Tfgray’s Weblog

My daddy the accountant used to say, “There are three kinds of lies: lies, damned lies, and statistics.” On September 15, 2008, the Wall Street Journal published an article titled “New Evidence on Taxes and Income” by Dr. Arthur Laffer, godfather of Neoconservative economics, and his friend Steven Moore. You can read it here:

http://online.wsj.com/public/article_print/SB122143692536934297.html

It’s chock full of, well, statistics.

Let’s start with this one:

In 2007, overall real median family income increased to $50,233, up $600 from 2006. The real median income for intact families — mother and father in the home — rose to $78,000, an all-time high.

Okay, leaving aside that $600 per taxpayer kickback from the government that everybody got, which neatly accounts for the $600 increase, let’s take a look at the word median.

In probability theory and statistics, a median is described as the number separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one.

Source: Wikipedia http://en.wikipedia.org/wiki/Median

Okay, that’s simple enough. You look at everybody’s income and find the number in the middle. Let’s see how that works in practice.

The village of Lafferland, where everyone is prosperous, is inhabited by 100 residents whose incomes range from $90,000 to $110,000. The average income is $100,000. However, since no one makes exactly $100,000, the median income happens to be that of Dennis the Dentist, who reported $100,001.98 on his tax return last year. He’s the guy in the middle. The median. Median, average, whatever. Right?

Now let’s just say that one of the Lafferlanders, Igor, by virtue of his superior business sense and willingness to use brass knuckles, manages to take over nearly all the town’s income. He’s now making nearly ten million dollars a year. Everybody else is making $0, except Dennis, who installs solid gold grills in Igor’s family’s teeth,  and is now at $200,001.98. Igor has scooped up the remaining $9,800K.

Dennis is still the man in the middle. The median income is now $200,001.98. The median income has gone up by $100,000!! This is, of course, an extreme example, but, here’s my point: the median tells you nothing about the distribution of income. The average income under this example remains firm at $100,000, which should be a great relief to the 98 people now living under Lafferland’s bridges.

Let’s look at the next nugget:

households in the lowest income quintile saw a roughly 25% increase in their living standards from 1983 to 2005.

True, but if you look at the chart right next to that sentence, you’ll see that about 2/3 of that rise came during the Clinton years, with a sharp drop-off under Bush 43 and a slight recovery since 2002. He then claims:

Roughly speaking, the Reagan and Clinton presidencies were equally good for them.

Except the chart right next to his words clearly shows a 9.6% income gain under twelve years of Reagan/Bush 1and a 18.2% gain under 8 years of Clinton. Ask an investment banker whether he’d prefer a 9.6% gain spread out over 12 years or a 18.2% gain in 8. (After he stops laughing and explains to you that either works out to a less than a 2% return per year, he’ll probably tell you the latter is the lesser of two evils.) Equally good? Did this renowned economist pass 4th grad math?

I’m going to skip over Laffer’s assertions about family size shrinking and how this means that the poor are getting richer, except to note that I have been reading articles lately about non-related people sharing housing in order to save money and would like you to consider the possibility that family sizes are shrinking because people realize that they can’t support as many children. Birth control is, after all, still legal. On to the next point.

Over time the [Earned Income Tax Credit] has multiplied the number of poor households that fill out tax forms each year and are thus counted in government income statistics. That’s because to be eligible to receive the refundable EITC, a tax return must be filed.

Yes, dear, but the bottom quintile (20%) is still the bottom quintile. More people at the bottom filing doesn’t increase the size of the quintile beyond 20% of the whole. It does expand the whole, and it also pushes those toward the top of that 20% into the next quintile.

Official tax return data show that in 1983, 19% of returns had zero tax liability; that percentage has climbed steadily, reaching 33% in 2005. (The Tax Policy Center estimates that in 2008 nearly 40% of filers will have no income tax liability.) Thus, we are now statistically counting more poorer families today than we used to. This is a major reason that median and poor household income gains appear to be a lot smaller than they have been in reality.

No, it shows that a greater number of people have low enough income to not owe tax. Yes, the EITC accounts for part of that, but recall that only parents with children living at home are eligible for it. The EITC argument does not apply to single/non-head of household filers or the elderly, unless they are raising their grandkids, which, come to think of it, I’ve been reading about a lot, too.

In the U.S., people who had low incomes in 1983 didn’t necessarily have incomes as low a decade later. People in this country have long moved up over time, and this income mobility continues to be true. While some people do remain in the lowest income group, they are the exception.

