Doc's Talk: COP: The 1% Myth and the Victimization of America

Wednesday, June 10, 2009

COP: The 1% Myth and the Victimization of America

Andrew Foy and Brenton Stransky
American Thinker
To view important charts go to:
http://www.americanthinker.com/printpage/?url=http://www.americanthinker.com/2009/06/the_1_myth_and_the_victimizati.html

A common liberal argument aimed at America's free market economy and reinforced in President Obama's budget proposal A New Era of Responsibility is that, over the last 25 years, the rich have gotten richer while the poor have gotten poorer. While this assertion should be of concern to anyone interested in domestic and economic policy, a critical examination of the data reveals the claim to be almost certainly spurious and uncovers an even more interesting question -- what is the motivation for the current administration to propagate such a claim? The following chart, produced by Thomas Piketty and Emmanuel Saez, and displayed in the President's budget proposal, demonstrates that over the last 25 years, the share of income going to the top 1% has consistently increased and therefore, one must conclude the share going to everybody else has gotten smaller.

chart 1

This would seem to provide compelling evidence for the argument that in America's free market economy "the rich get richer, while the poor get poorer." This deserves a closer look.

Alan Reynolds, a senior fellow at the Cato Institute, has demonstrated that three major factors missing from the Picketty-Saez data, when included in the calculation, significantly reduce the apparent growing trend in income inequality. Reynolds argues that changes in the tax code, the large expansion of tax sheltered investments, and the growth of transfer payments to individuals can explain the growing trend in the Picketty-Saez data over the past 25 years.

According to Reynolds, "studies based on tax return data provide highly misleading comparisons of changes to the U.S. income distribution because of dramatic changes in tax rules and tax reporting in recent decades." Since 1979, the highest marginal individual tax rate has been reduced from 70% to 35%, while over that same period the corporate tax rate for businesses making over $100,000 has been reduced only from 46% to 39%. This has led to a shift in individuals reporting income on corporate returns to reporting it on individual returns by filing as S-corporations.

Beside changes in the tax code, two major variables cancel out much of the remainder of the growth in income inequality. The first is the large expansion in tax sheltered investments like IRAs and 401(k)s. In 2007, there was an estimated 4.75 trillion dollars in these types of accounts, up from 400 billion 20 years earlier or an increase of nearly 1200%. The second variable is the growth in government transfer payments to individuals; which increased 214% during the same period (inflation adjusted). These variables are not accounted for in the Picketty-Saez data, because the majority of this money is not reported on income tax returns.

The Picketty-Saez data seems even more distorted when compared with the 2007 study published by the U.S. Department of the Treasury entitled, "Income Mobility in the U.S. from 1996 to 2005", which tracked almost 100,000 tax returns over a 10-year period. The study found that, controlling for inflation, nearly 58% of the poorest income group in 1996 had moved to a higher income group by 2005; 26% achieved middle or upper-middle income status and more than 5% made it into the highest income group. For individuals initially starting in the middle income group, 42% had moved to the upper-middle (29.6%) and highest (12.5%) income quintiles. Of those starting in the highest income quintile, over 30% had moved down by the end of the study period.

chart 2

The study concluded that economic growth resulted in rising incomes for most taxpayers over the study period with the median incomes of all taxpayers increasing by 24% after adjusting for inflation. The only groups to experience a decline in income were those initially in the top 1% and the top 5% groups. The study found that there was substantial income mobility of individuals during the study period, which was unchanged from the previous decade. A major point of the study is that income mobility in the U.S. works down as well as up, a sign that opportunity and merit drive American success.

The validity of the Picketty-Saez data and arguments aimed at growing income inequality are crucial when considering the current administration's plan to increase taxation on the highest earners to fund policy initiatives which will require a significant increase in government spending and intrusion into the private market. The plans to increase taxes only on the highest earners are especially remarkable considering the share of taxes the highest earners already pay.

chart 3According to 2008 IRS income statistics, the top 1% make 22% of income and pay 40% of total income taxes and the top 5% make 37% of income and pay 60% of total income taxes. The top 1, 5, 10, and 25% of wage earners pay a hugely disproportionate amount of taxes. This is the kind of data the current administration would like most Americans to remain ignorant of.

The bottom line, is that the policy initiatives being pursued by the current administration are expensive and will require huge expansions in government spending. To accommodate this spending the government will have to increase taxes. But consider this; could a politician advocate for a tax increase on the majority of the public and win - in any election? The answer is NO because regardless of the economic situation, the majority of individuals will always feel like they know how to spend their money better than the government does. However, could a politician advocate for a tax increase on a very small percentage of the public, argue it will be enough to finance spending that will benefit the majority, and win? The answer is clearly YES.

