Income Gap Widens

[GrnBay007]

As income gap widens, recession fears grow

Incomes fell for poor and stagnated for middle-class families since late 1990s, making it tougher for them to weather economic downturn.
By TAMI LUHBY, CNNMONEY.COM SENIOR WRITER


NEW YORK -- Poor and middle-class families are entering the recession in a precarious situation due in part to declining or stagnant income growth, a study released Wednesday has found.

Incomes, on average, have declined by 2.5% among the bottom fifth of families since the late 1990s, while inching up by just 1.3% for those in the middle fifth of households, according to an analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute, two liberal think tanks.

The wealthiest slice of Americans, however, saw their incomes rise by 9 percent.

The average income of the bottom fifth of families was $18,116; the middle fifth, $50,434; and the wealthiest fifth, $132,131.

Unlike what happened during the economic boom of the 1990s, lower- and middle-class families did not share in the prosperity of recent years, the report found. In fact, the United States hashad its longest jobless recovery and slowest rate of payroll growth during this decade.

"We're worried about the impact of the downturn on the families whose incomes haven't recovered from the last recession," said Jared Bernstein, Economic Policy Institute senior economist and co-author of the report.


Wages have not kept up with inflation, families have loaded up on debt and homeowners have seen the value of their largest asset decline, he said. The situation will only get worse during the economic downturn.

"Families are uniquely economically exposed to the costs of recession," he continued. "As we head into a recession, their incomes will take a further hit."

The income gap between the rich and the rest of the population is widening. In 22 states, the top fifth of families made more than seven times what the poorest fifth took home, according to the report. In the late 1980s, only one state - Louisiana - had such a spread. Meanwhile, in more than two-thirds of the country, the wealthiest saw their income grow more than twice as fast as the middle-class over the past two decades.

State governments, however, can step in and help mitigate this growing inequality and insecurity, said Elizabeth McNichol, a senior fellow at the Center on Budget and Policy Priorities and the report's co-author. For instance, they can extend the amount of time workers receive benefits during an economic downturn. Also, they can offer or improve support services, such as child care, health insurance and transportation services.

Governments can also put resources into public services and infrastructure projects, which will help create jobs and stimulate the economy, said James Galbraith, professor at the University of Texas at Austin and income gap specialist. The federal government may also have to funnel more money to the states so they can maintain services at a time when tax revenues may decline.

The study is based on U.S. Census Bureau income data that have been adjusted for inflation, the impact of federal taxes and cash value of government subsidies. It does not factor in capital gains or losses. It compares data from 2004 to 2006 with that of 1987 to 1989 and 1998 to 2000.

[oregonpackfan]

Hmmm.... I guess W's view that tax breaks aimed primarily for the very wealthy are not "trickling down" to the middle or working classes like he says they will.

[HarveyWallbangers]

Incomes, on average, have declined by 2.5% among the bottom fifth of families since the late 1990s, while inching up by just 1.3% for those in the middle fifth of households, according to an analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute, two liberal think tanks.

I'm sure this is super duper trustworthy. Heard the same things about Reagan's policies in the 1980's, but some on the left might even be able to admit now that old Ron did wonders for the middle class. Gotta love CNN.

[GrnBay007]

It's funny that the tiny little word "liberal" makes some people disregard any information.

I don't give a crap who writes it, I'm middle class and feeling it...I don't need to read it.

[the_idle_threat]

The study is based on U.S. Census Bureau income data that have been adjusted for inflation, the impact of federal taxes and cash value of government subsidies. It does not factor in capital gains or losses. It compares data from 2004 to 2006 with that of 1987 to 1989 and 1998 to 2000.

Why not factor in capital gains or losses? Because then the result would probably look a whole lot different. Capital gains were huge in the bull market days of '98-'00 as compared to recent years, and these gains would apply disproportionately to the incomes of the highest earners. Taking this into account, the incomes at the high end of the scale would likely be stangant as well or maybe (I'd say probably) would have dropped from '98-'00 to '04-'06.

Of course, then the income gap would not be widening, and they wouldn't have their fat headline. So they gerrymander the stats in this study to get the result they're looking for. It's perfect manufactured news for the opposition party in an election year.

It's a rough time in the economy with prices rising for everybody much faster than wages, but this canard about the rich getting richer while the rest of us suffer is a calculated political ploy.

In fact, high net worth retired folks who are risk-averse and are living off the interest from "safe" investments and savings are seeing their income cut dramatically right now with far lower CD, money market and short-term bond rates after the latest interest rate cuts by the Federal Reserve.

[the_idle_threat]

It's funny that the tiny little word "liberal" makes some people disregard any information.

I don't give a crap who writes it, I'm middle class and feeling it...I don't need to read it.

The information is terribly misleading, and intentionally so, so there's ample reason to disregard it.

We middle class folks are feeling the pinch---that is certainly true. But to say that other folks higher up the income ladder are not feeling the same pinch---and worse yet, to say they are making more money than before, based upon selectively considered data---is wrong. That's the problem with this article, and the underlying study. It is cynically designed to promote class warfare.

Now, surely the folks at the top of the income ladder are not suffering and dying in the streets. But nor are they making out like bandits on the backs of us lesser-income folks. Costs are going up for everyone. Income is not.

[Partial]

Hmmm.... I guess W's view that tax breaks aimed primarily for the very wealthy are not "trickling down" to the middle or working classes like he says they will.

They may not be trickling down as you say, but if they weren't there I bet there would be a lot less people employed..

[Harlan Huckleby]

Why not factor in capital gains or losses? Because then the result would probably look a whole lot different. Capital gains were huge in the bull market days of '98-'00 as compared to recent years, and these gains would apply disproportionately to the incomes of the highest earners.

