Equality and Choice

The question of equality does not look as if it going to go away. The enemies of individuality and liberty never sleep--like greed.

A question on the topic worth considering is the complicated "choice question." Many feel that how one lives depends less on what your intellect is and more on the choice of your lifestyle. Shortstops and nuclear science jobs are very exclusive and pay well but are not in high demand. But if you choose to be a teacher, it is unlikely you will become rich. Ditto nursing. Or fiction writing.

Indeed there are few real jobs in the world that lead to wealth. But millionaires in the U.S.--who are generally not extraordinary people-- have some distinguishing characteristics. First, they usually do not live like millionaires; they are scrupulously frugal. For them, work is their enjoyment; life is otherwise not much fun. Second, they work several jobs or areas; over one third are immigrants whose first language is other than English and many own mundane businesses that they work like crazy on. (A common business is fast food, like pizza shops. Millionaires--and there are a lot that do this--own four or five such shops and are constantly working long hours at multiple sites.)

The casual office worker may admire the guy's earnings but not his life style. I know a guy who works as a military contractor in Africa. He makes a lot of money but I am not sure many people would think his paycheck would be worth it. Everyone will tell you there is a lot of financial opportunity owning rental property but one must accept a risk and an incredible hassle. The lower paid general practitioner had the same option to become a high paid neurosurgeon, but chose not to.

So how much of one's tax bracket is his own choice?

The Camp-followers of Time

Shanghai in 1987

Shanghai in 2013

Who Are the Poor and Whose Money do They Want?

A curiosity exists among the citizens of the West over their idea of the poor and the endpoint of the notion of inequality and redistribution. Most seem to believe there are poor people here in the United States and those people will be rewarded financially by forced expropriations from others. A glance at the two graphs below will show how parochial an idea that is. In fact the poor in this country are quite well off compared to most. The inequality fad sweeping the world and the great leveling that some demand would necessitate the average citizen of Appalachia donating to the world's poor. First we loot Luxembourg, then.....

Do not ask for whom the redistribution bell tolls.

Stalking the Apparently Fascinating Top 1%

The current shameless campaign of envy and division purposefully confuses income and wealth, two entirely different entities; it also confuses the people who are being maligned.

A recent Congressional Budget Office report shows that, while the average household income fell 12% between 2007 and 2009, the average for the lower four-fifths fell by 5% or less, while the average income for households in the top fifth fell 18%. For households in the apparently fascinating "top one percent", income fell by 36% in those same years.

This data is different from most that is published which generally show the upper bracket improves. Why? The IRS tracks people, not groups. The CBO numbers are based on IRS statistics of specific individuals and households over time through Social Security numbers, not the generalized numbers from each bracket where the people change over time. There is a large turnover in each bracket from one time period to another--for example, in the apparently fascinating top 1% most people are in that bracket for only one year in a decade.

In fairness, these numbers are also self fulfilling. Since most people in the top one percent are there for a specific reason--stock sale, house sale, inheritance event or insurance event--and those events are not repeated, these people will have decline in income almost by definition.

But it only further demonstrates the complexity--and the insincerity--of such generalizations.

Income Mobility

An article on Yahoo written around a piece from the Brookings Institute on the topic of "income mobility"--the ability of someone in a lower economic quintile to move to a higher quintile--had this summation:

Not only was there less "income mobility " in the U.S. than in most of Europe but
"the American dream is less likely to come true in the USA than in any other major economy except the United Kingdom's.
A generation ago, an American family did not need to "climb the ladder" to become better off. If a family started in the dead middle of the income distribution in 1947and ended in the dead middle of the distribution in 1973, it still saw its standard of living approximately double. By contrast, middle-class incomes barely budged in the quarter century leading up to 2007."

While the Brookings Institute has its own ax to grind this, if true, is most disturbing. Income mobility is a harsh way of judging an economy; it is a zero sum game. If someone advances, someone is overcome and regresses. But capitalism's major claim is not the individual wealth of all, it is the wealth of some and the standard of living of all.

This would be a serious worry.

Black American Wealth

A new article by Thomas Sowell explores the terrible statistics on the development (or deterioration) of black American wealth over the last years. He lays it at the feet of the politicians who tried to jerry-rig the economy to accommodate unqualified home owners, mostly black.

That may be true but it misses the point. The real scandal is the failure of the black community to show any participation in the American social and economic process, its complete separateness from the American mainstream. How could white households have 33 times, 33 times!, the net worth of black households? And when will the black community stop its O.J. Simpson-like search for the perpetrator?

Lying Back at the Numbers

A number of years ago Sports Illustrated did an article on the emerging fighter Sugar Ray Leonard and how he might be helped and hindered with regard to marketing himself to white America. One factor, deemed a negative by the writer, was Leonard's illegitimate daughter whose picture he flaunted on his sock during bouts. A mitigating factor, it was offered, was that within the black community this was quite common--over 70% of kids were illegitimate--and that might soften the effect among white Americans. The following week several letters to the editor proclaimed outrage of what they perceived as a misprint; it was inconceivable to them that 70% of black children were illegitimate. It must have been 7%.

It was indeed 70% and still is. There is, however, a part of us that has difficulty with the astonishing. Facts outside our norms are not dealt with well and often just ignored or forgotten, like a bad date or an unpleasant illness. So it is with the recent statistics on net worth of families. According to PEW Research (maybe with an ax to grind) the median net worth of white households in 2007 was $134,992, in 2009 it was $113,149. The median net worth of black families was $12,124 in 2007 and in 2009 it was $5,677. Net worth not income; assets minus debt.

These are numbers that most will see and squeamishly look away. An objective person must look on these numbers with horror. Initially some will point out the discrepancies, of course, and call to the barricades. Some will muse this kind of disparity will be socially destabilizing, although being on the lower end of the scale in America has little connection to poverty when seen in a broader geographical--or temporal--framework. Moreover inequality always exists, if and how it becomes destabilizing appears no more defined than coffee house surmise.

But there is a real and obvious problem here that has nothing to do with comparisons. The black community has amassed no wealth. They clearly are living from check to check. They have no savings, no fallback position in a crisis, nothing for a down payment, no extra money for a luxury, no extra money for school, no money for a rainy day. A dental bill is more than a problem, a fender bender a disaster. Most of all, all of the country's discussions must be obscure to them. Taxes are meaningless, interest rates do not apply, the housing market an abstraction, savings and the very notion of self denial towards a desired end--a concept most Americans would think inherent to the nation--the stuff of a foreign culture. Somehow the black community has managed to live in a nation of great flux, immigrants coming and going, with mandatory affirmative action and have remained separate from the basic heart of the country.

The only thing more numbing is how this came about and where it is going.

GDP as Bling

GDP is consumer spending, plus government outlays, plus gross investments, plus exports, minus imports. With the exception of exports, GDP measures spending.

But GDP does not distinguish between spending on good project vs. bad projects, between spending that results in production vs consumption, between debt financed and savings financed spending. There certainly must be differences.

Say the Pittsburgh Pirates, as an entity, have a budget of 45 million dollars and they are going to spend 7 million dollars on a power hitting first baseman. Is spending that money for Pujols the same as it would be for Overbay? Would things be the same if you borrowed money from next year to buy Pujols? Either way buying Pujols is a good deal for the team, in no way is buying Overbay a good deal. And going into debt to buy Pujols is still a good deal.

The problem here is that GDP is a poor marker, an inaccurate stat. It measures--except for exports--consumption, not production. It substitutes consumption for wealth.

That is a trailer park error.