One way to quantify income mobility is to examine how many people remain in the same tax bracket over time. We compared the returns of tax filers in the lowest tax rate bracket (zero) in 1987 with their returns in 1996. Only one third of the tax filers were still in the zero tax bracket, but 25% were now in the 10% bracket, 32% had moved up to the 15% bracket and 9% were in the 25%, 28%, 33% or 35% brackets. And that was following them for a decade, not a generation.

From 1996 to 2005, we have the income mobility data for income quintiles. Of those filers who were in the lowest 20% in 1996 and who also filed in 2005, 42.4% remained in the bottom 20%, 28.6% were in the next highest quintile, 13.9% were in the middle quintile, 9.9% were in the second highest quintile, and 5.3% were in the highest quintile.

He sort of skips over the fact that many students (those who went back to school after a stint in the big world and were not still classified as dependents on their parent’s tax forms) would hopefully be doing better nine years or so after graduation. Any person serving as enlisted below the level of sergeant, especially with a family to support, would also fit into that bottom-earner category. Hopefully, after nine years they’d have a few promotions under their belts or would be gainfully employed in the private sector. As Laffer points out, low income is a transient state for many people, still, 42% of them fail to make the jump. That’s one hell of an exception.

Many of the people in the bottom quintile of income earners in any one year are new entrants to the labor force or those who are leaving the labor force.

I really like that term, “those who are leaving the labor force.” In neat, bland language it summarizes the concepts, “retired,” “fired,” “laid off,” and “died.” On to his next point.

The data also show downward mobility among the highest income earners. The top 1% in 1996 saw an average decline in their real, after-tax incomes by 52% in the next 10 years.

This one is very interesting. He states it as though we’re looking at the top 1% in any given year, rather than following through on a case by case scenario as with the bottom quintile. Yes, in any given year a certain percentage of top income earners will die, retire, or be pushed off the corporate cliff clutching their golden parachutes. If, as he did above with the bottom 20%, he looked only at those who were in the top 1% in 1996, and compared those same people’s tax filings in 2006, you might well see a decline. The top 1% is, after all, only about 1.3 million tax returns.  

When you think about folks who won the lottery, athletic bonus babies with an average career of 4 years, one-hit wonders in publishing and on stage and screen, and high earners who quit, retired, were forced out, or perhaps passed away during that ten year span, 52% decline in income, sure. That makes sense, especially if the dead ones are counted as having zero income. However, he states this as though the income share of the top 1% (regardless of who they happen to be in a given year) has declined by half.

But if you go here,

http://www.slideshare.net/cmulbrandon/income-distribution-in-the-united-states/

a different picture emerges. Click the “full” icon in the lower right hand corner to expand the screen so you can read it. Then look at pages 8 and 9. Under Clinton, income distribution had shifted to the point where the bottom 99% of taxpayers were getting 50% of all income, up from about 48% under Reagan/Bush1. (The historic high came under Nixon, with about 55% going to the bottom 99%.) Under Bush 2, however, the percentage of income going to the bottom 99% of us slid to 47%.

Let me reverse these figures for clarity. From Clinton’s 50% of all US income going to the top 1%, now we have 53% of all income going to the top 1%. And if you look at page 9, you will see that between 1994 and 2004 the income of the top 1/1000th of Americans skyrocketed to 6.9% of the total, largely due to Dr. Laffer’s favorite medicine, lower tax rates.

How does this equal a 52% income decline for the top 1%? Only if you use Laffer math, which, dare I say it, is laughable.

But here’s the most mathematically interesting sentence in the whole piece:

…in 1981, when the highest tax rate on the rich was 70% and the top capital gains tax rate was close to 45%, the richest 1% of Americans paid 17% of total income taxes. In 2005, with a top income tax rate of 35% and capital gains at 15%, the richest 1% of Americans paid 39%.

While the equation in this sentence looks a lot like Tom Robbins’ “If a hen and a half lays an egg and a half in a day and a half, how long does it take a wooden-legged monkey to kick all the seeds out of a dill pickle?” try following my back of the envelope math.

Tax rates for the wealthiest are now half of 1981 rates for top bracket earnings and one third for capital gains. At the same time, the percentage of all tax receipts paid by the top taxpayers has more than doubled. That would suggest that top bracket incomes have gone up somewhere between four-fold and six-fold, wouldn’t it?

There’s another thing my daddy the accountant used to say.