President Obama, using the recipe described above, repeatedly stated during his campaign that he would absolutely NOT raise taxes on anyone who makes less than the top 5% of earners -- the ones supposedly getting richer while the rest of us were getting poorer. In reality, as presented by the nonpartisan Congressional Budget Office in their analysis of the President's budget, this solution of raising taxes on only the top 5% will not provide enough revenue to support the huge expansions he is proposing.

As you can see, the Obama administration's budget (demarcated with the dotted lines) leaves revenue as a percent of GDP far too low to pay for the government services he is offering --

chart 4

and this already assumes the repeal of Bush's tax cuts for the rich. His only option then is to raise taxes on the rich to a higher level but that mechanism won't get him close to a balanced budget. Inevitably, he will need to institute a broad-based tax increase - an increase that if advocated for from the onset of his campaign, would have most likely resulted in an election defeat.

In The Constitution of Liberty, F. A. Hayek stated that, "It would probably be true...to say that the illusion that by means of progressive taxation the burden can be shifted substantially onto the shoulders of the wealthy has been the chief reason why taxation has increased as fast as it has done and that, under the influence of this illusion, the masses have come to accept a much heavier load than they would have done otherwise."

The 1% Myth was a useful tool deployed by Liberals to make the majority of the American public feel like victims so they would vote for the candidate who offered them the prospect of seizing from the rich and redistributing to average Americans what rightfully belonged to them in the first place. It was a wonderful distraction to prevent the majority of the public from realizing that they were the real target all along.

While the data show that the public should not be overly concerned regarding growth in inequality, they should be extremely concerned about politicians willing to use invalid arguments like the 1% Myth to advance an agenda of increased government spending, taxation, and regulation that will almost certainly lead to economic stagnation, and a reduction in opportunity for ALL Americans.

Andrew Foy, MD and Brenton Stransky are authors of The Young Conservative's Field Guide. They can be contacted through their website at ahardright.com.

Page Printed from: http://www.americanthinker.com/2009/06/the_1_myth_and_the_victimizati.html at June 10, 2009 - 12:50:45 AM EDT

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The IDF’s Minorities in Numbers and Pictures

In honor of IDF Diversity Week, we present diversity through numbers and pictures. Each year, more and more Muslims, Christians, Druze, Bedouin and immigrants from around the world take on the responsibility of defending Israel.

MUSLIMS:

Muslim Arab Israelis are not required to draft in the IDF, but there are many who volunteer. In 2013, there were over 200 Muslims serving in the IDF and over 300 in the reserves.

Bedouins:

Bedouins are nomadic Muslims who were in Israel when modern borders were set in place and are now considered Israeli citizens. They are not required to draft but a growing number choose to enlist. In 2012, there were over 1,400 Bedouin Muslim soldiers doing regular IDF service and almost 1,500 in the reserves.

Read more:http://www.idfblog.com/2014/02/27/truth-idf-numbers-pictures/#more-34027

Are you aware that in 2013, Middle class taxes go up-significantly?

In January of next year, the federal income tax rate for middle-class taxpayers is scheduled to rise from 25 percent to 28 percent, and the payroll tax is scheduled to rise from 13.3 percent to 15.3 percent… This drives the marginal tax rate based on the aforementioned three taxes to 48.12 percent. Add in state and local property, corporate, excise, and other state and local taxes, and the percentage of each additional dollar that is taxed hovers around 50 percent… When half of each additional dollar earned is taxed away, taxpayers experience a disincentive to start businesses or expand existing ones. This leads to fewer jobs being created.

Why is HAMAS Inside Tampa Schools?

Clare Lopez

Kelly Miliziano, who teaches history classes at Steinbrenner High School in the Tampa, Florida area apparently thinks it’s perfectly OK to invite a senior official of a HAMAS-affiliated organization into her classroom to discuss Islam with her students. According to local media reports, not only has this been going on for years, but in spite of the civil and criminal proceedings that could result from such reckless negligence, the Hillsborough County school superintendent, Mary Ellen Elia, and the chairman of the school board, Candy Olson, also expressed approval for students under their responsibility to be exposed repeatedly to guest speaker, Hassan Shibly, who is the Executive Director for the Council on American-Islamic Relations (CAIR) in the Tampa area.
More...

