Economics

Democrats (aka, liberals, progressives, socialists, or Marxists) politicize Economics. Spinning economic statistics is their forte. This need not happen. Sometimes, economic realities are economic realities, not susceptible to differing interpretations.

Such is the thesis of this Economics section. Herein, I present economic realities (ie, facts, data, numbers, stats) that are basic, simple, and unambiguous. I then reason deductively, formulating judgments and deriving conclusions almost mandated by the realities. Objectivity reigns.

Besides, Democrats own subjectivity and spinning. One case study slam dunks.

The US Census Bureau released its 2005 (Warning: 3.2 MB PDF file) Income, Poverty, and Health Insurance Coverage in the United States report in August 2006. Leftists pounced. Following are 3 articles from 3 charter members of the liberally biased MSM.

(Note: If you have problems accessing the original articles, the ‘Offline’ link will retrieve saved copies of these articles from my Web site.)

1)   The Boston Globe, Another Year, Another Wage Loss, Robert Kuttner, 2 Sept 06, (Offline)

The Census Bureau reported that median incomes for working-age families were down again, for the fifth straight year. Real median income for households under age 65 is down by 5.4 percent since 2000, even though the economy has grown every year. All of that gain has gone to upper-bracket people and corporate profits…

The Economic Policy Institute (on whose board I serve) has released its annual, encyclopedic report, “The State of Working America.” Among its findings: The economy's productivity increased by a remarkable 33.5 percent between 1995 and 2005, but real wages have declined since 2000. Employer-provided health coverage declined from 69 percent in 1979 to 56 percent in 2004. The top 1 percent's share of interest, dividends, and capital gains has risen from 37.8 percent in 1979 to 57.5 percent in 2003.

Politically, it's evident what is occurring. Those in a position to capture astronomical incomes are awarding themselves an ever-larger share of the national economic pie. Meanwhile, ordinary incomes, job security, health security, and retirement security are eroding…

The changes in the tax code and regulatory laws and workplace practices that benefit America's super-rich did not just happen, either. They are the result of relentless maneuvering by the financial elite and its political allies.

So this Labor Day, at the beach or in town, we suffer not just from reduced economic opportunity but diminished political imagination. You can ignore politics, but you can't escape it. So we might as well reclaim democracy to benefit the many rather than the few.

2)   The Washington Post, Devaluing Labor, Harold Meyerson, 30 Aug 06, (Offline)

Labor Day is almost upon us, and like some of my fellow graybeards, I can, if I concentrate, actually remember what it was that this holiday once celebrated. Something about America being the land of broadly shared prosperity. Something about America being the first nation in human history that had a middle-class majority, where parents had every reason to think their children would fare even better than they had.

The young may be understandably incredulous, but the Great Compression, as economists call it, was the single most important social fact in our country in the decades after World War II. From 1947 through 1973, American productivity rose by a whopping 104 percent, and median family income rose by the very same 104 percent…

That America is as dead as the dodo. Ours is the age of the Great Upward Redistribution. The median hourly wage for Americans has declined by 2 percent since 2003, though productivity has been rising handsomely. Last year, according to figures released just yesterday by the Census Bureau, wages for men declined by 1.8 percent and for women by 1.3 percent.

As a remarkable story by Steven Greenhouse and David Leonhardt in Monday's New York Times makes abundantly clear, wages and salaries now make up the lowest share of gross domestic product since 1947, when the government began measuring such things. Corporate profits, by contrast, have risen to their highest share of the GDP since the mid-'60s -- a gain that has come chiefly at the expense of American workers…

For the bottom 90 percent of the American workforce, work just doesn't pay, or provide security, as it used to...

Labor Day is almost upon us. What a joke.

3)   The New York Times, Downward Mobility, Editorial, 30 Aug 06, (Offline)

If you're still harboring the notion that the economy is ‘good,’ prepare to be disabused.

Even the best number from yesterday's Census Bureau report for 2005 is bad news for most Americans. It shows that median income rose 1.1 percent last year, to $46,326, the first increase since it peaked in 1999. But the entire increase is attributable to the 23 million households headed by someone over age 65. So the gain is likely from investment income and Social Security, not wages and salaries.

