inequality—with President Obama the offender-in-chief—are erroneous and serve mainly to fan the flames of class warfare in this country. But who benefits from that?

Janice Willett

Ridgewood, NJ

We now return you to the ongoing narrative.

NOPRIZE:  There is a missing "Full Disclosure" here.  Five minutes sleuthing didn't solve it for me, but I already know the answer.  [UPDATE:  Can't hide from Sue.]

Comments

[narciso]

Are there two suns, do I spot a bearded spock,
Cohen making sense?

http://www.miamiherald.com/2012/01/17/2594308/money-the-mothers-milk-of-politics.html

[Jack is Back!]

Y'all know whose fingerprints are all over this SOPA legislation, right?

Our old friend, Irish real estate investor, part of the Ted Kennedy sandwich and Barney Frank's banking buddy - Chris Dodd as head of the MPAA. That's who. Surprised?

[NK]

RickB/Ranger- you are both right as usual. I have a personal fascination WITH stats because I was never smart enough to actual DO math. My wife on the other hand has a PhD in econometrics, and her expertise is basically applied math and database creation/analysis. She's brilliant and has integrity, so she is routinely disappointed with the ability to torture data in unscrupulous ways-- in business (MBS risk algorithms), government (everything) and the academy (Mann's 'Hockey Stick'). It is a dismal science.

[narciso]

This is the second instance of this;

http://bigpeace.com/kpatton/2012/01/18/sources-claim-iran-killing-its-own-scientists-not-cia-or-mossad/

[Ranger]

Well, carp. Typad ate my post on this, so I will try again.

Via Instapundit:

The false frame of regulation vs. inequality

Off the top of my head I can think of a few overregulations that unfairly favor the wealthy: crackdowns on food trucks in favor of restaurants, regulations blocking people from selling home-baked goods, online gaming regulation favoring big casinos, regulations keeping women from doing hair-braiding for money, and a bunch more. If you expand the notion of "regulation" slightly to include mandates, a skewed tax code, and wealth transfers, there's plenty of evidence that our inequality stems in part from too much -- not too little -- government.

Actually, you don't have to expand the notion of regulation at all to make the point. Just look at how regulation and licensing increases the amount of capital need to open an enterprise, and how in increases the cost of keeping an enterprise going over time.

The results are that regulations create a huge barior to low income people starting their own buisness and becoming economicly self sufficient. Most regulations these days don't keep people safe, they keep people poor. And since they don't keep people safe, every safty failure because a new excuse for more regulation.

[Porchlight]

Chris Dodd as head of the MPAA. That's who. Surprised?

Not at all. But the bipartisan support is hurting Repubs. The Hill reports DeMint and Rubio are rethinking their support of the bill. I was surprised they supported it in the first place.

[Clarice]

Gosh, narciso, what an interesting article on Iran.

[Ranger]

Chris Dodd as head of the MPAA. That's who. Surprised?

If the Republicans were really smart, they would push through a change to restore the system to the way it was, with copywrite good for 7 years. That would devistate Hollywood's income stream overnight.

[narciso]

Yes, clarice, it seems to match with Ledeen's musings, and he has likely even better sources

[OldTimer]

Anybody heard about the Energy Department giving the final "no" to the Keystone pipeline? If this is true, the first candidate to stand up and decry with facts and bombast the tyranny of this odious move, has my everlasting vote.

[NK]

Ranger-- I don't think the Repubs should do anything about SOPA, except let it die. I support everyone's intellectual property rights, but SOPA is not about property rights. SOPA is cronyism for Hollywood to get things from Congress it can't get in the marketplace. Let it die; what's Hollywood gonna do, complain it couldn't buy Congress. let it die quietly and move on to imporatnt things-- like avoiding national bankruptcy.

[centralcal]

Old Timer:

edhenryTV Ed Henry
Breaking: A source tells colleague Wendell Goler State Dept will announce later this afternoon it is NOT going forward w/Keystone Pipeline

[OldTimer]

Right, NK, SOPA is a gift to the lefties and their propaganda market.

http://biggovernment.com/nsorrentino/2012/01/13/the-stop-online-piracy-act-pits-hollywood-against-tech-and-the-american-people/

[NK]

oldtimer/CC-- if course it will be NO. They'll say NO because of the Repub deadline, the deadline made it impossible to say yes, Blah blah blah. Meanwhile, Barry will privately tell Canadian PM Harper it's all US politics, after election it will be yes Blah Blah Blah. If you want a clear choice in Novemeber, you'll be happy with this. It's a real choice between Left and Right in November.

