“There are lies, damned lies and statistics.”
- Mark Twain -
We recently reported the results of a CBPP study that showed that the gap between the wealth of the rich and the poor has greatly increased over the last 30 years. Here’s what we said in anticipation of the cynical exploitation of the study by the tax-the-rich crowd (emphasis added):
The survey does, indeed, show, as fellow tax bloggers Jim Maule and Linda Beale are sure to point out, that the rich have gotten richer. What it does not show, and what is not to be automatically inferred from it, is that the poor and the middle-class have gotten poorer.
Of course, I fully expect the tax-the-rich types to suggest that very thing. But by doing so they only betray one of their many faulty premises: Namely, that wealth, like energy, is finite and an increase in one individual’s wealth is always matched by a commensurate decrease in another individual’s wealth.
The study likewise does not show that decreased taxes on the rich are a primary, or even major cause, of increased wealth or that confiscatory taxes on the rich will somehow make the poor and the middle-class more wealthy.
Linda Beale, one of our more respected and respectable tax bloggers, has been kind enough to make me a prophet.
Here’s what she said about the CBPP study in a recent post (emphasis mine):
The facts of income disparity increase in this country are startling, and the likely result–in terms of corporatist capture of government policies (as witnessed in the “flawed success” of financial reform, as noted by Salon’s Andrew Leonard) and continued degradation of lifestyle for most ordinary Americans, is disturbingly remininiscent of the “roaring twenties” contrasts in lifestyles of the poor and the excessively rich.
This is a complete misreading of the CBPP graph, reproduced below.¹ The graph not only does not show that there has been a ‘continued degradation of lifestyle for most ordinary Americans,” it shows the very opposite.
With apologies to Raymond Chandler, the truth here is about as inconspicuous as a Tarantula on a piece of Angel Food.²
Again, the above graph clearly shows that all classes of Americans experienced an increase in their annual incomes over the last 30 years. Moreover, it shows that the incomes of the poorest Americans – represented by the dark blue line at the bottom of the graph – increased 16% since 1979.
So, when Professor Beale suggests that the CBPP study is evidence of the “continued degradation of lifestyle for most ordinary Americans” it means that she is either intentionally misstating the results of the CBPP study or doesn’t understand the graph.³
Given the existence of studies like this one from the CBPP (and there are many more of them out there), the continued assertions by the left that the oppressing rich run roughshod over the oppressed poor in order to increase their own wealth and that the financial condition of the poor and the middle class has declined as a result of the oppressors’ conduct, can only be described as abject delusions.
The anti-capitalist left, much like their right-wing fundamentalist counterparts who deny the truth of evolution because it conflicts with their belief in a benevolent creator, must deny that the financial condition of the middle class and poor rises when the financial condition of the rich rises because that admission undermines it’s equally sacrosanct belief that the rich exploit the poor and are the leading cause of their financial woes.
Beware of ideological zealots regardless of which side of the ideological divide they hail from. They will intentionally take truths they dislike and fold, bend, spindle and mutilate them into falsehoods that validate, rather than contradict, their cherished beliefs.
Footnotes:
¹ Were Ms. Beale committed to an accurate interpretation of the CBPP study rather than the confirmation of her pre-conceived progressive views, she would have concluded, as I and most others have, that the study shows that when the rich get richer, the poor and the middle class get richer, too.
² The egalitarian left is less concerned with improving the absolute condition of the poor than it is with improving their condition relative to the rich. But because only so much can be done to raise the financial status of the poor, the left serially proposes policies that are designed to lower the financial status of the rich.
³ I am an avid reader of and frequent commenter at Linda Beale’s tax blog, ataxingmatter. Although I often disagree with her, her eloquence and erudition always make me think. Having said that, I think I know enough about her political beliefs to conclude that she herself is less concerned about the predicament of the poor in absolute terms than she is with the disparity in wealth and power between the rich and the poor. This, of course, is a legitimate concern – I heard Alan Greenspan tell Charlie Rose once that the biggest problem facing the U.S. economy is the cavernous disparities of wealth between the haves and the have nots.
But what it is illegitimate is when the pro-tax left promotes policies (usually tax hikes on the rich) that are designed to close the wealth gap by attempting to get Americans to believe the lie that continued increases in the wealth of the rich actually create and perpetuate continued decreases in the wealth of the non-rich. The goal of this misinformation, of course, is to foment class hatred. After all, nothing gets out the vote like the thought that someone might be cheating you out of something to which you’re entitled.
9 responses so far ↓
1 Knox Marlow // Jun 30, 2010 at 7:02 pm
This is such a ripe area for debate, that I can’t even scratch the surface. A number of observations (with no order of priority):
1. The numbers are skewed by the “ultra-rich.” The ultra-rich don’t get rich based on tax policy. The ultra-rich become ultra-rich because they have special characteristics and successfully commercialize those special characteristics. Obvious examples range from athletes (Michael Jordan; Tiger Woods) to celebrities (Oprah) to technology titans (Bill Gates; Steve Jobs; Larry Ellison; Sergey Brin and Larry Page).
2. If you exclude the ultra-rich from the numbers, I’m guessing the back-and-forth dialogue about the numbers would change dramatically.
