Economic Mobility is Real

Wrong, Muirgeo. The free market is not dependant on government action. The political class is dependant on government action. Your confusion stems from the fact that the political class has its tentacles firmly attached to the free markets and begins screaming the minute the flow of juice lessons for some reason. The free market would let the losers die to make way for fresh growth. Its the political class that keeps them going.

I know that question wasn't meant for me but if the Fed had not bailed these lenders and borrowers out, their situation would be worse.

Posted by: Methinks

Sounds like we have some point of agreement...the so-called free market seems VERY dependent on government action, over-site and regulation for its very success and survival. How can that be?

And yet your only solution seems to be more rules and regulations to create more ways for those with money to influence and manipulate the system to their advantage.

Posted by: Keith

This occurred because of relative deregulation and loosening of the rules. Not the other way around as you suggest. This is a testament to the failure of laissez faire capitalism.....AGAIN!

My point would be that these SOB's who want to use the backing of the Fed to make schiester deals screwing and stealing from an unwary public are not operating in a free market system. So indeed if they want to use our money they need to follow the rules we set up.

This sort of stuff just proves what BS and how incoherent the libertarian ideas of deregulated markets can be when put to the real world. And it is these ideas that allow for massive wealth and income inequality NOT true competition or free market principals. And again over and over we see the supposed libertarian coming to defend these non-market anti-competitive forces. It's as if you all included raiding the public treasury and undermining our democratic institutions as all part of the market system. It its to the point that the liberal economist try to conjure up untruths about what the facts say truly about income mobility. Covering for a unworkable ideology leaves them no other choice.

Bottom line is Wall Street should take the hit for the subprime mess and the liquidity crisis. The fact is average Americans will more likely pay for it in the short and long term while some with well set up tax havens are walking away with the last dollars of some very poor yet hard working citizens. It's all a big transfer of wealth facilitated by the wealthy using government to their ends.

Further, the liberal (classic) economy has had its chance to prove itself ever since Reagan and the deregulators took over. Now as in 1929 we see again its abject failure. And now again we need another FDR to set the rules straight while once again ignoring the repeated yells, shouts and objections of the ill-got privileged classes.

"These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain they seek to hide behind the flag and the Constitution. In their blindness they forget what the flag and the Constitution stand for. Now, as always, they stand for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike." FDR

Methinks

My point is that the Fed acted in the best interests of the economy as a whole. The FOMC would never have cut rates if the economy was not sending out signals that it required more liquidity. If core CPI was reading an annual increase of 6% rather than 2% the fed would have increased the fed funds rate, not lowered it. As a result of the Fed's actions, some financial institutions and borrowers got a certain amount of relief, but what relief they got was not sufficient to prevent 2% foreclosure rates and multi billion dollar write offs.

By the way, why are the financial institutions continuing to report multi billion dollar losses on the write down of CDO's if the Fed actions represented a bailout? - Bruce

I know that question wasn't meant for me but if the Fed had not bailed these lenders and borrowers out, their situation would be worse. Some large institutions may go into bankruptcy and more people who had no business buying a 6,000 square foot home will default on their mortgages. The Fed has been squashing interest rates until recently. The market has been squashing the risk premium. Now, instead of allowing the market to correct itself and allowing some of the biggest risk takers in the market to pay the price of taking such giant risks (and learn a lesson), the Fed has exhibited a willingness to do whatever it takes to bail them out of bankruptcy - consequences be damned. The lenders will still have losses but those losses won't be equal to the risks that they took.

Qoute from muirgeo: "The social engineering IS done by those with money controlling the rules to their favor. How hard is that to see when you see the raping of people from their homes funneling money upwards to Hedge fund managers who pay 15% tax on their incomes while middle class working PRODUCTIVE people pay 30% or more and the AMT to boot."

And yet your only solution seems to be more rules and regulations to create more ways for those with money to influence and manipulate the system to their advantage.

muirgeo

I would not call your posts amateurish. That would be an insult to non-professionals everywhere. That said, I will respond to your post. The role of the Fed is to provide a sufficient level of liquidity relative to the economy. In lowering the fed funds rate, the fed fulfilled that purpose. Who "wins" and "loses" when the Fed acts should be of no concern to the FOMC.