[Jim Miller]

Ranger - There's a big, double example of the effects of regulation on inequality from southern California.

Years ago, I read an account of the effects of "smart growth" policies, or whatever they called them.

Basically, the increase in regulations meant that it took five years to go from proposal to an actual house. The big building firms could handle that because they could bank permits year by year.

The small contractors couldn't because they can't wait for five years to get paid, and, I suppose, because no one wants to loan them money that long, and that speculatively.

Turns out that the price competition in the market came from the little guys.

So there were two results of this set of regulations, higher prices for home buyers, and small businessmen driven out of the market.

But the big firms did OK, and so did the people who already owned homes, a group that is better off than average.

(My apologies for not having more details, but it has been some years since I read about this.)

[NK]

PS: barry is telling the Unions the same thing, come November I'll approve Keystone... TRUST ME.. and keep sending those checks. SUCKAS...

[narciso]

Harper's not stupid, he's from Alberta, he's already negotiating with the Chinese to ship them the fuel.

[Old Lurker]

Sorry Ranger "If the Republicans were really smart..." I was laughing so hard I forgot to read the rest of your post.

[NK]

Marc-- of course, Harper will get a premium from the Chinese hedged against currency fluctuation. In truth it will be a better deal for Canada and the NO will be a #$@T-sandwich for American workers and consumers. Barry is going HARD left for the election-- everything until November is based on that. I've said that for 6 months.

[NK]

Marc=Narc

[Rick Ballard]

NK,

The original risk algorithms for MBS were probably good enough to function for a very long time. It was the additions, first of bells, then whistles, then a pretty fringe on top and finally some nice air horns which drove Wall Street to invent the investment bankers CDS suicide vest as the "logical response" to the idiocy engendered by the additions.

Someone of a suspicious nature might question the true value of the credentials possessed by the Wall Street lemmings crowding the edge of the cliff. Perhaps it would be better if they went forward alone for a bit.

[NK]

RickB-- I completely agree. The MBS business was an honest productive business for a decade before abuses blew it up. My point is at some point (2004-2005?) data was abused to make the deals AAA. Once they were AAA, Fannie bought the mortgages and the taxpayers were on the hook. The quants told damnable lies to get their fees paid.

[Porchlight]

I am nearly utterly ignorant on this topic so pardon if this observation is banal, but it seems like the MBS abuse was an eventual consequence that should have been foreseen due to the implicit government backing via Fannie. The elimination or mitigation of the consequences of risk will increase incidence and degree of risk, especially when the chance of profit is considerable. It was fraud waiting to happen.

[Melinda Romanoff]

NK-

Earlier, 1989 it was just starting up. When they started MERS in '95, the stops were pulled.

[Ranger]

Porch,

Yes, exactly. GNMA (which were FNMA and FMAC bonds were pitchs as one of the best retirement investments because they provided high yealds and had 'implicit government backing.' Basically, they were as safe as T-bills with a higher yeald. The problem, of course, was with all that money coming in, they needed to find more mortgages to buy to keep the bond yeilds up. At the same time, FNMA/FMAC were telling congress that there was no risk to taxpayers from all these bonds being issued, because there was no formal government backing to them. If those institutions had been truely private, they would have been committing fraud. But its not fraud when the government does it.

[steve]

All other filers—the 99.5 percent—saw average increases of 15 percent in AGI and 17 percent in after-tax income. The middle class has not “lost ground” over the last decade.

So people at the 99.5th percentile are now "the middle class"? That's just really lame. If you drill down into that 99.5 percent of filers you will see that the actual middle class has in fact lost ground.

[A Casual Observation]

Microsoft's Windows 7 sucks big time.

[Ranger]

Oh, BTW, as to the issue of a brokered convention, you did notice that she who can not be named said she would vote for Gingrich if she lived in SC, so that the nomination fight keeps going.

[Ranger]

So people at the 99.5th percentile are now "the middle class"? That's just really lame. If you drill down into that 99.5 percent of filers you will see that the actual middle class has in fact lost ground.

Posted by: steve | January 18, 2012 at 01:16 PM

Care to support that with some actual facts?

Or are you just posting it because you heard or read it somewhere, and it sounded good?

[Porchlight]

Thanks, Ranger. I guess I need to read Reckless Endangerment.

[Porchlight]

Ranger,

As far as I can figure she wants the nomination fight to drag on in order to make it more difficult for Romney. I don't know if she will endorse before the convention, but that's how I'm reading it at present.

