The Devil in the Details

I’ve told you the story of the mathematician, the lawyer, and the accountant before so you know how aware I am that given the impulse you can jigger the numbers to achieve any result you want. That’s the basic point of Alan Reynolds’s Wall Street Journal op-ed and it’s a reasonable one. However, in getting there he instantiates the very thing he’s complaining about.

I agree with him that the White House’s insistence that the average of the incomes of the lower 90% of income earners is a fair proxy for median income is a maddening one. It might be simpler just to say that normal distribution of income stops with the top 10% of income earners. I also think his determination that, if you use the same methodology as the White House does to find that median income is about the same now as it was 35 years ago, it was also the same 47 years ago is an interesting one. It certainly supports the point I’ve made here that our problems are not a result of differences of opinion between Republicans and Democrats so much as a remarkable agreement between Republicans and Democrats, both of which have followed the same lousy policies for the last half century.

However, I find the errors and elisions in his op-ed just as maddening. For example, he writes:

Are all those shopping malls, big box stores, car dealers and restaurants catering to only the top 10%? The question answers itself.

I have two problems with the remark. First, he’s ignoring the tremendous changes in real consumer prices over the last half century. Your phone bill is a fraction of what it would have been then and that’s changed your behavior. Your doctor’s bill is a lot higher.

Second, there are a lot fewer car dealers than there were a half century ago. For reasons not entirely clear to me the auto manufacturers have decided they’re better off with fewer customers rather than more (you aren’t the customer for auto manufacturers—auto dealers are). That means there are just about half as many much wealthier auto dealers serving twice as many customers as there were in 1970, a common pattern throughout the economy.

Here’s the story I would tell about the changes in the economy over the last half century. We’re importing a lot more of what we consume than we did 50 years ago. That plus government subsidies paid to people in the top 10% of income earners have resulted in a lot more money relative to the rest of us for the top income earners. We’ve also imported a lot of low skill and unskilled workers which has pushed the wages of the lowest and, increasingly, middle income workers down relative to what they might have been otherwise.

That has been offset to some degree by a drop in the prices of consumer goods, especially electronics. Your television today is bigger, better, and a lot cheaper than your television would have been in 1970.

Finally, a lot of income has been taken in the form of non-wage compensation and most of that has been in the form of healthcare insurance.

That’s the story of the last fifty years as I see it. I think it sticks to the observed facts better than either the White House’s version or Mr. Reynolds’s.

15 comments… add one
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    It certainly supports the point I’ve made here that our problems are not a result of differences of opinion between Republicans and Democrats so much as a remarkable agreement between Republicans and Democrats, both of which have followed the same lousy policies for the last half century.

    And yet you (and most of the other people that AGREE with this position) will go out and vote for them again. I can’t complain too much, though, as up until last fall I did the same damned dumb thing for the same damned dumb reasons.

    A worse problem is that if you try to go with the smaller parties you’re mostly going to get the same damned results. Consider immigration: the Greens and Libertarians both agree with the Dems and Republican leadership that the borders should be dissolved and citizenship made meaningless. So you end up voting for what, the Natural Law Party? (I haven’t checked their position, BTW. Who cares?) And on the left there is no alternative – they all agree that every poor person in the world should be imported to the US and given at least $35,000 seed money.

    Given that this runs counter to the positions of a super-majority of voters, one can only conclude that their isn’t a free market in politics either.

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    You know, this post makes a good summary of you blog’s POV.

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