ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

American Dream: Why is the American Middle Class So Damn Poor?

Updated on January 8, 2017

What Income Inequality Looks Like

IF INCOME INEQUALITY WERE MINIMAL THEN THE SLOPE OF EACH LINE WOULD BE ROUGHLY THE SAME (The Top Line is the 95th Percentile, the Bottom Line is the 20th Percentile)
IF INCOME INEQUALITY WERE MINIMAL THEN THE SLOPE OF EACH LINE WOULD BE ROUGHLY THE SAME (The Top Line is the 95th Percentile, the Bottom Line is the 20th Percentile) | Source

The American Middle and Poor Class Have Been Falling Behind for 14 Years

AND SO HAS AMERICAN EDUCATION; MANY BELIEVE this is no coincidence. A recent analysis from :TheUpshot of the New York Times has shown that in 2010 the American Middle Class, meaning the median income in America is either tied with or behind Canada; the expectation is that today, it is well behind Canada. Below is an excerpt from a table prepared in :The Upshot analysis:

America Is Quickly Falling Behind Economically

PERCENTILE OF AFTER-TAX INCOME
1980
1992
2004
2010
95%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
90%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
90%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
80%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
70%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
60%
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
MEDIAN
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES/CANADA
40%
UNITED STATES
UNITED STATES
NORWAY
CANADA
30%
UNITED STATES
AUSTRIA
NORWAY
CANADA
20%
UNITED STATES
DENMARK
NORWAY
NETHERLANDS
10%
UNITED STATES
NORWAY
NORWAY
NETHERLANDS
5%
NORWAY
NORWAY
NORWAY
NETHERLANDS
WHICH COUNTRY HAD THE HIGHEST AFTER-TAX INCOME?

DEMOGRAPHIC SURVEY #1

ARE YOU

See results

On top of that, a recent 685-page economics tome by French economist Thomas Piketty, analyzed over 100 years of tax records from France, Germany, the US, the UK, and Japan determined that the US, while not quite there yet, is on the trajectory that will replicate late 18th century French economic inequality, just before the Revolution that led to the top 1% having their heads chopped off. Piketty's book, Capital in the 21st century, was released in February 2014 and immediately sold over 200,000 copies and has captivated Wall Street, the cream of Washington's policy makers, and think-tankers.

His fundamental conclusion is that the "rich really are getting richer" and that "wealth doesn't trickle down, it trickles up" (something I have been saying all along; he just proved it). Further, he firmly believes his data shows that his 18th century metaphor will become reality if the inequality if left unchecked.

Piketty found that in the US, the only times inequality decreased was during war, depressions. or when government directly intervened like with the New Deal and the Marshall Plan. He takes US tax policy to task blaming it as being part of the inequality problem. Ironically, one reason the graduated income tax was started in 1913 (progressive era) was to redistribute income or "level the playing field" as it were. But, over the intervening 100 years the Conservatives generally won out in taking the "gradients" out of the "graduated" thereby transferring the wealth back to the wealthy; especially in the last 30 years. The last tax cut by President Reagan effectively made the income tax almost a flat tax with only a small nod to the poor.

One thing I wasn't aware of that Piketty pointed out is that the idea of a robust American middle class is a recent phenomenon and has occurred basically during our lifetimes; from the 1950s to the 1980s. After that, it went into decline. Prior to the depression, there were never that many good years in a row for a middle class to establish itself given that a 2008-sized recession or larger occurred, on average, every 5 to 6 years!! In fact, the longest period between recessions of any kind since 1789 to 1940 was 5 years!!!

Like the 2008 Great Recession, most of the downturns only affected the bottom 90% of income earners; it was only in the five or six big depressions where the top 9% felt the pain as well; the top 1% was rarely troubled by these momentous events.

TRICKLE UP not TRICKLE DOWN

What Did These Other Countries Do Right That America Did Not?

THEY INVESTED IN EDUCATION. THEY TRAINED IN NEW SKILLS, AND THEY REDISTRIBUTED WEALTH, that is what they did. After the 2008 Great Recession begun by America which then spread around the world because those financial systems were as complicit in making bad loans as our own investment and commercial banks were, Europe and Canada invested in their education system. America, on the other hand, ended up doing the opposite even though President Obama tried, through his stimulus program, to prevent the underfunding of America's educational system.

He knew most of the State and local governments would education as one of their first austerity moves; all he had to do was look back in history to understand that. His effort paid off for a couple of years but then the money ran out, the economy had not recovered because of the political headwinds he faced and the States cut education big time.

Except after the Great Depression, around 1996 with the new Welfare Reform Act, and then again in 2009 with the stimulus, America has never had a real interest in training workers displaced either due to economic downturns or changes in technology for jobs that required new skills; it is that old "rugged individualism" thing rather than "what is good for America thing", I suppose. Lucky for Canadian and European workers, their governments don't take that view and they help their workers learn new skills. Consequently, as of today, the bottom half of their income earners earn more than our bottom 50%.

Finally, they understand that capitalism, left unchecked leads to income inequality, so they do something about it (yes, most of Europe and Canada are essentially capitalistic countries, I think only Norway is still socialist in terms of economic systems). They use their tax system to turn the "trickle up" effect that Piketty determined actually occurs into a true "trickle down" which conservatives wrongly claim happens.

It is the combination of these factors that you will see, if America does not change its ways, the next column in the table above to contain only the top two rows with the name UNITED STATES.

This Is Not A Chance State of Affairs

IN FACT, WE ARE DOING IT TO OURSELVES ON PURPOSE! Well, that is sort of stupid isn't it; shouldn't we just stop? Unfortunately, it isn't that simple. Like the climate change deniers, the same group of people and politicians deny, regardless of what the facts show, that the economic system their philosophy tells them to adopt can possibly have such a terrible outcome. It never has before, they say.

Well, yes it has, but they won't believe that either, for there is always a way to rationalize each individual example of failure away. The problem is, they have to rationalize 25 failures away, if you count the 2008 Great Recession. There were 24 major recessions between 1785 and 1929 that need explaining as well. (These weren't the only ones, but the others were not caused by economic policies) To counter this criticism they point to the great economic boom since America was born because of their philosophy. Well that is not quite true either.

Yes, there were periods of great economic growth, between recessions, depressions, and wars; but most of it was generated by the push West and then the expansion into those territories. So long was there was new land to conquer or settle, the economy could expand. It wasn't until the West Coast was fairly well settled that the American economy started feeling the same constraints we see today. Because of this ability to expand, there was a natural safety valve when the economy went south, people moved West.

As a result, it wasn't until 1929 when people and policymakers understood there was something wrong with the way we "always did things economically" and FDR and John Maynard Keynes sent us down a new path; which worked much better. But time passes, people die, and memories fade; but ideas don't. The ideas of "a man is an island", "the rugged individualist", "big business knows best", "the only good regulation is a repealed regulation:, and "government is bad" gained popularity once more as did the failed economic system of laissiz-faire or Classical economics. By 1981, we had forgotten the need for income equality and by 2001 all the lessons learned from 1929 were relegated to the trash heap as they interfered with business as usual. Seven years later, right on schedule came the Great Recession of 2008.

And because, as previously mentioned, we did all the wrong things during the recovery, e.g., not enough stimulus, not enough support for education, not enough training of new skill sets, not returning to the Clinton tax rates (after recovery happened), and the opposition Party opposing all efforts of the Party in power to institute a recovery plan, we get a report in 2014 that Europe and Canada has pulled ahead of half the income earners in America.

DEMOGRAPHIC SURVEY #2

THINKING ABOUT POLITICS, DO YOU FIND THAT YOU

See results

© 2014 My Esoteric

Comments

    0 of 8192 characters used
    Post Comment

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “where is the other half of that diagram in figure 2 that shows increased demand increases supply and that increased supply lowers costs?”

      That’s a false assumption for a non-profit university. If a school has 100 seats available for a class and 150 apply, then 50 either don’t get in or go elsewhere. The following year, they get 175 applicants and still have only 100 seats available, so 75 go elsewhere or go nowhere. But either way, the input costs to run the school and service those 100 students of which they have capacity has not changed beyond normal CPI adjustments. Since they are not competing with the other university for profits, the increased supply is irrelevant. They already have masses of kids trying to get in with limited capacity. So if you’re non-profit, and you’re at capacity…the only thing that matters is the cost to service your capacity. So where is their justification for raising tuition costs year over year at such consistently astronomical rates? There is none. They know the kids can borrow more, so they charge more. Because even non-profits aren’t so non-profit. They are as bloated and irresponsible in how they handle taxpayers dollars as any gov’t agency.

      “while raw assistance keeps increasing over time, because GDP is increasing, it remained constant as a percent of GDP.”

      Define raw assistance. As we already established, for accounting purposes prior to 2010 a large percentage of assistance is in the form of student loan subsidies, which are not recorded as subsidies unless they fall into default and the issuing bank is forced to take the loss. In such cases the binding liability then becomes a subsidy to the Gov’t and is recorded as such. This doesn’t change that fact that university are well aware of the capacity of students to borrow without collateral in large quantities, and therefore have incentive to raise tuition well in excess of inflation…which is exactly what they have done. In order to quantify raw assistance…you need to incorporate every single student loan year over year.

      “1) How many of those 28 out of 100 had the DVD given to them, 2) if they bought one, how many of the remaining, say 10 just to pick a number, bought their DVD as cheaply as possible, say $3 bucks at a yard sale, and how many splurged and paid full price, say a whopping $30 to buy a new one?”

      Therein lies the difference in priorities. During the depression, people swam in the east river looking for driftwood to burn for heat. What would they have done with a DVD while they’re family was starving ? How many of them would have had more than one radio in their home, used or not? There is a laundry list of unnecessary accessories that people below the poverty level have in their homes as per the consumption census. I personally don’t care what they have. The problem is that they often have as many luxuries as I do, and somehow the left keeps coming up with more entitlements that I need to provide to them. Because nobody wants to clean up their own backyard anymore. I don’t want to hear about people crying poverty when they have the same nonsense I do, but I am expected to provide for them. If I have to choose between paying for used accessories, or a dental check-up for my kid…I get the dental check-up…and I don’t complain that insurance didn’t cover it, and then find the time to have more than one DVD player in my house.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW wrote "28% of families below the poverty threshold have more than 1 DVD player....give me a break !!!"

      ME responds by saying WOW, arrest those deadbeats for wanting a little entertainment in their lives. It seems your position is "I am poor, therefore I must do my best to appear to be poor by denying myself any relief from my poorness".

      Rediculous. 1) How many of those 28 out of 100 had the DVD given to them, 2) if they bought one, how many of the remaining, say 10 just to pick a number, bought their DVD as cheaply as possible, say $3 bucks at a yard sale, and how many splurged and paid full price, say a whopping $30 to buy a new one?

      Is that a significant number (although I realize that for many on the Right, 1 is too many.)

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      In your CATO reference, where is the other half of that diagram in figure 2 that shows increased demand increases supply and that increased supply lowers costs? That is a one-sided argument people and institution on the Right and Left extremes, of which CATO is one, often use to make their point. Because I know how CATO wants the answer to turn out, I always have to validate their analysis.

      I was able to recreate one of CATO's correlation number. They did it by running a correlation coefficient between $ of tuition relative to $ of assistance. Since both increased in magnitude in tandem (in other words, they both went up together and they both went down together), it follows the Correv will be very high. The problem is, and CATO knows this, you can't make legitimate comparisons . I was finally able to duplicate the numbers, well one of them anyway, you offer above.

      But, the correct methodology is to use normalized changes in educational assistance. in case assistance as a percent of GDP. When you do this, the correlation falls to around 20%. Consequently, while raw assistance keeps increasing over time, because GDP is increasing, it remained constant as a percent of GDP. To obtain the CATO results, spending on assistance must outpace the growth in GDP.

      The correlations you provide above I also found in your CATO analysis and the appropriate time span, 1977 -2002, is used. But, unfortunately

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “To say that "That makes it easier for the people who belong, and the others should go elsewhere." means, unambiguously, that people whose parents can't afford a higher education, don't deserve one.”

      No…it means what I said. People who want to pursue traditional university degrees should do so, and other fields should not. There are plenty of wealthy kids who don’t belong in universities as well, and only go because it’s a status symbol, so there parents make them. I had one client who sent their kid to Harvard because he had the grades to get in. He got out of school and couldn’t find work…which is very unusual for a Harvard graduate. When I asked what his degree was in, it was theology. Essentially, these people buried themselves in debt for a degree that offered no remuneration. Why…because he got in. So what…what did it get him…squat. He could have studied theology in the library or with the local rectory for free.

      Optics are precisely the problem. People expect to get a degree even if it offers them nothing. And in many cases it does. I am not saying that kids shouldn’t go to school. I am saying the gov’t should be giving them massive amounts of credit to do so. Because all it is doing is driving up cost. Nothing is gained from tuition going up at the pace that it is.

      “just can't digest your, possibly unconscious desire to have a nation of a few wealthy, a few middle class, a few merchant class, and a large poor class”

      I have no such desire. You just assume that the only way to be successful is to obtain a traditional university degree. Nothing could be further from the truth. If you want to be a Lawyer, Doctor, CPA…then such a path makes sense. If you want to be a plumber, electrician and various other roles…than such a route is a waste of money. You just seem to presume that you can’t get wealthy in such fields…which is rather pretentious. And yet nothing is further from the truth. There is enormous wealth opportunity in most any field if you work hard enough. We have a client worth over 50 million dollars who started as a mechanic, and then borrowed the money to start his own truck leasing company. Today he has 250 employees. He did that on a GED. He may be the extreme, but a degree is not required to be wealthy. We’d have more people like that if we could revive the entrepreneurial spirit in this country. There are also plenty of lawyers who graduate law school and pass the bar who don’t have a nickel to their name. If you’re a criminal defense attorney in NY…you’re a dime a dozen. Success is defined by motivation and how hard you push yourself. It can be done in any field. And some of those field require traditional university training, and others don’t. If you want to work for a multinational corporation…chances are you want at least a 4 year degree. But it doesn’t have to be that expensive. If you want to be self-employed as small business owner…you’re probably wasting your money in college in most fields.

      “I am curious, your logic that any subsidy increases demand and therefore costs (because supply must stay constant for that to occur), then any form of financial aid is off the table including philanthropic grants, scholarships, and the like. I don't even need to ask if you agree, for you must for your position to hold water”

      No…gov’t subsidies increase cost. When a philanthropic group gives money…they are more careful about assigning needs to giving, because they are subjected to limitations. When gov’t gives subsidies, they care not for the cost of such subsidies…because their money supply is limitless. If my position doesn’t hold water…perhaps you’d like to explain why most of the research on this topic does in fact support the premise that financial aid is highly correlated to increases in the cost of tuition.

      Let me explain a very basic premise about spending that Dr. Friedman once articulated.

      When you spend your own money on yourself…you’re are conscious of both cost & quality/value.

      When you spend your own money on someone else…You’re conscious of cost...but not always quality/value.

      When you spend someone else’s money on yourself…you’re care not for cost…but very conscious of quality. (Employee’s using the corporate card at dinner)

      When you spend someone else’s money on other people…neither cost or quality are relevant. (Gov’t subsidies, and most things gov’t does).

      I am still waiting for your explanation on which of these input costs that both profit and non-profit universities are seeing rise so much faster than virtually every other sector to justify this massive spike in tuition costs ??? If you’re non-profit…than input costs would dictate output costs, since profit is not a motivator. So somewhere in the supply chain there is a spike in the cost to run the university.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      To say that "That makes it easier for the people who belong, and the others should go elsewhere." means, unambiguously, that people whose parents can't afford a higher education, don't deserve one. Do you have any idea of the poor optics that position holds relative what this country is thought to stand for? That is straight out of Burke and Kirk that there are the have's and the have nots, and that is the natural order of things. The latter, of course, implies the have nots are there by their own choosing and not the actions of the haves. (real life, in other words),

      I just can't digest your, possibly unconscious desire to have a nation of a few wealthy, a few middle class, a few merchant class, and a large poor class, ala 1700s - 1945.

      How do you justify that state of affairs being a good thing?

      This "The enrollment growth alone is not what drives prices up. It’s the nearly unlimited endogenous supply of money that the gov’t guarantees those who wish to go to school. " is wrong on the face of it; the first sentence essentially disconnected from the second and is counter to what you have been saying -- increased demand (enrollment growth) increases costs. (Of course you forget the other side of the equation which is increased demand increases supply which lowers cost).

      Now, it may be true that subsidies do increase demand, and therefore supply, the way you have framed it is false. In my day, and I think the same is true today, is that being able to qualify for college admittance comes first, the colleges capacity to accept the qualified students comes second, and finally, in last place, comes the ability to pay which determines if a student can get into any particular institution; not the other way around.

      I am curious, your logic that any subsidy increases demand and therefore costs (because supply must stay constant for that to occur), then any form of financial aid is off the table including philanthropic grants, scholarships, and the like. I don't even need to ask if you agree, for you must for your position to hold water.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Additionally, tuition data from the NCES Digest of Education Statistics

      and aid data from the College Board Trends in Student Aid demonstrated the correlation between Total Federal Aid and tuition as follows:

      Private four-year 0.962

      Public four-year 0.970

      Public two-year 0.940

      Additionally as pointed out below...

      "ten papers that dealt with the ability of

      colleges and universities to capture for themselves

      federal student aid in the form of higher

      tuition or reduced in-house assistance. Of

      these ten, eight found evidence that federal aid

      showed up in higher tuitions or smaller institutional

      scholarships."

      http://object.cato.org/sites/cato.org/files/pubs/p...

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “When you remove the subsidies, then as you say because demand is so artificially high, the higher education system will implode until it stabilizes where there are just enough colleges for those that can afford it.”