By the way, why are the financial institutions continuing to report multi billion dollar losses on the write down of CDO's if the Fed actions represented a bailout?

Unit,

Muirgeo believes that you and I should pay for his retirement and health care, and any other income-transfers that flow in his direction.

In fact, the only time Muirgeo disagrees with the dictatorship of the proletariat is if the proletariat desires a road be built that passes in front of a WalMart. He's quite the definition of a classic liberal, isn't he? :-P

LMAO @ Python! However, if you want to stay in kindergarten, you need to write 'then' when you should be writing 'than' from now on.

This must be kindergarten, I typed "affects" instead of "effects".

(I find that levering paper more than 8 to 1 is just too risky. ;-P )

But I digress, back to the topic, whatever that was... :-)

Loaned to financial institutions where investors and depositors who are paying their mortgages risk losing their savings. Those institutions are not protected from defaults, as I understand it; they are simply more liquid as a result, and will still lose billions, even though they will pay back the infusion that has occurred at the lower rate.

Those institutions are kind of protected from default - if they're large enough. The institutions lent far too much money to far too many people with poor credit, at risk premiums that were also far too low and asked no questions and required no down payment. There was just no risk control - not at the banks nor at the hedge funds that loaded up on crappy Z-tranche CDO paper and then levered it 10 to 1. The Fed has made it clear that it is willing to bail out the lenders (read: degenerate gamblers) regardless of inflation, a falling dollar and moral hazard. Just this morning, a Fed governor said that he's not going to let fears of moral hazard stand in the way of growth. Today, while equities partied like speedballing hippies in response to the higher expectations of a bigger Fed rate cut, Eurodollar futures implied higher future interest rates.

The homeowners, on the other hand, will just go back to renting. No down payment means that they didn't lose anything except points off their credit - point deductions they've well earned.

The only people who are really getting screwed, as you point out, are those who are responsible savers. Ultimately, it is they who will pay the piper.

not that this has anything to do with the original topic, but switching topics is a favourite debating strategy of Muirgeo and his/her/its ilk.

muirgeo:

"I'm surprised a professor of economics would point to this data when discussing income mobility and not mention the PSID (Panel Study of Income Dynamics)"

more muirgeo:

"I referenced ( PSID (Panel Study of Income Dynamics) from the U of Michigan )the actual data that an economist should use when talking about income mobility in America."

The Thomas Sowell article linked in the post addresses this. Sowell, and the graph in the post cite not the Census, but the IRS, which along with the PSID are the only two tracks that follow individuals. The last point in Sowell's article is that the PSID's numbers do in fact agree with the IRS's.

So the problem is not that the source is not PSID, but that muirgeo is not aware that PSID is not the only compiliaton of individualized income trends. When you think about it, you would expect the IRS to have individual tracking, wouldn't you?

muirgeo:

"Why not instead of flooding the banking system with billions flood the homeowners who took out bad loans with the billions so they could directly pay off their debts while the guys on Wall Street took ALL of the hit?"

Seems to me that the money the banking system acquires as a result of lowered rates is not "given away" -- it's loaned. Loaned to financial institutions where investors and depositors who are paying their mortgages risk losing their savings. Those institutions are not protected from defaults, as I understand it; they are simply more liquid as a result, and will still lose billions, even though they will pay back the infusion that has occurred at the lower rate.

Are you proposing, instead, that the fed lend this money to the basically unqualified borrowers who already aren't making their payments as it is? Or are you saying we should just "give" them the money to pey their mortgages with? I kind of favor the plan where the fed gets its money back, thank you.

It's like trying to catch a greased hog. Aren't we talking about Krugman's assertions such as: "...but since the early 1970's the hourly wage of the typical worker has barely kept up with inflation."?