For the other 91 million households, the median dropped, by half a percent, or $275. Incomes for the under-65 crowd were hurt by a decline in wages and salaries among full-time working men for the second year in a row, and among full-time working women for the third straight year. In all, median income for the under-65 group was $2,000 lower in 2005 than in 2001, when the last recession bottomed out...

The Census findings are yet another indication that growth alone is not the answer to the economic and social ills of poverty, income inequality and lack of insurance. Economic growth was strong in 2005, and productivity growth was impressive. What have been missing are government policies that help to ensure that the benefits of growth are broadly shared … like strong support for public education, a progressive income tax, affordable health care, a higher minimum wage and other labor protections.

President Bush is unlikely to push for those changes, wed as he is to tax cuts that mainly benefit the wealthy. But the economic agenda for the next president couldn't be clearer.

Horrors. Median wages are down. The middle class is shrinking. The rich are getting richer. After all, the Census Bureau says so,

Or, does it? What these leftist cherry pickers failed to cite is the following chart which appears on page 4 of the Census Bureau report, the first page of the Income section:

Following is the Census Bureau chart on recessions:

Using the same data, I redid the chart, expanding the compressed Y-axis:

Obvious judgments are:

    Median income continues to increase.

    Median incomes starts to fall a year or two before a recession starts, and begins to rise again a year or two after a recession ends.

What? Did the 3 liberally biased MSM journalists somehow overlook this chart? Well, it's pretty hard to miss, being prominently displayed on the first page of the section from whence they garnered their stats. No. They saw it, and understood what it meant. What, then? Did they dismiss it because it gave the finger to their blind ideology? Of course, they did. The clear implication in all 3 articles is that Bush's tax cuts have caused and are causing a massive transfer of wealth from the middle class to the rich. As a result, middle-class wages have fallen and continue to fall. Rot. The charts contravene this lie.

How egregious is their spinning? Pretty much maximal.

Two other spins can be countered:

1)   From the Globe's Another Year, Another Wage Loss article:

The economy's productivity increased by a remarkable 33.5 percent between 1995 and 2005, but real wages have declined since 2000.

Scope the graph. Note why Kuttner selected 2000 as his baseline year.

Larry Kudlow in his 4 Sept 06 Will Dems Never Learn article (Offline) retorts:

Despite all this, the economic Left is rebelling against the Bush prosperity. Along with articles in the New York Times and Washington Post, the Economic Policy Institute released a Labor Day study complaining that while productivity has increased 33 percent over ten years, real wages have declined since 2000.

But this neglects a broader measure called total compensation, which includes tax-free retirement and health benefits. Across the 2000-05 period, inflation-adjusted total compensation has increased 13.1 percent, and over ten years has advanced 31.8 percent, in line with the productivity rise. That's a bright picture.

It's okay to have a pessimistic point of view. But it's not okay to cherry pick data in order to reveal a worst-case Bush-bashing scenario. It's equally pathetic when the class warriors on the Democratic left can only carp about one alternative proposal: raise taxes on the rich.

2)   From the Post's Devaluing Labor article:

As a remarkable story by Steven Greenhouse and David Leonhardt in Monday's New York Times makes abundantly clear, wages and salaries now make up the lowest share of gross domestic product since 1947, when the government began measuring such things. Corporate profits, by contrast, have risen to their highest share of the GDP since the mid-'60s -- a gain that has come chiefly at the expense of American worker.

Alan Reynolds in his 31 Aug 06 Statistical Politics article (Offline) retorts:

Consider the recent New York Times front-page story, “Real Wages Fail to Match a Rise in Productivity” by Steven Greenhouse and David Leonhardt. It began by claiming: “The current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers. ... The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity ... has risen steadily over the same period.”

The authors appear confused. The current expansion began in late 2001 and is not over, so whatever happened after hourly wages “peaked in early 2003” or “since last summer” tells us next to nothing about whether or not there will be an increase in real wages and benefits over the whole cycle...