Your theory sounding plausible, so I went to the original report to see what they say about capital gains.
http://www.epi.org/studies/pulling08/4-9-08sfp.pdf

The authors claimed they did not include capital gains only because they did not have reliable data. They did look at estimates for capital gains, and concluded that growth of inequality would be GREATER had it been factored into their study. Remember, they are looking at the stock market from the late 80's through 2006, certainly the overall market trend was positive. They noted that rich families lost much capital income in 2001, but the market had corrected, and capital gains were contributing to the widening gap again by 2003.

[Harlan Huckleby]

The information is terribly misleading, and intentionally so, so there's ample reason to disregard it.

It would take somebody more sophisticated than us to debunk the study, like say, I don't know, an economist? You reject the study because it doesn't fit your ideology. Maybe there is a credible debunking somewhere, but I don't smell anything fishy.

[the_idle_threat]

Why not factor in capital gains or losses? Because then the result would probably look a whole lot different. Capital gains were huge in the bull market days of '98-'00 as compared to recent years, and these gains would apply disproportionately to the incomes of the highest earners.

Your theory sounding plausible, so I went to the original report to see what they say about capital gains.
http://www.epi.org/studies/pulling08/4-9-08sfp.pdf

The authors claimed they did not include capital gains only because they did not have reliable data. They did look at estimates for capital gains, and concluded that growth of inequality would be GREATER had it been factored into their study. Remember, they are looking at the stock market from the late 80's through 2006, certainly the overall market trend was positive. They noted that rich families lost much capital income in 2001, but the market had corrected, and capital gains were contributing to the widening gap again by 2003.

You're mistaken in a couple of ways, Harlan. I didn't bother to look at the report when I made my posts above, but I've looked at it now, since you've made it conveniently accessible.

The report itself---and the article above---both state that they are not looking at the market continuously from the 80's to 2006. They are looking at a few discrete three-year periods. The periods I'm focusing on are the second and third periods---1998-2000 and 2004-2006.

They say they didn't include capital gains because they're too hard to measure. This is plausible. But how convenient is it that they leave out capital gains? If they had even tried to estimate capital gains in the respective periods---which they surely could have and would have done if doing so would have helped their point---the data would almost certainly show that incomes for the highest earners went down from the period 1998-2000 to the period 2004-06. This would have been unacceptable, so they decided to just leave out what they admit is a large component of income for top earners. (See page 63 of the report: "Capital gains or losses ... are largely received by high-income families.")

Where do I get the idea that capital gains would have gone down from the period ending in 2000 vs. the period ending 2006? Just look at the financial markets. People were making money in the stock markets hand over fist in the late 90's---the tech boom. Day trading was rampant, IPOs were skyrocketing, and mutual funds and separate investment accounts were doubling and tripling in a year's time. This was the era of "irrational exuberance." Realized capital gains would have been huge.

From 2004-06, the markets were pretty stagnant, there were few IPOs, and people were simply not raking in money the way it was flowing in '98, '99, and even in early 2000 before the tech bust started. There's no evidence to support capital gains going up from the period ending in 2000 to the period ending in 2006. There's every reason to believe that capital gains actually went down. This would mean that the income gap actually closed between top earners and low earners from the period ending in 2000 to the period ending in 2006. But that wouldn't fit with the hypothesis, so capital gain data is conveniently left out.

As for their claim to the contrary---that inequality would be greater if they included capital gains, I think you're reading that wrong. But it's really more the fault of the study, rather than your fault, since they worded it so misleadingly in the study.

It's empirically true that:

(A) there would be greater inequality between rich and poor incomes in any given period if they included capital gains, since capital gains are disproportionately realized by the rich. When capital gains are left out, high incomes are underreported.

But this does not mean that including capital gains would:

(B) widen the inequality between rich and poor going from one period to another, which is the conclusion of the study, and the conclusion you're coming to.

On the contrary---as I stated above---including capital gains would almost certainly narrow the gap between top and bottom incomes, going from the period ending in 2000 to the most recent period ending in 2006, since capital gains were almost certainly a lot lower in the later period.

In the study, they're stating (A) and you're inferring (B), even though (B) is not supported by any evidence and in fact is unlikely to be true. But I think they want people to infer (B), and that's why they state (A) the way they do. They say inequality would be greater with capital gains included, and they hope people infer that growth of inequality would be greater as well.

In fact, if you look at the study (on page 63 again) it says "results showed an implausibly large surge in capital gains going to low-income
households in 2006." Implausible how? Because it didn't match their preconceived notions? Because it would blow their study out of the water? Their own data estimates might have shown a closing of the income gap due to larger amounts of capital gains going to lower income households. :!: They fixed this little inconvenience by omitting the data altogether. The result: they protect their study's dubious conclusion.

This is a junk study by biased researchers, designed to provide "evidence" to support their public policy goals. Large amounts of data are summarized, estimated, and---in the case of capital gains---left out completely. No valid conclusions can be drawn from it, except that people will believe anything if it supports their world view.

[the_idle_threat]

The information is terribly misleading, and intentionally so, so there's ample reason to disregard it.

It would take somebody more sophisticated than us to debunk the study, like say, I don't know, an economist? You reject the study because it doesn't fit your ideology. Maybe there is a credible debunking somewhere, but I don't smell anything fishy.

It's funny you should say this, because in another thread I was defending progressive income tax rates. My distaste for this report is really based less on on ideology, and more on the fact that I resent when so-called authorities try to pit the wealthy against the poor, especially under false pretenses.

As for sophistication, I've mentioned previously on this board that my undergrad degree is in economics. I've worked in the investments field all my adult life, even if I've never held the job title of "economist." I'm not spouting off about a subject I've only read about on the internet.

