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Friday, June 22, 2007

Snookering the electorate

I think that if a donkey was in the White House instead of an elephant the press would be making great efforts to convince the public that this economy is really good. They would be happy to sell this truth. But the spinmeisters can't have this state of affairs. Blogger Engram dissects statements by a politico from the previous administration. First part of the statement:
“The typical American family is making $1,300 in inflation-adjusted dollars less than they were in 2000. They’re $1,300 poorer each and every year,” added Sperling, who was chairman of the National Economic Council during Bill Clinton’s administration. “If Rudy Giuliani and President Bush want to say that’s success, they can.
This doesn't fit his sense of things until he remembers that there is Census data which fits...
You can see that median income peaked in 1999 and then dropped each year until 2005, when it finally turned around (slightly). But the 2005 figure is about $1300 less than the 2000 figure, so this must be what he was referring to.
Then the dissection begins with some selected excerpts:

...let me explain why the Census numbers are so unreliable.

First, they are based on a person's memory of what they made in the last year.

Second, in the Census Bureau income measure, people are asked only about pre-tax income, so any effect of the Bush tax cuts would not be apparent.

What you really want to know is how much money people have after taxes.

Third, the income figures do not reflect all forms of income. Not only are capital gains excluded, but other noncash benefits are excluded as well.

A much better approach is to use the figures that appear on actual tax returns. The numbers are objective (not memory based), you can look at after-tax income (which is what you really want to know), and all forms of income are taken into account, including benefits.

In year 2000, after-tax income was $45,900. In 2004, it had increased to $48,400 after taking out the effect of inflation. That is an increase of $2500, or 5.5% (contrary to what the Census Bureau figures suggest). Note that actual incomes increased more than that, but this is the increase that occurred over and above the rate of inflation. When the numbers for 2005 come out, there is no doubt that they will be higher still. As such, it is simply wrong to assert that the median family is $1300 poorer in 2005 compared to 2000. The Census figures indicate that families feel poorer, but that might be because we have a media that is largely incapable of reporting anything positive about the economy. Whatever the reason, it happens not to be true. People in the middle in America are getting better off with each passing year. As such, Gene Sperling should have said “The typical American family is making $2,500 in inflation-adjusted dollars more than they were in 2000...."
The far more indicative, even if imperfect, data shows a $2500 improvement rather than a $1300 decline for the typical family. I've seen interviews with Mr. Sperling and have no reason to think that he is stupid or ignorant. It would be interesting to see his response if a knowledgeable interviewer grilled him on the matter. Technically he can point to Census data and claim that he is not lying but for my taste he is being far too disingenuous.

1 comment:

Oroborous said...

While I agree with the gist of the post, 2007 isn't going to be a good year for the average American family - unemployment up, home values down, a falling dollar keeping oil prices high...

It'll make the election-year rhetoric quite spicy.

But the long-term trend is clear, and clearly favorable - except that "average household income" stats will stagnate for the next few decades, since fixed-income retirees will constitute a greater segment of the population.

But if we adjust for that, the sky's the limit.