Posters here have shown:

a) incomes aren't stagnant. Most people improve their incomes during their lifetime. The apparent stagnation is due to statistical affects (taking of medians) and bad logic.

b) even if incomes were stagnant, look at how much more stuff you can do/buy with your money now compared to Kruggies 1973. Therefore, regardless of income stagnation, money's ability to improve quality of life has increased, and isn't that more important than the actual money anyway?

Shall we finish one topic at a time, or is changing subjects the only way there is to "win"? How did Iceland get involved? Geez, leave those guys alone.

Please link a PSID statement that says that most American individual's wages/income "barely" keep up with inflation.

From my personal life, I don't know a single person who is not much better off now economically than they were in the 70s or 80s. Maybe I need to hang out at the NY Times more.

"Money interest like religion needs to stay clear of the running of our government." - Muirgeo

Yes and cancer needs to stop, bacteria need to quit invading my body on a regular basis, etc... but how do you accomplish that? Academics have figured out that the only way to get money out of politics is to remove power from centrally located seats in DC and decentralize decisions via market solutions. Do you agree? If you don't then you should stop claiming that you're the true classic liberal.

Python,

If you think this data shows we have "good" income mobility then you are in Kindergarten . I referenced ( PSID (Panel Study of Income Dynamics) from the U of Michigan )the actual data that an economist should use when talking about income mobility in America.

http://krugman.blogs.nytimes.com/2007/11/13/the-wsj-goes-green/

A lends B money.

B turns out to be a worse credit risk than though and doesn't pay money back.

A loses $Billions.

Moral of the story (obviously):

B is a helpless victim of A's excessive greed.

Yes, diz, this is clearly the left's new definition of "predator".

How hard is that to see when you see the raping of people from their homes funneling money upwards to Hedge fund managers who pay 15% tax on their incomes while middle class working PRODUCTIVE people pay 30% or more and the AMT to boot.

Is it just me or is this one of those ditties one comes up with when one doesn't actually know what one is talking about but has heard certain vocabulary words slithering out of politicians like Barney Frank? It doesn't even begin to make sense.

Most hedge funds don't have long term capital gains and if they have them, they are not a significant. I fail to see how losing one's property by making the stupid decision to buy more home than one can afford with a zero down-payment and an adjustable rate is equivalent to rape. these people were renters before, they lost nothing, they are renters again. The lender, however, is screwed. Anyone who has actually done the math (i.e., compared NPV's) knows that there is no financial advantage in owning a house vs. renting it.

How all this raping is somehow funnels gobs of money to hedge funds (which lost by buying the loans of these losers) is a mystery to anyone with the ability to think logically. Of course, we could use the force of government, as Muirduck would undoubtedly prefer, to make these hedgies disappear in favour of more "productive" workers. Of course, hedge funds are just pools of money for investment purposes and provide significant liquidity in the market. Without liquidity, the risk premium would be much higher and fewer deals will be done which means less work for "productive" people.

Which brings to mind two other issues. It's because there was so many hedge funds (and other investors) looking to deploy capital that risk premiums were squashed and a lot more people could suddenly afford houses. In early July, a high yield fund manager was telling me that high yield paper was coming to market pricing about the same as AAA paper.

The other thing is Muirnonsense's claim that productive people pay more than 30% in taxes. At the same time he/she/it continually screeches about the growing income inequality and how useless and userious and small the top 20% (the group that actually pays the 30+% rate) is. Now, it seems that either everybody is rich enough to pay 30% in taxes or the only productive members of society are in the top 20% of earners. I'd ask which it is, but past experience has taught me that the answer from this particular poster will be even more incoherent, for this is the way of the left.

Rust_belt,

What you say about tax avoidance may be true for some in the top income bracket (mostly those who own businesses), but I assure you that you're absolutely wrong about everyone in that bracket.

Isn't it strange how when you basically prove their is income mobility, the Trollskys change the argument to income disparity? Did they surrender on the mobility part?

Someone up above actually said:

"Other countries like Iceland, Norway, Ireland, Switzerland have similar or better per capita incomes and much less income inequity."

