Every time David Cay Johnston writes about income, or economics in general, my teeth hurt. This is a good example of why:
A reasonable interpretation of this data is that we had a recession, income fell, and since then the economy has done a good job of producing real income gains (real means above inflation.) I am not arguing that these numbers tell the whole story, and lord knows I am no fan of the economic policies of this administration, it is just that that is the story they tell. I suspect the numbers for 2006 will be similar and probably that will be true for 2007 and 2008 as well (income and employment tend to lag changes in the economy as the numbers from 2000 show.) Whatever my opinion on the economy going forward, that is what has happened.
So what does Johnson do with these numbers?
Uh, talk about shallow analysis. Pick an advantageous starting point and tailor the conclusion. Cay responds with this:
The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy.
It does? Given that people today live in 2007 and not 2005, and that if the numbers are even close to what I expect them to be they will be well above 2000 at this point, I can’t see how that follows. Furthermore, if earning essentially the same in 2005 as in 2000 is more stressful, why? He throws in some reasons:
Many Americans are also paying a larger share of their health care costs and have had their retirement benefits reduced, adding to their out-of-pocket costs.
Since health care costs are part of the inflation calculus how does that explain it? “Many” is an interesting word on the retirement benefits reduction. What is many? How does he define retirement benefits? I suspect I could write that many Americans have had their retirement benefits increased and it would be just as accurate and meaningless. No way to tell, no source for the claim is provided.
Of course he ignores the effects of tax reductions and expansion of the Earned Income Tax Credit on middle and low income taxpayers by spending all his time in a misleading discussion of the gains from tax cuts to the wealthy. Buried amongst his tendentious arguments you tend to focus on what he wants you to take away from his piece rather than inconvenient facts that when removed from the context he puts them in argue for a somewhat different take:
The I.R.S. data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5 percent.
Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.
The number of taxpayers making more than $100,000 grew by nearly 3.4 million and accounted for more than two-thirds of the growth in the number of returns filed in 2005 compared with those in 2000.
So, 3.2 million fewer people make less than 25 k per year and and 3.4 million more people make more than 100k.
Reading the article one might miss that as he has set up the argument for you to focus on all the rich getting richer without pointing out that more people (assuming his characterization of the data is correct) are entering the upper income ranks and fewer are in the lower income brackets, which is a good thing in my estimation, but maybe Johnston disagrees.
Bizzy Blog has other observations and compiled the data.
Update: David Cay Johnston responds in the comments to Bizzy Blogs post. Points for problems with his explanation. No points for commenting on his habit of starting his debates on blogs with puffed up explanations (see this comment thread and this one) of what a noble and diligent reporter he is, though feel free to do so.
Update x2: Backtalk has more and shows some interesting trends in household income that don’t fit the “tax cuts helped the rich and screwed the little guy” meme. Hat tip: Instapundit.
Update x3:Thanks to Instapundit again, I see Tom Maguire weighs in as well. He is a little muddled at first, but makes a number of points about the story that favor the thesis of Johnston, which Johnston ignores. One complaint, and I have many, which I didn’t point out before is that the data may not be that similar over time, and therefore small differences may actually not really exist (though they could make his case more convincing.) Since he is using tax returns, which include both single filers and joint filers, as well as income that might escape the AGI and in differing amounts depending on the tax regime, I have no idea how to judge whether we are comparing apples and oranges. As I said:
I am not arguing that these numbers tell the whole story, and lord knows I am no fan of the economic policies of this administration, it is just that that is the story they tell.
So the other complaint is, that whatever story they tell it may not comport very well to reality.
#1: So, the fact that people left the bottom bracket and entered the top makes the NYT graph factually incorrect? Or is this just an alternate data point you feel is equally relevant to describing our economy?
No. That isn’t my argument. I do argue, assuming I understand your query, that he makes claims in the text which the quote from his piece I highlighted undermines. It has nothing to do with the graph.
Nor does your characterization fit the data he is citing. The data shows the number of people (in real terms) making less than 25k declined by a very substantial amount. In percentage terms the figure is even more impressive. It doesn’t say they are at the top, though I am sure some are. Some of those at the bottom probably were at the top previously as well. I think that is a good thing, which his presentation of the data obscures, as one can tell when reading all the lefty blogs who missed that implication and for the most part analyzed the piece not at all. .
The same for the number making more than 100k. Also a good thing, but made to look almost as if it were a bad thing by the tendentious way he framed it.
The problem with the graph I described above. If you look at the first table one takes away one impression. Looking at the graph one comes away with a very different impression. Very common technique and very misleading. Of course the problems are myriad, I just pointed out the way he manipulated it. Factually the issues will take a lot of time to dissect, but backtalk discusses some of them.