Did You Know... Ignoring the Call to Islam will Bring Jihad

‘Conquest through Da’wa [proselytizing] that is what we hope for. We will conquer Europe, we will conquer America! Not through sword but through Da’wa.’
-- Yousef al-Qaradawi , Muslim Brotherhood spiritual leader The Arabic word ‘Da’wa’ means the “call to Islam.” But do not think that Da’wa is the same thing as an invitation to an optional holiday event. The classical Islamic doctrine of jihad mandates that enemies must be given the opportunity to convert to Islam or pay the jizya tax before it is permissible to attack them.
Clare M. Lopez

Who is being discriminated-facts tell the truth

Religious bias

Hate crimes motivated by religious bias accounted for 1,409 offenses reported by law enforcement. A breakdown of the bias motivation of religious-bias offenses showed:

65.4 percent were anti-Jewish.
13.2 percent were anti-Islamic.
9.5 percent were anti-other religion, i.e., those not specified.
4.3 percent were anti-Catholic.
3.8 percent were anti-multiple religions, group.
3.3 percent were anti-Protestant.
0.5 percent were anti-Atheism/Agnosticism/etc.

http://www.fbi.gov/about-us/cjis/ucr/hate-crime/2010/narratives/hate-crime-2010-incidents-and-offenses.

On March 31, 1977, the Dutch newspaper Trouw published an interview

with PLO executive committee member Zahir Muhsein. Here's what he said:

"The Palestinian people does not exist. The creation of a Palestinian state is only a means for continuing our struggle against the state of Israel for our Arab unity. In reality today there is no difference between Jordanians, Palestinians, Syrians and Lebanese. Only for political and tactical reasons do we speak today about the existence of a Palestinian people, since Arab national interests demand that we posit the existence of a distinct "Palestinian people" to oppose Zionism.

For tactical reasons, Jordan, which is a sovereign state with defined borders, cannot raise claims to Haifa and Jaffa, while as a Palestinian, I can undoubtedly demand Haifa, Jaffa, Beer-Sheva and Jerusalem. However, the moment we reclaim our right to all of Palestine, we will not wait even a minute to unite Palestine and Jordan."

In March 1977, Zahir Muhsein, a PLO executive, said:

"The Palestinian people does not exist. The creation of a Palestinian state is only a means for continuing our struggle against the state of Israel for our Arab unity. In reality today there is no difference between Jordanians, Palestinians, Syrians and Lebanese. Only for political and tactical reasons do we speak today about the existence of a Palestinian people, since Arab national interests demand that we posit the existence of a distinct Palestinian people to oppose Zionism."

"For tactical reasons, Jordan, which is a sovereign state with defined borders, cannot raise claims to Haifa and Jaffa, while as a Palestinian, I can undoubtedly demand Haifa, Jaffa, Beer-Sheva and Jerusalem. However, the moment we reclaim our right to all of Palestine, we will not wait even a minute to unite Palestine and Jordan."

The Arab Apartheid

Ben-Dror Yemini
In 1948, the Arab countries refused to accept the UN partition proposal and they launched a war of annihilation against the State of Israel which had barely been established. All precedents in this matter showed that the party that starts the war - and with a declaration of annihilation, yet - pays a price for it. Between 550,000 and 710,000 Arabs fled because of the war and a larger number of 850,000 Jews were expelled or fled from Arab countries (the "Jewish nakba").
Population exchanges and expulsions were the norm at that time, occurring in dozens of other conflict points and affecting about 52 million people. In all the population exchange precedents that occurred during or at the end of an armed conflict, there was no return of refugees to the previous region, which had turned into a new national state.
Only the Arab states acted completely differently from the rest of the world. Instead of assimilating the refugees, they crushed them despite the fact that they were their coreligionists and members of the Arab nation - instituting a regime of apartheid. So the "nakba" was not caused by the actual dispossession, which had also been experienced by tens of millions of others. The "nakba" is the story of the apartheid, oppression, abuse and denial of rights suffered by the Arab refugees at the hands of the Arab countries. (Maariv)

International Law and Military Operations in Practice - Col. Richard Kemp

"Islamist fighting groups study the international laws of armed conflict carefully and they understand it well. They know that a British or Israeli commander and his men are bound by international law and the rules of engagement that flow from it. They then do their utmost to exploit what they view as one of their enemy's main weaknesses. Their very modus operandi is built on the correct assumption that Western armies will normally abide by the rules, while these insurgents employ a deliberate policy of operating consistently outside international law. "

Lost Historical Moments

What Rabin’s last Knesset speech really said:repudiation of a Palestinian state

Rabin ruled out a fully sovereign Palestinian state :

“We view the permanent solution in the framework of State of Israel which will include most of the area of the Land of Israel as it was under the rule of the British Mandate, and alongside it a Palestinian entity which will be a home to most of the Palestinian residents living in the Gaza Strip and the West Bank. We would like this to be an entity which is less than a state, and which will independently run the lives of the Palestinians under its authority.”

Rabin ruled out a total withdrawal from Judea and Samaria and thus a return to the pre-June 1967 borders :

“The borders of the State of Israel, during the permanent solution, will be beyond the lines which existed before the Six Day War. We will not return to the 4 June 1967 lines.”