(I'm sure he/she meant "inequality", because it's not clear how anyone would measure "inequity" from stats.)

When trying to see how similar things are, what fool looks at small homogeneous societies and compares them to large heterogeneous ones?

Total population of Iceland, Norway, Ireland, and Switzerland? 16.5 million, with minority and immigrant populations too small to even list (yes, Ireland does have immigrants now, but compared to entire population their number is very small.)

There are more a) people, b) young people, c) immigrants, d) millionaires in any one of 4 American states (Florida, California, New York, and Texas) than there are combined in the countries listed above. Yet, someone wonders out loud why those other 4 countries have less income diversity. Is this kindergarten?

Bruce,

What follows may seem and may indeed be very amateurish and show my lack of economic education but please entertain me.

Remember 1 or 2 months ago when the liquidity crisis hit mostly related to the sub prime lending fiasco? Do you remember Jim Cramer of CNBC's Mad Money screaming and crying and yelling at the Fed to do the right thing? Him and all the econ talking heads and pundits were screaming it was up to the Fed to do the right thing. You remember that right. Apparently the right thing to do was to drop rates and flood billions of dollars into the system to save Wall Streets collective arses.

Why not instead of flooding the banking system with billions flood the homeowners who took out bad loans with the billions so they could directly pay off their debts while the guys on Wall Street took ALL of the hit?

Isn't that a fair question?

Is there something I'm missing as to why this wouldn't happen except for the obvious?

IMO it is this kind of stacked deck that makes me claim that people of means do not always earn their money. I don't despise the wealthy...I despise those who basically steal from the system...a system they set up to transfer wealth...and I despise when people who despise social welfare for individuals of little means try to tell me these wealthy people earned their wealth rather then gained it from government welfare.

No Bruce let's consider the Fed, the Hedge fund managers, the speculators, the bankers and the cashiers who lost their house to all of the above.

Facts:

A lends B money.

B turns out to be a worse credit risk than though and doesn't pay money back.

A loses $Billions.

Moral of the story (obviously):

B is a helpless victim of A's excessive greed.

Stephen Reed,

The Department of the Treasury acknowledged that shortcoming in the technical index of the paper. However, they also presented arguments showing why death of the 1996 taxpayer was the most likely reason for a missing 2005 tax return. The second most-likely reason for missing returns is that late-filers were omitted, and late filers tend to be higher income workers with more complicated returns. They did not believe the number of persons with below-threshhold incomes in 2005 was very large:

"The remaining attrition due to factors including non-complienace and income falling below the falling the filing threshold appears to be relatively small."

There is a problem with this data that I see. Only those who filed a tax return in both 1996 and 2005 were included in the data set. This means that if someone filed a tax return in 1996 but not in 2005 because they did not earn enough income to need to file a return, they were not included in the set. We are thus missing many people.

What we need is a comprehensive survey/analysis of a randomized sample of anyone in the population and then follow up with them 10 years later.

Muirgeo,

I don't see any major difference between the legacies of FDR and Reagan. Both brought about massive growth of the political class, as has every regime since.... maybe Coolidge. Yes, there is infighting within the political class, and the losers are exceptionally disappointed when they are cut off from the revenue stream, but who wins has little if any impact on those of us in the non-political class. We know only that the rent will steadily increase no matter which of the psuedo-parties is in charge. Its okay though. We don't depend on government. The world changes and we adapt.

muirgeo

Sorry if I sound uncaring, but the majority of the people losing their houses - including many real estate speculators - made poor financial decisions. Similarly, the majority of the people who are permanently trapped in the lowest income quintile made poor life decisions. Government cannot, and should not, be in the business of protecting people from their own stupidity even if government claims to be acting in the name of fairness and equality.

As to the players in the sub prime mess, which you seem to be referencing, my observations are as follows:

As far as the Fed goes, in my humble opinion, they picked 5.25% as a target fed funds rate and kept raising rates until they hit their target, oblivious to economic impact. In doing so, they took too much liquidity out of the economy. They should have stopped raising rates at 4.5% and then responded to the economic feedback. Now they are backtracking to undo the damage they've done. Having said that, I look at them as any other group of fallable human beings, not as a sinister cabal plotting against the working man.