      No…demand will drop off somewhat…but those who choose to continue to take the traditional university route will not have a gov’t ATM card. The universities will know that…and they’ll charge less. They are not going to close their doors and say “We had a nice run”. Not by a long shot.

      Unless you can explain to me why it is that even public state run (supposedly non-profit) universities have skyrocketing tuition. What exactly is it in their input costs that is rising so much faster than everyone else. Are they seeing electric expenses 10 times higher than the business across the street ??? Perhaps they are paying 10 times the cost to cut lawn on the University ??? Or maybe they raise the costs because they can. They know the kids have access to the lending…so they charge more and care not for managing costs.

      “A world where middle management and up are all filled by foreign college degree holders who filled the demand left by the lack of degreed Americans”

      Nonsense…people come here to get their degree’s more often as it is. There are X amount of spaces in the classroom. The most qualified person who wants to pursue that career path should get in. Sometimes that will be a foreigner…who already comes here as it is. And sometimes it will be a US born kid. That is really irrelevant. Frankly, having hired many people in big corporations for many years…unless you’re coming in with a PHD…nobody really cares where you went to school or what you majored in. The only exception is Ivy league which is a private club. The last kid I hired at Fidelity before I left had a Masters degree in criminal justice. He couldn’t get on the police dept and made a career choice change. His degree was worthless in relation to what he was hired to do. He was a go-getter…so I hired and trained him because of his attitude…nothing more. Not to mention those lack of degreed Americans will be charging the degreed middle manager $400 to change the $8 flapper in your toilet bowl, because the guy with the MBA can’t figure how how to do it.

      “you actually mean schools are in business primarily for the purpose of having money put in their coffers?”

      Yes…they are. They all want their race to the top grants from the Federal Gov’t…and their annual budget increase no matter what my property taxes are. Do you think a superintendent making $500k per year cares if the kids can read or not. They don’t. Why ??? Because what are you going to do to them. You can’t fire them…they’re tenured. You can’t choose to change schools without selling your home. You are powerless as a parent. You have literally no recourse other than to pay for private school…which is what I do.

      “there is little correlation between the subsidies as a percent of GDP, which was constant at around 1.03% from its 1978 reference point until about 2003 when it increases dramatically.”

      Subsidies are higher percentage than you are stating. Prior to 2010 student loans were not granted directly from the Federal gov’t exclusively. The loans were subsidized, but often issued by the bank. My student loan was issued by Marine Midland Bank. However, from an accounting perspective…it did not reflect as a subsidy until or unless it is defaulted on. Most loans historically don’t default…not yet anyway. Since I never defaulted…it was never reflected as a subsidy. However, as a practical matter, the bank was not going to lend me that much money with no collateral if the gov’t had not assumed the binding risk. That permitted me to borrow massive amounts of money, which college admissions knew full well I had access to. They even help you apply. That’s like asking the person you’re buying the house from how much you should borrow for the mortgage. Officially, I was not subsidized on the Federal budget…because I made the payments. But the underlying binding guarantee is what caused the loan to be issued. This doesn’t disprove my contention, it demonstrates that you are unaware of how subsidies are treated for accounting purposes.

      I hate to break the news to you…but this has become a generally accepted principal in economics. For example a recent NBER paper found that private universities eligible for subsidies charge as much as 75% more than those not eligible. And ironically, due to their often large endowments, they often have enough money that must be given away, that they can be net-net cheaper than state schools in many cases. That depends on the schools and the size of the endowment. I helped get one kid of a client into Tulane for less than the University of Albany. However, when they are eligible for student aid, the evidence shows they crowd out private aid on a dollar for dollar basis. NBER paper below.

      http://www.nber.org/papers/w17827.pdf

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “Does that mean more demand is a bad idea, they we should work to keep demand down?”

      It means that demand for college or any product or service should be organic. K-12 is to learn fundamentals. Simply encouraging people to go to college and accumulate debt due to inflated prices is counterproductive. If the subsidy isn’t there, the cost goes down. That makes it easier for the people who belong, and the others should go elsewhere. Trade & Vocational schools etc.

      The enrollment growth alone is not what drives prices up. It’s the nearly unlimited endogenous supply of money that the gov’t guarantees those who wish to go to school. The schools know you can borrow without collateral (Now directly from the Gov’t). So they have no reason to watch cost. What would you do if your customer base could borrow to buy what you were selling with no collateral ??? I’d charge a lot more also.

      It entirely supports my argument. The cost have been rising rapidly since 1978. That is the earliest point that the BLS produces data sets for the cost of college tuition. They didn’t track it prior. If you look at individual universities you can see it began to rise just before that as the subsidies kicked in. Using the example of Penn University…between 1960-1969 the cost rose just a little more than the inflation rate. From 1970-1978…the cost nearly doubled as the subsidies began. By the early 80’s the subsidies were not only in place…but had become common place. The increase in enrollment in the 50’s was a result of the College Scholarship Service of the 50’s which was launched by private institutions to provide aid commensurate with needs for those that demonstrated academic acumen. But there was no such thing as these broad subsidies until the mid 60’s, which was just the beginning. And like most subsidies…in a relatively brief period…prices begin to skyrocket. Things really began to move when the Higher Education Act of 1972 was passed.

      “If I am not mistaken, that state of affairs only came to be true after the Great Recession of 2008”

      You’re mistaken. Trade unions have been importing foreigners for a long time. We have oversupplied the labor force to be too top heavy for a long time. I have been in the financial services sector for nearly 20 years. I cannot ever remember a time when we didn’t get a constant supply of resumes of college graduates. We never have to go looking for them. Sometimes, they turn out to be totally unqualified and/or downright lazy. It is hard to find quality people, but not college grads looking for work. They’ve been everywhere for a long time. There has always been an army of them out there. And the trades have been short for a long time. In general our entire labor force has and has had for some time a massive structural problem of people who have skills that don’t meet demand. Kids graduate with college degrees because they are going to college just to go to college and racking up debt. Then they get out of school and often end up working in a field that has nothing to do with what they studied. So what was the point ??? Microsoft still imports software engineers from other countries. Many valuable skills are taught outside traditional universities. Companies like Apple get it…where they started their own University to hire and train employees directly.

      “Income inequality is what leads to a lot of the misallocation of resources.”

      No…misallocation of resources happens any time the gov’t socially engineers an outcome. Housing, Medicine, Education. All are socially engineered…all have major price and allocation distortions. Why is a DVD dramatically cheaper in constant dollars than a corresponding VCR 25 years ago ??? Because the gov’t doesn’t socially engineer the market. That translates into an effective pay increase for anymore who needs to buy them. The cost of all areas of gov’t intervention is a pay cut for every American as it costs more to acquire the item or service.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      The chart at http://globaleconomicanalysis.blogspot.com/2012/07... doesn't help either because there is little correlation between the subsidies as a percent of GDP, which was constant at around 1.03% from its 1978 reference point until about 2003 when it increases dramatically. I am not sure why for 2003 - 2007, but the reason is clear for 2008 and 2011, a rapidly decreasing GDP. From 2002 to 2012 it rose from 1.06% of GDP, topping out at 1.36%. It has decreased to 1.26%/

      The reason there is little correlation is that while college tuition inflated rapidly from 1978 - 2003, subsidies were flat/ That is a zero correlation, isn't it? Then, from 2003 - 2007, you may have a slight case because they both grew in the same direction, quickly. But after 2007, when tuition continued to increase, the percent of GDP did increase in tandem, but ONLY because GDP collapsed. All-in-all, those charts tend to disprove your contention.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      When you say "More subsidies mean more enrollment which artificially drives up cost. It is a pretty strong constant in economics that if you subsidize something…you get more of it." Does that mean more demand is a bad idea, they we should work to keep demand down? Understand that the largest enrollment growth, which mimicked the growth in subsidies, was between 1950 and 1972 when tuition rates generally rose with inflation. It wasn't until the early 80s that college tuition started going through the roof. Not surprisingly, this killed the growth in enrollment which flattened out considerably, as did the subsidies as a percent of GDP. I don't think those facts support your argument.

      To what time period are you referring when you say "Except we have an abundance of degree’s and not enough jobs to fill them. This is a total misallocation of resources." If I am not mistaken, that state of affairs only came to be true after the Great Recession of 2008 when 10 - 14 million people lost their job in the space of a year or so.

      Income inequality is what leads to a lot of the misallocation of resources. When 50% or more a Americans income remains flat for decades and another 30% saw their income rise just a little while the remaining 20% saw huge increases, all for artificial reasons which distort the economy beyond recognition, you can't help but end up with everything else being misallocated.

      You do know the end result of your position don't you? When you remove the subsidies, then as you say because demand is so artificially high, the higher education system will implode until it stabilizes where there are just enough colleges for those that can afford it. That would probably be the 1.5% enrollment rate (of total population) of 1950 instead of the 7+% it is today.

      With so few college graduates who happily enter the workforce with their debt-free degree, what are they going to find? A world where middle management and up are all filled by foreign college degree holders who filled the demand left by the lack of degreed Americans. Under your scenario, that HAS to be the outcome because college attendance rates MUST plummet as colleges go bankrupt. Businesses will have no choice but to 1) import management from abroad (there will certainly be an overabundance of blue-collar workers without degrees) or 2) move overseas where the talent is. You can't have your cake and eat it too, you know.

      I started college in 1965 and graduated in 1971 and costs were definitely NOT skyrocketing; that didn't happen until the late 70s and early 80s, during the stagflation years. By that time, the rapid growth in enrollments had flattened out.

      When you assert that "The answer is the schools will graduate kids who are clearly failing so they can continue to get the endless funnel of money." you actually mean schools are in business primarily for the purpose of having money put in their coffers?

      Your resource doesn't prove what you said. there are plenty of techniques to mesh that Montana data to make reasonable determination of the relative rankings of one state over another in terms of overall quality; the analytical hierarchy process (AHP) for one which is used by many large corporations to help make subjective decisions. The study I pulled from consider 10 to 12 variables at the school district level.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “ME wonders "Then why was it so hard for so many people to afford higher education at good schools"

      You may want to wonder why it is even more difficult to attend higher education schools today. I am talking about the fact that gov’t programs are getting you into school, and burying you in debt via the artificial demand that they have created. Kids are graduating today with a debt burden that often makes the attendance at the university now a bad economic decision. It is becoming more rewarding to attend trade schools.

      “Guess what, when I ran a correlation between the two data sets, it came out an amazing 98%!!”

      Good…I am glad we agree. That’s the point. This is precisely what I have been saying. More subsidies mean more enrollment which artificially drives up cost. It is a pretty strong constant in economics that if you subsidize something…you get more of it.

      So we placed incentives for the labor force to attend universities when many people shouldn’t be there to begin with. Not everyone should go to college. Now we have trade unions like the sheet metal workers importing foreign workers to do jobs that Americans don’t want because they think they shouldn’t have do with their college degree. Except we have an abundance of degree’s and not enough jobs to fill them. This is a total misallocation of resources.

      So the kid that should be going to a university is saddled with debt for the rest of his life. And the kid who worked for the energy company that spray foamed my attic last year also has a massive debt burden for his degree at John Jay University, which was totally useless in the real world, since he works as a spray foam operator. How many cubic feet of spray foam will he have to spray into wall cavities and roof decks to pay off the college debt before it was worth it ??? The answer is never, because he didn’t belong there to begin with. He was suckered into believing that is what everyone has to do. This is precisely what socially engineering does. It misallocates resources and distorts prices. The people that belong in school get less of a return on their investment because of the massive inflation. And the people that should have gone get no return on their investment and are also saddled with debt that is barely manageable.

      And since these subsidies were rolled out in the late 60’s and the cost skyrocketed…more Americans are attending college for a 4 year degree or more. And how has this translated into economic results for the average American with more access to education ??? Since 1970…real wages have stagnated. So what’s better economically…to be an ironworker who makes a median wage of 55k per year without the student loans who can direct that income to a mortgage…or a CPA with a median wage of 78k per year, but has student loan payments as big as a home mortgage for the next 30 years.

      The problem is you seem to be confusing the concept of education with going to college. A common mistake that many people make. Going to a university is not always a smart decision. And yet every parent out there says that “when my kid grows up, they are absolutely going to college”. They’re fools. Meanwhile…only 46% of all the kids who enroll actually graduate with a degree.…because it’s too damn expensive, and many realize once they started that it wasn’t for them. But they still have to pay off the debt burden for the time they were there. And 25% of student loan borrowers are now behind in their payments as of a 2011 Harvard study. The proper thing to do is eliminate the incentives…let the cost of education find its true relative value. Some kids will go to school and other will enter the trades. Instead we brainwash people into thinking that if they don’t go to college they’re a failure. Meanwhile the plumber lives in a bigger house than me, and ½ his income is cash.

      There is no empirical evidence in evaluating states. Because states have wide ranging results from county to county with vastly differing policies. The university of Montana put out research on this awhile back. Texas had the highest quality teachers, Florida was number two. When ranking education efficiency (The cost per student per percent of reading above or at 4th grade level, The cost per student per percent of math above or at 4th grade level) New York and New Jersey are near the bottom. They spend more money for less results.

      http://www.msubillings.edu/caer/quality_rankings_o...

      Results are not a direct result of how much money is spent, or necessarily graduation rates. In NYC, kids who actually graduate High School have an 80% illiteracy rate and require remedial reading. So how are they graduating ??? The answer is the schools will graduate kids who are clearly failing so they can continue to get the endless funnel of money.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says - "They didn’t dry up…that is exactly the point. The cost of education was dramatically more affordable before the gov’t subsidies."

      ME wonders "Then why was it so hard for so many people to afford higher education at good schools"

      Also, you made me go look. I plotted college enrollments as a percentage of population from 1950 to 2014. Then I plotted government spending on tertiary education as a percent of GDP. Guess what, when I ran a correlation between the two data sets, it came out an amazing 98%!!

      As to good and bad primary and secondary schools being evenly distributed across the United States, again, in spite of your singe data point, they are not, empirical evidence is what has led me to that conclusion.

      If you take the latest survey from http://wallethub.com/edu/states-with-the-best-scho... (there methodology seems sound) and assign each state an R, P, B for Red state, Purple state, or Blue state, and also another label for what part of the US the state is located in (E, S, M, W) You get the following results by averaging their respective ranks (again, this is a quite legitimate analytical technique):

      Stratification Avg Rank

      Blue ........................ 20

      Purple..................... 18 (best)

      Red......................... 31.75 (worst)

      -----------------------------------------

      East ........................ 15.5 (best)

      South...................... 40 (worst)

      Mid America .......... 19.9

      West....................... 33.5 (surprised me!)

      BTW - Florida ranks 21 out of 50

      Show me analysis that comes to a different conclusion.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Take a look at the below link. CPI didn’t calculate a national benchmark in the 1950’s for the cost of education. But you can obtain it by school. Below is the average all in cost of tuition by year at Penn University.

      http://www.archives.upenn.edu/histy/features/tuiti...

      In 1950 the total cost including room and board on the HIGH end for an undergraduate degree was about $1,460.00. At that time the national average income per family was $4,237 as per the BLS. So you could have sent your kids to Penn State for about 35% of your household income.

      By 2013 the total all in cost on the LOWER end (In state tuition) is $52,304. The Median household income in the US in 2013 was $43,585.

      So essentially, the average family now has to spend more than 100% of the totality of their annual income on tuition in order to attend the same school. And in the 50’s that was more like 35% of their annual household income. And somehow you equate this to mean that education is now more accessible. If you consider making something dramatically more expensive to be more accessible, than I guess you’re correct. No…education was less necessary to become economically successful than in recent decades because of the makeup of our economy. Education is not more affordable. It is more expensive…and people are willing to pile on what now amounts to a trillion dollars in student loan debt in order to obtain it. And now people have been so duped that we have an army of college graduates with their MBA living in their parent’s basement. And I still have trouble finding a good quality electrician. It’s a good thing we have gov’t programs to intervene. They have done such a wonderful job !!! Perhaps next they can socially engineer the internet somehow. This way we can all pay a few hundred dollars to send an email that takes a week to deliver.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      If you just look at the average amenities that the average "Poor" family in the US has....by these standards today, I lived the life of someone living in a third world country for most of my youth.

      http://www.heritage.org/research/reports/2011/07/w...

      28% of families below the poverty threshold have more than 1 DVD player....give me a break !!!

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “How many of those 3 and 4 TV households belong to those that can afford them?”

      As per the 2005 US Dept of Energy Consumption Survey

      78% of US households have air conditioning (Which I didn’t have growing up)

      65% have more than 1 television

      70% have more than 1 VCR (I didn’t have one as a kid)

      32% have 3 or more TV’s

      65% have at least 1 DVD player

      29% have at least 1 Video Game system

      63% have cable or Satellite TV (Which I also did not have as a kid, as NYC was not wired for cable TV at the time)

      81% have a microwave (Also didn’t have)

      Obviously many are luxuries that are not necessities, that we want to have. My grandparents were able to heat up food without a microwave. Striving for a higher standard of living is a good thing, and there is certainly nothing wrong with that. But prioritizing these items vs two family incomes are different than decades ago. In 1950 most families would not want to have a mother go to work so they could have two or more TV’s, radios etc. I grew up in the 70’s and 80’s and didn’t have much of what is on this list. I was a kid when Atari first came out. We couldn’t afford it, but my neighbor had one. Nobody had two. My current home has multiple I-pad’s/Ipods, Playstation & the Nintendo Wii. Most of which just sits there and is never used. Why…because it’s waste. I complain about it all the time, and my wife doesn’t listen. Americans expect more today…so they have to work more. If I cut out all this nonsense…she could stay home and we’d never have a care in the world. I instead I spend well over $1000 a month on Karate, Kumon, Soccer, Wrestling, Baseball, Ballet, & Music lessons etc. I had literally not one such expense as a youth. We played stick ball in the street for free. And today, I live in a middle class neighborhood, with a two income family that is filled with junk we don't need.