And in any case, it doesn't take specialized training or unusual knowledge to debunk this report. See my post above. Any person who knows about financial matters can understand how cynical and misleading this study is.

[packinpatland]

According to the stats in the article I(We) would classify as wealthy. Whoopee.
Sat. I did the grocery shopping.......when I came home I told me husband I am so glad that we only have one daugher still living at home......5 bags of groceries= $283.00. To eat healthy, it is expensive. Very expensive. I don't know how families with multiple children at home do it.
$283....and not one thing that was precooked, a mix, a snack in a box or bag......I even bake my own bread. Vegetables and fruit were the bulk of my purchase. :roll: I just don't know where this will all lead.............or end.

[SkinBasket]

To eat healthy, it is expensive. Very expensive. I don't know how families with multiple children at home do it.

Eating healthy is relative. When it's what you can afford, ramen, Mac n Cheese, Hamburger Helper, and egg noodles with butter is healthier than starving.

[packinpatland]

To eat healthy, it is expensive. Very expensive. I don't know how families with multiple children at home do it.

Eating healthy is relative. When it's what you can afford, ramen, Mac n Cheese, Hamburger Helper, and egg noodles with butter is healthier than starving.

I don't believe that........obesity, diabetes, high blood pressure...to name just a few, can be controlled or eliminated by eating right in most cases.
So, you either pay at the grocery counter, or pay at the doctor and pharamacy. Eat better and eat less.

[oregonpackfan]

I'm sure this is super duper trustworthy. Heard the same things about Reagan's policies in the 1980's, but some on the left might even be able to admit now that old Ron did wonders for the middle class. Gotta love CNN.[/quote]

Harvey,

What revisionist history book have you been reading to claim that Reagan "did wonders for the middle class." The reverse was true.

One of the first things he did as President was to fire all the federal air traffic controllers who went on strike.

It was during the Reagan administration where American corporations began exporting tens of thousands of American jobs overseas while receiving tax breaks for that practice.

It was during the Reagan administration that corporations began eliminating employee pensions. Those that do provide some form of employee retirement program began using 401ks, where saving for retirement is primarily the responsibility of the employee. Only about half of all American companies now provide any type of retirement program, almost all of them 401ks.

When Reagan took office, our country had a budget surplus. When he left office 8 years later, our country had the biggest budget deficit in its history. Part of the deficit was due to the corruption in his massive military buildup. Have you forgotten how Defense companies bilked the government by charging $89 for a wingnut and $600 for a toilet seat?

Reagan's economic policies were hardly friendly to the middle or working classes.

[Partial]

According to the stats in the article I(We) would classify as wealthy. Whoopee.
Sat. I did the grocery shopping.......when I came home I told me husband I am so glad that we only have one daugher still living at home......5 bags of groceries= $283.00. To eat healthy, it is expensive. Very expensive. I don't know how families with multiple children at home do it.
$283....and not one thing that was precooked, a mix, a snack in a box or bag......I even bake my own bread. Vegetables and fruit were the bulk of my purchase. :roll: I just don't know where this will all lead.............or end.

You're crazy. Eating healthy is far cheaper than going out getting fast food or frozen pizza. Not everything has to be organic or soy, ya know.

Since when are eggs, frozen broccoli, some turkey breast, etc expensive?!? That is certainly cheaper than the frozen pizza.

[Harlan Huckleby]

And in any case, it doesn't take specialized training or unusual knowledge to debunk this report. See my post above. Any person who knows about financial matters can understand how cynical and misleading this study is.

I haven't read your long post yet, am setting aside a hour curled up in front of the fireplace with my cocoa. I will get to it. This report has been out for 3 or 4 weeks, it appears to have been summarized and repeated in every media outlet on the planet. If it were as flawed as you state, there would be debunkings by the conservative think tanks and newpapers. Maybe they are out there, I don't see them.

[Harlan Huckleby]

They are looking at a few discrete three-year periods. The periods I'm focusing on are the second and third periods---1998-2000 and 2004-2006..... the data would almost certainly show that incomes for the highest earners went down from the period 1998-2000 to the period 2004-06. This would have been unacceptable, so they decided to just leave out

Oh come on. You're speculating.


This is a junk study by biased researchers

We're comparing a peer-reviewed study to your back-of-envelope analysis. I'm not dismissing your opinion because you are wrong, but because I have no way of judging it. And the more forcefully and definitively you state your conclusions, the less credibility you have, because you are not being realistic about your own limits in understanding all the technical issues.

[packinpatland]

According to the stats in the article I(We) would classify as wealthy. Whoopee.
Sat. I did the grocery shopping.......when I came home I told me husband I am so glad that we only have one daugher still living at home......5 bags of groceries= $283.00. To eat healthy, it is expensive. Very expensive. I don't know how families with multiple children at home do it.
$283....and not one thing that was precooked, a mix, a snack in a box or bag......I even bake my own bread. Vegetables and fruit were the bulk of my purchase. :roll: I just don't know where this will all lead.............or end.

You're crazy. Eating healthy is far cheaper than going out getting fast food or frozen pizza. Not everything has to be organic or soy, ya know.

Since when are eggs, frozen broccoli, some turkey breast, etc expensive?!? That is certainly cheaper than the frozen pizza.

I agree with you.....but you can't eat that every meal.....or would kids want to.
And I wasn't comparing it to going out to eat.
There wasn't one thing in my grocery bags that was 'organic' (fresh doesn't mean organic) or soy.
Partial....let's talk after you've got several kids sitting around your table.

[Scott Campbell]

On the contrary---as I stated above---including capital gains would almost certainly narrow the gap between top and bottom incomes, going from the period ending in 2000 to the most recent period ending in 2006, since capital gains were almost certainly a lot lower in the later period. .................................................. ...............................................