“The figures don’t lie, but the liars really know how to figure.”

I’m excepting here from my previous post, again, this is Byron King writing at Whiskey & Gunpowder:

Lehman Brothers wants to pay $2.5 billion in bonuses to 10,000 employees…. What has anyone there done to deserve $250,000? Did I miss the news about somebody at Lehman discovering a cure for cancer? It’s all just so… Baby Boomer….

No, no, no, Byron. This goes much further back. Heck, the Romans had a word for it (two, actually) Prive Lege, in English, Private Law. If you squoosh it together into one word, it turns into the English word, privilege.

Common law, you see was for the common folks. Private law, however, was for the wealthy and powerful. The Baby Boomers invented this? Sure, and like my mother used to say, “You young people act like you invented sex.”

I’m going to make a leap here and assert that This is the end goal of the Neoconservative strategy, dating back to their Father of their Church, Leo Strauss.

You can find some Straussian basics here: http://en.wikipedia.org/wiki/Leo_Strauss

and here: http://www.alternet.org/story/15935/

In short, Strauss, a Jewish Zionist who escaped the Holocaust by emigrating to America, built his career as an academic philosopher by taking a text from Plato and standing it on its head. Up until Strauss wrote his dissertation, it was assumed that Socrates’ opponent was in the wrong when suggesting that lies are necessary to proper governance.

I really don’t want to get into all the snarly detail about Plato-Heidegger-Nietzsche-Locke-Yada-Yada-Yada, so let me sum up.

Strauss taught his students that there were three groups in society:

• The masses, who are essentially ignorant sheep to be herded. They are governed by basically low impulses and easily swayed. Interestingly, he apparently thought Machiavelli was a bad guy, because he was too liberal.
• The nobles (defined not as in “nobility of character” but as “the guys who have what everybody wants,” castles, sweet rides, hot trophy wives, etc.) are intensely competitive and acquisitive, desirous of glory and fame. (You know, having your children’s children sing songs about them.)
• The Wise: those who really control society by whispering into the ears of the nobles and guiding their actions.

Look at the number of Neoconservatives working behind the scenes in Republican circles (much of the Bush Administration and the denizens of dozens of Right Wing think tanks) vs the number who have actually stood for election, (um, who, other than Dick Cheney comes to mind?)  Does the above set of principles look like anything they might agree with?

Ok, let’s take a closer look at the sweet nothings The Wise whisper into the ears of the The Nobles. General principles:

• Lying is okay. After all, it’s being done for the Highest Good, social cohesion.
• Liberalism is bad, leading inevitably to either fascist dictatorship or mindless hedonism.
• Authoritarian rule is all to the good. In Strauss’ own words, “…only on the basis of principles of the right – fascist, authoritarian, imperial – is it possible in a dignified manner, without the ridiculous and pitiful appeal to ‘the inalienable rights of man’ to protest against the mean nonentity (Nazism).”^[26]  Yes, he actually attacked Nazism from the right. Where was Attila the Hun when we needed him?
• Oh, yeah, the “inalienable rights of man” mentioned in the Declaration and Constitution are doo-doo, and wussy doo-doo, at that. (See quote above.)

You can see why the lower end of the rightward side of the spectrum despises those guys in the ivory towers. I mean, who wouldn’t? The interesting thing is that Strauss’s students and acolytes, Wolfowitz, Perle, et al, are the ones who have successfully enlisted the support of those same masses for such causes as tax cuts for the rich and the Iraq war. Apparently, that’s where the lying comes in, and oh, they do it so well.

[Side note: I couldn't help but notice George Bush's facial expression as he gave his first speech in favor of the Paulson bailout. I've raised 3 kids and can identify the "bird flew in through the window and ate all the cookies" look. It's different from his previous performances, where the smirk gave away the parts where he was fibbing. He knew that wouldn't work this time. He'd already gotten notice from Congress that he wasn't sliding any more of that hair-on-fire WMD sign-here-now-or-we're-all-doomed cheese past them. (As we become more threatened, we tend to revert to more primitive behavior, including tactics that worked when we were five.)]

Okay, so the revered teacher of those who have advised our leadership for the past 8 years believes that an authoritarian system, supported by falsehood, is the most effective form of politics.  (Actually, the real count is more like 40 years. Most of these guys started in the Nixon Administration, and like the bad pennies they are, turn up everytime we’re dumb enough to elect Republicans.)

Time for Change? I think Ben Franklin would agree.