      There is nothing false about the statement. My parents reside in Naples Florida today. That is one of the wealthiest counties in the nation. I would put their public education standards up against virtually any NYC public school where most students are barely literate. The result are not based on North vs South, but rather how each county is run in its state and it’s corresponding population.

      “all that effort the Right spends promoting that would be better served improving the public school system”

      In other words throw more money and resources to people who continue to misallocate what they have already been given. It never ceases to amaze me how opposed the political left is to the concept of choice. Yet, if I told you that a new Walbaums opened up the road from you, but you aren’t legally allowed to shop there unless you sold your home and moved closer to it…you’d be outraged. You’d say it was discriminatory. There is no better accountability to a provider of a product/service than giving the consumer a choice. But the left only likes choices when the central planners make the choice for you. A voucher system is not terribly difficult to implement and the most fair social solution. The only difficultly is arranging bus service. And they manage it with the private school students just fine.

      “Common sense and history argues against your conclusion" There was a time before student loans or at least before they became material; why didn't colleges dry-up then?”

      They didn’t dry up…that is exactly the point. The cost of education was dramatically more affordable before the gov’t subsidies. Instead of drying up…they kept cost low…and more affordable. Once again the gov’t created a subsidy…and the cost skyrocketed to such a point that in order to obtain the education…you need to bury yourself in a lifetime of debt. The rate of inflation since these subsidies is astronomical. And somehow making something less affordable is supposed to be a brilliant gov’t fix. The more the gov’t touches…the more prices are distorted.

      http://globaleconomicanalysis.blogspot.com/2012/07...

      The reason there were less people attending universities in the 40’s and 50’s had to do with the structure of our economy. We had many more jobs that were more “blue collar” in nature that were much more financially rewarding and didn’t require a college degree. Frankly, thanks to these inflated education prices…were moving more and more back in that direction. When you look at the cost benefit analysis, I’d rather be my HVAC contractor making 150k-200k a year on commercial and residential services calls who spent a few thousand in trade school than an MBA buried in debt.

      You need to look again…you are graded on completing each step. Not just achieving an answer. Furthermore, each child learns differently. Not allowing teachers the flexibility to adapt to the child’s strengths and weaknesses in order for them to grasp the material is the overriding problem with Common Core. It centralizes the entire process, and allows no latitude for the teacher to operate. The premise that you will ever be able to walk out of a classroom in California, and into a classroom in New York, and the same exact material is being taught on the same day all across America is idiocy. That is the expectation of how teachers are expected to now run their classrooms. And students are falling way behind. Adding Calculus is nothing new in Florida. I attended Barron Collier HS in Naples for 6 months during the brief time I lived in Florida as a youth. They were teaching calculus back then also. And they were light years ahead of NYC public schools in curriculum. You cannot standardize a child’s learning curve. If this is the way they want to run education, than get rid of teachers altogether. There is no point in having a professional in a room if they aren’t allowed to evaluate their job and how best to do it. They can’t even grade their students final exams anymore. You fix the accountability by giving parents and students choices. And you simultaneously need to give teachers labor mobility and flexibility to respond to the needs of the community. None of the above currently exist.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says - "Families don’t have to have two incomes in most cases. "

      ME responds by saying, "it depends on how you define families". 66% of two parent households have dual incomes. By default, single-parent households cannot, and they represent 27% of households. So I guess you could say that 61% of all households are single earners, although I am not sure what that means.

      How many of those 3 and 4 TV households belong to those that can afford them? Without knowing that number, your statement regarding TVs is mere hyperbole put out there to imply something that may or may not be true.

      - Of those 3 or 4 TV households who cannot afford to have purchased those new had them before they got in that condition?

      - Of those 3 or 4 TV households who cannot afford to have purchased those new had them given to them by friends and relatives?

      There are many more such questions about your implication that makes it meaningless.

      LW says "Quality education is regional from county to county within a state. It is not specific to the south or North"

      ME responds " while the first part of your statement is demonstrably true, the last part is equally demonstrably false." and to me, instead of making it harder on public school systems with vouchers, all that effort the Right spends promoting that would be better served improving the public school system.

      LW says "BTW, I wouldn't have had a college education without student loans.” That is a counterfactual argument. If all the kids who got student loans couldn’t get them, then demand would dry up dramatically. "

      ME says, "Common sense and history argues against your conclusion" There was a time before student loans or at least before they became material; why didn't colleges dry-up then? No, they thrived and became too expensive which, along with the national security friendly desire of progressives to have a better educated society, is what drove the student loan program in the first place.

      No, I don't have any kids in grade school, too old for that, but I have grand kids that are and yes, Florida has adopted a form of Common Core math.

      --"The Florida Department of Education added calculus, cursive writing and made a handful of other changes to the standards in 2014. They renamed them the Florida Standards, but the standards do not substantially differ from Common Core." from http://stateimpact.npr.org/florida/tag/common-core...

      I didn't get calculus until my senior year in High School, and that was in what is called today, Advanced Placement. And no, Common Core didn't have 12-steps, it had 4. It is the OLD way that had 12. Look again.

    • profile image

      JillRivas 2 years ago

      If in case you are looking for a fillable 565 form; I was able to get a copy from PDFfiller. It also allowed me to fill out the form, e-sign and print. Here's the link to the form I've used: http://goo.gl/uMaK6l

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Families don’t have to have two incomes in most cases. They do so because they want a lifestyle that offers more. There is nothing wrong with that. But in 1960 people didn’t have 3-4 TV’s in their house. They had one. These are personal choices to live a more affluent lifestyle.

      Quality education is regional from county to county within a state. It is not specific to the south or North. That has always been the case. My parents live in Naples Florida. Their public school system is vastly better than that of NYC where 80% of the graduates can barely read. Some counties have money, others don’t. Since neither of us wants to punish kids for the lack of accomplishment of their parents, vouchers make the most sense, with schools competing for them.

      “Like almost all government programs, they pop up when others begin shirking their responsibilities and that is what happened with education. So, it is not because parents "aren't given choices", instead, it is because they don't take advantage of the choices they do have, which are considerable.”

      On the contrary, gov’t programs crowd out private opportunities. The US was the leader in public education, and now has fallen way behind the rest of the world. Has the Federal Gov’t taken a larger role or smaller role over that time ???

      “So, it is not because parents "aren't given choices", instead, it is because they don't take advantage of the choices they do have, which are considerable.”

      Tell me…what are the choices of a kid/parent who lives in the south Bronx ??? Are they simply not taking advantage of all the gov’t has offered them over these many decades ???

      “BTW, I wouldn't have had a college education without student loans.”

      That is a counterfactual argument. If all the kids who got student loans couldn’t get them, then demand would dry up dramatically. What happens when demand dries up ??? Prices go down with less customers, making school more affordable. Unless you find 1,100% increases in the cost of education coinciding with these subsidies an accident. Universities will not just shut down because large numbers if kids can’t get loans. They’ll simply have to link their cost to a reasonable measure of demand. There is no other rationale reason why the cost of education should have gone up that aggressively. Their input costs are nowhere near that high.

      I can tell from your answer you don’t have any kids in grade school bringing home common core assignments. The 12 steps you outlined to arrive at 279 is actually a total of 3 steps. Adding in the extra unnecessary references is why parents and students are opting out of this program and its ridiculous exams in droves of 1000’s this year. And thankfully we even have math and science teachers refusing to administer them now.

      http://www.longislandpress.com/2015/04/15/record-s...

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      The old way to accomplish 474 - 195 was to:

      1. notice that the 4 in 474 is smaller than the 5 in 195

      2. because of this, you must take 10 from the next number and add it to the 4 to get 14.

      3. Now subtract the 5 from the 14 to get 9

      4. Since you took 10 from the 7 in 474, you must subtract 1 from the 7 to get 6

      5. Now compare this 6 with the 9 in 195

      6. Since it is smaller then you must "borrow" another 10 from the next number 4.

      7. Add the 10 to the 6 to get 16

      8. Subtract the 9 from the 16 to get 7

      9. Now, because you borrowed 10 from the 4, you must subtract 1 from the 4 to get 3

      10. Next compare the 3 with the 1 in 195

      11. Since it is larger, you can subtract it directly to get 2

      12. Put the three digits together to get the answer of 279

      That is the EASY old way.

      Now, here is the HARD common core way.

      1. Notice that 474 is 74 away from 400, mark down 74

      2. Notice that 200 - 195 is 5, mark that down

      3. Notice the 200 is 200 away from 400, mark down the 200

      4. Add the 74 + 5 + 200 to get the answer of 279

      Yep, Common Core has it all wrong. I suspect that is what is behind the 10, 8, and 5 problem as well.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Education began failing ever since 1) the 70's all members of the family needed to work and 2) the 60's when women finally had, and took advantage of, the opportunity to join the workforce in large numbers. Well before there were any significant federal education programs, huge numbers of families opted-out of helping their children through school; in order to work, they voluntarily turned the responsibility over to the school system. THAT is the root of many of the problems we face today.

      Another original major factor in the overall poor quality in American education is the decision of many states, mainly, but not entirely, in the South sloughing off their responsibilities to provide quality education to their children. This was (is) especially true for minority students but, historically in those states it even impacted white middle and lower class children (not so much today.)

      A third original factor is the way school districts were (and many still are) funded with property taxes. That method guaranteed poor education to the poorer counties, say San Joaquin in CA, and better education to rich ones, e.g. Beverly Hills.

      But, so long as the parents stayed involved, the number of good states, vis-a-vis their education program, far outshone the bad states. In the 60s, that stopped.

      Like almost all government programs, they pop up when others begin shirking their responsibilities and that is what happened with education. So, it is not because parents "aren't given choices", instead, it is because they don't take advantage of the choices they do have, which are considerable.

      BTW, I wouldn't have had a college education without student loans.

      When the core education curricula doesn't support national objectives, then, like it is today, the nation suffers. Now, I am aware that that argument falls on deaf ears to those who put states ahead of nation. Unfortunately, there is no way of overcoming that because they reject out of hand the fundamental principal behind the Constitution.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      In case you have any doubts about what Federal standards mean…this is an actual question in the common core curriculum that the Federal gov’t is pushing down on 2nd grade students.

      “Tell how to make 10 when adding 8 + 5 ? ”

      The correct answer is: “Take 2 from the 5 and add it to 8 (8 + 2 = 10). Then add 3”

      http://thepunditpress.com/2014/10/10/common-core-m...

      The idiocy of these Federal standards are why my wife (a public school teacher saddled with this nonsense at work) insisted on pulling our kids from public school when my kids came home with these types of questions. Now they attend Catholic school as well as the Kumon institute. In such places…8+5=13 and will never = 10. This is not isolated either…it is in every state that took race to the top money and adopted this nonsense.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      "Education is one of the national priorities that begs for central planning of some sort; the way it works now is atrocious with each state doing its own thing while fighting federal efforts to improve and standardize what is taught, to the detriment of our youth."

      Education is a failure because the consumer (parents) are not given choices. When they have choices...the marketplace responds. When the gov't "standardizes" things, we get results like affordable housing programs that wreak havoc on the banking system, the disaster that medicare created, and the massive trillion dollar student loan bubble. Perhaps I would be more confident if the Federal gov't could run one single solitary agency with even a small degree of efficiency and effectiveness. I for one don't want my kids to have their education run like the post office.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      GDP wouldn’t be a significant factor in poverty reduction during periods of anemic growth such as now, as I referenced earlier. However, strong recoveries like the early 80’s and mid 90’s tell a different story.

      “7 Year propaganda campaign” ??? So are you arguing that the lowest labor force participation in 4 decades is made up propaganda ??? The fact that a dominant percentage of labor market participation is low income employment also propaganda ??? No…that is just the reality of what is happening in the labor market, because this is one of the most anti-business climates ever created by a presidential administration. Simply pointing out the realities of an incredibly weak recovery is hardly a propaganda campaign, but instead pointing to reality.

      But, since you’re so well versed in economics, you already know how weak the labor market data has been…so I don’t have to tell you that. You already know that there are significant differences in U6 vs U4 data. And you already know that anyone who is out of work more than 1 year isn’t counted in either of the data sets since 1994. They simply vanished. You already know that the number of people working part-time involuntarily is more than 50% higher than when the recession began. You already know high-wage industries accounted for 40 percent of the job losses but have only seen 30 percent of the recovery’s job gains. If that is a success…than congrat’s.

      http://money.cnn.com/2014/11/20/news/economy/ameri...

      Perception certainly does not mean a recession. Sometimes it simply means extremely weak progress that does nothing but move the economy sideways. Polls probably will improve as financial markets do well, and 401k balances increase. Unfortunately, asset price inflation and cheap money doesn’t necessarily always mean a strong labor market improvement, as we have seen for the last 5 years. So if the Obama adm’s goals were to see significant stock price gains…with a lot of part time and/or low paying new job creation...they’re a huge success.

      “ME notes that expansion under PBO is 2.2% from 2009 - 2014 in spite of the Conservatives best effort to prevent it from happening (collateral damage from trying to destroy PBO); this last year was 2.4%.”

      So in other words…an incredibly weak recovery.

      “So, is Obama's recovery anemic? No, not in an historical perspective; especially against the strong headwinds the GOP threw (is throwing) up.”

      From a historical perspective, 1920 was far more severe…and a far faster rebound. So from a historical perspective…this is a terrible recovery. Especially when viewed from a labor market perspective.

      The last time I checked…the administration got their entire stimulus bill thru, along with the ACA and every other piece of major legislation they wanted up until getting their clocks cleaned in the last mid-term elections. It’s incredible to watch them pass virtually everything they wanted and then watch the left pretend like he was somehow prevented from implementing his agenda when the results they wanted weren’t there.

      “What I am saying is there is no comparison in the recovery between the that depression and this recession (even though the Tea Party wanted Obama to do exactly what Roosevelt did in 1937 which, of course, ended up in the 1937 recession; which, in turn, would have made the comparison valid.)”

      Correct…1929 was way worse than 2008. Even though the Obama adm repeatedly tried to compare the two as though they were similar as an excuse for such a poor labor market recovery. Which means the recovery should have been much stronger. And correction…the tea party was more interested in policies that resembled the 1920-21 recovery…which was incredibly fast without any massive fiscal intervention.

      “Unfortunately, LW, you haven't presented much in the way of empirical evidence and what you have, only deals with PA spending and not all of the other variables involved.”

      Unfortunately, you’re statements have been empirically disproven by the budget data I cited repeatedly. You suggested that poverty declines only when PA spending increases as the dominant variable. And in constant dollar terms, the entire decade of the 1990’s disproves that assumption and correlation. In fact the correlation during this period was exactly the opposite of which you implied. The same is true of the 1980’s where a substantial decline took place beginning in 1983 with no increase in PA spending of any significance. You’re so intent on proving it works, that you completely ignore the two strongest economic recoveries of the last 40 years that were accomplished by doing exactly the opposite of what you suggest works. And then critique the Bush 43 adm for its results in relation to the poverty rate, when they were the biggest PA/entitlement expansion administration of the last several decades. I am not suggesting that there aren’t other variables. There are variables related to both fiscal and monetary policy that drive economic outcomes. And there is also a normal business cycle, regardless of policy. What I am saying is that all of these policy initiatives are supposed to be designed to incent growth. And growth is how we best deal with poverty. And the two strongest recent recoveries, and declines in the poverty rate came about without policies that saw big increases in inflation adjusted dollars to PA spending. And that’s assuming you use the BLS estimates on inflation. If you use their pre-1980 formula for measuring price changes, then PA spending plummeted before these recoveries.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Unfortunately, LW, you haven't presented much in the way of empirical evidence and what you have, only deals with PA spending and not all of the other variables involved. You are so intent on disproving what is intuitively obvious (PA spending impacts poverty) that you are looking at is a single tree in a whole forest of influences on poverty.

      I agree that central planning doesn't work in government (it works fine in business which y'all seem you want gov't to be) unless it is properly executed by including all appropriate stakeholders. Education is one of the national priorities that begs for central planning of some sort; the way it works now is atrocious with each state doing its own thing while fighting federal efforts to improve and standardize what is taught, to the detriment of our youth.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "The US was not in a perpetual recession in the 1930’s either. But we called it a depression because even when GDP was expanding, much like today"

      ME corrects to say 1929 - 1933 was a full-blown depression; 1937 - 1938 was a major recession, but yes, in people's minds today, the whole period was a depression. While the economy did start growing until 1937, it barely got back to 1929 levels when the bottom dropped out again. Of course employment never did come close to recovering until WW II. The economy, however, did recover and rushed pass 1929 as WW II dawned.

      What I am saying is there is no comparison in the recovery between the that depression and this recession (even though the Tea Party wanted Obama to do exactly what Roosevelt did in 1937 which, of course, ended up in the 1937 recession; which, in turn, would have made the comparison valid.)

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "GDP expansion today is barely enough to call it a recovery. "

      ME notes that expansion under PBO is 2.2% from 2009 - 2014 in spite of the Conservatives best effort to prevent it from happening (collateral damage from trying to destroy PBO); this last year was 2.4%.

      By comparison, the 10 years 1998 - 2008, growth was 2.6% per year, and that was with both sides trying to help (or at least one side not trying to hinder). Further, growth has been slowing since 1958 from 3.1% (1958 - 2014) to 2.1% (1998 - 2014) - all without Obama's help. During that period we had 30 years of Republican administrations and 24 years of Democratic ones.

