Dead-Wrong because Robin Hood did not take from the “rich” indiscriminately. He took from the elite insider class of the government to give it back to the [...]]]> Let’s get something clear here. This Robin Hood, “Take form the Rich and Give to the Poor” babble is completely off base. It is dead wrong and insulting.

Dead-Wrong because Robin Hood did not take from the “rich” indiscriminately. He took from the elite insider class of the government to give it back to the peasants. He did not take from the store owner, the farm worker or the blacksmith. He took from those connected to the Prince because the Prince had created an unfair tax burden on the working class and was lining his and his friends pockets. This tax system created scenarios where people tried to hide their money to protect it from taxation. Obama is no Robin Hood. His eilite Harvard and Acedemic circles are not the working class.

The second and more insulting part of the metaphor is the notion that the “rich” in this country came into wealth by wringing the money from the poor working class by force. Companies that provide jobs, services and goods are the elite class separated from the people? In fact, these companies and individuals are from the people. They are construction companies, farmers, and service organizations of all shapes and sizes.

The metaphor is a joke both illustratively and literally. I do believe that it shows the underlying distaste of success now popular in today’s Liberal thinking.

The income gap

One you have likely heard and may fall into is this…The income gap between the have and have-nots is widening. I do not deny that the gap is widening in fact if [...]]]> I have mentioned a few in a previous post and I now have a few more that are bugging me.

The income gap

One you have likely heard and may fall into is this…The income gap between the have and have-nots is widening. I do not deny that the gap is widening in fact if it was not the economy would likely be in serious trouble. It is just a function of simple math. Let’s take some simple examples. One, let’s say plumber, makes $40,000 a year. The second makes a clean $1,000,000. The plumber has a great year, things go really well and he increasing his income by a whopping 50% to $60,000 the following year. Now the millions did ok, his business was not growing as fast as he would like but he did out pace inflation and increased his income by 5%. This would take him up to $1,050,000. Yep there it is, the income gap is widening. In the first year the difference in income was 960,000 (1Mil – 40k) and this year it is over 990,000 (1.05Mil-60k). Everyone is making more money and the government would get more revenue… and this is BAD.

Now let’s look at more realistic numbers. If employee making 40k got a more traditional 5% increase to 42k, the millionaire would have to make less then 1/5th of 1% to keep the gap from widening. I am not sure how you can make sense of changes in this number?

So what we come to is this, the millionaires in this country would have to stop making money just to keep it fair. Suppose one of those millionaires instead was a founder of say…Google…and clears 100Million. Well then we are all toast they will outpace 100,000s of Americans combined. So to make it fair we need to take more of their money. Right? Raise their taxes to level the playing field… hold on… taxes do not change income levels. So in fact, to stop this gap from widening we have to stop them from making the money in the first place. What options do we have to stop millionaires from making more money? The most obvious one I can think of is slowing the economy and making it harder for businesses to turn a profit. I am sure their are others but this seems to be the one currently in practice.

Median incomes

Closely tied to the last is the median income argument. The next statistics you will hear about is “median income”. This is the logical counter to the simple math used in the income gap analysis above. Again, I submit that mathematics and normal economics is the cause of such statistics.Remember that the median is not an average it is the middle salary of all employed Americans. It is used to approximate the expected income of a “normal” worker and from this aspect is a better indicator then the average.

In a given year, employees join and employees exit the work force. Other employees move up the brackets. In a growing economy it is likely that more people are entering the workforce as jobs open up then those that are leaving it. With the workforce always changing, all that is necessary to shift the median downward is to have more employees enter the work force under the median then above it.

Here is a simple example. We have a small company of 5 employees. They all make 50K a year. So the median is 50K. Let’s say that 2 of those people are principles in the company and due to company growth they report 100k each on their taxes. The average moves up but the median (middle/third employee) is still 50K. This growth allows them to hire 3 new employees at 30K each. The average moves back down and the median is still 50K (30k,30k,30k,50k,50k,50k,100k,100k). But if they were to hire 3 more employees (at anything lower then 50K) the median would now move down. What does this statistic tell us about the health of our company? It is failing right? NOT MUCH of a useful metric on its own.

So, if the economy is growing, is it more likely to be hiring high-level employees and managers or staff level employees? Most corporations have more staff level employees then management level (at least they should). When they grow, the dominant trend would be to promote from within and hire junior staff. Since the overall number of Americans employed increases the median is likely to go down. Again, and this is somehow BAD?