No valid conclusions can be drawn from it, except that people will believe anything if it supports their world view.


Very thoughtful post, and a fine use of critical thinking to arrive at your own conclusions instead of just blindly accepting what was written.

I'd only add this. Who cares about the "gap"? My financial performance relative to Bill Gates is hardly a measure of my financial ability to survive a recession. I should be comparing my income against what it was, and what it will take to survive a recession. I consider this article inflammatory, and designed to galvanize those who blame the wealthy for the current situation.

Extremely unhelpful finger pointing - which is where we'll always find Harlan.

[Scott Campbell]

Harvey,

What revisionist history book have you been reading to claim that Reagan "did wonders for the middle class." The reverse was true.

One of the first things he did as President was to fire all the federal air traffic controllers who went on strike.



As a former Air Traffic Controller and dues paying member of NATCA, I can assure you with 100% confidence - those assholes totally had it coming to them. I worked with and was friends with many strikers who later crossed picket lines. Reagan's heroic stance protected millions of other middle class workers and 100's of millions of middle class Americans from the 10,000 controllers whose illegal actions can only characterized one way - extortion.





On August 3, 1981 nearly 13,000 of the 17,500 members of the Professional Air Traffic Controllers Organization (PATCO) walked off the job, hoping to disrupt the nation's transportation system to the extent that the federal government would accede to its demands for higher wages, a shorter work week, and better retirement benefits. At a press conference in the White House Rose Garden that same day, President Reagan responded with a stern ultimatum: The strikers were to return to work within 48 hours or face termination. As federal employees the controllers were violating the no-strike clause of their employment contracts. In 1955 Congress had made such strikes a crime punishable by a fine or one year of incarceration -- a law upheld by the Supreme Court in 1971. Nevertheless, 22 unauthorized strikes had occurred in recent years -- by postal workers, Government Printing Office and Library of Congress employees, and by air traffic controllers who staged "sick-outs" in 1969 and 1970.
Negotiations between PATCO and the Federal Aviation Administration (FAA) began in February 1981. PATCO president Robert Poli demanded an across-the-board wage increase of $10,000/yr for controllers whose pay ranged from $20,462 to $49,229; the reduction of a five-day, 40-hour work week to a four-day, 32-hour work week; and full retirement after 20 years service -- a package with a $770 million price tag. The controllers argued that they deserved these considerations due to the highly stressful nature of their very important work. The federal government balked at these budget-busting demands of more money for less work, well aware that other federal employees were likely to take action to improve their lot if PATCO succeeded. The FAA made a $40 million counteroffer which included a shorter work week and a 10 percent pay hike for night shifts and those controllers who doubled as instructors. Further negotiations between Poli and Transportation Secretary Drew Lewis sweetened the pot even more. Nonetheless, 95 percent of PATCO's membership rejected the final settlement. The FAA began work on a contingency plan that would go into effect if a strike occurred.
Designed to take place during the busiest time of the year for airlines, the strike threatened major carriers like Braniff, Eastern, American and TWA, who reported losses of $30 million a day during the strike. These companies had been counting on a summer surge in business to offset losses due to fare and route deregulation which had spurred the growth of new, smaller carriers that effectively competed with the giants. Concern grew regarding the extent to which the strike would impact business and the economy. Air transportation was a $30 billion-a-year business; every day 14,000 commercial flights carried 800,000 passengers -- 60 percent of them on business trips -- while 10,000 tons of air cargo was transported daily. Airlines employed 340,000 people and revenue losses due to the strike forced some to resort to layoffs and management wage cuts. The fresh fruit, fresh flower and fresh fish markets depended on swift air transport, as did other industry in need of spare parts, health care services for blood supplies, and the financial system for paper fund transfers. But other businesses prospered thanks to the strike -- among them Trailways and Greyhound, the Amtrak rail service, and car rental agencies, as travelers sought alternate means of transportation.
To the chagrin of the PATCO strikers, and the surprise of nearly everyone else, the FAA's contingency plan functioned smoothly, minimizing the strike's effects. Approximately 3,000 supervisors joined 2,000 non-striking controllers and 900 military controllers in manning airport towers. The FAA ordered airlines at major airports to reduce scheduled flights by 50 percent during peak hours for safety reasons. Nearly 60 small airport towers were scheduled to be shut down indefinitely. The FAA's Oklahoma City training school, which normally produced 1,500 graduates per 17-21 week course, considered plans to increase that matriculation number to 5,500. (More than 45,000 people applied within four weeks of the strike's onset.) PATCO strikers made dire predictions about reduced air safety as a consequence of the 60-hour work week put in by their replacements, but in fact limited traffic and the extra monitoring efforts of the 33,000 Air Line Pilots Association members diminished the risk of an "aluminum shower," as controllers euphemistically called an air accident. Before long, about 80 percent of airline flights were operating as scheduled, while air freight remained virtually unaffected.
There wasnt much support for the PATCO strikers. The public sided with the government and exhibited little sympathy for individuals whose earnings were already well above the national average. AFL-CIO president Lane Kirkland accused Reagan of "brutal overkill" in firing the strikers, and another union leader complained that the president was engaged in "union-busting," but pilots and machinists continued to do their jobs in spite of the PATCO picket lines, while labor strategists criticized Poli for calling an ill-advised strike that damaged Labor's image. The International Federation of Air Traffic Controllers considered a boycott of U.S. air traffic to show support for PATCO, but it never developed. (Canadian and Portuguese controllers did engage in a two-day boycott.)
The federal dreadnought turned all its big guns on the hapless strikers. PATCO leaders were hauled off to jail for ignoring court injunctions against a strike. The Justice Department proceeded with indictments against 75 controllers. Federal judges levied fines amounting to $1 million a day against the union while the strike lasted. Over 11,000 strikers received their pink slips, while 1,200 went back to work within a week's time. Morale among the strikers was shaky. "I thought Reagan was bluffing," lamented one controller. In October the Federal Labor Relations Authority decertified PATCO.
Two months after the strike, a congressional committee report indicated that by January 1983 only two-thirds of the controllers needed for full and safe operation of air traffic would be in place, and recommended rehiring some of the strikers who had been fired. The administration curtly refused, and Transportation Secretary Drew Lewis declined even to meet with PATCO leader Robert Poli. By 1984 air traffic had increased by 6 percent while there were still 20 percent fewer controllers than had been on the job prior to the strike.
According to journalist Haynes Johnson, the decisive manner in which Reagan handled the PATCO strike convinced many Americans that he was "the kind of leader the country longed for and thought it had lost: a strong president" -- in sharp contrast to the widely-held view that Reagan's predecessor, Jimmy Carter, had been too indecisive. Reagan stressed that he derived no satisfaction from sacking the controllers. He pointed out that he was the first president to be a lifetime member of the AFL-CIO. And he was aware that PATCO had been one of the few unions to support his presidential bid. "I supported unions and the rights of workers to organize and bargain collectively," he wrote in his memoirs, " but no president could tolerate an illegal strike by Federal employees."