Regarding the financiers of bad real estate loans, banks, hedge funds, brokerage houses etc, they did very well during the real estate boom. They were opportunistic. I've never known that to be a bad thing in business. Are businesses supposed to allow opportunities to pass them by? Right now, with the market soft, they seem to be taking it on the chin, individually and collectively. Isn't that the way markets are supposed to work?

Finally, while I'm sure some individuals were the victims of fraud, most of the loans were transacted with full and fair disclosure. I see all of this as normal ordinary business dealings. Could you please point to specific, widespread examples of "corruption, graft and deceit" involved?

"That's fine but I'd consider myself closer to a true liberal (classic) and a true supporter of competition and markets then some one like yourself who absurdly denies these non-market by-passes to wealth aided by the very government excesses one like yourself should be shouting down"

I'm not sure this even makes sense, but can you provide a single example of the commenter you're addressing, or the hosts of this site, supporting "non-market by-passes to wealth?" Or is this just something you imagine they support because they don't support non-market equalization of wealth?

The progressive idealists created the system, Muirgeo.

Posted by: Randy

I don't agree. I think it's no coincidence that when you compare FDR and his post 30 years with Reagan and his post ~30 years its obvious that the two ideologies result in different distributions of the pie and arguably that the latter results in economic and political instability.

Socialism is when the government takes over the economy...Libertarianism (laissez faire capitalism) is when the economy takes over the government. That's what Reagan has brought to us.

I support neither and realize the importance of a well regulated market with political power diffused among the people and the branches of government with strict adherence to the constitution. Money interest like religion needs to stay clear of the running of our government.

It seems to me that concern about income inequality is one of the dividing lines in current politics. Free market conservatives do not care about income disparity so long the disparities were the results of free exchanges and were not the result of government coercion. Liberals seems to be quite concerned about income disparities.

I fall into the free market conservative camp. The one area I agree with the liberals on is that I am against people becoming rich through government interventions. On the other hand, I am not at all concerned that Bill Gates is much richer than I. In fact, I am grateful that he has chosen to live such a productive life and has done so much to increase the wealth of almost everyone.

Sorry muirgeo, you're implying that the positions of our hosts are not honestly arrived at. I think you're full of crap.

Posted by: cpurick

That's fine but I'd consider myself closer to a true liberal (classic) and a true supporter of competition and markets then some one like yourself who absurdly denies these non-market by-passes to wealth aided by the very government excesses one like yourself should be shouting down...not supporting or making every excuse under the Sun for.

As an example, let's consider computer engineers and supermarket cashiers.

Posted by: Bruce

No Bruce let's consider the Fed, the Hedge fund managers, the speculators, the bankers and the cashiers who lost their house to all of the above.

I agree that engineers and cashiers should be paid on productivity and competitive factors. What I listed above is a mangled wreck of corruption graft deciet and opputunism disguised as EARNED WEALTH in a so-called free market. Please stop confusing the two.

muirgeo:

"When I see the liberal economist here trying to finagle the truth and facts to tell us there is no significant change in income inequality, in wealth accumulation or that income mobility is better then it is or that the science of global warming is in doubt... then it is clear to me who's ideology needs propping up by obfuscating the facts and denying reality"

Sorry muirgeo, you're implying that the positions of our hosts are not honestly arrived at. I think you're full of crap.

Bruce,

Agreed that inequality is a political/philosophical issue. It seems obvious to me that inequality is a good thing (who would work without it), but it sure seems to bug the hell out of the progressives, or at least playing it up has been a big winner for them in terms of political power. I'm thinking that its best to treat progressives just as religious missionaries. Don't answer the door if you recognize them, or nod politely and send them away if expecting someone else and the door is opened by mistake. But debating them is pointless, as their paradigm is crazy but unshakeable.

Muirgeo, the US does rank very high on PPP Per Capita income. Some countries may earn more in absolute dollars, but their dollars do not go as far.

