Income Confusion: Part II
By Thomas Sowell

Tuesday, November 20, 2007


When most of us look at income statistics, we are not just being numbers junkies. We want to find out something about actual flesh-and-blood human beings -- specifically what their standard of living is like.

But you cannot always just take statistics at face value -- or, worse yet, with the spin that politicians and the media put on them.

Income, for example, is not the same as earnings, and neither is the same as the economic resources on which people's standard of living is based.

Since most of us get our income by earning it, it might seem that any difference between income and earnings would just be some technicality that only economists or accountants would bother with.

In reality, the difference can be huge, depending on the income bracket and the age of the individual.

Most of the income received by people 65 years old and up is not counted statistically as earnings. Only 24 percent of their incomes are earnings. Most of their incomes are from pensions or other sources known as "unearned income," such as returns on investments.

It should hardly be surprising that people who have been around a long time would have accumulated more money in the bank and maybe have a little nest egg in a mutual fund, each of which provides a stream of income during their retirement years, even if that income does not get counted as earnings.

Despite a drumbeat of political rhetoric depicting the elderly as being in dire economic conditions, the actual incomes of the elderly are more than four times what their earnings statistics might suggest -- or what politicians can claim, citing those statistics.

When it comes to wealth, the average net worth of people 65 years old and up is several times that of people under the age of 45. The highest average net worth in any age bracket belongs to households headed by people aged 70 to 74.

Although income is often confused with wealth, as when people currently in high income brackets are referred to as "rich," the elderly average lower income than middle-aged people, but more wealth.

Since 80 percent of the people who are 65 and up are either homeowners or home buyers, their housing costs tend to be lower. Among those 80 percent, their median monthly housing costs in 2001 averaged just $339 a month.

That includes property taxes, utilities, maintenance costs, condominium and association costs for people with such living arrangements, and mortgage payments for those who do not own their homes outright.

There are of course some elderly people who are poor, just as there are some poor people in every age bracket. But statistics cited by politicians, journalists and others who inflate the number of the poor need both scrutiny and skepticism.

The elderly are not the only people whose standard of living is grossly understated by those who cite statistics on earnings or income.

Those statistics do not include income received by low-income people as transfer payments from the government, such as welfare checks, much less various in-kind transfers, such as subsidized housing and subsidized medical care.

As of 2001, about 78 percent of the economic resources used by people in the bottom 20 percent of income recipients were in the form of either cash transfers or in-kind transfers.

To judge the standard of living of low-income people by income statistics is to leave out more than three-quarters of the economic resources used by them.

It is understandable that those who have either a political or an ideological vested interest in exaggerating the numbers of "the poor" would use statistics that greatly understate the standard of living of low-income people, as well as that of the elderly.

But that is all the more reason for the rest of us to be aware of what statistics do and do not mean -- and beware of those who want us to believe the worst, whether for their own political advantage or because that fits their ideological vision.


Thomas Sowell is a senior fellow at the Hoover Institute and author of Basic Economics: A Citizen's Guide to the Economy.
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Liberals are people that will believe anything twice.

Pure gobblygook. Never have I heard such bullshit posted on this site, and no, I'm not going to prove it, this my opinion, period. You have 3 sources for you mis-information. Dr. williams, Thomas Sowell, and Ann Cuntler. HAHAHAHOHOHOHEHEHE~LOL~.

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

Facts is facts…
I will admit that Sowell puts a little spin on the facts.....however,
all you seem capable of, med, is putting spin on spin. You have no facts! You offer no rebuttal other than opinion.
You can continue to believe in the miserable, rotten deplorable conditions that exist in America because of the bogey men---AKA neocons who are giddily planning your destruction!!!

A clear display of wishful thinking on your part..... Irrational gibberish.

