House of Eratosthenes

…well…if you’ve had this discussion with someone left-of-leaning lately, you’ll know the next thing that happens is as reliable as nightfall. They love their facts and statistics — cling to them like some kind of security blanket. And they seem to understand the concept that statistics, especially statistics that consist of averages, are produced by counting all of something in some consistent way. But they live in this funny half-world in which large pieces of the “all-of-something” disappear, or never existed in the first place. Yes, they shun information and shun facts. Ask a prog about anything that has to do with a non-favored demographic group that is being inconvenienced in some way, or is suffering in some way. Men being hit harder by the current economy, or Christians being forced to close their church services for a re-routed gay pride parade, or the Boy Scouts losing United Way funding…

They don’t want to pay attention to this stuff. Which is their right, of course. But then they have this adorably naive way of carrying-on like when they deliberately ignore half the picture, their statistics somehow still count for something.

It’s just one of the fundamental laws that make up the universe, whether you appreciate that or not: Anything that is an average, is only valid if it is produced from all of whatever the average is supposed to be reflecting. Libs aren’t happy with that. They’d rather consume their half-facts, puff up the adrenaline, and get angry. It’s more fun that way.

But the fact of the matter is…while it’s true the very rich do prosper more than the average during the boom times…they also lose a lot more during the busts. Liberals come to some bizarre conclusions here because — yet again — they’re fond of paying attention to one side of the equation, but not the other:

A recent report from the Congressional Budget Office (CB0) says, “The share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007.”

This news caused quite a stir, feeding the left’s obsession with inequality. Washington Post columnist Eugene Robinson, for example, said this “jaw-dropping report” shows “why the Occupy Wall Street protests have struck such a nerve.” The New York Times opined that the study is “likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.”

But here’s a question: Why did the report stop at 2007? The CBO didn’t say, although its report briefly acknowledged—in a footnote—that “high income taxpayers had especially large declines in adjusted gross income between 2007 and 2009.”

No kidding. Once these two years are brought into the picture, the share of after-tax income of the top 1% by my estimate fell to 11.3% in 2009 from the 17.3% that the CBO reported for 2007.

The larger truth is that recessions always destroy wealth and small business incomes at the top. Perhaps those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce “inequality.” Of course, the same recessions also increase poverty and unemployment.

The latest cyclical destruction of top incomes has been unusually deep and persistent, because fully 43.7% of top earners’ incomes in 2007 were from capital gains, dividends and interest, with another 17.1% from small business. Since 2007, capital gains on stocks and real estate have often turned to losses, dividends on financial stocks were slashed, interest income nearly disappeared, and many small businesses remain unprofitable. [emphasis mine]

Daniel J. Mitchell from the Cato Institute explains the harm that our tax policies really do:

You can see, he’s been running into this too. You say “rich people lose” and there are people out there who immediately stop listening — and they tend to be the loudest ones. But that’s part of the equation. And the loud people will still want to run around pretending to be all scientifical and junk, even though they’re only looking at half the picture.

See, it depends on your purposes. If you’re scavenging for sound bites to try to get people whipped up about an agenda, it’s appropriate to cherry-pick the data and toss out whatever doesn’t suit your needs. If you’re trying to get a reading on the situation and arrive at a rational understanding of what’s going on, and you’re going to rely on statistics and averages to do this, then you want to count everything.

We’re in economic trouble right now, because we’ve spent a lot of years allowing our policies to be written and interpreted and molded and shaped by people who go through the motions of doing the latter when they’re really doing the former.

On point and well-said.

Remember that time a few years ago when Microsoft’s stock took some kind of a hard dive, and Bill Gates lost something like 5.8 billion dollars of net worth in a single day? It was said to be the largest personal loss of all time, but of course everyone who commented on the story was quick to add that it would barely scratch him, being the world’s richest man (or something very close to it).

Like most on the Right, I’m sick and tired of hearing the high-income earners blamed for everything that’s gone wrong over the past few years. Maybe it’s time we started blaming the people at the bottom instead – that is, the ones who made poor life choices (such as to get in trouble with the law, use drugs, or get knocked-up too young) and wind up on government assistance? Or who chose to violate our borders and then help themselves to all the free services our government offers to them w/o asking more questions?

Those are the people that are bleeding us dry, not the wealthy, not the job creators, not the innovators. Even the most powerful hedge fund managers and investment speculators cannot hide from the free market forever – if that market is left alone and allowed to do its job.
- cylarz | 12/06/2011 @ 12:30

Leave a Reply

You must be logged in to post a comment.

Recent

Items of Interest

Monthly Archives

What They Say

Links

When the Top 1% Loses…Tuesday, December 6th, 2011

When the Top 1% Loses…
Tuesday, December 6th, 2011