The article ignores recent facts, but compares last year with the peak of the previous cycle. “Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute (EPI), a liberal research group.”

Analyze this: The year 2000 was the peak of a nine-year expansion that was feeble during President Clinton's first term, when real compensation fell in 1993, 1994 and 1995 and rose by less than 1 percent in 1996. Yet this week's New York Times complaint is that total compensation rose by “only” 1.4 percent a year since the cyclical peak of 2000? How dumb do they think we are? How dumb do we know they are? …

(S)erious economists never compare labor's income shares to “gross” domestic product. GDP includes big items that are not any American's income -- notably, depreciation for wear and tear on everything from computers to highways.

The sensible practice is to examine labor compensation as a share of national income. Then, it turns out that “labor's share of income has averaged 70.5 percent (of national income) over the past 50 years and has remained within a narrow range of that average,” according to the St. Louis Fed.

Ian Dew-Becker and Robert Gordon likewise found that, “contrary to the widespread impression that labor's share has been squeezed, there was no change in labor's share from 1996:Q3 to 2005:Q1. ... Labor's income share ... fluctuated around a mean of 71.2 percent between early 1984 and early 2005.”

The article quotes myopic economists at Goldman Sachs saying, “The most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income.” Five years ago was 2001. Labor's share of national income is always highest in recessions because profits are lousy (and lousy profits produce recessions).

The contradictory New York Times articles of last May and this August seem to view economic non-facts as malleable political propaganda.

Although intriguing, these arguments and counter-arguments are not the gist. This is: If all 3 MSM articles entirely misrepresent the Census Bureau data on median income, we can safely assume they dissemble and prevaricate with other stats, too.

The New York Times expresses the true ethos of the Left:

What have been missing are government policies that help to ensure that the benefits of growth are broadly shared … like strong support for public education, a progressive income tax, affordable health care, a higher minimum wage and other labor protections.

What ‘progressive’ income tax rate would satisfy the New York Times? 50%? 90%? 500%? After all, rates below 100% only confiscate income. What about wealth, or net worth? True Progressives would advocate a progressive wealth tax. To them, a tax rate of 500% would be orgasmic.

Interestingly, there is also a fairly strong correlation between poverty and recessions, although not as strong as between median income and recessions. Following in a chart from the Census Bureau report:

Using their data, I redid the chart and graphed the 4 major sub-groups that the Census Bureau poverty data tracks:

A heads-up. If you run across an article claiming that the poverty rate has increased under Bush, peremptorily dismiss it.

Unlike anti-rational ideologues like Kuttner, Meyerson, and the editorial staff of the New York Times, I relish positing affirmatives and embracing naked reality. Following are the baselines I establish in this Economics section:

1)   Federal Income Taxes

Do the rich pay their “fair share” of income taxes? Or, do they pay more than their fair share?

2)   GDP comparisons among developed industrialized nations

Leftists believe that government intervention in the economy leads to accelerated economic growth. No. High tax rates depress economic growth. In a monumental feat of bulletproof scholarship, I prove that free market capitalism is a far superior economic engine compared to socialism. Be warned, however. The section on GDP is a book, but a page-turner every bit as electrifying as any <shudder> New York Times bestseller.

3)   Income, Wealth, or Economic Inequality

Pure Marxism advocates pure equality. In a pure Marxist state, everybody owns everything. Private property is anathema. Garden-variety leftists advocate pretty much the same thing. To them, income inequality is unfair and unjust. To eliminate inequality, they advocate a massive transfer of wealth from the rich to the poor. Marxism in another guise.

4)   Leading Economic Indicators

There is universal agreement that the Conference Board's Leading Economic Indicators (LEI) index is an accurate predictor for future economic expansions and contractions. Since January 2000, I've maintained a chart of the index. Required perusing.

5)   Poverty

Free market capitalism eliminates poverty more efficaciously than socialism does. In fact, socialism creates rigid economic castes.

Pretty ambitious list. We'll see what happens.