meta-roj

with data from a reuters story about a to-be-released-today (and hence not yet linkable) congressional budget office report, i thought i’d take a moment to put some numbers together… the various reports give us some benchmarks… but no real comperable data. since i barely touch this economics stuff (i have friends to do the heavy lifting on this subject), i just want to make some quick observations and see what develops.

The report said the top 1 percent, with incomes averaging $1.2 million per year, will receive an average $78,460 tax cut this year, and have seen their share of the total tax burden fall roughly 2 percentage points to 20.1 percent, according to The New York Times.

In contrast, households in the middle 20 percent, with incomes averaging $57,000 per year, will receive an average cut of only $1,090, the newspaper said, citing the CBO report.

Taxpayers whose incomes range from $51,500 to around $75,600, saw their share of federal tax payments increase, according to CBO figures cited by The Washington Post.

…

The newspapers, citing the CBO report, said about two-thirds of the benefits from the cuts went to households in the top 20 percent, with an average income of $203,740.

People in the lowest 20 percent of earnings, which averaged $16,620, saw their effective tax rate fall to 5.2 percent from 6.7 percent, though their average tax cut was only $250.

the republican spin on this, predictably enough, is that we’re all better off now:

Report Finds Tax Cuts Heavily Favor the Wealthy [new york times, august 13, 2004]

“It doesn’t matter who you are, the report shows that you are better off now than you were before the tax cuts,” said a House Republican aide. “It’s showing that everybody’s tax burden has gone down as a result of the tax cuts.”

unless, of course, you fall into that $51,500-$75,600 band (but that’s nit-picking). there’s a bigger picture here (and that’s barry’s cue). most things in economics only really matter in relative terms – it’s not about how much a loaf of bread costs in dollars-and-cents, it’s about how much a loaf of bread costs compared to how much you earn. it’s not about how much you earn, it’s about how much you earn relative to how much it costs to keep that job. so i want to hook up two “bigger picture” thoughts to these tax-cut figures: debt and poverty.

one thing that’s not included is the other side of the coin (so to speak) – the national debt, which, by my rough calculations ($7,330,000,000,000.00 / 294,000,000), is just a little less than $25,000 per person. now that i’ve got that benchmark number, i’m going to play fast and lose with the data, because it seems that everyone else is anyway. the first thing i’m going to do is multiply the $25,000 individual debt figure by 2.5 average individuals per household to come up with a $62,500 national-debt-per-household figure so i can compare it to income per household.

$62,500 is just a wee bit more ($5,500 more) than the average income of the middle quintile of american households. so, if you just give back your tax cuts, for the middle quintile’s tax cut of $1090, they’re only $61,410 behind on their “share” of the national debt. the bottom quintile’s $250 tax break puts them only $62,250 behind on their “share.”

so, for you low-to-middle-income households, enjoy your tax cuts, because you need to work extra hard to get us back into the black. if you’re in the bottom quintile, you need to work about 45 months to earn enough money to pay off your chunk of the debt. if you’re in the middle quintile, it’s just a little more than 13 months. oh. and no eating or cable tv while you’re at it.

the other issue i’d like to weave into this cloth is something i’ve mentioned here a couple times – the maldistribution of wealth. and today, i’m going to go with the poverty spin. according to the census bureau, the federal poverty level for a single, working-age adult is $9,573 (in 2003), which works out to just a little less than the federal minimum wage for a full-time employee ($5.15/hr * 40 hours/week * 50 weeks/year = $10,300).

i could be wrong here, and i guess everyone knows i’ve been wrong before, but it seems to me that you can do more for the economy (which is to say, positively affect more people) at the low end of the income spectrum than you can at the high end. we can keep expanding the size of the picture to include issue after issue, but i kinda wonder what the overall economic effect might be if the bottom quintile of households could afford, for example, a new 50mpg car. i suppose there is the problem of what to do with all the old cars, but it’s just a thought really. what happens when the next 5 or 10 million americans get themselves up to the point where they can afford new durable goods?

i’d be interested in finding out, but that’s not the direction we’re headed right now – or so it seems to me.

i guess the theme this week is going to be the economy, i found another gem.

White House Sees Record Budget Deficit [reuters, july 30, 2004]

The White House blames the 2001 recession and the aftermath of the Sept. 11 attacks for ushering in the deficits

yes, except that the 2001 recession doesn’t look like a recession so much. i wonder if anyone at the white house is reading the reports coming out of the commerce department? this administration used to be so good at keeping everyone on the same page…

The U.S. budget deficit will hit a record $445 billion this year, according to a White House report on Friday that is sure to fuel election-year wrangles about President Bush’s economic policies.

