Friday, July 30, 2004

Traveling between two Americas 

The PowerLine guys made a good point the other day (they've a habit of doing this):
This "two Americas" thing puzzles me a bit. I can understand how it could be a winning approach with Democratic primary voters, who represent only a small slice of the population and are driven mostly by resentment. But it strikes me as an odd theme for a general election. While virtually everyone--maybe even Kerry and Edwards--has financial worries at some level, the number of people who perceive themselves as downtrodden, hopeless and unable to save a dime can't possibly approach a majority. An odd approach, I think.

Someone asked me at the bagel shop this morning who are these people making $200,000 who John Kerry wants to tax?  "They are certainly comfortable," he said, "but you wouldn't call them wealthy."  Rocketman concurs: "That isn't wealthy, that's hard-working."  One of the most important things to remember in any discussion like this is that the people making $200,000 this year aren't the same as the ones who did so five years ago, and probably not the same as those that do so five years from now.  I'm a professor with tenure, and my family income has fluctuated +/-25% over the last six years.  For many others, the fluctuations are much greater.

Thus the point of what Rocketman is saying: people in the lower parts of the income distribution don't seem themselves staying there, and probably they will not.  There aren't many good studies of income mobility since you need many years of longitudinal data to do them, but here's a good synopsis of the last two I know of.  And here's a graph from a 1992 Treasury study showing who moved up (rust colored bar segments), who stayed in the same (green) and who moved down (red).

People do not believe they will stay in place.  People believe they will benefit from hard work, and they are smart enough to understand that tax increases will inhibit them from meeting their goals.  When I hear Bush discuss entrepreneurship initiatives like this or this, I sense he gets that.