3. While on the topic of the ultra-rich… It would be interesting to compare the pre-tax (and after-tax) income of the average NBA basketball player in 1979 and 2007 (the book ends of the CBPP chart). I strongly suspect that the incomes of NBA basketball players (and other athletes) have increased vastly more than the incomes of other U.S. taxpayers. If I’m correct, this could provide a case study that could be used to frame the entire debate. (Is it “fair,” asks Professor Maule, that NBA basketball players have enjoyed this disproportionate increase in income/wealth since the late ’70s? And so forth…)
4. I wonder how the evolution of U.S. tax law has skewed the data over 30 years. Bluntly, did wealthy taxpayers use loopholes or tax evasion to report less income in older years? I suspect it would be impossible to quantify the impact of loopholes or tax evasion. I strongly suspect that the impact could be material.
5. I’m completely dumbfounded by the comments (a la Linda Beale) that disproportionate income growth at the top reflects a “deterioration” of lifestyle for the average American. That viewpoint completely disregards the evolution of technology and the market forces that have increased the purchasing power of the average American (by decreasing the costs of consumption on an inflation-adjusted basis).
Thanks for the opportunity to vent!
-KM
2 Peter // Jun 30, 2010 at 10:11 pm
Knox,
Excellent observations. Remember, statistics showing that the middle class and the poor do better when the rich do better will never be given any weight by people who have a vested interest in making the public think the rich are getting rich at the expense of everyone else.
Scapegoating works.
3 Case Rested: Trickle Down Policies Work // Jul 11, 2010 at 11:12 am
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4 Frost // Nov 14, 2010 at 8:38 am
This graph seems to measure household income, not individual income. Many more households are double income today than were during the early 80s, with both husband and wife working. I wonder if that skews the results.
5 James // Jan 5, 2011 at 6:00 pm
Are the numbers inflation adjusted? 16% growth over a 28 year period is hardly real growth if inflation is not taken into account. Inflation adjusted growth is all that matters when discussing quality of life. I couldn’t agree more that a high rate of growth in income at the top does not mean that there’s somehow a flow of dollars from the poor to the rich. Nor can one conclude, as Peter seems to imply, that the poor get richer because the rich get are getting richer. However a more progressive tax structure is more fair. Sticking with the athletes for a moment, haven’t we all scoffed at $50,000 fines as mere drops in the bucket, while the idea that they might pay 5% more in income tax seems to send us running to the polls with the Tea Partiers. Higher income tax rates for the very wealthy is neither anti-capitalist, nor anti-growth and the idea that taxing the rich will somehow keep them from trying to use their skills to get richer (allowing for that trickle down thing that the wealthy love to talk about – neither side is an honest broker on that one) is absurd. $1,000 to a family of 4 living on $50,000 (2%) is about food on the table while $100,000 to a family of 4 living on $1,000,000 (10%) is about a the kids driving BMW’s or a Toyotas. It’s not the same dollars. The $1,000 might be thought of as having move value than the $100,000. It seems fair to have tax tables that, to some degree, reflect the value of the taxed dollars. Let’s shrink the government to shrink the debt and the need for higher taxes will dissapate. It’s going to be tricky though.
6 Doug // Mar 16, 2011 at 5:23 pm
So here is a question for you all. Do think that cutting social programs for lower income folks in lieu of uninstalling the tax breaks for the ultra wealthy is morally correct?.. Just wondering since the lower middle class which according to your graphs above is doing so well, news to me by the way, you guys get out don’t you? Well they just might be significantly impacted by these cuts. Another thing about the graph. Nobody mentions the line representing the ultra rich. It has gone through the roof. Does that say something to us about how we losing contact with what is right. James is correct to state that $1,oo0 is a lot different to someone making peanuts versus someone that is earning in the top percentile. Do you actually think that the trickle down theory works with all of the economic turmoil that is around us. Even David Stockton has stated that it was junk. Whatever just happened to paying your fair share because you knew it was going to help others. If we drive the poor into hovels we will drive ourselves into great unhappiness. Peace and happiness are not derived from material gains. Only caring about others do we gain true happiness.
7 Peter // Mar 17, 2011 at 8:08 am
Doug,
I think it’s immoral to force person A to pay for person B’s bad choices.
I admire the rich and successful. They contribute more to society by taking care of their own and creating jobs for others than the poor ever do.
I think supply side policies work and the graphs I provided prove they work.
I don’t think we should follow everything David Stockton says? I am sure he, like everyone else, is capable of being wrong.
I believe in helping the poor, giving to charity, volunteering services to help the less fortunate. I do not, however, believe the government should force people to be charitable.
If you care about others, by all means, help them. On other hand, if you care about others, you should not force them to help the people you think should be helped.
It’s a little thing I like to call freedom.
8 Demersus // Oct 10, 2011 at 11:26 pm
Yes, we should all admire the likes of Charles Keating, Kenneth Lay, Jeffery Skilling, Barry Madoff, John Rigas and others. They all worked very, very hard to acheive their great successes. We should all be inspired to conduct ourselves in ways which emulate them.
9 Peter // Oct 11, 2011 at 2:53 pm
Demersus,
No, we shouldn’t admire them. We should arrest, try and convict them, which is precisely what we did.
Employees steal billions of dollars from their employers every year. We should arrest, try and convict them as well.
Nice try.
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