__________________
If you wind up with a boring, miserable life because you listened to your mom, your dad, your teacher, your priest or some guy on TV telling you how to do your shit, then YOU DESERVE IT.
~ Frank Zappa ~

Liberty means responsibility, that is why most men dread it.
~George Bernard Shaw~

and beware of those who want us to believe the worst, whether for their own political advantage or because that fits their ideological vision.

This last sentence is speaking of you medicineman, although I'm sure you didn't read that far, or at all, before posting.

Exactly my thoughts on this post of yours, pure gibberish, buffoonery and idiocy.

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

Holy Macaroni....hahaha...med, here are some additional facts/statistics that you will amusingly totally ignore...you will once again rebut with your opinion.....

Bush Boom Continues [Larry Kudlow]

There is no recession. Despite all the doom and gloom from the economic pessimistas, the resilient U.S economy continues moving ahead—quarter after quarter, year after year—defying dire forecasts and delivering positive growth. In fact, we are about to enter the seventh consecutive year of the Bush boom.

The pessimistas are a persistent bunch. In 2006, they were certain a recession was just around the corner. They were wrong. Instead, the economy posted two consecutive quarters of near or above four-percent growth.

Earlier today, a doom and gloom economic forecast from Macro Economic Advisors was released predicting zero percent growth in the fourth quarter. This report is off by at least two percentage points. These guys are going to wind up with egg on their faces.

Here are the facts: Americans are working. The 4.7 percent unemployment number remains at an historical low. On a three-month rolling basis, the U.S. economy has added over 100,000 jobs. Meanwhile, the household job count shows that an average of 303,000 jobs have been added in the last three months. This is noteworthy because it suggests that the job market is turning around.

Hours worked are growing more than 1-percent annually, while workers' wages are running 3.8 percent, a full percentage point ahead of inflation. As for this week's productivity report, it was nothing short of spectacular: the 6.3 percent productivity gain was the best in four years. A rise in productivity is good for growth. It's good for profits. And it's good for low inflation.

Speaking of inflation, business inflation is down from 3.5 percent just over a year ago to 1.5 percent today. Meanwhile, oil prices have retreated to $88. And, to top it all off, last night we received a tremendous new number showing household net wealth has headed even higher. It stands at a record $59 trillion dollars. That's more than seven percent above a year ago.

Another factoid worth considering is that mortgage refinancings are soaring at lower rates. Since June, they are up nearly 70 percent, while mortgage rates on 15 and 30-year loans are down nearly a 100 basis points. That is a very positive, very welcome development that ought to cushion the plunge in home sales, and maybe even prices.

Down in Washington, Democrats are stuck with a Keynesian message of economic pessimism, spending increases, and tax hikes to finance their big government proposals. Unfortunately, they still refuse to acknowledge that tax rates have a profound effect on behavior. This kind of tax and spend, big government, Walter Mondale approach may come back to haunt them at the polls next year.

The GOP, on the other hand, has a positive supply-side message of limited government, lower spending, and lower tax rates. And while it's true that the recent Republican-led Congress failed to adhere to its fiscal lodestars, the statute of limitations is quickly running out on that score.

Incidentally, Democrats have not offered a single spending cut proposal during their time at the helm. Not one. That's just one reason why—not to mention what I expect to be continuing growth in 2008— I believe the economic pendulum will soon swing in favor of the GOP.

There's no recession coming. The pessimistas were wrong. It's not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that's a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It's finishing up its sixth consecutive year with more to come. Yes, it's still the greatest story never told.
The Corner on National Review Online=

__________________
If you wind up with a boring, miserable life because you listened to your mom, your dad, your teacher, your priest or some guy on TV telling you how to do your shit, then YOU DESERVE IT.
~ Frank Zappa ~

Liberty means responsibility, that is why most men dread it.
~George Bernard Shaw~

~lol~ Wavels ...

The last time I posted something by Larry Kudlow, Med wrote it off by saying that Kudlow "is a rich prick."

Vi

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Liberals are people that will believe anything twice.