November 13, 2007

Treasury’s Income Mobility Report Blows Away ‘Mediocre Bush Economy’ and Other Myths

I see that the Treasury Department has updated my related post (“Income Inequality + Economic Mobility = Long-Term Prosperity”) from a couple of years ago. :–>

In all seriousness, it’s hard to overstate the importance of today’s report (“Income Mobility in the U.S. from 1996 to 2005″; press release; full study PDF). That’s because it provides documented evidence of more, not less, economic mobility than in previous eras. Beyond that, taken in combination with an independent report I covered last week, it demonstrates beyond any reasonable doubt that the first four-plus years of the Bush economy were exceptional.

Tuesday’s read-the-whole-thing feature editorial at provides a great overview (bolds are mine), plus some tantalizing details:

….. you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We’d refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum.

….. (The study shows) beyond doubt that the U.S. remains a dynamic society marked by rapid and mostly upward income mobility. Much as they always have, Americans on the bottom rungs of the economic ladder continue to climb into the middle and sometimes upper classes in remarkably short periods of time.

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.

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.

….. 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.

….. 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.

The study is also valuable because it shows that income mobility remains little changed from what similar studies found in the 1970s and 1980s.

….. 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.

….. As the Treasury data show, we shouldn’t worry about inequality. We should worry about the people who use inequality as a political club to promote policies that reduce opportunity.

The impressive mobility and income statistics in the report collectively remind us of three points that Old Media and too many politicians want us to forget:

  • First, that those on the bottom rungs of the economic ladder typically don’t stay there very long, i.e., being irretrievably “stuck in poverty” is largely a myth.
  • Second, since the poor are not the same people from year to year, and since the poor who replace the ones who just moved up are either new workforce entrants or people who have fallen from greater heights, it’s likely that they too will make or remake their way up the economic ladder in a relatively short period of time.
  • Third, the rich are also not the same people from year to year. To the extent that they still exist, high punitive tax rates single out different people each year, “rewarding” their newfound success with confiscatory tax bills.

The 24% real income increase cited by the Journal should relegate the “stagnant incomes” myth to the economic waste heap once and for all (but it won’t).

Today’s Treasury study also provides a great deal of satisfaction when compared to similar data for the years 1987-1996. Just look at these two charts:


(Sources: “Income Mobility in the U.S. from 1996 to 2005,” issued Nov. 13, 2007; “Income Mobility in the U.S.: evidence from Income Tax Returnsfor 1987 and 1996,” issued May 2007)

Here are the salient points:

  • Every base-year income group in 1996, with the exception of the lowest quintile and by a relatively insignificant amount, made greater progress during the subsequent nine years than did their 1987 counterparts.
  • The median income gains during the most recent nine years studied were over double the gains seen in the nine years before that (24.2% vs. 11.1%).
  • The average American has made far more economic progress during the past 9 years than he or she did during the nine years before that.

Oh, and there’s one more question to address: Is it possible to estimate whether most of the remarkable progress during the past 9 years occurred in the earlier Clinton years or the later Bush 43 years?

Yes it is.

Last week, the Conference Board (“about” page here) released a study on discretionary income that was covered by yours truly (NewsBusters; BizzyBlog). That study and a previous comparable version reported that the following percentages of American households had discretionary income (technically, “those whose spendable income exceeds that held by households with similar demographic features”) in various recent years:

– 1997/1998 – 52%
– 2002 – 52.1%
– 2003/2004 – 51%
– 2006 – 63.5%

Though the years involved don’t align perfectly, the fact that the entire percentage increase in households with discretionary income has taken place in the last few years makes it reasonable to conclude that most, and perhaps all, of the income mobility that occurred from 1996-2005 (the years in the Treasury study) took place in the final few years. Certainly no one can credibly claim that the majority of the mobility improvement occurred before 2002. Further, though things can certainly change quickly in this volatile world, broad economic statistics reported since the Treasury study give us no good reason to believe that things have changed for the worse since.