[Scott Campbell]

was during the Reagan administration that corporations began eliminating employee pensions.


And thank god they did. If GM had done so, maybe they wouldn't now start at a $3000 per vehicle cost disadvantage when competing with Toyota. There's no telling how badly this countries out of control unions damaged our country. There was a time when it was very difficult to tell the difference between organized crime, and organized labor.

Corporations should not be in the pension business. It led to unhealthy empleyee/employer relationships, and lifetimes of mediocrity for workers at a single company. Free agency in the workplace is a far better system, though cutting the corporate unbillical cord from the pension welfare mindset was a painful process.

[Scott Campbell]

When Reagan took office, our country had a budget surplus. When he left office 8 years later, our country had the biggest budget deficit in its history. Part of the deficit was due to the corruption in his massive military buildup. Have you forgotten how Defense companies bilked the government by charging $89 for a wingnut and $600 for a toilet seat?

Reagan's economic policies were hardly friendly to the middle or working classes.



I just couldn't possibly disagree with you any more. Reagan's military build up eliminated the greatest risk to this country that encompassed my entire childhood - the Cold War.

His economic policies set the table for the unprecedented economic growth of the 1990's. Reagan is one of the greatest Presidents in American history.

[GrnBay007]

designed to galvanize those who blame the wealthy for the current situation.


I don't blame the wealthy for the current situation nor do I have ill feelings towards them....although, I've seen people blindly fall into wealth that have never worked a day in their life after their mighty high school education and I will say I respect those people that worked their way to wealth much more.

Now, I'm curious. Since you made the comment above about "blame the wealthy for the current situation". Who or what is to blame specifically, iyo

[Scott Campbell]

designed to galvanize those who blame the wealthy for the current situation.


I don't blame the wealthy for the current situation nor do I have ill feelings towards them....although, I've seen people blindly fall into wealth that have never worked a day in their life after their mighty high school education and I will say I respect those people that worked their way to wealth much more.

Now, I'm curious. Since you made the comment above about "blame the wealthy for the current situation". Who or what is to blame specifically, iyo


I'm not saying you would blame the wealthy. I'm saying some would. Especially those pointing to the "gap" rather than a more meaningful metric.

Who to blame? I'd blame the mortgage industry for their responsibility for the housing collapse. Decades old rules regarding credit worthiness criteria just got thrown out the window, and created a super heated market - followed by the inevitable collapse. There are probably a bunch of suits who deserve jail time over this. But housing is only part of the equation.

Some of this is cyclical. Some of it may be related to the war. Some of it looks to me like our weakening ability to compete globally. Ultimately I think it's too complex to point fingers of blame. I'm not sure the blame game is a productive exercise anyway.

Better strap in, because I don't believe we've hit bottom.

[Scott Campbell]

....although, I've seen people blindly fall into wealth that have never worked a day in their life after their mighty high school education and I will say I respect those people that worked their way to wealth much more.



I had a friend from HS who made it big by the time he was 35. He was one of the poorest kids in our school, and had a chip on his shoulder that provided all of the motivation he needed to crush his competition and become wealthy. I'll never forget the first thing he told me after his net worth crossed into 8 figures - "it's a lot harder to keep it than it was to make it".

It makes sense if you think about it, and helps explain why so many lotto winners, athletes and other people who stumble into their fortune end up losing everything.

[Harlan Huckleby]

I consider this article inflammatory, and designed to galvanize those who blame the wealthy for the current situation.

Extremely unhelpful finger pointing - which is where we'll always find Harlan.

Facts are facts. It's possible that the authors of the report are brazenly dishonest as Idle suggests. I doubt it. You would need a debate between advocates *with experience in the nuances* to learn much more.

As far as "inflammatory" and "finger pointing", you don't get class stereotyping from me, ever. (You're the one who stigmatizes people working for $8/hour in box retail stores as incompetent.)

[Scott Campbell]

As far as "inflammatory" and "finger pointing", you don't get class stereotyping from me, ever.


I guess we'll have to agree to disagree then.

[Partial]

designed to galvanize those who blame the wealthy for the current situation.


I don't blame the wealthy for the current situation nor do I have ill feelings towards them....although, I've seen people blindly fall into wealth that have never worked a day in their life after their mighty high school education and I will say I respect those people that worked their way to wealth much more.

Now, I'm curious. Since you made the comment above about "blame the wealthy for the current situation". Who or what is to blame specifically, iyo

Irresponsible people.

[oregonpackfan]

was during the Reagan administration that corporations began eliminating employee pensions.