[Ranger]

One of the things the defenders of FM/FM argue is that they never knowingly baught sub-prime mortgages themselves. Fair enough as far as it goes, but they did create lots of ways to increase sub-prime lending. The result was that FM/FM was boosting the supply of mortgages in the MBS market, thus reducing competition for themselves in the prime mortgage area. Combine that with the lack of oversight from the Friends of Angilo, the way MERS reduced the cost and incresed the speed at which mortgages could be moved from one institution to another, and the CDS system to provide the illusion of inurance against any losses and you have all the eliments for a mega disaster.

[Ranger]

As far as I can figure she wants the nomination fight to drag on in order to make it more difficult for Romney.

True, but in the long run, one can't discount the opportunity that if a convention is brokered, she would have a lot of power in the process of choosing the nominee, and might even be considered for that position herself.

[Porchlight]

That might be her long game, but I think the odds of a brokered convention are mighty slim. I like the odds of a drawn out primary process (esp. in the South) favoring a Romney challenger a bit better. No matter what happens, if she does endorse, I trust her to time it perfectly for her endorsee.

[Ranger]

No matter what happens, if she does endorse, I trust her to time it perfectly for her endorsee.

As do I.

[dork lungfish]

"""" Laura D’Andrea Tyson """"

Notorious collectivist "economist" who also once said that Americans were under-taxed.

Also note that the "inequality" tailed off after Reagan's dramatic tax cuts.

[Clarice]

I hope she goes to Nebraska and starts a state wide protest against the dufus in the WH and then the Jobs council attacks him and accuses them of wasting their time and reputations in some more pointless window dressing.

[Rick Ballard]

Ranger,

If the original MBS were put through a rigorous engineering style analysis, it would pass without problem - per the initial design parameters. CDS would not pass due to "net to zero" being a sophistic construct bearing no relation to reality due to its ultimate reliance upon governments ownership of printing presses and investment bankers ownership of politicians.

The only aspect of the original design MBS which would activate warning signals in an engineering style analysis is reliance upon far too few testing labs (CRAs) issuing mill certifications.

A decent engineering failure analysis performed today would conclude that nothing has changed and that all investment products should be stamped CAVEAT EMPTOR above a skull and crossbones.

Given the retreat of retail investors, it might not even be necessary.

[Ranger]

Rick,

What also goes unmentioned is the extent to which the law of supply and demand is still applicable in the real world. Increasing the pool of home-buyers through expanding sub-prime mortgages much faster than the housebuilding capacity could grow led to a shortage of housing that drove up prices for everyone. Now, the persistant oversupply of housing compared to the number of qualified buyers continues to depress prices, long after the "models" say housing should have bottomed out.

[pagar]

"Lamar Smith R San Antonio is flirting with getting beat in a primary on this one."

Absolutely needs to be done ASAP.

[daddy]

"There's a big, double example of the effects of regulation on inequality from southern California...
Basically, the increase in regulations meant that it took five years to go from proposal to an actual house."

Best example. It took 5-6 years to conceive and build the AlCan Highway, more than 1300 miles long and over numerous bridges, from Helena Montana to Fairbanks.

This year, after a 10 year struggle, we just celebrated a Legal victory to win regulatory permission simply to build a 3000 foot long bridge over an Alaskan River up in the Interior. No idea when we'll actually start building it. It's crazy.

[richard40]

As clearly shown in the authors stats, booms usually increase income inequality, while recessions and stagnant growth usually reduce it. Obama has taken this to heart by ensuring we stay in perpetual recession and stagnation, thus reducing income inequality. Arent you glad that Obama is wisely making us all equally poor and destitute. We wont have to envy the rich anymore, because they will be just as poor as the rest of us.

[ljm]

This should shake thing up:

http://www.drudgereport.com/flash2.htm

[Trolls Anonymous]

You are a very articulate commentator and observer, A Casual Observation!

Posted by: glasater | January 18, 2012 at 03:45 AM

Not really. I'm just parroting what an increasing number of patriotic, like-minded people are saying in their frustration with this treasonous and treacherous current administration, which includes, lest we forget, not just Obama, but Clinton, Holder, Napolidumbo, Geithner and Panetta, also, all of whom are equally contemptible.

But thanks, it was nice of you to say so. :)

[A Casual Observation]

Oops.

[Thesis Writing]

olalalalalal.....! you really know the feelings...