Treasury’s mobility study, combined with The Conference Board’s discretionary income data, shatter yet another myth. It’s a myth Old Media propagates and will continue to propagate day-in and day-out, despite the overwhelming evidence just cited: That, as far as the average American is concerned, the Bush 43 economy has been mediocre, nothing special, or worse, and that it has paled in comparison to the Golden Era of the 1990s.

Now you know better.

Cross-posted at

WSJ Expects to Tear Down Subscription Wall: Murdoch

In a move that must be causing Excedrin headaches at the New York Times and other Old Media outlets, USA Today reports that the Wall Street Journal’s new owner expects to tear down its subscription wall:

News Corp. (NWS) Chairman Rupert Murdoch said Tuesday he intends to make access to The Wall Street Journal’s website free, trading subscription fees for anticipated ad revenue.

“We are studying it and we expect to make that free, and instead of having 1 million (subscribers), having at least 10 million-15 million in every corner of the earth,” Murdoch said.

News Corp. has signed an agreement to acquire Dow Jones (DJ), and the deal is expected to close in the fourth quarter. A special shareholders meeting is scheduled for Dec. 13 in New York.

Murdoch said he believes that a free model, with increased readership for, will attract “large numbers” of big-spending advertisers.

The website, one of the few news sites globally to successfully introduce a subscription model, currently has around 1 million subscribers, which generates about $50 million in user fees.

The move should greatly improve the overall fairness and balance of online news, analysis, and discussion. Though the Journal’s editorialists have their blind spots, particularly their open-borders immigration outlook and their disrespect for New Media, not a week goes by where I don’t see a behind-the-firewall editorial that I wish were available to all.

Many of the economic policy arguments made in the Journal historically have not, and still do not, get a fair airing in what’s left of the “Newspapers of Record.” Now the economic thought driving the unprecedented prosperity that began in the early 1980s and has, with only the most minor of blips, not let up since will be out there for general consumption.

This is incredibly good news if Rupert Murdoch carries through with his intentions. Specious economic arguments are on their way to becoming endangered species.

Bring it on, Rupert.

Cross-posted at

Attention Ted Strickland and Marc Dann: Let the Gumshoes Do Their Work

Filed under: Economy,Taxes & Government — Tom @ 4:27 pm

From the Cleveland Plain Dealer:

Mortgage-fraud task force opens command center in Cleveland
Task force sets up office in Cleveland

A task force hacking through the Cleveland area’s tangled web of mortgage fraud has so much work that it has opened a full-time, high-tech command center.

Federal, state and Cuyahoga County agencies will fill the office with seven full-time and six part-time staff, County Prosecutor Bill Mason said. Investigators will collaborate on cases that may number in the thousands and involve hundreds of millions of dollars.

The office, opened within the last two weeks, is the only one of its kind in Ohio. It is in downtown Cleveland, but officials asked that the location be kept secret.

The task force, formed about a year ago, is shifting into high gear and uniting under one roof will improve communication and efficiency, Mason said.

In addition to Mason’s office, task force members will be from the Ohio attorney general’s office, the state Commerce Department, U.S. attorney’s office, FBI, Internal Revenue Service, U.S. Postal Service, Department of Housing and Urban Development and local police departments.

….. The county is the foreclosure leader in Ohio, the state hit hardest by a nationwide spike. Ohio’s foreclosure rate for the first quarter of the year — 3.5 percent — was almost triple the national figure, according to the Mortgage Bankers Association.

Mortgage-fraud rings, capitalizing on some of the most lax lending policies in U.S. history, have blitzed entire Cleveland neighborhoods and extended their reach to outer suburbs like Solon. Mortgage brokers and others have cashed in on fees and inflated sale prices. Then, in many instances, they left homes abandoned.

Mortgage fraud is a problem nationwide, but the FBI considers Cuyahoga County a hot spot …..

….. Mortgage fraud may account for 25 percent of Ohio’s foreclosures, said state Attorney General Marc Dann, whose office is picking up much of the command center’s expense.
Dann declined to comment because he believes discussing it is prohibited by Ohio’s organized-crime law. Mason said the gag rule applies only to specific investigations.

Though the crackdown is only beginning, Mason’s office already has charged more than 140 people in cases involving more than 200 properties and $37.5 million in loans.

Ted and Marc: Congrats for your involvement in this. Now let them do their work.