Corporations should not be in the pension business. It led to unhealthy empleyee/employer relationships, and lifetimes of mediocrity for workers at a single company. Free agency in the workplace is a far better system, though cutting the corporate unbillical cord from the pension welfare mindset was a painful process.

While their were some abuses by unions, they were designed to protect the rights from abuses by their employers.

The elimination of pensions by corporations is one indicator where loyalty between employer and employee has been badly eroded. Do you think employees are going to work to their maximum when employers callously regard them as expendable?

[oregonpackfan]

When Reagan took office, our country had a budget surplus. When he left office 8 years later, our country had the biggest budget deficit in its history. Part of the deficit was due to the corruption in his massive military buildup. Have you forgotten how Defense companies bilked the government by charging $89 for a wingnut and $600 for a toilet seat?

Reagan's economic policies were hardly friendly to the middle or working classes.



I just couldn't possibly disagree with you any more. Reagan's military build up eliminated the greatest risk to this country that encompassed my entire childhood - the Cold War.

His economic policies set the table for the unprecedented economic growth of the 1990's. Reagan is one of the greatest Presidents in American history.

Scott,

Too often Reagan is given undue credit for the dissolution of the Soviet Union. His military buildup had virtually nothing to do with the Soviet Union breaking up.

The Soviet Union broke up primarily because of:
1. massive internal graft, corruption, and inefficiencies within the country.
2. massive amounts of money spent on its military fighting border wars against Afghanistan and countries within their western boundaries seeking independence.

Again, Reagan came into the presidency with a budget surplus and left with a budget deficit larger than all the American presidents combined.

As far as the economic growth of the 90's, need I remind you that Bill Clinton was the President for eight of those years. He left the presidency with a budget surplus.

[Scott Campbell]

Do you think employees are going to work to their maximum when employers callously regard them as expendable?


Absolutely I do. If employees don't work to their maximum, they certainly become more expendable. Employers can't take care of any employees if they are tied to a business model that is not viable. Pension plans are not viable for business. That is why they are going away - not because Ronald Reagen was president. Pensions are not portable, and they artificially tie employees to their existing employers - restricting free agency. Pensions are incredibly unhealthy from both the employer, and employee side of the equation. That is why they are going the way of the dodo bird.

[Scott Campbell]

He left the presidency with a budget surplus.


......a surplus based on capital gains tax revenue from the phony baloney dot bomb bubble.........and with much of the White House furniture, and the country headed into a recession.

[Scott Campbell]

While their were some abuses by unions, they were designed to protect the rights from abuses by their employers.



I agree, that's how they were originally designed. But by the time Jimmy Hoffa was elected into his leadership position, the work of the Unions transformed into something sinister and corrupt. The ties to organized crime were widely known.

[GrnBay007]

the work of the Unions transformed into something sinister and corrupt.

No different than politicians. :P

[Scott Campbell]

the work of the Unions transformed into something sinister and corrupt.

No different than politicians. :P


Maybe East coast politicians. :P

[The Leaper]

Too often Reagan is given undue credit for the dissolution of the Soviet Union. His military buildup had virtually nothing to do with the Soviet Union breaking up.

Perhaps.

However, his skill as a communicator allowed him to create an opportunity for dialog with the Soviet Union where one had not existed before in decades.

You can attribute Russia's fall to whatever you want to...there certainly were numerous reasons for the breakup. However, there is no arguing that Reagan's personality and communication skills were key to bringing about that fall so rapidly and with so little hostility. Without Reagan, that fall may have taken another 10-20 years to occur.


As far as the economic growth of the 90's, need I remind you that Bill Clinton was the President for eight of those years. He left the presidency with a budget surplus.

The budget surplus only occured after the GOP took Congress in 1994 on the platform of balancing the budget, which ultimately was what ensured the budget surplus...and kept Hillary from creating billions in new spending. The reversal of the trend of increasing deficits actually was a result of the tax increases of Bush Sr. (which ultimately knocked him out of office). That reversal, by most trends I've seen, began around the 2Q or 3Q of 1992...BEFORE Clinton even took office.

[Harlan Huckleby]

the unions are prone to corruption just like every other human institution.

the sad thing about unions is that the only ones that are thriving are the unions for public sector employees, the place where they are least needed. I'm not against unionizing public employees, but it's obvious that the labor movement doesn't want to do the much harder work of organizing in the private sector.

[Zool]

the unions are prone to corruption just like every other human institution.
\
Bring on skynet

[Scott Campbell]

the sad thing about unions is that the only ones that are thriving are the unions for public sector employees, the place where they are least needed. I'm not against unionizing public employees, but it's obvious that the labor movement doesn't want to do the much harder work of organizing in the private sector.



Gotta love those trade show unions. You know, the union rules prohibiting non electricians from plugging in a phone, or a lamp. Safety first!

[packinpatland]

the sad thing about unions is that the only ones that are thriving are the unions for public sector employees, the place where they are least needed. I'm not against unionizing public employees, but it's obvious that the labor movement doesn't want to do the much harder work of organizing in the private sector.



Gotta love those trade show unions. You know, the union rules prohibiting non electricians from plugging in a phone, or a lamp. Safety first!

About ten years ago I did a trade show in NYC at the JacobJavitts Center....my boxes got soaked on the loading dock, because only union 'loaders' were allowed to touch them, and there weren't enough on the clock that day......they wouldn't let me carry the stuff in myself!

[Scott Campbell]

Was your stuff ruined?

[LL2]

the sad thing about unions is that the only ones that are thriving are the unions for public sector employees, the place where they are least needed. I'm not against unionizing public employees, but it's obvious that the labor movement doesn't want to do the much harder work of organizing in the private sector.



