NetNews Usenet Archive 1992 #16/NN_1992_16.iso/spool/misc/activism/progress/5253

Text File | 1992-07-21 | 6.0 KB | 119 lines

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From: Rick Francis <[e-mail]>
Subject:      Rich Get Richer? Bush Adm. vs. Truth
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Date: Tue, 21 Jul 1992 18:37:40 GMT
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The following piece, in addition to demonstrating how statistics can be
used and abused, suggest the current administration is using all sorts
of taxpayer-funded propaganda from the most unlikely sources.  Read
past the first few paragraphs to see how the Treasury calculated a
statistic likely to be repeated by the Bush folks in the campaign.  An
excerpt:

'Another statistic -- the Treasury's own -- is not mentioned in the
Treasury's primer:  In a comparison of the incomes of the top 1 percent
of taxpayers in 1979 with those of the top group in 1988, the very rich
accounted for nearly half of all taxpayers' gain in income.'
___________________________________________
From _The New York Times_, July 20, 1992.  Page C1

THE RICH GET RICHER, BUT THE QUESTION IS BY HOW MUCH

by Sylvia Nasar

Washington, July 18

Trying to challenge the widepread impression that the rich got a wildly
disproportionate share of the gains from the Reagan economic boom,
the Treasury has been quietly circulating a "primer" on income
distribution to journalists and economists.
        The 24-page document, prepared by R. Glenn Hubbard, Deputy
Assistant Secretary for Tax Analysis, asserts that the richest 1 percent
of American taxpayers reaped only 11.3 percent of the income gains in
the 1980's.  The Treasury tracked the same individuals -- those who
had extremely high incomes in 1979 -- from 1979 to 1988.
        The Treasury concludes that the top 1 percent of taxpayers "fared
somewhat better on average over the 10-year period than many other
taxpayers covered by the Treasury panel, but not very much better
(and certainly did not capture a major share of the income gain)."

NOT 'MEANINGFUL'

But experts in the field who reviewed the Treasury's calculation were
highly critical, saying that the Treasury economist had fallen into a
well-known statistical trap that all but guaranteed that the gains for
the top group of income earners would appear modest.
        "It's not a meaningful calculation," said Lawrence F. Katz, an
economist at Harvard University.
        The Treasury's calculation contrasts sharply with one by an
economist at the Massachusetts Institute of Technology, Paul R.
Krugman, that the richest 1 percent of American families reaped 70
percent of the growth in average family incomes from 1977 to 1988.
Professor Krugman's data are now enshrined in Gov. Bill Clinton's
economic program as Democratic Presidential candidate and dismissed
by the Treasury as a "meaningless statistical artifact."
        There are many meaningful ways to look at the fortunes of
various income groups.
         But economists said that by arbitrarily defining the top 1 percent
as those who were in the group in 1979 as the Treasury did -- as
opposed, for example, to those who were in the top 1 percent in the
midpoint of the 10-year period or those who fell into the top 1 percent
based on their average income in the decade -- automatically
introduces a downward bias in the results.
        "It makes a big difference how you define the rich, whether you
define them at the beginning or end of the period," said Isabel V.
Sawhill, an economist at the Urban Institute, a research organization.
        To demonstrate this potential bias, Ms. Sawhill calculated how the
income of the top 20 percent of income earners changed between 1976
and 1986.
        "If you define the top quintile as people who had high incomes in
1977 and follow them for the next decade, you find their incomes
declined by 11 percent," she said.
        "But if you define them as people who had high incomes in 1986,
and compare them to where they were in 1977, you find their incomes
went up by 65 percent."
        Researchers can produce skewed results in one direction or
another based on whether the group being studied is culled from the
year that starts a period or from the year that ends it.  Those at the top
in one year have only one place to go in subsequent years if they move
out of the group:  down.  Some retire, some get fired, and others, who
may have just had an unusually prosperous year, go on to have more
normal earnings.  The average gain for this group is dragged down by
those whose incomes move down.
        Those who were in the top 1 percent at the end of the period
under study could have moved up from only one place in the years
past:  from somewhere below.  So the average gain for this group is
inflated by people who joined the group by dint of big income gains.
        "I would ask Treasury to redo their calculation on the top 1
percent defined by 1988 income," said Joel B. Slemrod, an economist at
the University of Michigan.  "I'm pretty sure the numbers would
change quite a bit."
        A reporter had, in fact, asked Mr. Hubbard several times to make
such a calculation, but he refused on the ground that the results would
be uninteresting.

'UNEVENLY DISTRIBUTED'

        Another statistic -- the Treasury's own -- is not mentioned in the
Treasury's primer:  In a comparison of the incomes of the top 1 percent
of taxpayers in 1979 with those of the top group in 1988, the very rich
accounted for nearly half of all taxpayers' gain in income.
        "The gains of the 1980's were incredibly unevenly distributed,"
said Mark Condon, a researcher at the Urban Institute who was co-
author with Ms. Sawhill of a recent study of income mobility.
        "That's what the Treasury is trying to refute," Mr. Condon added,
"and that's what the Krugman calculation gets across pretty well."

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