Wednesday, November 3, 2010

David Cay Johnston on non-Reporting of Income shifts



Scary New Wage Data

David Cay Johnston | Oct. 25, 2010 04:35 AM EDT
Now for some really scary breaking news, from the latest payroll tax data.

Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar, new data from the Social Security Administration show. Total wages, median wages, and average wages all declined, but at the very top, salaries grew more than fivefold.

Not a single news organization reported this data when it was released October 15, searches of Google and the Nexis databases show. Nor did any blog, so the citizen journalists and professional economists did no better than the newsroom pros in reporting this basic information about our economy.

The new data hold important lessons for economic growth and tax policy and take on added meaning when examined in light of tax return data back to 1950.

The story the numbers tell is one of a strengthening economic base with income growing fastest at the bottom until, in 1981, we made an abrupt change in tax and economic policy. Since then the base has fared poorly while huge economic gains piled up at the very top, along with much lower tax burdens.

Read Rest here:

Link to a Graph on median and average income, 1999-2009, in 2009 dollars

Those wishing to hide income disparity tend to use average income, whereas those to whom income distribution matters use median income.

I highly recommend his latest book  Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and StickYou with the Bill)  . The book starts with the Bandon Dunes as the poster case for what is wrong with the incentive structure, and how it snares even those with a high regard for building community and fixing incentive structures elsewhere.


Update:  Nov. 6, 2011

Checking  into this a bit further, I find this:

In the midst of electoral chaos yesterday, I did not get around to noting a striking screw-up at the Social Security Administration — you know, the folks with which we’re supposed to entrust our retirements. I’ll get to that in a minute, but first, a Bob Herbert column sent along by a friend, on rising income inequality and a new book on the subject by two political scientists:


        The SSA data Johnston (and Herbert) rely on is completely bogus — the result of a massive error. Check it:
The Social Security Administration asked its inspector general to investigate how a $32.3 billion mistake skewed its statistics on 2009 wages in the U.S.
Two people were found to have filed multiple W-2 forms that made them into multibillionaires, an agency official said yesterday. Those reports threw statistical wage tables out of whack and, in figures released Oct. 15, made it appear that top U.S. earners had seen their pay quintuple in 2009 to an average of $519 million.


UPDATE: Mr. Johnston writes me:
Your final point about me in your post is dead wrong.
The Social Security Administration discovered its mistake BECAUSE my column in Tax Notes drew attention to the figures, which I accurately reported. Gosh, but for my accurate reporting this mistake would have stayed permanently in the record and forever given us a false impression of wage income in 2009!

The whole post is worth a read;  it is here

Another book on the topic of income inequality is Paul Pierson and Jacob Hacker,

Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class  much of which can be read online.

 It is discussed by the two authors at a New American Foundation event, video archived here.

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