Gotta love those trade show unions. You know, the union rules prohibiting non electricians from plugging in a phone, or a lamp. Safety first!

About ten years ago I did a trade show in NYC at the JacobJavitts Center....my boxes got soaked on the loading dock, because only union 'loaders' were allowed to touch them, and there weren't enough on the clock that day......they wouldn't let me carry the stuff in myself!

It's no different here in Chicago at the McCormick Place or Stevenson Center. If you send a shipment over there for the trade show a trucker can literally wait hours to unload, and after the first hour truckers charge by the hour for wait time. Shipping to trade show places can be expensive!

[packinpatland]

Was your stuff ruined?

Thankfully, I had packed table coverings on the top of each box....they were VERY wet....but protected everything that was under them.
What bothered me the most about the situation was the 'nonchalantness' by the center's managers...........you know, the shrugged shoulders 'nothing we can do' crap. :evil:

[the_idle_threat]

They are looking at a few discrete three-year periods. The periods I'm focusing on are the second and third periods---1998-2000 and 2004-2006..... the data would almost certainly show that incomes for the highest earners went down from the period 1998-2000 to the period 2004-06. This would have been unacceptable, so they decided to just leave out

Oh come on. You're speculating.

This may be true, but I'm citing some basis for the speculation too, if you look at the economic data from those time periods.

I push the envelope by stating the authors of the study made it intentionally misleading, but there is no other rational conclusion if you understand how capital gains work, and especially if you consider why they limited their study to discrete three-year periods rather than considering all years (this is an argument I haven't even made above, but may be even more damning). They "conveniently" leave out too much information that would torpedo their point, and it's impossible to believe that was unintentional.



This is a junk study by biased researchers

We're comparing a peer-reviewed study to your back-of-envelope analysis. I'm not dismissing your opinion because you are wrong, but because I have no way of judging it. And the more forcefully and definitively you state your conclusions, the less credibility you have, because you are not being realistic about your own limits in understanding all the technical issues.

I understand your resistance to my argument. People don't want to agree with someone who is overbearing and comes across as a fist-pounder. I do that at times. I call it the "Tyrone" syndrome.

But you're speculating (incorrectly, I might add) when you say I don't understand the "technical issues." You can assume that I have a "limited understanding" just because you have a limited understanding, but some people actually work in this field.

Is this study really "peer reviewed," or are you just assuming that? I missed where it was published in a professional journal, where it would gain the attention of economic peers. It appears to be self-published by a self-identified liberal think tank. Not exactly the place where reliable studies are born.

Of course, unquestioning journalists who are sympathetic to the findings might just pick it up and run with it. I think that's what's happened here. And of course, they probably only read the press release. You and I looking at the actual study have probably done more research than most journalists did.

Self-published releases from such places are unlikely to gain much attention from actual economists, or even from serious critics, who would consider the source and not waste the time. Who has the time to debunk all the garbage coming from biased think tanks? How many think tanks are there just in the D.C. area? How 'bout in the rest of the country?

And I understand when you claim that I'm a voice in the wilderness and that's why you think I'm mistaken (although I answer that argument in the paragraph above), but to say I'm wrong because you haven't seen criticism on blogs---that's a tad insulting. Why do I lack the ability to understand this study, but some anonymous blogger somewhere else would be an authority?

All that being said, I understand that you want to believe I'm wrong, so I can't convince you. Go ahead and believe this study's clearly erroneous conclusion.

I argue too forcefully and---even more significantly---you want to believe the study. People believe what they want.

[the_idle_threat]

On the contrary---as I stated above---including capital gains would almost certainly narrow the gap between top and bottom incomes, going from the period ending in 2000 to the most recent period ending in 2006, since capital gains were almost certainly a lot lower in the later period. .................................................. ...............................................

No valid conclusions can be drawn from it, except that people will believe anything if it supports their world view.


Very thoughtful post, and a fine use of critical thinking to arrive at your own conclusions instead of just blindly accepting what was written.

I'd only add this. Who cares about the "gap"? My financial performance relative to Bill Gates is hardly a measure of my financial ability to survive a recession. I should be comparing my income against what it was, and what it will take to survive a recession. I consider this article inflammatory, and designed to galvanize those who blame the wealthy for the current situation.


Thanks Scott. I agree that the "gap" is irrelevant. People can't improve their own financial situation by focusing on what other people have. It's especially unproductive to waste time banging on the "rich" when trying to improve things for the poor. It just sows discord and solves nothing.

Of course, the Economic Policy Institute, which authored this study, thinks the income gap is a HUGE problem, and that's why they have incentive to lie about it in a big fat "research" report.

[Scott Campbell]

Was your stuff ruined?

Thankfully, I had packed table coverings on the top of each box....they were VERY wet....but protected everything that was under them.
What bothered me the most about the situation was the 'nonchalantness' by the center's managers...........you know, the shrugged shoulders 'nothing we can do' crap. :evil:


Well at least your stuff was ok. I think I would have been bothered more by by the bill for their "work".

[Harlan Huckleby]

especially if you consider why they limited their study to discrete three-year periods rather than considering all years (this is an argument I haven't even made above, but may be even more damning).

They are using the Census data that was available for those three year periods. Census data is not collected continuously. There is no conspiracy. If they had continuous data I expect they would use it.


I understand your resistance to my argument. People don't want to agree with someone who is overbearing and comes across as a fist-pounder.

Well, true enough, you are a prick, this goes without saying. But I wasn't holding it against you.
I think you are smart and knowlegable enough to ask intelligent questions, but not capable of providing intelligent answers. I'm not saying that your criticims are wrong, just that it is not possible to analyze them. You can pretty much throw any intelligent-sounding accusation up against the wall. I don't have the knowlege or time to make sense of them.