      So, is Obama's recovery anemic? No, not in an historical perspective; especially against the strong headwinds the GOP threw (is throwing) up.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LM says "Because simply expanding GDP is not enough. It has to be significant growth. "

      ME responds - actually, I have to retract something, assuming I didn't point it out earlier ... GPD did enter the last equation I came up with; it entered as the change from the previous period. While its significance is high (p-value= .01), it was the lowest of the seven predictive variables. "By itself", however, even though it was significant at p = .004, it failed to explain very much as a model with an R2 of only 11%. In other words, other variables are needed to explain the other 89% (one of them being PA spending).

      LW says "However, the average citizen doesn’t know that. They know how they feel. And they feel lousy, because the labor market participation is the worst it’s been in 4 decades. How could that be if we’re not in a recession ??? "

      ME says "easy, we aren't in a recession" You said it all with the word "perception". There are many things that influence perception when "reality" isn't one of them. In this case there are two major ones; 1) only the wealthy participate in growth and 2) a 7-year propaganda campaign by the Right who is determined to destroy President Obama. I would feel the same way as many other Americans do, if I wasn't so well versed in economics and didn't know better. (BTW, the latest average of polls on "How is Obama doing economically" finally went over to his favor.)

      Saying it another way, perception of a recession does not necessarily mean there is one unless that perception is so strong that it destroys growth. Fortunately, the Right has failed in that mission.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “ME responds - if that were true, then GDP, or some direct variation, would have been enough to provide a high R2 at a .05 level of significance ... it didn't. Why? Why did the others, out of many different possibilities, work, and work well?”

      Because simply expanding GDP is not enough. It has to be significant growth. Those of that follow economic data closely know that we’re not technically in a recession and have not been in some time. However, the average citizen doesn’t know that. They know how they feel. And they feel lousy, because the labor market participation is the worst it’s been in 4 decades. How could that be if we’re not in a recession ??? It’s because we are in a period of anemic growth. The US was not in a perpetual recession in the 1930’s either. But we called it a depression because even when GDP was expanding, much like today…the progress was anemic. And that’s not enough to impact the labor market in any significant way…and therefore the poverty rate to any significant degree. GDP expansion today is barely enough to call it a recovery. Poverty will have a chance to go down when there is significant widespread expansion across the economy. And as the 1990’s showed…slowing PA spending happened in advance of this. Therefore increased PA spending is not a prerequisite to reducing poverty. And as the 2000’s showed…massive expansions to new entitlements did little to impact the poverty rate.

      The empirical evidence is the law. If you take Federal money from programs like race to the top…you are required by law to adopt the common core standards. That applies even to private schools. The Federal gov’t taxes revenue from the local citizens, than uses the money to fund agencies like the dept of education and redirects the funds back into educational programs. Except in order to get your money back that you paid in taxes, you are obligated by law to adopt Federal standards. It was for this reason that we pulled my kids from their school which was private and moved them to a catholic school in which the diocese decided not to take such Federal money, effectively forfeiting my Federal money that I paid into. Because common core is going to destroy a whole generation of kids. I am active in the local public school for budget reasons only. But I don’t send my kids there. My wife teaches and has taught in two separate public schools outside of our local district. It’s the same story in each school. The board handles budget issues. They effectively sign off on issues of curriculum at the direction of administration, because most board members don’t know anything about things like horizontal and vertical alignment of curriculum. And that is only to the small extent that the local districts control curriculum. Most of this is set at the state capital…and increasingly at the Federal level.

      My point was that central planning doesn’t work whether it comes from the Federal Gov’t or from Albany. If you want results…put the money in the hands of concerned parents…and let them direct funds to where they wish it to go. The vast majority of parents will make sure their kids get the best education possible, and the schools will be forced to compete for those voucher dollars. It is a more equitable distribution of resources…and it puts control and choice in the hands of consumers.

      “Even if you limit it to a "graduation test", a well written one defines the curriculum, so long as it is not a multiple choice test but an analytical, thought-based written exam. One question, for example, might be "compare and contrast the evidence supporting and refuting both evolution and divine creation." Another might be "provide and discuss three examples each of when America was at its moral worst and moral best."”

      I couldn’t disagree more. Answers to such questions are open to interpretation. Who defines the correct answer to the highest and lowest moral state of a nation ??? There is not absolute right or wrong answer. How about we start with making sure kids who graduate can read, write, add and subtract. Because we’re handing out diploma’s to kids who can’t complete these basic tasks. 80% of the kids graduating from NYC public high schools need remedial reading courses.

      http://newyork.cbslocal.com/2013/03/07/officials-m...

      “Did your brother-in=law opt out of all insurance, or just Medicare? Who can afford his prices today?”

      He opted out of all. Actually both of my brother in-laws are Dr’s and both opted out of all coverage. And their prices are much more affordable. Almost anyone can afford to pay them, because you pay what you can afford. Services are negotiated, not unlike any business. They have more time with less patients, and actually make more money with much less overhead. And they can practice medicine without having to run it like a fast food restaurant drive thru. This is becoming a common trend in the medical field. AAPS even has a template online for Dr’s to opt out now. Some Dr’s are not opting out…but just not taking on new Medicare patients until one dies. They effectively just limit their practice’s exposure to them.

      http://www.aapsonline.org/index.php/article/opt_ou...

      Look at the difference in cost when you opt out of insurance. The power of the marketplace.

      http://bangordailynews.com/2013/05/27/news/portlan...

      The link you have above hardly describes a deregulated environment. In fact it has never been worse. Since the creation of Medicare, the cost of medicine has become completely distorted and skyrocketed. Consider that the Federal gov’t is the single largest health insurer in the nation. Medicare alone has 132,000 pages of rules. In order for a Dr to take on a new Medicare patient, they must evaluate 42 different choices with 6,100 possible combinations in order to properly classify the patients E&M code as per Medicare guidelines. It is a bureaucratic nightmare. This is an actual story from physicianspractice.com.

      “A family practitioner who says the “straw that broke the camel’s back” landed in 2009. The physician, Chris Noyes, MD, recalls, "I had a patient who moved from out of state to be with his kids. He had lung cancer when he came in, and he ultimately died. We wrote off a fairly large balance," Noyes said. "Two years after he died, we got a letter from Medicare saying they had overpaid for a flu shot for him by $2 and they wanted the money back with interest and a penalty, and if I didn’t pay it all within 30 days they would prosecute me."

      It is utter insanity dealing with them.

      College tuition hasn’t declined at all. I never said it did. In fact I said the opposite. It has skyrocketed since the gov’t began to subsidize the cost of school loans in the mid 60’s. Do you see a trend here ??? The gov’t has subsidized housing, the cost of higher education, and the medical field. If they intervene in the production of I-pads…you’ll soon need a HELOC to buy your next I-Pad.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      I saved your govspending reference, that will be very handy, thanks.

      As to the list you provided, I need to reconcile that with my other sources, but I can tell you I excluded many of the line items as they were not direct assistance to the public; much was for providing infrastructure.

      In addition to "payment to vendors" (Medicaid) and a little in education subsidies, I used 603, 604, 605, 609, J67, J68, Y05, Y06, and maybe Y14 (I can't tell if Workers Compensation - Benefit Payments was included in my earlier data)

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "Addressing all of those other variables such as the unemployment rate is inherently addressed by simply measuring economic prosperity."

      ME responds - if that were true, then GDP, or some direct variation, would have been enough to provide a high R2 at a .05 level of significance ... it didn't. Why? Why did the others, out of many different possibilities, work, and work well?

      There is no question that, as a general, heuristic rule, that "poverty is reduced by prosperity" is true. By leaving it at that, however, you are implying that when the economy is not prosperous (which historically happens on average once every 4.7 years, counting all 49 recessions since 1785) and poverty rises (or the economy collapses and poverty skyrockets), then nothing should be done; for at some point in time, from 3 months to 8 or 10 years (1815 and 1929, respectively) the economy will prosper and poverty will go down ... some. But given how frequently the economy heads south, exactly when does poverty actually have a chance to go down? (This is still true if you count just the 9 recessions since WW II, one every 7.7 years.)

      Regarding education see http://nces.ed.gov/pubs95/95780.pdf and http://www.usatoday.com/story/opinion/2014/09/25/s... (consider Texas which has an oversized influence on national textbooks due to market forces) and http://www.ascd.org/ASCD/pdf/journals/ed_lead/el_1... These vary from principals/teachers having about 50% influence to, in many cases, much less. What empirical evidence do you have that your school board is the norm?

      Even if you limit it to a "graduation test", a well written one defines the curriculum, so long as it is not a multiple choice test but an analytical, thought-based written exam. One question, for example, might be "compare and contrast the evidence supporting and refuting both evolution and divine creation." Another might be "provide and discuss three examples each of when America was at its moral worst and moral best."

      LW says "The medical field was never deregulated. It is nearly entirely controlled by the gov’t. "

      ME replies that the healthcare industry was deregulated in the 1980s see http://www.cfeps.org/health/chapters/html/ch1.htm

      As to doctors, prior to the 1980s, Drs were more or less free agents. After deregulation and the profit motive destroyed healthcare, they became minions of for-profit hospitals and health organizations. As I said, the worst thing that has ever happened to the healthcare industry. This was also the period when direct-to-consumer restrictions were removed from pharmaceuticals, another bad idea (this one may have been from the Democrats, however)

      Did your brother-in=law opt out of all insurance, or just Medicare? Who can afford his prices today?

      As to student loan and tuition costs, this has a particularly tell chart in the middle of it https://www2.ed.gov/about/bdscomm/list/hiedfuture/...

      and this one puts the rise in college tuition in the right light; show me where it has decreased. http://nces.ed.gov/fastfacts/display.asp?id=76

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Addressing all of those other variables such as the unemployment rate is inherently addressed by simply measuring economic prosperity. It doesn’t take a genius to figure out that as the economy gains steam and momentum that the labor market gains steam, and therefore there is more employment opportunity, and less poverty. This is inherently what I have been saying. Poverty is reduced by prosperity. If you have economic prosperity, everything falls into place. You grow your way out of poverty.

      “ME replies "neither have local school boards" which tend to have political or social agendas rather than educational ones.”

      Local school boards don’t really design curriculum, even though they have technical authority there. In reality they leave that to administration. The president of my local public school board lives across the street from me, and I attend all their meetings. They handle mostly budget items. And frankly even that they have little control over, as most of it is done at the state level. And at least at the local level, concerned parents would and should have more access to people making decisions. Instead parents in Utah have to listen to mandates handed down by D.C. Political appointees who are trying to standardize classrooms, and don’t seem to understand that different kids learn differently…and teachers need latitude to address that locally.

      “ME replies - I could actually go along with that, even to be used in religious schools, so long as the "core"curriculum, a curriculum set by both federal and state educators, that all schools must adhere to a prove was successfully communicated to the students”

      Core curriculum isn’t even necessary. Simply a minimum standard test in order to graduate. Core curriculum obviously doesn’t mean too much. We already have that. And 60% of the kids who graduate from the High School my wife teaches in can’t read. Somehow they graduate anyway.

      “However it is constructed, it must by insured that the profit motive does not interfere with educational goals like it has with medical care. (Deregulation of the medical field was one of the worst decisions made in terms of overall care to the maximum number of people”

      The medical field was never deregulated. It is nearly entirely controlled by the gov’t. In fact Dr’s have never been more regulated. In fact “for profit” Dr’s that have opted out of all forms of insurance including Medicare have been able to cut their cost dramatically by simply eliminating the bureaucracy and dealing directly with the patient. They negotiate prices, and patients pay what they can afford, just like it was before the gov’t jumped into the medical business. My brother in-law went opt-out in Medicare several years ago, and the cost of services went down 60% overnight, and hasn’t raised his prices yet. That was in 2009

      “ME replies - clearly that didn't work in the time before significant lending and the only subsidies were from scholarship. The reason there is such a loan program in the first place is competition failed to provide college education to those who couldn't afford the price tag. The result, of course, is a less educated America and all of the negative consequences that brings on.”

      Actually it worked perfectly. The cost of education in inflation adjusted dollars was much more affordable before the gov’t began guaranteeing, and eventually directly loaning all these dollars. There was a time when there was a lower enrollment rate in universities. But that was not because of the cost of education. It was because there was demand for workers in areas where a traditional college education would be a waste of time and money. Today we have the opposite. We have legions of MBA’s with mounds of debt living in their parent’s basement. And the trades unions need to recruit foreigners because we convinced young people they all need to go to college. The truth is that not every kid should go to college. Some are better off in the trades. Instead the market is totally distorted, kids are buried in debt with degree’s that are a dime a dozen…and I can’t find a decent carpenter who shows up on time. When did the gov’t being guaranteeing student loans…??? In 1965. When did the cost of education skyrocket...???...almost immediately afterwards. According to the BLS…since 1978…the cost of college tuition/fee’s has increased 1,115%.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I would personally use much more in the way of spending as welfare. However, when we look at items like increases in Medicare and compare the rate of increase, I can’t link that to policy changes from one administration to another, because it is mandatory spending and has been since 1965. So the per capita expenditures on such items will inherently increase bases solely on demographics. Actually they’re going to explode in about 5 years. The only exception being the Bush 43 administration which added an entirely new massive entitlement to Medicare. But that is why I didn’t count the rate of change from Reagan to Bush 41 to Clinton. The changes are sown into the budget and linked to CPI-U ahead of time.

      As for Governmentspending.com they outline what is included in Welfare here….

      http://usgovernmentspending.blogspot.com/2009/04/w...

      They are

      Code Description

      603 Unemployment compensation

      604 Housing assistance

      605 Food and nutrition assistance

      609 Other income security

      B22 Federal Intergovernmental - Employment Security Administration

      B50 Federal Intergovernmental - Housing and Community Development

      E22 Current Operations - Social Insurance Administration

      E50 Current Operations - Housing and Community Development

      E75 Current Operations - Public Welfare, Vendor Payments for Other Purposes

      E77 Current Operations - Public Welfare Institutions

      E79 Current Operations - Public Welfare - Other

      F22 Construction - Social Insurance Administration

      F50 Construction - Housing and Community Development

      F75 Construction - Public Welfare, Vendor Payments for Other Purposes

      F77 Construction - Public Welfare Institutions

      F79 Construction - Public Welfare - Other

      G22 Other Capital Outlay - Social Insurance Administration

      G50 Other Capital Outlay - Housing and Community Development

      G75 Other Capital Outlay - Public Welfare, Vendor Payments for Other Purposes

      G77 Other Capital Outlay - Public Welfare Institutions

      G79 Other Capital Outlay - Public Welfare - Other

      J67 Assistance and Subsidies – Public Welfare, Federal Categorical Assistance Programs

      J68 Assistance and Subsidies – Public Welfare, Cash Assistance Programs – Other

      Y05 Unemployment Compensation - Benefit Payments

      Y06 Unemployment Compensation - Extended and Special Payments

      Y14 Workers Compensation - Benefit Payments

      Y53 Other In Trust - Benefit Payment

      There sources are outlined here…

      http://usgovernmentspending.blogspot.com/2009/03/t...

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW said "Without it, universities would be forced to price themselves more rationally."

      ME replies - clearly that didn't work in the time before significant lending and the only subsidies were from scholarship. The reason there is such a loan program in the first place is competition failed to provide college education to those who couldn't afford the price tag. The result, of course, is a less educated America and all of the negative consequences that brings on.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "But that too can be easily resolved and made into a competitive market. Simply give every kid in the country a voucher of equal value that they and their parents can direct at the school of their choice. Then let the schools compete for those voucher dollars."

      ME replies - I could actually go along with that, even to be used in religious schools, so long as the "core"curriculum, a curriculum set by both federal and state educators, that all schools must adhere to a prove was successfully communicated to the students.

      Other classes, including religious ones in religious schools, can be added by local and state communities.

      However it is constructed, it must by insured that the profit motive does not interfere with educational goals like it has with medical care. (Deregulation of the medical field was one of the worst decisions made in terms of over all care to the maximum number of people.)

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "Bureaucrats that have never taught a class in their life push mandates on teachers about how to run classrooms."

      ME replies "neither have local school boards" which tend to have political or social agendas rather than educational ones.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Now, to address, briefly, the "missing parts" in your comments, namely

      1. the bottom tax rate threshold

      2. the unemployment rate

      3. the Gini Index

      4. the ratio of the top tax floor to the bottom tax threshold (little covariance with #1)

      5. % change in GDP from the previous year

      EVERY one of those factors proved very significant in the analysis. So, to be complete, you must address how each one of those changed between your start and ending dates (not jest PA spending) to get a complete picture of what was driving changes in Poverty Level.

      That means even IF PA spending had actually decreased, other factors might have had more influence on the final poverty rate which would lead you to a false conclusion.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      We have different sources obviously; I don't need to do any adding and subtracting, just converting to constant dollars. For most of my data, I used a table in the US Statistical Abstract (until, in their infinite wisdom, the Census Bureau discontinued in 2011) titled "social welfare expenditures under public programs".

      That table shows, for 1993, Total Social Welfare Expenditures Benefits, (which contains much more than what your source makes obvious as pubic assistance outlays). was $1366.7B. Remove social insurance and things like school construction, non-vendor payments from medical, etc and your left with $265B (1993$) or $421B (2012$)

      Unfortunately, finding a comparable number for 2000 was much harder, but ultimately doable. I finally found a similar table, Table 538 of the 2012 US Statistical Abstract, allowed me to pick equivalent items which matched reasonably well with my previous numbers where they overlapped. That got me through 2009. (I simply found the government spending website was a too gross a level to be used consistently.)

      So, for 2000 I get $428.6 (2000$) or $571B (2012$), an increase of $150B (2012$)

      Translate that to per capita and you get for 1993 a rate if $7,398 per person (2012$) and $7,603 per person (2012$) in year 2000; an increase of $205 per person (2012$).