If you haven’t read it yet, scroll down to my earlier post, What Gives the Neo-cons Their Power? in which I discuss Authoritarianism and Social Dominance, the psychological aspects underlying Strauss’ philosophy. Check out the links. They explain a lot.

How is it that the neoconservatives, with their authoritarian tendencies, crackpot economic theories, and foreign policy tirebiting have come to so dominate the GOP? Interesting insights emerge if you look into their financing. Yes, there are domestic millionaires contributing to their think tanks, whose definition of Freedom is the repeal of the entire 20th Century (except for the nukes) creating a glorious return to the days of the Robber Barons when you could legally shovel dead rats into the sausage grinder, child labor was an acceptable alternative to education, and everybody peed in the streams. However, a sizeable amount of their support comes from a surprising source.

Sun Moon financed the founding of the premier neo-con daily, The Washington Times, and writes Bill Kristol’s paycheck over at the Weekly Standard. Why exactly is the Right so eager to ally themselves with a man who has announced that his goal is to destroy American democracy and replace it with a theocracy that worships himself? Why is he financing the Neocon agenda, rather than the Democrats, who, according to the Neocons, are the “real” traitors?

Sun Moon, a North Korean, built his relationship to the Right back in the Fifties, with massive contributions to the World Anti-Communist League. For detailed information on Moon’s revenue stream, go to www.consortiumnews.com, where Bob Parry has kept the investigative flame burning since he broke the Iran-Contra story decades ago. Links to his series of articles on Moon are on the left-hand rail.

Two personality traits that enable this counterintuitive alliance are known as Authoritarianism and Social Dominance. According to forty years worth of studies conducted by Dr. Bob Altemeyer, recently retired from the University of Manitoba, Authoritarians comprise about 25% of the population, which may explain why there seems to be a point below which which Republican support levels will not fall. Authoritarians function most comfortably in a rigid hierarchy that values obedience over thought, tend to be parochial, intolerant, easily led, and gravitate toward religious fundamentalism. Altemeyer’s studies show this to be true regardless of religion, so the same personality dynamic driving the jihadists can be seen driving elements of the Christian Right. One defining characteristic of authoritarian thought process is the ability to “compartmentalize;” to fail to see contradictions within one’s belief system or between one’s beliefs and one’s behavior.

Altemeyer identified Social Dominants by positive responses to such questions as “The most valuable skill you can learn is to look someone in the eye and lie to them.” He found that this group comprises 5 to 10% of the population. These individuals are generally amoral, value personal status and success over all other factors, and will do whatever is necessary to achieve their goals.

The Authoritarian Social Dominant is most dangerous. These individuals combine the compartmentalization and lack of critical thinking skills of the authoritarian with the power drive and amorality of the social dominant. Altemeyer cites Hitler, Stalin, and Mao as extreme examples. John Dean drew heavily on Altemeyer’s research for his study of the neo-cons, Conservatives Without Conscience. You can study up on the subject at http://home.cc.umanitoba.ca/~altemey/ where Altemeyer’s book, The Authoritarians, is posted.

In an email exchange, I asked Dr. Bob if he thought Governor Palin would be considered a “Double High,” and he responded:

I can’t say that Sarah Palin is a Double High. I couldn’t say she was if she scored highly on the RWA [Right Wing Authoritarian] and SDO [Social Dominant] scales. That’s an individual diagnosis, and ought to be based on patterns of behavior (as I did in the book with Tom DeLay, GWB, and Pat Robertson). Sarah Palin is too new on the scene, and there’s too much false information floating around about her.

That said, many established facts support the Double High hypothesis. I don’t think there’s much doubt about the RWA part, given her various stands. Has she shown signs of high social dominance? Well, her firings when she became mayor, her intimidation of the town librarian, her firing of the Public Safety Commissioner, her drumbeat lying about The Bridge to Nowhere and earmarks all fit the pattern. More telling to me is her seeming attitude that she can tell her followers anything and they’ll believe her. That looks like a social dominator leading high RWAs.

TF: In your research, or do you know of anyone else’s research, that speaks to successful techniques for countering authoritarian social dominants?

How do you counter social dominators? Vigorously, I’d say (although I’ve no studies on this and it’s just my opinion). It’s very much the same as how do you control playground bullies when the adults don’t. If you just “take” the bullying, it will never end. People have to unite against social dominators and fight back. I think a good example of that now is how the Obama campaign has changed its tone recently.

Responses posted with Dr. Altemeyer’s permission.