"These people only want to complain about the tax structure and regulation while ignoring lobbyist, cronyism and the electoral process."

That is not an accurate characterization of the vast majority of opinions expressed on this site. Opposition to rent seeking is in fact a one of the most common themes in the Cafe.

I have to wonder whether this is a topic that lends itself more to personal opinion than factual analysis. Income disparity data can be misleading for a variety of reasons. It all depends upon the parameters (source data, definition of income etc...) upon which the research is based. For example, Alan Reynolds does an excellent job of disputing the Picketty and Saez results by pointing out salient facts (changes in corporate structures from C to S Corporations which shifted income from corporate to personal returns as one example) that the researchers overlooked. I think that those who bemoan income inequality are doing so for primarily political reasons and are leaving true economic arguments at the door.

Just for fun, let's assume that the rich really are getting richer and the poor are getting poorer. Does this fact alone indicate a manipulation of the market by the rich which government must step in and cure? Of course not.

For example, technology can play an enormous role in increased income inequality, yet one that can't be readily quantified. The value provided by skilled or semi-skilled positions is diminished as technology provides ways to do those jobs more cheaply. Conversely, those that provide the breakthroughs in technology will see their value greatly enhanced.

As an example, let's consider computer engineers and supermarket cashiers. The engineers develop automated self-checkout machines which reduce the demand for cashiers while improving profits for the supermarket owners. In this scenario, demand, and thus wages, for cashiers will decline while the opposite is true for engineers thus widening the income disparity between the two groups. This all occurs without any manipulation in the labor market. I think this is what we are seeing on a large scale as we move from a manufacturing to an information economy and there's no way to turn back the clock.

The progressive idealists created the system, Muirgeo. You all thought that all that power would be used against the powerful. C'mon, admit it. That's what you thought. Hell, that's what you still think. Well, its dumb, and its boring. But hey, if you want to devote your life to making life better for the political class, there's nothing I can do or say to stop you. Go for it. Personally, I figure my best bet is to work within the free markets to earn a living for me and for those I care about. As for the government, I'll keep out of trouble by paying their rent in full and on time, and have no further concern with it.

" . . . I understand it shows the US of A to have the greatest income disparity . . ." - muirgeo.

To be unfair to muirgeo this is going to be pretty obvious - if the richest people of the world reside in the U. S. of A. then, of course, it's a case of "well duh!".Gil

That's simply not true. Other countries like Iceland, Norway, Ireland, Switzerland have similar or better per capita incomes and much less income inequity.

Likewise when we WERE the worlds leader in per capita income back in the 50's and 60' we had much less income inequality.

It's ALL about transfers of wealth. These people only want to complain about the tax structure and regulation while ignoring lobbyist, cronyism and the electoral process.

The idea that people of wealth in this country are self made on a free market system is laughable and an offense to most of these peoples very own closely held ideologies about how markets work best.

Lee,

The social engineering IS done by those with money controlling the rules to their favor. How hard is that to see when you see the raping of people from their homes funneling money upwards to Hedge fund managers who pay 15% tax on their incomes while middle class working PRODUCTIVE people pay 30% or more and the AMT to boot.

If you want to be a liberal economist stand by your principals at least and call this crap that's going on for what it is.

When I see the liberal economist here trying to finagle the truth and facts to tell us there is no significant change in income inequality, in wealth accumulation or that income mobility is better then it is or that the science of global warming is in doubt... then it is clear to me who's ideology needs propping up by obfuscating the facts and denying reality.

Well said Lee Kelly.

Income inequality is not inherently unjust or a problem which needs to be solved. If the wealthy are maintaining or increasing income inequality by enlisting the services of politicians, to pilfer from the poor and provide protection from competition, then I would think income inequality a problem. However, there are many plausible causes of income inequality facts, not all of which are unjust or a problem which needs to be solved.

It is only of concern to would-be social engineers, who are distressed by the fact that society does not conform to their preferences, presumptious enough to think themselves fit to wield power over everybody else, and conceited enough to think that their own preferences to reflect a common good to which we should all aspire.