      BTW, if you add up the parts under Welfare (housing, unemployment, and Family/Child, they exceed the top line Welfare number, so I used those plus vendor payments (Medical) and non-attributable (Education) in an attempt to reach equivalent results. Unfortunately, doing that led to results that sometimes were greater than the ones from the tables and sometimes less.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Let me make this simpler…according to http://www.usgovernmentspending.com/

      The total “MEDICAID” budget, which is clearly welfare in the year 1993 was 443.1 and traditional welfare was 803.1 for a combined total of 1246.2

      By the year 2000 Medicaid increased to 614.1 and traditional welfare was DECREASED to 758.9 for a combined total of 1373. So the combined increase is 126.8.

      However, if you use the BLS estimates which you know I am critical of, but we’ll use them since you’re confident in them. According to the BLS, $1246.20 in the year 1993 requires $1485.09 in the year 2000. But the combined increase was only up to 1373 by the year 2000.

      So in inflation adjusted dollars the 1485.09 must be subtracted from the actual expenditure of 1373…giving us a net “constant dollar” DECLINE of 112.09.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “This should not be surprising; when poverty grows, ipso facto, so does spending on poverty. Likewise, if poverty decreases, so will PA assistance spending. However, the reverse is also true, especially if it is significantly decreased, the poverty rate will increase. AND, if poverty is high, significant spending will decrease it, if properly spent.”

      Except that during the early 1990’s spending not did not slow, it actually decreased in real dollars coming out of a recession and anemic growth in the early part of the decade. Meaning the decline in PA spending happened before any significant economic expansion, and yet the rate of poverty declined anyway.

      “ME repeats - "From 1993 to 2000, in 2012$ spending on what the gov't classifies as "traditional" assistance, e.g., medicare is excluded, it increased from $1,633 per head in 1993 to $2,005 in 2000." That is an Increase, not a decrease as you suggest. And yes, you are correct, poverty rates did decline in the 1990s”

      That is not what I wrote…please re-read. Spending on MediCAID increased. Spending on traditional welfare programs went from $803…in 1993 to $795 in 2000. Last time I checked $795 was LESS than $805. And when further adjusted for 8 years of inflation…the decline is actually larger. When you aggregate the increase in Medicaid, and the decrease in traditional welfare…you get a net decline during the 1990’s in inflation adjusted dollars.

      “ME responds - No, that is cumulative from 2001 - 2006 5.1% (11.7 to 12.7). The 2000 to 2007 increase would be 8.9% cumulative.”

      You’re talking about two different things. You said earlier that spending on poverty increased by 5% between 2000-2006. The aggregate amount was well above 5%, but annualized it is about 5%.

      “ME asks, where is your statistical analysis to back that up; one that shows all of the other variables other than GDP are not significant.”

      Poverty consistently declines during periods of prosperity. Overlay a BLS chart of economic expansion/contraction on top of a chart of fluctuations in the poverty level. You’ll note that as the economy gains, steam poverty declines. There is a lag effect, just like with employment data. But prosperity produces reductions in poverty. Expansion in the 1980’s and 1990’s are classic examples of this. Contractions/anemic growth in the 1970’s are an example of the reverse. In the case of the 1990’s, the spending declines on PA programs happened in advance of any significant uptick in economic activity. The cut’s came first…then the rapid expansion.

      When most people causally reference free markets, they are talking about a laissez faire system. No place in the word does a true free market exist. That would be anarchy. But since you wish to use semantics, I will use laissez faire for future reference.

      Monopolies and oligopolies are caused by gov’t regularly. The health care system long before the Unaffordable Care Act was distorted by programs like Medicare & Medicaid. The US Gov’t has been the largest individual participant in the health insurance market for many years before the ACA was ever conceived.

      The State and Local gov’t can’t figure out the education system because they have been under mandate from the Federal Dept of Education for decades. Bureaucrats that have never taught a class in their life push mandates on teachers about how to run classrooms. That is how we got the disaster known as common core, along with decades of other failures since we created the Dept of Education as a heavy handed cabinet level position under Carter. Another example of more Federal Gov’t and declining quality. Along with a public school system that the gov’t has turned into legalized segregation. I also think K-12 is a national issue. I don’t know if I would call it national security. But that too can be easily resolved and made into a competitive market. Simply give every kid in the country a voucher of equal value that they and their parents can direct at the school of their choice. Then let the schools compete for those voucher dollars. But that will never happen as long as the teachers union has the political clout that it does.

      State Universities do distort prices, for college. But the larger issue is the Federal Student loan system which offers massive amounts of debt to students, and creates unrealistic demand in the market place. Without it, universities would be forced to price themselves more rationally.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW wrote "Free market by my definition does not mean ZERO gov't. It means gov't serves as a market regulator, maintaining a competitive market. But not acting as a market participant, which distorts the market"

      ME replies - Many people mistakenly conflate "free market" and "laissez faire"; they are two entirely separate ideas as your 2nd sentence suggests. Having said that, they are related. It is a fact that without your 2nd sentence, which is the essence of "laissez faire"( or classical liberalism) the free market is guaranteed to disappear.

      I think your 3rd sentence is overly broad, as such, it is neither right nor wrong. In the case of price controls, I suspect we would agree about 99% of the time (there are always necessary exceptions). But we would 100% disagree if you are including government consumption such as military procurement.

      The gray areas are programs like ACA. With ACA, I see it as returning to a free market as it requires competition between providers rather than the monopolies and oligopolies that existed prior to ACA and to some extent still exist today. Monopolies and oligopolies are the price distorters as was obvious with health care in the decades prior to ACA. Missing is health providers and insurers to easily work across State lines. Ironically, that is one State's Rights issue which the Right does not like and actively works against.

      Gov't policy can, but not necessarily, distort the market. In the case of education, I don't see that as a market at all, at least below the college level. (Given your statement, that would include state universities as distorters and should be abolished.) In my view, education at the elementary and high school level is a national security issue and ought to be treated like one. I don't think the federal gov't is involved enough in directing national education; Lord knows the state and local governments/communities haven't figured it out yet. Education should be a collaborative effort between federal and state governments. Yes, there needs to be community input, but not community control ... it is too political which push for personal social agendas.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW wrote "he data from 2000-2006 does show growth in the poverty rate. That is my point. Even per capita welfare spending was increasing, and so was poverty. "

      ME responds - This should not be surprising; when poverty grows, ipso facto, so does spending on poverty. Likewise, if poverty decreases, so will PA assistance spending. However, the reverse is also true, especially if it is significantly decreased, the poverty rate will increase. AND, if poverty is high, significant spending will decrease it, if properly spent.

      LW writes again. "Yet, the 1990’s saw shrinking per capita spending on welfare and lower poverty rates. "

      ME repeats - "From 1993 to 2000, in 2012$ spending on what the gov't classifies as "traditional" assistance, e.g., medicare is excluded, it increased from $1,633 per head in 1993 to $2,005 in 2000." That is an Increase, not a decrease as you suggest. And yes, you are correct, poverty rates did decline in the 1990s

      LW wrote "The data from 2000-2006 where you reference a 5% increase, I presume you mean annualized…because the cumulative was much more."

      ME responds - No, that is cumulative from 2001 - 2006 5.1% (11.7 to 12.7). The 2000 to 2007 increase would be 8.9% cumulative.

      Yes, let's not rehash Piketty.

      I have to disagree, the tech downturn barely registered as a recession and some economists won't give it that title. It was 8 months long, unemployment made to only 6.3%, not too far above the historic norm, and GDP "crashed" all of 0.3%; I don't even talk about it in my book. And even if you want to call it a recession, it pales in comparison to the 2008 near depression.

      LW writes " There is only one variable that consistently matters. That is economic growth."

      ME asks, where is your statistical analysis to back that up; one that shows all of the other variables other than GDP are not significant.

      In reality, GDP didn't enter directly into the model (although it does enter indirectly through other variables. After trying many more things, including, as I mentioned before, GDP, the final set of variables that are significant at a 95% confidence level are:

      1. PA spending per capita

      2. The threshold for the lowest tax bracket

      3 The unemployment rate

      4. The presence of a major war

      5. The presence of a minor war

      6. The GINI index

      7 The ratio of the top tax bracket floor to the lowest tax bracket threshold.

      Adjusted R2 is .958 (adjusted for degrees of freedom with 80 data points.) and an F-statistic of 2.5E-48, a rather tight fitting model. I ran it against 5 pairs of dates and the changes tracked perfectly in terms of direction and was very close in magnitude, except for the 2007-2014 pair. Minimum error was 0% (2007) and maximum error was 9.4% (2000).

      I will update my hub on this shortly.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      The data from 2000-2006 does show growth in the poverty rate. That is my point. Even per capita welfare spending was increasing, and so was poverty. Yet, the 1990’s saw shrinking per capita spending on welfare and lower poverty rates. Precisely the opposite outcome. The income inequality is a meaningless statistic because of all the changes in how income has been reported and what is now required to appear on a tax return that did not in the past. But I won’t regurgitate that info, as we have beat it to death. All I see in this data, is that broad based economic expansion drives people out of poverty and back into the labor force as it did thru the most prosperous periods of the 1980’s and mid to late 1990’s. And big spending entitlement expansions such as the Bush 43 adm gave us, did little to lift people out of poverty.

      The data from 2000-2006 where you reference a 5% increase, I presume you mean annualized…because the cumulative was much more. And when you add in Medicaid it’s more than that. But, even at 5% that is well above the rate of inflation if CPI-U is to be trusted. From 2000-2002 there was a fairly severe recession in the aftermath of the tech bubble, which was greatly exasperated by the events of 9-11-01. But either way, spending on welfare went up per capita at a pace that is supposedly faster than the BLS estimates for inflation.

      “an attempt to keep things from getting worse. Clearly, not enough was being spent to actually lower the poverty rate”

      Another counterfactual. It tells me that we create too many incentives for people to stay dependent on the gov’t. It’s always “not enough” The stimulus wasn’t enough. The Greek Bailout “wasn’t enough”. It’s not a matter of how much you spend…but how productively you allocate it.

      “I don't use 2007 on because of the influence of the recession”

      Then you shouldn’t use 2000-2002 because of the influence of the tech recession and 9-11.

      According to

      http://www.usgovernmentspending.com/breakdown_2000...

      From 1993-2000, in traditional welfare spending…(excluding Medicaid)

      The Federal gov’t spent “per capita” $803 per person in 1993, and by 2000 it declined to $759 per person. That is a net decline…not an increase.

      Also, using the same source…Medicaid went up from 336.5 in 1993 to 482.7 in the year 2000. When you combine the roughly 5% annualized increase in Medicaid with an inflation adjusted decline in traditional welfare programs…you have a decline in inflation adjusted dollars for the aggregate amount of spending from 1993-2000…the entire term of the Clinton Adm.

      There is only one variable that consistently matters. That is economic growth. All that concerns me is what policies foster competition and incent growth. I wish our elected officials were concerned with the same thing.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      My model tracked what happened between 1978 and 1989 in that it increases then decreases, but the magnitude changes are more muted than I would like. (Also, it did a terrible job in the 2000 scenario). As I said earlier, I am still missing a piece of the puzzle.

      From 1993 to 2000, in 2012$ spending on what the gov't classifies as "traditional" assistance, e.g., medicare is excluded, it increased from $1,633 per head to $2,005. Having said that, it did decline from 1997 to 1999.

      But again, you are describing a univariate world, where in fact, it is a multivariate one. While PA spending may go the wrong direction when that is all you consider, other factors are at work changing the poverty rate as well; you have to talk about ALL of them in the same breath.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Given we both read a lot., impressions are made. I knew generally that control was concentrated (much more than I thought a year ago) in a few mega corporations. I felt safe in using Pareto's 80/20 split to be conservative.

      If you add in self-employed, that brings the ratio to 43/57.

      As you know, many things influence the poverty rate, and at any given time one may have more influence than others.

      Here was what was going on between 2000 and 2006, inclusive (all $ used are constant):

      1. Per capital PA spending increased 5%

      2. Poverty rate increased 6%

      3. Median family income fell 1.7%

      4 Percent earning $50K or less increased 0.7% points (increasing wealth inequality)

      5 Percent earning $35K or less increased 1.2% points (increasing wealth inequality)

      6 Percent earning $100K or more increased 0.8% points (pointing to a shrinking middle class)

      7. Percent earning between $50K and $100 Decreased by 1.6% points

      8. F-T employment increased 5.7%

      9. P-T employment increased 6.7%

      10. P-T employment for economic reasons increased 21.9%

      11. Marginally attached increased 11.3%

      12. Discouraged workers increased 1.9%

      13. Not in labor force increased 9.8%

      14. Population increased 9.5%

      What all of those numbers tell me is the number falling into poverty is increasing. Items 8, 13 and 14 are most damning, a 10% growth in population compared with a 10% growth in "Not in Labor Force", but only a 6% growth in F-T employment. (One would expect the % increase in "Not in labor force" to equal to "Not in labor force"/"Civilians available to work" time the % increase in population.)

      Items 4 - 7, clearly indicate growing income disparity with each income extreme growing and the middle collapsing. This points to growing poverty. So does 2 and 3 directly.

      So, from 2000 through 2006, poverty grew at 6% yet spending on poverty increased only 5%. When those two percentages grow similarly in a weakening economy, that means what money that is being spent on PA is simply maintenance spending, an attempt to keep things from getting worse. Clearly, not enough was being spent to actually lower the poverty rate.

      From this, we get there was not "all that Extra spending". What increase there is is simply being driven by the requirements of a weakening economy and a shift in income distribution.

      I don't use 2007 on because of the influence of the recession.

      In going through this, however, I see that I need to add something in about per capita income.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I can’t help but find this interesting as I look closer at your assumptions. The poverty rate was on an upward trajectory from the late 70’s during an extremely weak economic period. The poverty rate increased from a ballpark of 12% to 15% into the early 1980’s. Reagan is sworn into office in Jan of 1981. Not a single piece of significant legislation is implemented until 1982 (Namely Tax Reform). From 1983 on thru the end of his administration the rate of poverty declines. During that period, spending on poverty programs on a “per capita” basis was about 1/3rd the increase seen during the Bush 43 administration. Even if you take CPI data at face value, than the Reagan years saw spending increases on poverty programs no more than CPI…if not less. And yet the rate declined from 15% to near the 12% mark by the end of his term.

      During the Clinton adm, after a clean sweep in the first mid-term election…his administration goes fiscally conservative and signs off on welfare reform bill with a conservative congress. Spending on traditional welfare programs saw an actual net decline on a “per capita” basis from 1993-2000. And spending on medical related welfare services is slower than the Bush 43 adm on a per capita basis… and yet the poverty rate went down during that time.

      So Clinton actually cuts welfare spending, and Regan barely increases it…both on a “per capita” basis. Both grow medical related welfare services at a slower pace than the Bush 43 adm.…and both lead to a decline in poverty rates. Then comes Bush 43 who increases traditional welfare programs by better than 50% on a “per capita” basis (which is 3 times the increase seen during the Reagan years)…and the rate of poverty goes up. Please explain ???

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I wasn’t saying you’re data was wrong about 80% of business activity being controlled by 20%. I had just no knowledge of any such source, which is why I asked you to cite it. Job creation is 50/50 if you discount those whom are self-employed without employees. However, I wouldn’t do that, because they’re still employed even if they only created a job for themselves. With regard to the 80/20% you cited…that is not too hard for me to accept. When you consider the enhanced regulatory environment over the last several decades (Sarbanes-Oxley, Dodd-Frank) it makes it dramatically harder for small business owners to compete with large entities. The cost of compliance in such an oppressive regulatory environment is suffocating to a small business. So it does make a lot of sense. That has a lot to do with why regional banks can’t compete with the JP Morgan’s anymore.

      I am still waiting for an explanation as to why the poverty rate increased during the Bush Adm when spending on poverty programs increased substantially whether measured per capita just as you would prefer to do. According to you, that doesn’t happen. All that extra spending was supposed to prevent poverty.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      OK, did some work with your hypothesis that GDP is somehow involved ... it isn't. GDP and GDP per capita; neither ended up being significant.

      Next I tried the ratio of PA spending to GDP (and GDP per capita), the one you think is important. Both were significant to some degree, but not as much as per capita PA spending is.

      It even was a possibility that I could add one to the current model; ratio of per capita PA spending and per capita GDP. It did improve the model but unfortunately the results were counter-intuitive. It turns out, the two are highly collinear and made the addition useless.

      Next I tried the ratio by itself. It gave a useful model, but not as good as per capita PA spending.

      So, it is a no-go with GDP.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      I'm sorry, I was wrong. I was wrong in that I was too conservative in my estimate. In fact 80% of business activity (as measured by gross sales) is controlled by 0.007% of total firms (those who employ 5,000+ per firm). If you want to calculate it yourself, go to

      http://www.census.gov/econ/smallbus.html

      Where do you get your assertion?

      If you were thinking of employment payroll, it is 50/50, if you break it out firms with 500+ employees and firms with less than 500 employees.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      "80% of business activity is controlled by less than 20% of businesses"

      Please cite a source for this. From what I see...the largest engine of growth in the US is the small business community. And it has been for some time.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Free market by my definition does not mean ZERO gov't. It means gov't serves as a market regulator, maintaining a competitive market. But not acting as a market participant, which distorts markets. Where does the gov't serve as a participant ??? Health Care...the largest provider....huge price distortion. Education....cost skyrocket...huge price distortion and skyrocketing prices. Housing....well...enough said.

