Monday, December 28, 2009

If by rich you mean the top 60% 

Dane Smith thinks the last decade, the "tax-cut decade" in his terms, was a terrible decade:
For a quick tutorial on the specifics of how bad the decade was, check these two sources: a concise and authoritative McClatchy Newspapers article by Tony Pugh, published in September, and our good friends at the Minnesota Budget Project,... The McClatchy analysis echoes the overhwelming consensus that those in the top 1 percent or the top 10 percent benefitted enormously and disproportionately from whatever economic growth occurred, and now have a greater share of wealth and income than the top tier has enjoyed since 1929, just before the Great Depression.
So is that really true? I went to the 2007 Survey of Current Finance (released early in 2009, and as a triennial survey is as close as we get to a systematic look at household finances) and pulled up a couple of datapoints on family net worth:

Median income 2007
Median wealth, 2001
Median wealth 2007

All data are in thousands of 2007 dollars (i.e., inflation-adjusted) using weighted adjustments (i.e., the internal data the Fed uses in creating reports.) Feel free to whip, chop and puree that data as you like. The point is that the middle and upper middle quintiles of the distribution saw increases in real net worth, while the lower two tiers were worse off. So it's not the top 1% or 10% but the top 60% that are doing better.

A couple other facts from that dataset:
  1. As has often been pointed out for income, the premium for a college degree has grown. But real net worth rose for those with only a high school diploma; where it fell was for the family with a head of household who had some college but not a four-year degree.
  2. Regionally, the average Midwest family saw its net worth fall from $124,400 in 2001 to $107,500 in 2007. In the South, it rose from $86,300 to $97,100. Single parents rose from $22,900 to $25,100. I think that because the Midwest has a higher share of employment in manufacturing, this is could be a source of decline.
So did the rich gain more than others and did inequality grow? Yes, perhaps, though clearly more than half of America gained wealth between 2001 and 2007. And we don't know what happens to this post-stock market collapse or real estate collapse. In the former the rich were probably harder hit; in the latter, the effect was probably more on the lowest quintile, since they hold a higher share of their wealth in real estate. (It's roughly 23-24% for all other income classes except the top 10%, for whom it is a far smaller share.) Whatever those changes are, I'd be interested to see how they are blamed on the "tax cut decade."

To the extent it's a tax cut decade, what of the extra 5% of families that no longer pay federal income tax in 2007 that did in 2001? The share of adjusted gross income paid in income taxes fell for both the poor and the rich. Again, what accounts for the differences in effect of these? I don't really know, but I don't think Dane does either.