Income inequality is another falsehood currently being pushed by politicians, and will be a household term for everyone by election day 2020. Therefore, in our JAM VIEWS mission, let's understand the truth of income distribution today in the United States.
As you are tired of hearing me chant, we must deal with the facts. We must understand that all news is tainted, if not clearly false, and the great majority of "experts" truly are not, as this blog continually uncovers. Once you understand the math, then you are permitted to scream for more redistribution, or to scream to take back more of your own money. That is the great freedom of being an American. All JAM VIEWS continually asks of us is to, first, understand the facts so that we may form an educated opinion for ourselves - not from someone else's sound bite.
And another reminder, it is much more fun to hang around people with views much different than our own. Vanilla is boring, and lack of growth is boring. Seek out diversity in your friendships and associates. Otherwise, you become that guy at the water cooler whom everyone already knows their opinion on everything. Don't be predictable!
Former Senator Phil Gramm and former Assistant Commissioner of the Bureau of Labor Statistics, John Early, have released another report detailing the true economic distributions in the U.S., as of the end of 2017. This week I thought I would attempt to summarize the current state of affairs from their report in order that you may be armed with some simple facts when Uncle Charlie and Aunt Vivian fly in from California for Thanksgiving dinner.
The first roadblock for Americans attempting to understand income inequality is that the Administrative State's Census Bureau chooses to produce irrelevant household income numbers. The Census Bureau claims that the top quintile (20% of earning households) has 17 times as much income as the bottom quintile, but they do not distribute the net number that you as a U.S. citizen are left with to spend however you see fit. The Census Bureau does not calculate in the taxes you have to pay before you get your money, and it does not calculate in the redistribution public transfer payments to American households.
For example, in the top 20% the numbers do not factor in that one-third of the income is first taken by the government in federal, state and local taxes, as this top 20% pays nearly 70% of all taxes for our country. Wow, thank you for your service! Also, the Census Bureau, inexplicably, fails to count the $1.9 trillion a year taken from higher quintiles and given to lower quintiles. Again, thank you for your service!
So you know, there are 95 federal programs, such as Medicaid and food stamps, along with dozens of state and local programs with which the Administrative State takes and gives. 40% of federal spending is allocated to these transfers, and this income provides nearly 90% of the bottom 20%'s resources, as well as more than 50% of the next 20%'s resources. Still with me?
At the beginning, there is actually a 60-1 disparity as the top 20% earns an average of $295,000, while the bottom 20% earns $4,900. Then the bottom 20% receives $48,000 in transfer payments and pays out almost $3,000 in mostly sales taxes, ending with approximately $50,000 in net resources. At the same time, the top 20% pays out an average of $109,000 in taxes leaving approximately $190,000 in net resources to spend as they see fit: A true Income Inequality Ratio of 3.8 to 1.
Interestingly, the average middle-income household receives nearly $18,000 in government transfers and pays the same $18,000 in taxes. Also, the lower second 20% earns 500% more income than the lowest 20%, but nets only 9% more to spend as they see fit. Not good.
The concerning issue, if you recall our Behavioral Economics posts, is that Americans operate in a mostly logical fashion when it comes to work and earnings. For instance, the anti-poverty spending of the last 50 years has raised most households into the middle class, yet has tempted many to stop working. In 1967, 70% of prime working-age adults in the bottom 20% were employed, and now only 36% keep a job. They are not being irrational, but logical. I am even curious as to why the next 20%, and even the next 20%, still work. It really doesn't make much sense.
Last week, I wrapped up a six-week course teaching inmates job hunting skills and interview techniques. As I sat down with each individual to complete their resume, a consistent answer was, "This doesn't matter. I'm just going to get a check." I told them that I couldn't really argue with them. "That sounds logical."
Maybe you think 3.8 to 1 is too much income inequality in our country, or maybe you believe this is too much income equality which is killing economic incentive and mobility, but at least now you have the truth. Vote as you see fit. Have a great week!
"Choose a job that you love, and you will never have to work a day in your life." - Confucius
** Thank you to WSJ, Forbes and Fortune for the above statistics, and most especially Senator Gramm and Mr. Early for their work.
** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.
** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com
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