      Where does the gov't not participate ?...Place like technology....which is incredibly cheap in adjusted dollars...and advancing rapidly.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      And I am saying that placing people on entitlements perpetuates gov't dependency that locks them into a cycle of poverty. Just look at Black Americans. They are among the poorest and most dependent on social assistance for multiple generations. And yet blacks who come to the US from other nations become some of the most educated and economically successful people in the country. In fact Blacks who immigrate from the poorest continent of Africa develop a higher overall education level than even white's who are born in the US. Why...perhaps they haven't yet been conditioned to be addicted to social assistance. If it was racism, those same blacks coming from outside the US wouldn't be able to do so well here in the US.

      Yet, the mid 2000's...2002-2006 were a significant economic upswing...poverty spending went up substantially the entirety of the Bush 43 adm, and we had an increase in poverty. Your formula just broke down.

      And I hate to break the news to you, but the two most conservative administrations fiscally speaking in the last 50 years were Reagan & Clinton. And they were the two most successful administrations in that time. Unless of course you enjoyed the malaise of the Carter years. Bush 43 was not even remotely a fiscally conservative administration with the exception of some small tax relief. In fact, they were one of the most profligate spending administrations on social spending in US history. Nevertheless, that had little to do with the social engineering of the housing market that triggered the collapse. It did however add on to a major entitlement bubble that is about to explode demographically in another 5-7 years.

      I can't help but laugh at the insistence on the success of social spending. Meanwhile the entire continent of Europe, with the exception of some of the Nordic nations that have reversed policies in recent years is in an utter catastrophe for pursuing exactly that approach. They have massive productivity problems, ridiculously high persistent youth unemployment, and unsustainable structural problems that are so bad...nobody will lend them money. Greece is welfare central...and a 3 year treasury is about 26%.

      It was those true conservative policies that ended the largest economic contraction in American history in 18 months. And it was the welfare state of the 30's that gave us a near two decade depression after the 2nd largest economic contraction.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Your last sentence in the last comment just caught my eye. There has been no time in American history where a 'free-market" in most areas of interest was dominant. It wasn't until after WW II did gov't try regulate those things which prevented a free-market from developing.

      Through 1900, American business was basically controlled by a set of oligarchs. Teddy Roosevelt attempted to break their hold on the American market, but was only partially successful. Even until the Great Depression, while somewhat more diverse, the economic power in America was concentrated in a few hands.

      It was after WW II as well as with the explosion in technology did concentration become much more diluted. Today, unfortunately, thanks to the efforts of Conservatives, we are back to the oligarch stage where more than 80% of business activity is controlled by less than 20% of businesses.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "... I am questioning how many people they lifted out of poverty...."; methinks you have this backwards. During economic downturns unemployment insurance and things like food stamps are designed to keep people from falling into poverty, not get them out of it. The perspective makes a huge difference when doing analysis. If it were has you say, to lift people out of poverty, then your arguments have some validity. But it isn't, which makes your arguments misplaced.

      It isn't "Which Conservative economic policy failed? ", it is that the economic philosophy Conservatives thinks work, does not. It always has and always will have an outcome like 2008. The only time in American history when there was an extended period of relative economic stability was after WW II and before Bush 43, when Keynesian-based economics had its heyday. That is a simple fact in terms of frequency and severity of downturns before and after WW II. 2008 was just a precursor to what would come if America kept going down the Conservative economic path.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “Now, I assume you understand that the concepts of momentum and inertia apply to economic systems as well, explain where you came up with 7 years”

      For those of us who were paying attention, the crisis began in 2007. Most people who don’t watch economic data didn’t know there was a problem until the end of 2008. In reality the mortgage market began showing heavy losses in 2006. But there was not a true ripple effect until mid-2007. So I have half of 2007, all of 2008, 2009, 2010, 2011, 2012, 2013, 2014. In reality it’s more than 7 years since the crisis began. And all that time, the Bush Adm was blowing up poverty spending.

      I didn’t say the GSE entirely caused the problem. But they played the largest role. You may recall the markets completely collapsed the day they went in to conservatorship. Are you really going to cite in your hub the “Financial Crisis Inquiry Report”. Congress holds an investigation that exonerates the GSE’s…who they just happen to control. What a surprise. Meanwhile, while the commission allowed some conservative appointee’s, they were authorized no staffers for research while the Democrat appointee’s had 80 of them. Conservatives were not informed of witnesses, interview times, or allowed to examine or cross-examine them. GOP members of the commission received a 900-page draft report only eight days before it went to the printer. And a 43,000 word dissent was cut down to 9,000 words by Democrats, so people read what they wanted them to read. I can’t think of one economist I have worked with that don’t think the GSE’s were the biggest factor. Even today, when you go to a bank and apply for a loan, 100% of the allowable lending limits is dictated by the FHA. Banks have no control over this. That’s why you can’t get much of a difference in credit from one bank to another. Because they all follow the same lending standards set by the Gov’t. There is nothing free market about it.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I never said that I wouldn’t expect unemployment payments and food stamps to increase in a recession. Since these are existing policies, they ae mandated to increase. I am questioning how many people they lifted out of poverty. My logic doesn’t fail, as it is supported by a recent paper by the NBER linked to earlier. 60% of recent job creation was a direct result of ending extended unemployment benefits. Meaning when the free money stopped, they were forced to work. All they needed was incentive. If the benefits continued, they would simply keep collecting them. So no…as the NBER research suggests…cutting these benefits doesn’t mean that poverty would increase. It means people would be forced to be self-sufficient. Your argument is a counterfactual.

      Which Conservative economic policy failed? Was it the CRA mandating low income lending, the GSE’s cooking their books and leveraging the housing market by pushing for low income lending. No…wait…that all came from the political left…who exercised majority control in D.C. from 2006-2010. Not that it matters because these policies of social engineering were started by the Left all the way back in the 70’s. And ofcourse, whenever Conservatives fought such policies and attempted to institute reforms, they were blocked at every turn. Nice try at rewriting history. But…as Warner Wolf used to say…Let’s go to the video tape.

      https://www.youtube.com/watch?v=BzCG80Wz4mg

      What was it that Andrew Cuomo said when he was HUD secretary….let’s have a listen….

      https://www.youtube.com/watch?v=PEoqKYCMDmc

      “Then there is the Poverty Rate itself. The fact is the PR increased 22% during the Bush administration! It has increased only 0.7% percent during Obama's term. Hmmmm 22% vs 0.7% increase, how does that work into your story”

      It works perfectly with my story…the Bush Admin dramatically increased entitlement spending during his tenure. He passed a massive expansion to Medicare. Welfare spending went up by 70% during his administration from 2001-2008. And medical welfare spending (Medicaid etc) went up by about 65%. His Adm was one of the biggest entitlement expansion in history. So it doesn’t surprise me that poverty went up as more people were dumped on the gov’t dole. Hmmm….how does that work in your story….huge welfare increases…more poverty.

      From the US Census

      “Despite the decline in the national poverty rate, the 2013 regional poverty rates were not statistically different”

      Not to mention a record number of people on food stamps, and the lowest labor participation in 40 years. I guess of you consider more people dependent on gov’t and out of work for an extended period a success…than you have what you want.

      http://www.census.gov/hhes/www/poverty/about/overv...

      “% of GDP, again, so what does that prove?”

      It proves a lot. Congress drafts spending budgets based on a share of GDP. Because if you spend too high a percentage of GDP, you destroy your currency. GDP dictates revenue to the treasury. So budget estimates are based on this. This tells the gov’t how much it can spend. Then it will allocate resources accordingly based on projected revenue. More importantly is simply looking at a proportionate percentage of total spending. Which gives us basically the same result of proportionality when looking at actual dollars spent, and what percentages were allocated towards what resource.

      “So long as the CPI information used to account for inflation is consistently used for all years being converted, then the translation to constant dollars IS meaningful.”

      But it’s not. What we estimate inflation to be today is not what their estimates where in their time. So they would increase spending in accordance with their perception of inflation at the time. Not based on how we interpret inflation today in a historical context. Even today that is not a constant. We change historical GDP and inflation routinely.

      April 22nd 2013

      "We are carrying these major changes all the way back in time - which for us means to 1929 - so we are essentially rewriting economic history. The changes will affect everything from the measured GDP of different US states to the stability of the inflation measure targeted by the Federal Reserve. They will force economists to revisit policy debates about everything from corporate profits to the causes of economic growth.”

      Brent Moulton,manager of the national accounts at the Bureau of Economic Analysis

      What is humorous to me is that you’re quoting a methodology used by an agency among other Federal agencies that can’t project their way out of a paper bag, let along account for (as in can’t find) trillions of dollars.

      Not one professors told you it was a waste of time. Yet not one professor is ever accountable for their projections. Yet when you talk to economists like Bill Gross, who is also one of the most successful fixed income managers on the planet…he is quick to tell you how far off the CPI is from reality. I tend to agree with people who are actually held to a standard of results.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Your timeline focuses entirely on GSEs as if they caused the recession ... they didn't. See https://hubpages.com/politics/Fannie-Mae-and-Fredd... and http://fcic.law.stanford.edu/report

      There is no question they had a part to play, but shadow banks made them look like small potatoes.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "Hall’s analysis is not alone. And we now have 7 years after the recession, with still the same results. More social spending…no improvement in the poverty rates which are now near multi decade highs if you accept census data and info from the BLS." - Poverty Rates:

      2008 - 13.3 Spending (2012B$) - $772

      2009 - 14.3 Spending - $934

      1 - 2010 - 15.1 Spending - $935

      2 -2011 - 15.1 Spending - $946

      3 - 2012 - 15 Spending - $950

      4 - 2013 - 15 Spending - $958

      5 - 2014 - 14.4 Spending - $945

      Now, I assume you understand that the concepts of momentum and inertia apply to economic systems as well, explain where you came up with 7 years,

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      To your 60% NBER comment. I will need to find a free version of the whole report to look behind the headline and what caveats are associated with such an astounding result.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Yes, using PA spending (in constant $) per capita is the right way to do the analysis.

      Keep in mind, however, the government back then might or might not have used inflation to plan outyear appropriations. But, what matters is how much was spent in a given year in current dollars. So long as the CPI information used to account for inflation is consistently used for all years being converted, then the translation to constant dollars IS meaningful. The calculator I used is the BLS publishes whose tables go back to 1913. It makes no sense for BLS to change their methodology for producing the deflators midstream and then publish it. Consequently, there is no problem in using their calculator to convert current year $ to constant dollars for it gives usable results.

      You can't using housing costs to shoot down the BLS CPI, it is not part of the market basket.

      I find this statement "...adjusting against CPI is a waste of time to come up with a constant dollar value. ..." very humorous. If this were true, then every bit of time series analysis by any corporate, think-tank, or gov't analytical organization was a huge waste of time and treasure. Personally, I used the BLS (and other) CPI throughout my entire cost and economic analysis career, except when I was analyzing things like fuel; then I used a fuel specific index. I know when the GAO reviewed some of my work, they also used the same indices.

      I also know when I was getting my BS degree in accounting and Masters in operations research, not one professor told us the CPI was a waste of time, in fact they insisted we use it. Somehow, I think you are way off-base in your denying that is the proper methodology.

      Medicaid is included, but only those parts of Medicare which might be considered public assistance.

      I haven't checked, but I suspect the ACA subsidies (your free healthcare) are being included as PA spending.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Typo, OK I buy that, but my data is in 2012 constant dollars.

      % of GDP, again, so what does that prove? Suppose a huge natural disaster such as massive snow storms from Nov through April each year from 1947 to 1962; yes, I know this is impossible, but this is also a thought experiment. What would the impact on GDP be in this scenario? Obviously, GDP would be devastated. Yet this would mean PA spending, as a percent of GDP, would skyrocket; even though the actual spending did not change. The bottom line is when the independent variable (GDP) is not or is weakly correlated to the dependent variable (PA spending), then trying to do analysis by dividing the dependent variable by the independent variable produces erroneous results. That is cost and economic analysis 101.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Try five and a quarter years past the 2008 recession, not seven. It was "officially" over in the Summer of 2009. Then, because of economic momentum, its effective on the economy continues, as you know, beyond the official end; just like a recession actually starts before the official start date.

      Since employment loss didn't stop until the beginning of 2010. It was at that point where things truly began to improve. April 2015 is only 5.25 years from Jan 1, 2010.

      It is a given both unemployment payments (directly) and food stamps (indirectly) must increase as a result of more than 10 million being forced out of work because the economy crashed in Bush's administration; why would you expect otherwise and why do you use that as a reason to say public assistance spending doesn't help. Your logic simply fails.

      I would assume you would agree that IF neither unemployment nor food stamps had not increased, then poverty would have ... a lot. If you don't, your logic would be interesting to understand.

      But, in fact, because of the Conservative's failed economic philosophy, PA spending (which includes Medicaid) increased 21% between 2008 and 2009. BUT THEN, it decreased 1.12% from 2009 through 2014. Yes you have that right, it decreased. How does this Decrease jive with your narrative?

      Then there is the Poverty Rate itself. The fact is the PR increased 22% during the Bush administration! It has increased only 0.7% percent during Obama's term. Hmmmm 22% vs 0.7% increase, how does That work into your story. Oh, BTW, since 2010, PR has Decreased 4.6%! Oh yeah, between 2011 and 2012, the PR decreased 0.7%; so, it looks like we only had to wait, what ... two years?

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I am curious to know...since you are so convinced that spending on social programs has a direct correlation to reducing poverty...how many years does this take. We are now 7 years past the last recession. We are supposedly in a recovery. Most of the welfare reform of the 90's has been gutted, and we have record numbers of households on food stamps. So how many more years of increased welfare and entitlement spending is deemed necessary before we see a result. During this 7 year period, traditional welfare programs have gone up about 18% and Medicaid by itself is an additional 37% increase in that time. When can we expect to see this sharp decline in the poverty rate ??? Obviously 7 years isn't enough. Perhaps 10-15-20 years ???

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      That is a typo. I was trying to say you’re not using constant dollar, as in not adjusting for inflation by correctly reflecting the proportionate share of GDP which is highly relevant. Spending on Social Welfare excluding Social Security in 1947 was 1.2% of GDP. By 1964 it was 2% of GDP. The entire period between 1947-1964, the total spending on welfare programs (Less Social Security) was between 1-2% of GDP. Adjusting for proportionality based on the size of the economy and population, there was no significant change in spending until the Great Society. Even today, those programs that are traditionally classified as welfare are still between 2-3% of GDP. GDP drives revenue into the treasury. Whether measured as a share of GDP or simply a share of total allocated spending, there was no major change in welfare spending until the Johnson/Kennedy administration.

      The only way you can derive the conclusion that you’re coming to is to work off a per capita basis. So if you were to compare a per capita proportionate amount of welfare spending annually against the annual CPI, then you’ll find a big increase relative to CPI. However, as I have explained in the past, official current and historical CPI statistics are not the methodology which was used at the time these budgets were drafted. So while you can go on the BLS site and find that CPI rose about 40% during the period of 1947-1964, the inflation data used at the time was quite different. This data has been restated, as much economic data is. And in doing so, it is not in accordance with the inflation estimates of the day which dictated the budget at that time. So in order to obtain a semi-realistic picture, you can only measure spending on anything as a share of the economy and/or the total budget. Because that was based on ACTUAL tax revenue realized and entering the treasury at the time. Under neither of these methodologies will you find this significant increase.

      Just to give you an idea of how impractical these CPI measures are that you’re adjusting against…According to the US census Bureau…the median home price (in unadjusted actual dollars) in 1940 was $2,938. By 1960 it was $11,900. However, if I go to the BLS’s website and use their inflation calculator which is based on restated historical CPI…an item purchased in 1940 for $2,938 would only cost $6,211 by 1960. That is about ½ the actual price change that was truly experienced by a potential home buyer. Something tells me that if I approached a seller in 1960 and said I wanted to buy his home for $6,211 when it was listed for $11,900, he probably wouldn’t have cared to listen to my arguments about adjusted CPI-U. That is precisely why economists so often measure most everything as a share of GDP. Bottom line…adjusting against CPI is a waste of time to come up with a constant dollar value. Looking at how much of actual Federal Spending was directed to what cause in the budget tells you how the gov’t was redirecting resources. Their resources are “X” each year. They either direct more of those resources, or they direct less.

      You are absolutely correct, there a many variables which dictate poverty rate. The only one that is consistent is the rate of economic growth. More people working means less poverty. No argument at all in that regard.

      The quotes you cited have literally nothing to do with any of the three changing their minds on gov’t spending in relation to poverty. However, I don’t disagree with many of their statements. When Greenspan said

      "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan."

      I agree. You can’t make the assumption that such self-interest would work in a marketplace that is influenced so heavily by exogenous gov’t forces that are not fostering competition, but rather dictating outcomes with heavy handed policies of social engineering. I would not expect any private entity in any industry to function properly when the gov’t moves beyond regulation and becomes a market participant. Every area of the economy in which the gov’t has become a participant has turned disastrous. Housing and Health Care are two classic examples of gov’t intervention distorting prices and demand.

      “Again, not true, at least in the short-term. The only assistance directly tied to economic activity is unemployment insurance. The rest depend on the political mood, not economic activity”

      You are dead wrong…Medicare and Medicaid are dictated by CPI-U. That’s how they get increases allocated. Every year the increase is based on that figure. CPI-U is dictated by the velocity of money…aka economic activity.