So What really happened these past years?
My intent is simply to have you take the numbers going up and/or down with a grain of salt and think about them. Each statistic alone can mean many things. It is only when we combine multiple indicators that we can truly see the full picture. I attempt to combine more information from the IRS statistics to clarify the economic picture around the median income levels.

In 1999, There were 94.5 million tax returns that paid taxes. There were 30.5 million returns for Americans making under $25,000 which amounts to 32.3% of the returns from that year. The median income that year was $50,641 (2007 dollars). Just bank those numbers as comparisons.

By 2003, [after the beginning of the recession and the attacks on 9/11/2001], we [logically] seem to have slid back a bit. There were 89 million returns that paid taxes but a full 3 million more returns were filed than in 1999 (more returns; less tax payers). Of those returns 23 million of those were from Americans making less than 25,000. There were 3 million more returns filed but 7 million less low income tax payers. Is this proof the shrinking economy was hurting those at the bottom the most? The median income that year was down to $48,835 (2007 dollars). Or is it proof that the Bush tax cuts of 2001 eliminated more lower income people from the tax roles completely while adding 3 million new wage earners?

Slide forward to 2006. There were now 10 million returns that paid taxes. Of those 28 million were filed by Americans making less than 25,000. We were now are up another 8 million tax filers including almost 5 million of those under 25,000. I believe that this is proof that the economy is growing and more wage earners are joining. If this is the case depending on the type of jobs being created, it is very possible that an influx of lower paying wage earners would bring the median income down. Would this be good or bad? If you know please let me know. Well… the median income for 2006 was $49,568 (2007 dollars). So it moved up.

I am unconvinced that median income means much at all by itself. But in this more complete context of more tax returns being filed and more wage earners it would seem to indicate a growing economy.

Final Conclusion

For further confusion the median income in 2007 was now $50,233. So what do we now have. We have increasing tax filings, increasing median incomes, increasing revenues. I would think that this is proof of the value of cutting taxes to avoid recession. I would also think that this exemplifies “a rising tide lifts all boats”. Simple proof of conservative principals in action for the benefit of all.

But for my liberal friends, I have a statistic to help you out…it is listed within these numbers and you might have even heard it before…”Median incomes are down during the past eight years of the Bush presidency.” Yep down from $50,641 to $50,233 over the eight year period. Of course, you have to ignore the facts of the recession of 1999-2000 and the attacks of 9/11 and the fact that the major drops all occurred before the Bush tax plan was fully in place. But hell, if you are going to use a confusing statistic in the first place, no need to burden it with the truth.

Tracking the growth [...]]]> We all hear how big the national debt is. They even have Debt Tickers that attempt to show it. The National Debt is currently at 10Trillion dollars. But what of the yearly impact on this number. From 2005-2007 the Debt rose by just under 1.1Trillion dollars. Or about 550 billion a year.

Tracking the growth of the federal budget from 2001-2007. We can see that the budgets grew from 1.9Trillion in 2001 to 2.77 Trillion in 2007. Each year it grew between 5 and 10%. During that same time Revenues were 2.1Trillion in 2001 and grew to 2.7 trillion in 2007.

Looking at the year by year numbers a single year hold in expenditures and a traditional year in GDP growth would put the budget back in balance for the short term. So in a general sense the point is valid. In fact this is exactly how we were able to turn deficits into surpluses in the Clinton years. Under the last four years of the Clinton Administration the Federal budget grew 100 billion dollars and tax receipts grew 500 billion. In some of those years the budgets did not grow at all. All it takes is someone with enough discipline to put it in place.

Since tax revenues are limited by GDP (as my previous blog explains) then the only options available are really to cut taxes, get the economy moving and limit spending. Since we are tasked with an ever increasing requirement for Entitlement Spending we will likely have to cut other items to get back in line. By “Freezing” the federal budget in total or at least in overall scope for a single year we can get ourselves back in line.

Democrats make this plan sound extreme and completely impossible. Many companies and individuals around this country have had to mange without a raise (or worse a cut in pay) at least once in their lives. Do we not think that government employees and agencies can do the same thing for a year? I think they can, in fact I think it is time we all expect from them what they have always forced upon us. I believe that until the impacts and returns of this financial crisis aer known we should hold all spending at current levels. If we could have the discipline to do this every other year and maintain a 5% growth rate we could be in a far better place in 4-8 years. But if instead we are to add another trillion in spending and raise taxes, slow the economy and lose revenues we dig even further into this hole. The impacts of that are likely to limit any possible return from the bailout and compound the problem.

The choice is so clear. If it is not made this November it will be made in the congressional elections of 2010 and again in 2012 but the climb out will take just that much longer. I would like to start now.