Monday, July 30, 2012

Big Lies in Politics

Perhaps the biggest lie of this election year, and the one likely to be repeated the most often, is that the income of "the rich" is going up, while other people's incomes are going down. If you listen to Barack Obama, you are bound to hear this lie repeatedly. - Thomas Sowell/townhall

But the government's own Congressional Budget Office has just published a report whose statistics flatly contradict this claim. The CBO report shows that, while the average household income fell 12 percent between 2007 and 2009, the average for the lower four-fifths fell by 5 percent or less, while the average income for households in the top fifth fell 18 percent. For households in the "top one percent" that seems to fascinate so many people, income fell by 36 percent in those same years.
Why are these data so different from other data that are widely cited, showing the top brackets improving their positions more so than anyone else?
The answer is that the data cited by the Congressional Budget Office are based on Internal Revenue Service statistics for specific individuals and specific households over time. The IRS can follow individuals and households because it can identify the same people over time from their Social Security numbers....

All sorts of statements are made in politics and in the media as if that "top one percent" is an enduring class of people, rather than an ever-changing collection of individuals who have a spike in their income in a particular year, for one reason or another. Turnover in other income brackets is also substantial.

There is nothing mysterious about this. Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience.

Politicians and media talking heads love to refer to people who are in the bottom 20 percent in income in a given year as "the poor." But, following the same individuals for 10 or 15 years usually shows the great majority of those individuals moving into higher income brackets....