Income Mobility: How the Liberals Lie about the Income Gap.

US Income Mobility

We are frequently inundated with frantic cries from the left concerning the widening income gap, or how the rich keep getting richer and the poor keep getting poorer. These are, of course, emotional arguments designed to pluck at our heart strings as opposed to rational arguments based on facts and data.

One of the unspoken assumptions in that emotional argument is that “the rich” are invariably the same group of people and that “the poor” are likewise the same. This implicit assumption is key to the emotional reaction that the liberals are counting on because it evokes images of a huddled mass of helpless and starving poor who are trapped in a system which exploits them on a daily basis, and unfairly so. But does this assumption stand up to rational scrutiny?

A November 13, 2007 Wall Street Journal article titled Movin’ On Up discusses some of the findings in a U.S. Income Mobility Study conducted by the Treasury Department which exposes these emotional appeals as being just “so much populist hokum:”

The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.

Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.

So what does this mean? In the ten year period being studied almost 60% of those who started out in the lowest income group in 1996 had made use of the opportunities afforded them in the United States to significantly improve their circumstances by 2005, with 25% of them having risen to the middle and upper-middle income quintiles, and with around 5.3% having completely reversed their fortunes to move up to the top of the income strata. So rather than a stagnant huddled group of people trapped in poverty, as the liberals would like us to believe, we have significant evidence of a dynamic system which affords a wealth of opportunity for everyone to improve their lives if they so choose.

But what of the rich, you ask? The upper 5% or even 1% of the income earners? Well, as the graphic above illustrates these groups have not faired nearly as well since they are the only groups to experience an actual decline in their median incomes over the study period. The upper 5% had their median incomes decline by 6.8% and the upper 1% had their median incomes decline 25.8%.

In a period where the lowest quintile saw their median incomes increase by 90.5% (almost double) the upper 1% actually lost about 25.8% (about one quarter) of their median income. This is hardly an example of the rich getting richer while the poor are getting poorer. Clearly the group that benefited the most over this 10 year period were the poorest in the nation, not the richest. Yet the liberals persist in claiming exactly the opposite.

Also encouraging is the fact that the after-inflation median income of all tax filers increased by an impressive 24% over the same period. Two of every three workers had a real income gain — which contradicts the Huckabee-Edwards-Lou Dobbs spin about stagnant incomes. This is even more impressive when you consider that “median” income and wage numbers are often skewed downward because the U.S. has had a huge influx of young workers and immigrants in the last 20 years. They start their work years with low wages, dragging down the averages.

In other words, overall the median income (in real, inflation adjusted dollars) increase by 24% which means the everyone benefited to some level. Two-thirds of the workforce did better throughout the study period and the one-third that lost out were predominantly in the higher income quintiles:

Only one income group experienced an absolute decline in real income — the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been “rich” merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall. Others may simply have not been able to keep up with new entrepreneurs and wealth creators.

The key point is that the study shows that income mobility in the U.S. works down as well as up — another sign that opportunity and merit continue to drive American success, not accidents of birth. The “rich” are not the same people over time.

So much for that implicit assumption that the rich are always the same group of people. Clearly they are not. This also deflates the class envy notion that the rich only inherited their money, that they didn’t really work for it. To go from middle or even lower incomes to the upper income brackets takes work and as this study shows the percentages of people moving both up and down the income ladder is significant.

All of this certainly helps to illuminate the current election-year debate about income “inequality” in the U.S. The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn’t remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation.

And this last point is key. America is NOT the permanently stratified, class based society that the liberals would have you think. The American dream is alive and well and providing opportunities for people of all income levels. As has been the case all along, risk taking and hard work are the keys to success, not the luck of the draw in nature’s parent lottery.

 

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4 Comments on “Income Mobility: How the Liberals Lie about the Income Gap.”

  1. Ren says:

    Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any ‘humanitarian’ progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool.. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Prozac, Zanex, Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, couch potatoe, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the ‘charitable’ contribution is almost entirely offset.. Not to mention the opportunity to plug their name, image, product, and ‘good will’ all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to ‘tax revenue’. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. ITS THEIR OWN DAMN FAULT. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. So when people forgive the rich for all of the above and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. If these filthy pigs want to be over-paid, then they should be over-taxed as well. Remember: The richest 1% STILL own 1/2 of all United States wealth EVEN AFTER taxes, charity, and PR CRAP. A similar rule applies worldwide. There is nothing anyone can say to justify that. Anyway, there is usually a higher state and local burden on the middle and lower classes. They get little or nothing without a local tax increase. Otherwise, the red inks flows. Service cuts and lay-offs follow. Again, because of the OBSCENE distribution of bottom line wealth in this country. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Lower crime rate, more widespread prosperity, stable job market, free and clear assets, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can’t even afford basic health care. ALL BECAUSE OF GREED. I really don’t blame the 2nd -5th percentiles. No economy could ever function without some reasonable scale of personal wealth and income. But it can’t be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, they will jump to small minded conclusions about ‘jealousy’, ‘envy’, or ‘socialism’. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

  2. goright says:

    I approved the comment above because the author is obviously passionate about their position and because it contains no profanity.

    I will point out the following two items in response:

    (1) The size of the economic pie changes over time and is not static as is alluded to above.

    (2) The entire point of my article was that the “1% club” as you call it isn’t a club at all, or at the least it’s membership changes significantly over time contrary to your obvious assumptions.

  3. Fry says:

    Doesn’t this mean that social programs like public education, unemployment, medicare, and so forth actually do what they are suppose to and help get the poor out of poverty. This was seem to shoot down liberal rhetoric about income disparity and conservative rhetoric about slavish social programs. What we need now is to find out why their income increased.

  4. goright says:

    I tend to agree which is why I posted this piece. While one can always look at the disparity in incomes between the highest incomes and the lowest incomes the point here is that any such analysis is flawed and misleading if presented from the false perspective that the same people are at the top and the bottom over time. They simply are not.

    The real lesson here, IMHO, is that the American dream is alive and well in that your truly CAN go from rags to riches in this country with nothing more than your own initiative as this data demonstrates.


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