The figure is well above the 2003 shortfall of $374 billion, the prior record in dollar terms. But the midsession review forecast is $76 billion less than the $521 billion the White House projected in February.

so things (well, projections) are improving, and the rest of the article goes on to discuss the scope of the deficit in percentage-of-gdp terms. the peak in those terms was 1983 (that’s a reagan administration budget). some quick math tells me that’s about $1500 per living american to cover the gap for 2004. plus any extra emergency war money that comes up.

ok, with that, i hand it over to the experts…

a few days ago, i mentioned the two-year decline in american incomes. the “escape clause” was that the income decline occured during a recession. nevermind that other recessions since 1953 hadn’t produced income declines. today, that escape clause vanishes in the face of new economic data from the department of commerce.

US 2001 Slump May Not Have Been Recession at All [reuters, july 30, 2004]

Not only was the U.S. recession in 2001 the shallowest on record, it may not have been one at all — at least in the classic sense of two straight quarterly declines, new government data show.

so american incomes fell, despite a “flat” economy.

update (2004.07.31): somehow, i knew a “non-recession recession” would be irresistable over there. barry brings a different perspective (of course).

I.R.S. Says Americans’ Income Shrank for 2 Consecutive Years [ny times, july 29, 2004, registration]

The total adjusted gross income on tax returns fell 5.1 percent, to just over $6 trillion in 2002, the most recent year for which data is available, from $6.35 trillion in 2000. Because of population growth, average incomes declined even more, by 5.7 percent.

Adjusted for inflation, the income of all Americans fell 9.2 percent from 2000 to 2002, according to the new I.R.S. data.

but it was a recession! a double-dipper or something!

Before the recent drop, the last time reported incomes fell for even one year was in 1953.

update: no surprise, really (i should’ve looked)… barry has it too, with some depth.

a while ago, i dropped this here in the hopes that it would start something… it didn’t start much.

maybe this time…

The Fight of Our Lives, Bill Moyers [alternet]

The rich have the right to buy more homes than anyone else. They have the right to buy more cars than anyone else, more gizmos than anyone else, more clothes and vacations than anyone else. But they do not have the right to buy more democracy than anyone else.

[emphasis is not mine – that’s in the original]

update (2004.06.18 23:11): this same quote appears on metafilter. hmm. maybe something will happen this time. following the lead from the comments there, i thought it worth adding this too….

The Fight of Our Lives, Bill Moyers [alternet]

Our political, financial and business class expects them to climb out of poverty on an escalator moving downward.

i don’t do stock market predictions… and i barely touch economics, but i do stumble across charts every once in a while, and even i can see that there’s a difference between the last few i ran into….

for the positive (that is, bullish) pictures, we turn to an old meta-roj friend, barry ritholtz, who posts on confirming a market turn – presumably a turn up, based on the picture he points to.

on the other hand (we’re doing that balance thing again), there’s the negative picture (that is, bearish)… and for this we came across this extensive and practically panicky analysis of the money supply and some esoteric technical mumbo-jumbo. this one, i think i found through metafilter.

anyway, there’s a pretty big difference between these views, so i’m just going to point at the pretty charts and let the experts shred the opposition (if they so desire).

and while i’m synthesizing things, i should toss in the little echo in the back of my head from a story about alan greenspan’s increasing coziness with the white house.

Greenspan frequent visitor to White House these days

…the number of appointments with other White House officials jumped sharply with the new administration, from an average three per year from 1996 through 2000, to 44 per year in 2001 through 2003.

we don’t know the substance of the meetings, but perception is often more important than reality in the world of markets and speculation, and this data does suggest that the independence of the fed is, at the very least, under a great deal more scruntiny with bush than in previous administrations.

what does it all mean? is it safe to change the world this month?

it might be time to take a trip down memory lane.

there’s just too much room for conspiracy theorists on this one…

cruising for some rich friends?

#1 teton county, wyoming (average adjusted household gross income $107, 694 in 2002)
#2 fairfield county, connecticut
#3 marin county, california
#4 sommerset county, new jersey
#5 morris county, new jersey
#6 clear creek county, colorado
#7 douglas county, colorado
#8 hunterdon county, new jersey
#9 westchester county, new york
#10 new york, new york

update: since people either aren’t reading this in the comment, or just enjoy comparing the size of their income, this list is based on “average adjusted household gross income” as reported by the irs. you can find a newswire version of the story here. for now, fairfax is just going to have to learn to deal with their inadequacy issues.

update (2004.05.08): maybe these will help

this really warrants some homework and discussion, but for now, since the conference is over, i’m just going to drop it in here and see if anything starts.

according to one walter williams (i couldn’t find a nice bio to link in here in a few minutes of searching), “massive maldistribution” of wealth has severely weakened U.S. political institutions and democracy.

i dropped a hint related to this earlier, but i haven’t really had a chance to apply myself.

since i hacked up joi’s emergent democracy paper not too long ago, this is an interesting subject to play in.