      When you include Medicare/Medicaid they are always increasing in aggregate dollars and adjusted dollars. Your charts in the hub linked to above seem to exclude items like Medicaid/Medicare as public assistance. Since they pay more in benefits than the average beneficiary contributes. If you’re going to chart true increases in public assistance you need to include those items. After all, if we presume that these programs don’t distort prices higher (which they do), than for every dollar of social assistance paid towards something like a doctor’s visit for the needy, that is less money they would theoretically have for food or some other necessary item without these programs. Excluding them creates the illusion that assistance has declined in many years, when in fact it has been sharply increased and simply called something else. Because you have given someone $1 less in food stamps but $3 more in free health care…doesn’t constitute less public assistance. It’s called retitling aid to a different line item in the budget.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "Public assistance spending has is often politically driven. It always increases in constant dollars," Not true, see the periodic downturns on Chart 1 in my hub

      https://hubpages.com/politics/American-Dream-Pover...

      LW says "We already know from the data that massive expansions of social spending has had no direct correlation to outcomes." Again, not true, public assistance spending IS one of the significant factors. And again. spending as % of total spending is not relevant to this kind of analysis because I am relating the level of PA spending to Poverty Rate, I am not relating the % of total spending to Poverty Rate (although I should give it try to see if it sticks).

      LW says "No matter how you slice it, the vast majority of social spending is a mandatory adjustment that is invariably linked to economic activity." - Again, not true, at least in the short-term. The only assistance directly tied to economic activity is unemployment insurance. The rest depend on the political mood, not economic activity.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Greenspan - "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan."

      Bernanke - " It did so because, unlike the earlier decline in equity prices, it interacted with critical vulnerabilities in the financial system and in government regulation that allowed what were initially moderate aggregate losses to subprime mortgage holders to cascade through the financial system. In the private sector, key vulnerabilities included high levels of leverage, excessive dependence on unstable short-term funding, deficiencies in risk measurement and management, and the use of exotic financial instruments that redistributed risk in nontransparent ways."

      Paulson, along with being the architect of TARP and convincing Bush 43 (according to Bush) the country was headed to a massive depression says . You probably understand what Paulson's economic philosophy, so this should surprise you

      http://www.bloomberg.com/bw/articles/2013-09-12/ha...

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Using your figures from your last post and assuming the percentage changes were the same between years, the increase would be over 600% (which implies the percentage increases between listed years were smaller than the ones listed.)

      To answer your question however, here is a quote from the hub.

      "It occurs to me that prior to 1947, America was coming off of a war-footing. Before the end of WW II, Americans were 1) fully-employed and 2) drawing two incomes, if you were married. That accounts for the drop in the poverty rate from the beginning of WW II to its end in 1945. Then you get the sharp spike from 1945 to 1947 as incomes dropped when women were forced out of work and the soldiers returned home to few jobs. From 1947 on, the economy made the switch from war to peacetime with ever increasing number of jobs available for the men who were once at war. Also going on was an ever increasing amount of federal spending devoted to public assistance"

      There are LOTS of variables which determine Poverty Rate, with federal spending being just one of them. The purpose of multiple regression analysis, as you know, is to ferret out those relationships and determine which ones are significant; public assistance spending was and is one of those.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW says "... increased by 300%. While this is true in relation to a percentage of total Federal spending, ...". You need to reread what I wrote, LW. I was speaking of raw spending (in constant dollars) and not % of federal spending. The latter metric has no real value in this analysis. Nevertheless, the 1947 value is $15.6K (2012$) and 1962 was $50K (2012$), you can take it from here.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Landmark, given your background, this statement of yours makes me wonder. "... This is because you have chosen to use constant dollar analysis and simply ignore inflation, ..." You have it absolutely backwards Landmark.

      Just one of many examples of the same definition of Constant Dollar.

      Constant dollars is an adjusted value of currency used to compare dollar values from one time period to another. Due to inflation, the purchasing power of the dollar changes over time, so in order to compare dollar values from one year to another, they need to be converted from nominal (current) dollar values to constant dollar values, also known as real dollars, where all values are expressed in terms of a common reference year. (The principle, of course, can be applied to any currency worldwide, not only dollars.) The process of converting from nominal to real values is known as inflation adjustment.

      Just like every one of my economic and cost analysis teachers taught me.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      You asked for specific data. Here is some. An example of how terribly flawed your analysis is around the supposed correlation. You point out that between 1947-1964 the rate of welfare spending increased by 300%. While this is true in relation to a percentage of total Federal spending, you seem to have left out the fact that this happened almost entirely between 1962-1964. In 1962, welfare spending doubled in one year. But for the period between 1947-1961, the changes were statistically insignificant. In fact spending as a share of the Federal budget was in decline during the 40’s.

      1940 was 6% of Federal Spending

      1945 was 0.8% of Federal Spending

      1949 was 3.2% of Federal Spending

      1950 was 3.5% of Federal Spending

      1955 was 2.8% of Federal Spending

      1957 was 2.6% of Federal Spending

      1961 was 3.1% of Federal Spending.

      So since there was no change for 15 of the 17 cited years, how do you explain the precipitous drop in poverty rates during this period ??? Where is this correlation ??? From 1947-1961 the poverty rate declined from 34% to 19%.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Regarding the Bush 43 administration, you may recall that his economic team and numerous members of congress warned repeatedly of the coming crisis developing in the housing sector which was the lynchpin as far back as 2001, and every reform attempt was blocked. Thankfully we have the congressional video readily available from the early hearings to prevent you from rewriting history. As well as the actual written budget proposals which came directly from the Whitehouse proposing such reforms from 2001-2008. Greenspan, Bernanke, and Paulson have not made any public statements that I am aware of suggesting that they changed their minds and more gov’t welfare spending is now needed, or suggesting it affects beneficial changes in the poverty rate. Some examples of warnings and proposed reforms which were ignored by the social engineers are as follows…

      2001

      • April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity." (2002 Budget Analytic Perspectives, pg. 142)

      2002

      • May: The Office of Management and Budget (OMB) calls for the disclosure and corporate governance principles contained in the President's 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

      2003

      • February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market.

      • September: Then-Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

      • September: Then-House Financial Services Committee Ranking Member Barney Frank (D-MA) strongly disagrees with the Administration's assessment, saying "these two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis … The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." (Stephen Labaton, "New Agency Proposed To Oversee Freddie Mac And Fannie Mae," The New York Times, 9/11/03)

      • October: Senator Thomas Carper (D-DE) refuses to acknowledge any necessity for GSE reforms, saying "if it ain't broke, don't fix it." (Sen. Carper, Hearing of Senate Committee on Banking, Housing, and Urban Affairs, 10/16/03)

      • November: Then-Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

      2004

      • February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital and calls for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore … should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

      • February: Then-CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

      • April: Rep. Frank ignores the warnings, accusing the Administration of creating an "artificial issue." At a speech to the Mortgage Bankers Association conference, Rep. Frank said "people tend to pay their mortgages. I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there." ("Frank: GSE Failure A Phony Issue," American Banker, 4/21/04)

      • June: Then-Treasury Deputy Secretary Samuel Bodman spotlights the risk posed by the GSEs and calls for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

      2005

      • April: Then-Secretary Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America … Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

      • July: Then-Minority Leader Harry Reid rejects legislation reforming GSEs, "while I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process." ("Dems Rip New Fannie Mae Regulatory Measure," United Press International, 7/28/05)

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Information comes from data. And the data demonstrates that welfare spending actually declined in real dollars during many of the periods you claim that it rose. This is because you have chosen to use constant dollar analysis and simply ignore inflation, and it’s inherit impact on all aspects of fiscal policy. The answer to your question “Why then does public assistance spending have such a very low p-value (meaning highly significant) and is not collinear with any of the other independent variables?"

      Public assistance spending has is often politically driven. It always increases in constant dollars, but as a share of the economy is dependent numerous variables such as who holds office and the state of the economic environment. The question is whether such spending is collinear with the actual poverty rates. We already know from the data that massive expansions of social spending has had no direct correlation to outcomes. If it did, than poverty would be plummeting as we speak…but it isn’t. All you have is a counterfactual contending that things would be worse. Yet, as the data has already demonstrated, poverty rates have fallen dramatically during periods in which social spending was a much smaller portion of gov’t spending in real dollars than today. This took place over decades, not short periods of analysis. Which is precisely the opposite outcome that you’re are suggesting should have occurred.

      Hall’s analysis is not alone. And we now have 7 years after the recession, with still the same results. More social spending…no improvement in the poverty rates which are now near multi decade highs if you accept census data and info from the BLS. Many of the welfare reform features of the late 1990’s have been nullified. And in fact poverty is getting worse with a record number of people on food stamps, and the lowest labor force participation rate in the last 40 years. There are numerous studies chock full of data that contradict your assumptions.

      http://www.scribd.com/doc/88767476/The-American-We...

      A recent working paper in 2014 from the NBER found that 60% of recent job creation came from the expiration of unemployment benefits. Miraculously, people who lost benefits somehow immediately found a way to work. http://www.nber.org/papers/w20884. So much for the counterfactual suggesting without benefits “they’d be worse off”.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      http://www.usgovernmentspending.com/ simply provides some of the data but provides little information.

      Keith Hall did not comment on my statement "Why then does public assistance spending have such a very low p-value (meaning highly significant) and is not collinear with any of the other independent variables?" and I really doubt that he would disagree with it, either. He might take exception with my methodology or data, but since he simply made declaratory statements in the piece you offered and is only looking at the five years after the recession, I have to doubt his objectiveness, credentials or not.

      Also, given he was analyzing the economy for President Bush from 2005 - 2008, I am not impressed with his abilities. "From 2005 to 2008, Hall served as chief economist for the White House Council of Economic Advisers, where he analyzed a broad range of fiscal, regulatory, and macroeconomic policies and directed a team that monitored the state of the economy and developed economic forecasts. " Greenspan, Bernanke, and Paulson changed their minds about their analysis after 2008; Keith, on the other hand, apparently has not.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      The correlation of total spending with the poverty rate is a function of economic activity. If there are more people working, there are less people applying for things like food stamps, unemployment benefits and Medicaid. No argument there. But giving people food stamps doesn’t get them a job.

      I can’t help but get a kick out of how you refer to sources with references like “any statistician will tell you” Keith Hall, a former senior research fellow with George Mason and Commissioner of the BLS, who you seem to think is a competent group seems to disagree with your assertion. He would then qualify as an expert based on such standards.

      http://mercatus.org/expert_commentary/more-governm...

      For the record, I think the totality of most of these Federal Agencies is more corrupt than incompetent. But definitely a combination of the two. That would largely depend on who and where in the chain of command you’re forced to deal with. I spent 4 hours in the social security office last week to assist an elderly relative. It would be hard for me to call the local employees corrupt. These barely literate people aren’t smart enough to be more than incompetent.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      The correlation of total spending with the poverty rate is a function of economic activity. If there are more people working, there are less people applying for things like food stamps, unemployment benefits and Medicaid. No argument there. But giving people food stamps doesn’t get them a job.

      I can’t help but get a kick out of how you refer to sources with references like “any statistician will tell you” Keith Hall, a former senior research fellow with George Mason and Commissioner of the BLS, who you seem to think is a competent group seems to disagree with your assertion. He would then qualify as an expert based on such standards.

      http://mercatus.org/expert_commentary/more-governm...

      For the record, I think the totality of most of these Federal Agencies is more corrupt than incompetent. But definitely a combination of the two. That would largely depend on who and where in the chain of command you’re forced to deal with. I spent 4 hours in the social security office last week to assist an elderly relative. It would be hard for me to call the local employees corrupt. These barely literate people aren’t smart enough to be more than incompetent.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      If you can’t account for 8.5 trillion dollars over a period of less than two decades…you are by definition incompetent. If you did that in a private entity, they would put you in jail.

      I did show the statistics. They are easily attainable here http://www.usgovernmentspending.com/

      By LAW, spending on social programs such as Medicaid, Medicare & Social Security which dominate Federal expenditures are directly linked to the CPI-U. The adjustments are not optional, they are non-discretionary spending items. While I personally think there are huge flaws in the way CPI is now calculated, that is still what drives the adjustment. In order to have inflation, you must have an increase in the velocity of money. Which means that GDP must expand. Otherwise we have deflation. So spending on mandatory programs is invariably linked to GDP. These types of social entitlements also increase as a share of GDP when a new program is created that did not exist prior. Most of that happened in the mid 60’s. But there have been other additions like Part D of Medicare in the early 2000’s.

      No matter how you slice it, the vast majority of social spending is a mandatory adjustment that is invariably linked to economic activity. Unless you know of an extended period in which GDP expanded without any inflation or deflation. So to reflect an increase in any form of gov’t spending at the Federal, State or Local level without adjusting for its proportionate share of GDP is amateurish. That is expressly why in 2010, following the economic crash of 2008/2009 Social Security DID NOT give a 2010 increase to recipients. Because prices were falling in the trailing data. Deflation means no increase. GDP growth means and increase. They are linked by operation of Law. Trying to measure the increase in poverty spending by a factor of 300% without adjusting for economic growth and price changes presumes that a dollar had the same purchasing power 17 years later. I know you’re smarter than that.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      To your poverty-cycle comment. Why then does public assistance spending have such a very low p-value (meaning highly significant) and is not collinear with any of the other independent variables?

      Any statistician will tell you the amount of spending is highly correlated with poverty rate. Show me contrary statistics, not observations from a a 2-dimensional graph.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      So, relative to the "Pentagon", are you saying the CBO and GAO do not know what they are doing in their analyses which are accomplished by untrained analysts?

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Lastly, you can take this with a grain of salt...because I am not blaming you directly. But if you are going to cite a body for financial analysis, I wouldn't use the Pentagon as an example. This is an agency that can't account for 8.5 trillion dollars in less than 2 decades. They're hardly a model of competency. Your bosses over there make the boys at Enron and Arthur Andersen look like role models

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Your argument for linking economic cycles to the rate of poverty is relevant. Which is entirely my point. The decline of poverty in the 40's and 50's was about economic activity...not social spending. Social spending in real dollars was not increasing and in fact decreasing at certain points. Which means poverty can be addressed without gov't entitlements. You have to grow your way out of poverty, not enable more of it.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Bottom line is there is X amount of wealth creation each year. The gov’t taxes and spends “Y” in proportion to that wealth pie. That is why we tax a percentage of income and not a fixed dollar amount. Because adjusting for inflation does matter. The proportionate amount on the revenue side has been fairly consistent for nearly a century. The amount of spending as a share of that wealth pie has been increasing, and shifting dramatically more and more towards entitlements since the mid 60’s. And the results are pathetic. The only legit argument would be the impact of immigration and the importation of poverty. But even that is not the best argument, because a significant number of them are more entrepreneurial and successful than many natural born citizens.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “Sorry Landmark, you cannot get around the fact that the point of the Medicare Tax is to offset the cost of Medicare and the point of the Social Security tax is to offset the cost of Social Security.”

      You can get around it when the tax doesn’t directly fund those programs and is comingled with the general tax revenue. The gov’t tax revenue is “X”…”X” today is the same share of GDP as it was in the prior decades since WW2. How the gov’t chooses to spend “X” amount of revenue is all that has changed. Not to mention, as I mentioned earlier, in the case of Medicare, the benefit received had no relationship with the tax revenue contributed. The tax you pay doesn’t necessarily come remotely close to covering the cost of benefits received.

      “If I presented an analysis as you suggest to my Pentagon bosses, I would have been laughed out of the room.”

      I rest my case…If I ran a budgetary analysis in the private sector the way the Pentagon or any gov’t agency runs its analysis I wouldn’t be in business very long.

      “Also, trying to conflat public assistance spending with share of GDP is itself pointless because GDP, for the most part, doesn't drive public assistance spending and vice-verses; they both march to a different drummer.”

      I am comparing total spending as a share of GDP. The total amount of spending as a share of GDP has not changed that much. It is the composition that has changed. That is highly relevant. Each dollar of revenue has been redirected to social assistance programs in dramatic fashion, and there is virtually no change in social outcome since this shift began. GDP does in fact drive public assistance. GDP expansion drives inflation, and inflation drives the amount of aggregate social spending, as well as the aggregate amount of spending on all items.

      It is frankly ridiculous to compare the amount of social spending or any amount of spending on any program in aggregate dollars without accounting for the share of GDP. Otherwise you are pretending that inflation doesn’t exist. Otherwise we could argue that the gov’t spends more money on the military today that it did in 1942 during the height of WW2. But we know thanks to the reality of inflation and measuring expenditures as a share of the size of the economy that this is far from the truth. I shouldn’t have to explain that to you. So when you compare social assistance to increases from 1947-1964 increasing by 300%, the only way that would be remotely relevant is if the purchasing power of the dollars was stagnate during this period. If your example was to be taken even remotely serious, than a worker who was making an average national wage of about 12k in 1980 was up to about 32k in 2000. There wage nearly tripled over that period. So they are doing great…right. A dollar spent on social assistance doesn't provide the same amount of assistance 17 years later. That's why the aggregate amounts increased. Not because of an increase in the amount of public assistance provided.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      OK, I finished my model building and you can find it at https://hubpages.com/politics/American-Dream-Pover...

      I didn't use your name in vain, Landmark, lol.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LM, you say "Bottom line is your models are flawed. You’re presuming that all of those receiving benefits would not be able to sustain themselves had they not been receiving something for free. Yet this has never been shown to be accurate. As the old saying goes…give a man a fish and you fed him for the day. Teach him to fish and he eats for life."

      The kind of variables you describe are accounted for in the timespan of the my data set. A good portion of it (1935-1964) is when gov't spent very little on public assistance and people were forced to sustain themselves at the lowest possible subsistence level or die.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Sorry LandMark, you cannot get around the fact that the point of the Medicare Tax is to offset the cost of Medicare and the point of the Social Security tax is to offset the cost of Social Security. Absent those programs, you would not have the associated tax. That is the point of marginal analysis.

      You simply cannot talk about the total cost of a program without considering any offsetting costs. If I presented an analysis as you suggest to my Pentagon bosses, I would have been laughed out of the room.