Using criminal law is how you punish bad behavior and deter future bad behavior. You don’t do it by papering the good guys and the bad guys with guilty-until-proven-innocent subpoenas and lending regs that will contract the industry to the point where people who need loans and will be able to handle loans can’t get loans.

Quote of the Day: An Examiner Editorial Nails Bill Lerach — and the Washington Post

The Examiner nails Lerach (HT Instapundit), and in the process the Washington Post, which ran Lerach’s op-ed on Sunday:

Nobody disagrees that corporate bad guys caught with their hands in the till ought to face the full force of the law. What Lerach conveniently ignores is the fact that nobody within or without corporate boardrooms can be held accountable when the law itself is being systematically subverted and abused by people who pose as courtroom heroes while getting rich by obstructing the courts of justice. This fact will not be erased by Lerach’s artful clamoring about others’ alleged sins or even by past or future campaign contributions perhaps given with an eye toward someday securing a pardon.

As I asked yesterday, “Am I supposed to believe there was no one else without a criminal record available to make his arguments?”

I look forward to next Sunday’s Post op-ed contribution by Jack Abramoff (/sarc).

A Tax-Cut Benefit Old Media Will Never Acknowledge, While New Orleans Fiddling Continues

At Townhall, Doug Wilson comments on a fringe benefit of the Bush tax cuts (bolds are mine):

Wealthy Americans are becoming increasingly interested in donating to global causes. Since 1997, the rate of global giving has increased steadily at an average of 12.5 percent each year. According to a recent Financial Times story, JPMorgan Private Bank has “noted a rise of about 20 percent over the last year in client interest in overseas donations, with high-net-worth individuals looking to support education, health and economic expansion projects in developing countries.”

And they aren’t alone. Financial planners and international banks have seen similar upswings. It all begs the question—why?

What does this increased giving tells us about Americans?

First, it speaks to the sort of Main Street conservatism that permeates the culture, despite the popular media-driven assumption that conservative values are old-fashioned or even backward. With increasing frequency, Americans are educating themselves about global issues and working to fix the problems they see in concert with private organizations. In so doing, Americans breed a culture of self-reliance by acknowledging that government cannot fix every problem plaguing the modern world.

Second, it proves once again the power of tax cuts. Federal income tax rates decreased significantly between 2000 and 2007, and this has undoubtedly contributed to the rise in charitable giving. You say no way, but we do know from the experience in Western Europe, that as taxes went up, giving went down. Why? Because the state was going to solve the problem – not individuals. This leads some to contend that tax cuts hurt those in need. The truth is though, that when Americans keep more of their money they will often use it to help those in need—sans any governmental mandate to do so. Moreover, private citizens will consistently make more efficient use of their resources than government would because private giving creates partnerships between individuals and organizations and fosters accountability.

The last bolded sentence explains why you will almost never see Old Media acknowledgment of the overall growth in charitable giving. Oh, they will highlight individual acts of giving that fit their politically correct worldview. But in their world, only governments are up to the monumental tasks at hand.

This graphic from the Wall Street Journal over a year ago carried at this post shows just how wrong that point of view is:


How many Americans have even the foggiest idea of the figures just presented? The federal government has never played a bigger role in a disaster recovery than it has with Katrina, especially in New Orleans. Yet almost no one inside or outside of Louisiana is happy with what has been accomplished.

The Bayou State just received billions more in appropriations last week, much of which is related to Katrina relief ($3 billion in home reconstruction aid, plus $7 billion in water resources development act money). Louisiana Senator Mary Landrieu called it her state’s “$12 billion payday.” Why should we think that this boodle will make any more of a difference than the previous money did?

Cross-posted at

Couldn’t Help But Notice (111307)

“Using Destruction to Sell Us Cars? Ford Must Be Lost in a Dream” — No, more like an ongoing nightmare. A nightmare of their own making.


The Toledo Blade’s editorialists hysterically step up to impeachment madness, and step away — barely:

WHEN the history of George W. Bush’s presidency is written, it is a sure bet that the dark shadow of Dick Cheney will have to be explained. Historians will surely puzzle why this President invested so much trust and power in a vice president who scorned the Constitution, argued for torture, and routinely misrepresented the truth.

