From: sug6@usite-next.uchicago.edu (Patrick Sugent)
Subject: Re: Defending Reaganomics?
Organization: University of Chicago
Date: Tue, 18 Aug 1992 21:50:37 GMT

In article <92231.131424DART@SLACVM.SLAC.STANFORD.EDU> DART@SLACVM.SLAC.STANFORD.EDU (415) writes:
>In article <1992Aug18.1684780F8MEDELMA@clm.cc.wayne.edu>
>MEDELMA@cms.cc.wayne.edu writes:
>In what sense are the wealthy a minority?  You can only mean in the sense
>of shear numbers.  In terms of wealth they, the upper 2 percent of our
>society, are the clear majority:  the upper 2 percent of Americans receives
>as much money in straight earnings as the lower 51 percent of the population.
>This number becomes much more skewed when you take into account money
>returned on investments.  So, since the upper 2 percent clearly make up the
>majority of this nations income it's easy to see how cutting their taxes could
>have a significant impact.

   I wish you would at least be internally
consistent.  Post your numbers.  The top 2% _do not_ have the majority
of the nations income.  At best your logic is faulty, at worst you are lying
for whatever motivates you politically.

  The top 5% (according to that Fed study) have 24% of the nation's income.
However, the family income requirement to be in the top 5% percent is
only $96,117 (in 1989 dollars).  While this may sound like a lot, it hits
a lot of working couples that certainly feel middle class.  

  Additionally, the 24% may be over-stated.  The Fed study was essentially
based on 31 families (for the top 1%) and a particular statistical 
outsider may have made it different than prior (more in depth) studies in 
which the figure was somewhat lower.   Anyway, for purposes of this argument
I'm willing to live with the figure.  If the top 5% only have
24% of the income, I see no way in which the top 2% have the majority of
the income.  In other words, you are just wrong. 

  Additionally, any top percent study which ignores income mobility should be
immediately disregarded.  Of those top 1% in 1989, only 47.3% were the 
top 1% in 1979.

  Also, the Treasury Department points out that of the bottom
20% in 1979, two-thirds were in the top 60% by 1988 and only 14% were 
still at the bottom.  As you can see, income mobility is a big factor
that was conveniently ignored when this study first took place and led
to the rhetoric you are trying to espouse.

  What really seems to happen is that new entrants come in and are in
the bottom quintile.  They work hard, increase their income and other
new entrants take their place in the bottom quintile.  If this isn't
more or less "normal" I'm not sure what you expect.  There really seems
to be little "class" in the "class war".  Of course, the large job
creation of the 80s tends to bog down "average income" data since
new entrants get paid less than older workers.

  This is an excerpt from an article I posted previously:
__________________________________________________

1)  Please keep the following in mind.

--  We had large employment growth and a large number of new entrants in the 
80s.  I think it is natural that
new entrants will not get paid as well as older, more skilled workers.
When employment growth is as high as it was in the 1980s, the new entrants
are sure to weight the average in a deceiving manner. 

  Here is one example. It should be noted that this example deliberately
holds constant the quintiles so that the results aren't lost by assuming
away income mobility.  It also alleviates new entrants from the figures.

  Please note, that I am _not_ trying to read anything into this table
about sectors of the economy other than what it addresses, so don't 
accuse me of that. :-)


From the Urban Institute, reprinted in the WSJ.

Incomes and Social Mobility

How 1977 quintiles fare in 1986
Average family incomes (in 1991 dollars)

1977           1977        1986       percent 
Quintile      income      income      gain
______________________________________________
Bottom         $15,583    $27,998     77%
Second         $31,340    $43,041     37
Third          $43,297    $51,796     20
Fourth         $57,486    $63,314     10
Top            $92,531    $97,140      5

ALL            $48,101    $56,658     18%


Note: Sample limited to adults, ages 25-54 in 1977.


  As you can see, gains in terms of percent were much greater for those
in the lower quintiles when the quintiles are held constant.  Many of the
lower quintiles became "the rich" through their increased experience and
hard work.

_________________________________

  I have deleted the rest of your post since it is really just more
of the same stuff you posted above.  Please go back and read the article
I just posted on Krugman.  If the intellectual point man on "poor got
poorer" changed his mind after reviewing all the data, I see no reason
you shouldn't.

Pat


-- 
Patrick Sugent				"Cry 'Havoc!' and let slip   
sug6@usite-next.uchicago.edu		 the Hogs of Peace."
(708) 447-1771				 --P.J. O'Rourke
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