      The people who wanted to argue your way were contractors trying to get DoD to pay them money. We went round-and-round with Boeing over a leasing program they wanted on just this very issue; Boeing took your side, I took my side ... I won.

      Also, trying to conflat public assistance spending with share of GDP is itself pointless because GDP, for the most part, doesn't drive public assistance spending and vice-verses; they both march to a different drummer.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      It isn't pointless in the sense that we are analyzing changes in the budgets of past versus present. On the income side, the gov't is receiving revenue feedback consistent with what it has always received. We simply label the revenue source something different. However, the spending side has changed substantially. Many of your comments seem to imply that the gov't at times spends less on public assistance (which never actually happened when we look at all programs collectively) due to a decline in tax revenue. When in fact the gov't is taking in not just record aggregate tax receipts...but approximately the same share of GDP it always takes into the treasury. In 1950 we called it income tax revenue. In 2015 we call it Medicare tax revenue. It's the same amount of revenue either way. Revenue is revenue. It can be allocated anywhere the gov’t chooses to allocate it. Meaning if Medicare was abolished tomorrow, the tax revenue would stay the same. Congress would just shift the tax burden to the income tax or some other source. Either way they will get their 15-20% of GDP.

      Also, it’s not as though there is any relationship between the amount of Medicare tax I pay, and the benefit I receive. Such a relationship does exist with Social Security, so there is a valid reason to exclude it from the discussion. But Medicare taxes apply to 100% of your income regardless of how much you make…and benefits are not limited to contributions paid. That is the definition of welfare. All that has happened is we have shifted our fiscal spending habits to be not only a much larger share of GDP, but also directionally making social entitlements a substantially larger percentage of aggregate spending.

      Now the composition of spending today is much less weighted towards things like national defense than it was in the 40's/50's/60's and early 70's....and much more towards social assistance. So, common sense would seem to indicate that we should see a much faster decline in the rate of poverty as a result of this spending shift. But we have not seen any such precipitous decline. In fact the decline begins to level out as this spending shift takes place. So it leads me to again question just how effective such spending really is. The only rationale argument I can see is that perhaps as a developed market economy…we have seen the maximum feasible amount of poverty eliminated, and it would not get any better no matter what the policy would be. I personally don’t believe that. I think that the spending is just directionally much less productive and slows economic activity, thereby forcing aggregate spending to be a larger share of GDP by suppressing GDP. It would be nice if there really was such a thing as shovel ready jobs and needed infrastructure spending. But I wouldn’t hold my breath waiting for that any time soon. We are more worried about making sure people sneaking across the border to have babies get their hospital bill paid rather than spending money on a new high speed rail system.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Taking the 'net' spending on entitlements is definitely not pointless when one is doing marginal analysis, which is what is happening here. We are looking at just one part of the budget, not the whole budget, and discussing its impact. That, by definition, is marginal analysis and all factors must be considered, not just expenditures, but offsetting receipts as well.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Entitlements are defined as mandatory spending. That includes Federal Pensions, Social Security, Medicaid/Medicare. A benefit that someone is “entitled” to receive. As I said, I don’t consider pensions to be welfare because the benefit is commensurate with labor provided…hopefully. Social Security should work the same way…but doesn’t always. But for the sake of argument we will exclude it. Medicaid is welfare, and Medicare pays out more to the average recipients than they ever pay in…aka…welfare.

      Subtracting tax revenue from SS payments is pointless. The revenue is part of the total gross tax revenue of Federal receipts. It is itemized on a pay stub…but in terms of the treasury, the revenue is all merged together. It has not been a separate and distinct fund since the LBJ administration. Now… Federal tax revenue is the same percentage of GDP as it has been since the end if WW2. The total of all collective revenue streams has been in the 15-20% range depending on economic expansion or contraction. So the revenue side has not changed. The gov’t is taking in the same share of economic activity in tax revenue as it was in the 40’s/50’s/60’s/70’s/80’s regardless of how you choose to itemize it. The spending had changed markedly. Medicare/Medicaid did not even exist until the “War on Poverty. They are collectively 927 billion dollars. Income Security programs…which is basically a negative tax rate for the bottom quintile…is another 300 billion. That alone is 1/3rd of all Federal spending. So to suggest that we are spending less on the impoverished is frankly ridiculous. Medicaid alone at 8% of Federal spending (Federal Gov’t pays 60% of Medicaid, States pay 40%) takes up a higher % of the total Federal budget than all the welfare programs combined did in 1950.

      So, now that we know quite clearly that gov’t is spending a hell of a lot more on those whom are supposedly “in need”…why does the number of people “in need” in proportion to the population not change even in remote proportion to the increases in spending ??? I think we already know that one.

      Whether I have a problem with a specific group, and who receives what benefit is not relevant. We are discussing the efficacy of these programs, of which there is little. But for the record…I have a big problem with many of these programs. I don’t want to pay people to work unless they work for me. You shouldn’t need to be incentivized to want to work. The earned income program alone says quite a bit about the institutionalized gov’t dependence we have created. Medicare/Medicaid have done nothing but distort the economics of the health care system, driven up prices and are completely riddled with fraud. Not to mention, they don’t even fully account for their true cost. A private insurer must report all expenses over and above commissions as operating expenses. That includes salaries, benefits etc. We don’t do that for the proportionate amount of time legislators and their staff spend on these programs. Bottom line…I don’t care to pay for people who don’t attempt to contribute, and in some cases aren’t even Americans. Even if you want to…that is your prerogative. You’re entitled to your opinion. But to suggest we spend less on the poor is not even remotely accurate.

      We know that gov’t has to run deficits from time to time to increase the monetary base. I want that spending to be productive…not distributed in ways that create gov’t dependence and destroy competition. Bottom line is your models are flawed. You’re presuming that all of those receiving benefits would not be able to sustain themselves had they not been receiving something for free. Yet this has never been shown to be accurate. As the old saying goes…give a man a fish and you fed him for the day. Teach him to fish and he eats for life.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      According to my model, if we regressed back to the 1950 funding (in 2012$) then poverty would be around ... 47%! And frankly, that makes since to me.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      So, I would conclude your problem with the exploding entitlements is Medicaid, which mainly helps first children and second their mothers, is this correct?

      Or is it the $.1T in STEM, again oriented toward children and their mothers?

      Or is it the $0.06T in EITC which encourages Americans to work?

      Or is it the ... well the rest are too small to count?

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      If you consider Social Security and Medicare as "entitlement spending", then your right that it is large, but dominating ... no. If you don't consider it welfare, then the remainder is down in the federal budget weeds.

      SS and Medicare as welfare:

      - SS/Medicare - $1.5T

      - less contributions - $1.1T

      -- Remaining SS/Medicare welfare - $0.4T (very debatable)

      Other "welfare" programs:

      - Medicaid - $0.5T

      - Veterans - $0.1T (very debatable)

      - General & Federal Retirement - $0.1T (very debatable)

      - Unemployment - $0.04T (debatable)

      - REAL Public Assistance - $0.36T

      TRUE Public Assistance - $0.86T (most directed at children via Medicaid and STEM)

      Debatable Public Assistance - $0.9T

      Very Debatable Public Assistance - $1.5T

      Defense and Foreign Relations - $0.7T

      All Discretionary - $1.2T

      Now please explain how the federal budget is 'dominated' by "entitlement spending" [on deserving adults]?

      That is looking behind the numbers.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      Keep in mind...I am eliminating social security and Federal pensions from the category of entitlement spending in the data I am citing. Presumably because in order to collect a Federal pension...one would have to first provide their labor, which would not constitute welfare. And in the case of social security...a person should have theoretically paid in an adequate amount of contributions to account for the benefit...even though we know that is not necessarily the case. If I included those components, entitlements have grown from about 15% in 1940 to 20% in 1960...to 38% by 1980...to about 50% today. More and more gov't dependence.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      “Actually, "trickle-down" works very well ... but only for the rich. For everybody else, it has been an unmitigated disaster, which is why every country which tried it ended up trashing it.”

      You mean like Europe. In case you haven’t noticed…their obsession with a welfare entitlement state has put them in such a calamity, that the rest of the world won’t lend them money anymore. The exception being some of the Nordic nations that began reversing their welfare state model some time ago. In 1970, Sweden was the fourth richest country in the world. But by 1993, it has fallen to 17th. Then came various reforms, including cuts in public spending. Public spending as a share of GDP had reached 67% by 1993, but now it's down to less than 50%. Sweden has cut the marginal tax rate by 27% since 1983, and it has cut the corporate tax rate to 22% (which is much lower than in the United States). They turned over operation of their schools to private entities, and eliminated defined benefit plans for defined contribution plans. They also not surprisingly, are in much better shape than the welfare state of the rest of Europe. Trickle down has worked quite well there. And the welfare state collapsed European productivity and growth.

      In terms of the US, the lower quintile that stopped participating is trapped in institutionalized gov’t dependence. It sounds like you’re the one not reading the number behind the numbers. The Federal budget is dominated by entitlement spending. This was not the case 50 years ago. It was but a fraction of the total Federal Budget. Literally 1/3rd of Federal spending is attributable to programs that didn’t exist before Johnson’s “War on Poverty”. So if there is a problem…that would be that we are spending dramatically more money on programs that have not changed the result.

      In 1950 the total for entitlements was just shy of 6% of Federal Spending. By 1960 it was down to about 5.5% of Federal spending. By 1970 is was nearly 11% of total spending. Fast forward to 2010 and they total a whopping 38% of Federal spending. If there is a trend…it’s that gov’t is perpetually spending more and more on these programs…and getting less and less of a result. This is not a picture…but rather budget data…easily accessed.

      http://www.usgovernmentspending.com/year_spending_...

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      @Landmark, that is the problem, you are just looking at the chart and not the numbers behind it. Heritage put that chart for one reason ... "because it makes it Look Like what they are saying is true without doing the real statistical work that is needed. Pictures may say a thousand words, but that doesn't mean those words represent reality.

      Keep in mind, I look at the same chart and easily come to a different conclusion ONCE I have factored in other historic and economic events which occurred during that same time period.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Actually, "trickle-down" works very well ... but only for the rich. For everybody else, it has been an unmitigated disaster, which is why every country which tried it ended up trashing it.

      1. Since "trickle down", the lower fifth STOPPED participating in economic growth (like they did in the prior 30-years), in fact, they have lost ground. The 4th and 3rd fifths have gone exactly nowhere in the last 30 years. The 2nd fifth has grown only a little bit in that time period while the top 20% say YES, Trickle Down Works, just look at us and if the rest of you haven't benefitted, it is Clearly your own fault for you stopped doing whatever you were doing in the 60s after to participate in American economy.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      Here is a much better regression result. The Mult R2 was 95% and the Adjusted Rx was 89%, meaning about that percent of the variations in the data set, 1935 - 2014, is explained by the variables listed below. They ar:

      1. Raw Public Assistance Spending

      2. Per Capita Public Assistance Spending

      3. War

      4. Constant $ Floor for the highest tax bracket

      5. Two period (year) lag for recession (meaning there was something in the economy two years before a recession that is correlated to a change in poverty rate)

      6. Unemployment Rate

      * An Increase in variables 1, 2, 4, and 5 (meaning there was a recession 2 years later) indicates an Decrease in Poverty Level

      * An Increase in variables 3 (meaning the country was at war) and 6 indicates an Increase in the Poverty level.

      Further exploration will include looking at the lead and lag for war and unemployment.

      I'll be cranking out a hub on this for those interested in the details of the regression.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I am not working from my gut...I am using the very chart you cited. The poverty rate as a share of population has consistently been in the range of 12-15% since the mid 70's. I don't consider that to be a significant deviation from year to year.

      Today, total entitlements are about 2.1 trillion out of 3.6 trillion in spending. About 1.2 trillion of that is related to programs that were legislated in the mid 1960’s and rolled out thru the 1970’s and did not exist prior.

      So approximately 1/3 of the total Federal budget are programs that didn’t exist when the poverty rate dropped from 34% in 1950 after WW2 had already ended, to a rate of about 18% when the Great Society War on Poverty began. Since then…the rate has dropped from 18% to a range of 12-15% and stayed in that band. That’s after an massive expansion in new entitlements. What’s worse is…these programs didn’t spring into action in one year. They were progressively rolled out and expanded over a decade. So measuring their success should really begin from 1970/1975 at the earliest when comparing to today.

      More simply put…the rate of decline was much faster prior to the Great Society.

      The declines in the mid 1980’s and again in the mid to late 1990’s correlate to significant economic expansions. That should be no surprise. That means more people working. Job creation means less poverty.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      I don’t discount Piketty based exclusively on the transfer of income in one form. There are multiple variables. I will give you a quick review. And the aggregate of all his flaws is the problem.

      He evaluates total income from a tax return…taxable or tax free. But makes no mention of the muni market going totally un-reported prior to 1987…which disproportionately reflects as income for higher earners. There would be no evidence of this 4 trillion dollar market prior to 1987.

      He pulls income from a tax return which does not have qualified plan contributions which are options to defer by the employee…plus employer matches. That can’t be found on the return, and shelters a higher percentage of relative income from mid income workers.

      He doesn’t account for changes in the tax code that incent executives to realize more ordinary income.

      He doesn’t account for the limits on passive activity losses that were not in existence until the 1980’s and heavily surpressed income on an individual return prior to the changes.

      He counts tax units…not households. My 7 & 4 year had to file a tax return this year because she made just enough interest to cross the threshold in which they have to file. They live in the same house with me. They are 2 poor low income tax units now. My wife and I filing jointly are 1 rich unit…sleeping in the next room.

      He doesn’t evaluate the impact of fringe benefits as income…such as health care plans which developed into a typical employee benefit. (Although under the new unaffordable care act that will now be taxable income).

      He doesn’t include the impact of transfer payments.

      He pays no serious attention to mobility and how many of the top earners are actually different people from one year to the next, which treasury data says is significant.

      He doesn’t adequately account for the difference between the top 1%’s income as ordinary income vs capital gains. Capital gains are highly variable and are linked heavily to stock market performance.

      He doesn’t even touch on the heavy degree of imported poverty via immigration.

      There are many other flaws…which we have already talked about. Considering the total of them…his data is very misleading. I commend his attempt to try and measure what is probably not measurable. However, he should have done a better job explaining all the missing pieces…and why it isn’t measurable…rather than reaching a conclusion…which seems highly politically motivated.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      As to the Poverty issue. The problem with your comment is that I took into account the big drop from 1948 on, and the War and lagged Recession "were" significant variables. To me, they both make sense because during war, many more people get employed at generally higher wages and the year after a recession is over, poverty should decrease.

      You are working from your gut, trying to rationalize your preconceived notion, while I am working from empirical evidence and letting the answer fall where it may.

      For example, when you say "......and no improvement worth noting in the last 40 years. More spending...same results."; yet even though you see poverty rate remaining at "what would appear" to be a constant level and raw spending (that's another variable to be tested, spending per capita) climbing through the roof on a graph would seem to support your conclusion. the actual numbers contradict it.

    • My Esoteric profile image
      Author

      My Esoteric 2 years ago from Keystone Heights, FL

      LW - Relative to the discussion about Piketty and the growing wealth inequality; I did some rough calculations based on the paper you linked to at http://www.ntu.edu.sg/home/kebin/research/papers/t...

      Using estimates of 2.5 million C-Corps and the papers conclusion that $131K (FY 2000$?) per C-Corps was transferred from corporate to personal earning, we get between $300B and $400B of increased personal income due to the tax change policy. Assuming the population in 1986 and the mean income in FY03$ I get total income of ~$4,440B. So, what we are talking about is a max of 7% of total personal income consisting of this newly transferred wealth. Further, this is a one-time good deal in terms of impact on wealth inequality.

      So, using this as a reason to refute Piketty doesn't really work. Worse, if you start counting at 1988; the inequality continues to grow.

      Bottom 5th- fell from 3.8% of total income in 1988 to 3.2% in 2013

      Next 5th - fell from 9.6% to 8.4%

      Next 5th - fell from 16% to 14.4%

      Next 5th - fell from 24.2% to 23%

      Top 5th - increased from 46.3% to 51%

      Top 5% - increased from 18.3% to 22.2% in 2013.

      During that same period, the economy grew 85% over the 25 year period or 2.5% per year. Now, if there was no income inequality, what other explanation do you have 4/5ths of the working population declining in their share of total income while 1/5 sees a substantial increase. How is that not income inequality?

      If income were distributed absolutely evenly, then the shares would remain roughly the same; clearly they are not.

      If, as many in your camp say, the lower 1/5 are lazy bums with no incentive and contribute nothing to economic growth and should lose a share, then why is the same thing true for the next three-fifths. I have a hard time believing they didn't contribute to growth either.

      Why did the top 1/5 grow at 1%/yr while the next 1/5 down grew at .4%, and the next two levels didn't really grow at all in 25 years while the lowest 1/5th actually lost ground!! Oh yes, the top 5% grew at 1.4%/yr.

      Based on 1966 - 1986, this the way it should have looked given the 3.6% annual growth in GDP:

      Top 5% -- 1.8%

      Top 1/5 -- 1.8%

      4/5th -- 1.6%

      3/5th -- 1.2%

      2/5th -- 0.8%

      bottom 1/5th -- 0.6%

      The difference between those two time periods is mind-boggling.

    • LandmarkWealth profile image

      LandmarkWealth 2 years ago from Melville NY

      My Esoteric,

      The rate of poverty was plummeting long before there was any major change in the entitlement structure. I don't doubt that factors such as War and economic expansion/ contraction play a role. But the fact it the trend line is basically the same since the mid 70's. So entitlements that once made up a fraction of the budget, now consume nearly 2/3rds of budget...and no improvement worth noting in the last 40 years. More spending...same results.