Proof of the high crimes and misdemeanors needed to remove him from office would need to be very high – higher than political disagreement – before taking a step that would so roil the nation. Mr. Cheney has a lot to answer for. Let him answer to history.

Fairly written history will be very kind to Mr. Cheney. The wailing and gnashing of teeth will be fun to watch.


David Limbaugh (“Denying Progress in Iraq“):

Listening to the Democrats denying our progress in Iraq is reminiscent of a high school debate where one team gets stuck with the wrong side of the issue and has to defend it valiantly anyway.

Somehow the Dems missed that story about Al Qaeda being driven out of Baghdad. I don’t know how — it was right there on Page A19 in the New York Times last week. I happened to be in a place that carries the Times that particular day, and confirmed this.

This virtual non-reporting also explains how the Toledo Blade (yeah, again) could issue this editorial a few days later that is so out of touch you’d think the editorialists had no idea how things were going — because they probably don’t. A visit to Michael Yon’s place every week or so is prescribed.


In the midst of critiquing a bill imposing onerous mortgage regulation currently before Congress, Star Parker points to an experiment proving what a disaster it would be:

The Illinois Fairness in Lending Act passed in 2005 gives the state oversight authority on loans made in nine designated zip codes in the state. These zip codes are, of course, areas in which residents are mostly lower-income households.

The law places authority in a state bureaucracy to review all applications for mortgages in these designated zip codes. The bureaucrats who review these applications determine if the borrower needs credit counseling and requires the lender to pay for it if required.

The costs of the counseling are estimated to be as high as $700 and can delay the processing of the loan up to a month.

The borrower has no option to forego this counseling, whose objective is “to protect homebuyers from predatory lending in Cook County’s at-risk communities and reduce the incidence of foreclosures.”

What’s the result?

Cole reports the following: “Instead of protecting hardworking would-be homeowners from predatory lending, the new law protected them from credit. Within just a few months more than 30 mortgage lenders refused to lend on homes purchased in the targeted zip codes. Those lenders determined to service these communities saw a rise in their costs, which translated into higher interest rates on their loans.”

The purported cure was worse than the disease. Cole goes on to note that, “home sales in the designated zip codes dropped an average of 45 percent in just one month after the bill took effect. Home prices plummeted, draining relatively poor but hardworking people of what little equity they had in their homes.”

The idea that the current congressional majority wants to force-feed us a recession grows more credible with each passing day.

Positivity: Driver Reunites With Officer Who She Says Saved Her Life

Filed under: Positivity — Tom @ 5:57 am

From Upstate South Carolina:

Friday, Nov 09, 2007 – 05:05 PM

She was just seconds away from being hit by a train when her car got stuck on some Upstate tracks.  She gets a chance to see the police officer who she says saved her life.

Incredible dash cam video from Greer Police Sgt. Marcus O’Shield’s car shows him going up and pulling Betsy Devall from her car.  An Amtrak train going an estimated 70-80 miles an hour plowed into that vehicle just 17 seconds later.  Friday afternoon they saw each other for the first time, since that night.

They stood talking and looking at the points of impact Sgt O’Shields pointed out at the exact point where the train hit Betsy’s car and pushed it down the tracks.

Betsy Devall re-visited the tracks and saw Sgt. Marcus O’Shields for the first time since the night of the accident.  It was an emotional reunion as both shared their memories of that night.  Sgt. O’Shields just happened to be sitting next to the tracks when he says he saw Betsy Devall pull in, make a sharp turn, and get stuck on the tracks.  Betsy said she couldn’t see because was so dark, so she was trying to turn around when her car hit the tracks.  Then she says it was hung up on the ties and she couldn’t move.  But she didn’t know a train was coming, taking her time to get valuables out of the vehicle.

“I would have probably turned to get those things out of the car and there was only 17 seconds in between you got me safely across the track and the time it hit.  So more than likely I wouldn’t be standing here now if it wasn’t for him,” said Devall.

“I know in one way or another you are here because I was working that night,” said Sgt. O’Shields.

Go here for the rest of the story.