Rabin ruled out withdrawing form the Jordan Valley:

“The security border of the State of Israel will be located in the Jordan Valley, in the broadest meaning of that term.”

Rabin ruled out uprooting settlement blocs, like the Gush Katif bloc in Gaza (which was subsequently uprooted by former Prime Minister Ariel Sharon):

“The establishment of blocs of settlements in Judea and Samaria, like the one in Gush Katif.

AND

Rabin ruled out removing any settlement before coming to a full peace agreement with the Palestinians:

“I want to remind you: we committed ourselves, that is, we came to an agreement, and committed ourselves before the Knesset, not to uproot a single settlement in the framework of the interim agreement, and not to hinder building for natural growth.”

Rabin insisted on Israel retaining full security control of the borders with Egypt and Jordan, contrary to Israel’s relinquishment of the Philadelphia Corridor on the border with Egypt:

“The responsibility for external security along the borders with Egypt and Jordan, as well as control over the airspace above all of the territories and Gaza Strip maritime zone, remains in our hands.”

Correcting Oslo Myths-Part 2

3) Kuttab laments that the post-1993 Oslo process resulted in a Palestinian Authority "whose ministers and legislators are not guaranteed passage between Gaza and the West Bank ...."

Before free passage or other perquisites, PA leaders were obligated, among other things, to eliminate the terrorist infrastructure in the West Bank and Gaza Strip, end anti-Israeli, antisemitic incitement in schools, mosques, and communications media, and resolve all outstanding issues through peaceful negotiations. They met none of these commitments, sometimes bolstering terrorism and greatly increasing incitement.

4) Kuttab complains that under Oslo the PA got "lightly armed police ---- but no real sovereignty over the land or contiguity between our communities in Gaza and the West Bank."

Oslo agreements repeatedly were revised, regardless of Palestinian non-compliance, until the authorized number of police grew from 8,000 to 40,000. Though they were to be the only armed forces in the territories, Israeli estimates early in the second intifada put the number of gunmen - police, "security services," terrorists, and armed gangs - at 85,000. Their armament reportedly included not only heavy machine guns and rocket-propelled grenades, but also anti-tank and anti-aircraft missiles.

Sovereignty was to be negotiated in the envisioned 1998 "final status" talks - after a five-year period of confidence-building. Palestinian leadership chronically undermined the process. Palestinian terrorism made the 1993 - 1998 Oslo period more deadly for Israelis than the 15 years preceding it.

The United States doesn't have contiguity between the lower 48 states and Alaska and Hawaii; territorial contiguity between the West Bank and Gaza Strip - that is, through the 20 miles of Israeli territory between them - was never promised and would destroy Israeli contiguity.

5) "Palestinians have been made to endure hundreds of checkpoints in the West Bank, an eight-foot wall deep in our territories, and tight Israeli control over borders."

The security barrier is not "deep in Palestinian territories," but rather encompasses less than 8 percent of Judea and Samaria, and is mostly a fence, rarely a wall; the land in question is not "our [Palestinian] territories" but disputed territory to which, according to the authors of U.N. Security Council Resolution 242, Jews as well as Arabs have claims; and there are no international borders, only the 1949 armistice lines with Jordan. Under 242, borders remain to be negotiated. As for checkpoints - like the security barrier and "tight Israeli control" - Palestinian Arabs precipitated these measures themselves. No terrorism and there would be no fence or tight Israeli control and few checkpoints - like before the first intifada.

Correcting Some Oslo Myths

1) In Oslo "Israeli, Palestinian and other world leaders promised that ... Palestinian sovereignty would be solidified."

No, they didn't. The 1993 Declaration of Principles and subsequent Oslo agreements outlined a process by which final status negotiations about the West Bank and Gaza Strip would be reached. The process required an end to anti-Israel terrorism and incitement and a commitment to peaceful negotiations. The PA, Fatah, Hamas, Islamic Jihad, the Popular Front for the Liberation of Palestine, and other terrorist groups, sabotaged the process from the start.

2) "The reality is that, in defiance of U.N. Security Council Resolution 242, which states that it is inadmissible to occupy land by force, Palestinian territories are still under foreign military occupation."
Wrong again. Resolution 242 (1967) does note "the inadmissibility of the acquisition of territory by war." It also affirms the right of every state in the area "to live in peace with secure and recognized boundaries free from threats or acts of force." There were no "Palestinian territories." Jordan occupied the West Bank, Egypt controlled Gaza. Israel did not have "secure and recognized boundaries," so retention of some of those territories was possible under 242. Israel is not a "foreign" military occupier in the West Bank but, pending final negotiations, the lawful military administrator as a result of a successful war of self-defense.

Doc's Talk