This study was published everywhere. If the study is as nakedly flawed as you allege, there ought to be a response somewhere by people who work in the field and know the terrain.

[Harlan Huckleby]

Of course, the Economic Policy Institute, which authored this study, thinks the income gap is a HUGE problem, and that's why they have incentive to lie about it in a big fat "research" report.

Of course you are not approaching this from an ideological viewpoint. :lol:

[LL2]

You are worried about the income gap getting wider, but you should also worry about losing your desk job.

You have 7 years to learn Mandarin

Forget cheap imports. China's rise will soon be a force on Wall Street and Main Street and in Silicon Valley.

By Geoff Colvin, senior editor at large

(Fortune Magazine) -- Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer's games, the event was meant to mark China's debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world's dominant economic superpower much sooner than expected - not in 2050, but in 2015.

While short-term investors are already cashing in on China's growth by playing the global commodities boom, smart long-term thinkers are contemplating what happens when China matures from an exporter of cheap goods to a competitor in sectors where the U.S. is dominant - technology, brand building, finance. China has almost wiped U.S. makers of low-value items like toys and socks, but by 2015 it may threaten Apple (AAPL, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Procter & Gamble (PG, Fortune 500). It will increasingly influence the S&P 500 and the mutual funds in our 401(k)s. So it's worth looking at how that will happen, what it means, and what anyone can do in the seven years before the baton is passed.

Just using the exchange rate to convert China's GDP into dollars isn't helpful in comparing the two economies, because China controls its exchange rate; by that method, China's economy might not pass America's for decades. Exchange rates apply only to tradable products and services; they aren't very useful in valuing nontradable goods in a country like China that is much poorer than the United States. So we need some way to compare the real value of China's economic output with America's, and economists have developed one. It is called purchasing power parity.
For example, Chinese construction workers earn a whole lot less than Americans do, yet they can still build top-quality buildings. If we used the exchange rate, the value of a new skyscraper in Shanghai would count much less toward China's GDP than an identical building in Chicago would count toward America's, which makes no sense. Purchasing power parity corrects the problem.

Will China take the crown?

Angus Maddison's forecast (which uses purchasing power parity) isn't built on outlandish assumptions. He assumes China's growth will slow way down year by year, and America's will average about 2.6% annually, which seems reasonable. But because China has grown so stupendously during the past decade, it should still be able to take the crown in just seven more years.
If that happens, America will close out a 125-year run as the No. 1 economy. We assumed the title in 1890 from - guess who. Britain? France? No. The world's largest economy until 1890 was China's. That's why Maddison says he expects China to "resume its natural role as the world's largest economy by 2015." That scenario makes sense.
China was the largest economy for centuries because everyone had the same type of economy - subsistence - and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.

So how should we make the most of our seven-year grace period? For companies: Focus on getting better at your highest-value activities. Just because the Chinese will be fighting you in the same industries doesn't mean you'll lose. (Investors, remember that China bought $3 billion of Blackstone (BX) at the IPO price of $31 last summer, and the firm is now trading at $19.) It only means you'll have to work harder to win.
For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost. For government leaders: Improve U.S. education above all.

Those are the issues in China's becoming No. 1 that we most need to focus on. And as with so much else in China's recent history, we'll need to worry about them much sooner than we expected.

[Scott Campbell]

Great article. The answer for everyone is pretty much the same whether you're rich or poor - you better be ready to compete.

[the_idle_threat]

I think you are . . . not capable of providing intelligent answers. I'm not saying that your criticims are wrong, just that it is not possible to analyze them. . . . I don't have the knowlege or time to make sense of them.

Does this mean my answers are unintelligible or just that you can't figure them out? :?: Sounds like the latter to me.



Of course, the Economic Policy Institute, which authored this study, thinks the income gap is a HUGE problem, and that's why they have incentive to lie about it in a big fat "research" report.

Of course you are not approaching this from an ideological viewpoint. :lol:

I'm saying they have reason to be biased (which is readily apparent if you look at their website) and everyone knows statistics can lie. They're not going to produce a costly study that fails to reinforce their worldview.

It's true that I disgree with their worldview, but the "ideology" that makes me so adamant about this is that I depise their demagoguery,

[Harlan Huckleby]

I think you are . . . not capable of providing intelligent answers. I'm not saying that your criticims are wrong, just that it is not possible to analyze them. . . . I don't have the knowlege or time to make sense of them.

Does this mean my answers are unintelligible or just that you can't figure them out? :?: Sounds like the latter to me.

I get your points, but I can't weigh them because I don't know enough about the topic. All I can do is speculate, just like you. For instance, you were all head-up about the discontinuity in data, now I'm pretty sure that is just because Census data is discontinuous, and your conspiracy theory is wrong. But neither of us REALLY know because the answer may be obscure.


It's true that I disgree with their worldview, but the "ideology" that makes me so adamant about this is that I depise their demagoguery,

Again, if their report really is as bogus as you allege, the conservative think tanks would be issuing a response, since the report was so widely distributed.

And BTW, I was only kidding when I called you a prick. You're more of a nutsack type.

[MadtownPacker]

What the hell is a lame ass, non job having scumbag like Harlan doing in a thread about working people???

Dont you peeps know he aint nothing but a trust fund baby, leaching off his families wealth?

This is kinda like sex themed threads. He gets all opinionated about something he doesnt even do any more.

[Harlan Huckleby]

Mad, you've been so sweet to me lately, I was thinking of giving you a little piece of my giant trust fund. Mentioned it to dad's attorney just this morning. You know you are like family to me.


Your tone is very disturbing, I'm having second thoughts.

[MadtownPacker]

Shut your filthy trap!!

You think I would sign some shit from you? Probably would be some kinda indentured servant contract.

[Scott Campbell]

You know you are like family to me.



Low blow.