Sorry, the post cut off the first link.

The last part of it after images is:

bg1418cht1.gif

Apologies

Just in case anyone is interested. Here is 1969-1994. It's a compilation of Treasury data. I know it's Heritage, but I have seen the same chart from the Economic Policy Institute as well--just didn't have time to ferret around for it.

http://www.heritage.org/Research/Taxes/images/bg1418cht1.gif

As for the PSID, well, I am not surpised Don didn't mention it. I have never heard of it, and neither has wikipedia (google has though). I think most people use the Gini Index.

http://en.wikipedia.org/wiki/Gini_index

Muirgeo: thanks for pointing out that study-it is very interesting. But 2 questions pop into my head:

1-Doesn't this suffer from a flawed definition of income in which transfers and benefits are ignored?

2-Comparing the relative standing of a 30 year old now to a 30 year old then doesn't seem to make complete sense since I believe that people in my generation (upper 20's) get started later in life than their parents. This is likely due to increased college attendence which takes up time and waters down the value of the diploma often leading to further years of study in order to distinguish oneself. The result is a postponement of prime earning years.

" . . . I understand it shows the US of A to have the greatest income disparity . . ." - muirgeo.

To be unfair to muirgeo this is going to be pretty obvious - if the richest people of the world reside in the U. S. of A. then, of course, it's a case of "well duh!". As it has been rightfully pointed out before, primarily by Libertarians, if people are barely, if at all, productive then their net worth and income is going to be next to nil, regardless of which country they live in. Likewise I believe it was a Libertarian writer who pointed out that for a year if a bum sleeps under a bridge wasting his time and Bill Gates expands his portfolio by 10%, then for a year the gap between rich and poor expanded another 10%. I'm sure Libertarians would like to see productive and income go hand-in-hand somuchso that if there's is a great disparity between rich and poor it really means a disparity between those who are working hard and smart with those who are barely working at all.

I'm surprised a professor of economics would point to this data when discussing income mobility and not mention the PSID (Panel Study of Income Dynamics) from the U of Michigan which as I understand it shows the US of A to have the greatest income disparity, rising income inequality, and the least mobility of just about every country in Europe and Canada as well.

However, in spite of leading readers to misleading data I'm glad to see it appears he admits such things do matter.

Mr. Rustbelt, how is this not obvious? I am but one example, but I bet I'm typical. I was just barely above the 1st quintile back in '96, and am now in the top 5%. It's called graduating with a technical degree, not giving up until I got someone to hire me, and helping my employer be successful. Is this so hard to believe? No shady backroom deals, no corruption. One could say "work hard" and "play by the rules."

save_the_rustbelt - wouldn't deferment of income tend to positively distort these numbers, and particularly, as you note, for high earners (who presumably have greater ability to defer)? But these high earners already have negative income growth so correcting for deferment will make their income growth more negative. Doesn't this strengthen the case for relative upwards mobility of people on lower incomes?

Again, this data is for taxpayers (and I think over the age of twenty five). I need to understand how younger folk and non-taxpayers fit into the picture. Can anyone answer that?

Anyone who understands the definitions of "adjusted gross income" and "taxable income" knows those numbers are artificial numbers having very little to do with economic reality. And what is "cash income?"

While wage earners have very few opportunities to defer income, those in higher brackets have multiple opportunities to defer income and manipulate timing of transactions(I know, I taught some of them how).

And once you plop the 2001 and 2003 tax acts into the middle of this I'm not impressed with the conclusiosn.

The timing and tone of this document looks very political to me. I don't think the case is proven.

In this case, economic analysis is likely to be more valuable than analysis based on tax accounting. Depends on the economist though.

The issue is still open for discussion.

Devastating, one would think, to arguments about the importance of inequality. What can the Left possibly say in response to this? "What, only 90%?" Come on.

Great that you published this.

So 2% of the population are lifetime WalMart employees? By the rhetoric democrats used to push through minimum wage legislation, one would expect a much higher percentage.