The Income Mobility Trail of Lies

On paper, it appears the Treasury Department has managed to analyze income mobility inside out and backwards to come to the conclusion the poor are jumping up the income quintile ladder by leaps and bounds, while the rich are losing ground.

The study concluded there is considerable income mobility of individuals and the degree of mobility is basically unchanged from prior periods.

Key findings are:

1. More than half (minimum 55 percent) moved to a different income quintile during the period of time analyzed (1996 – 2005)

2. Most taxpayers had rising incomes due to economic growth.

3. After adjusting for inflation, median incomes increased by 24% for all taxpayers.

4. Real incomes of 2/3 of all taxpayers increased during the 1996-2005 period.

5. Median incomes of those in lower income groups increased more than median incomes of those in higher income groups.

6. Less than ½ (40 percent minimum) in the top 1% in 1996 were still in the top 1% in 2005.

7. 25 percent those in the top 0.01% in 1996 remained in the top 0.01% in 2005.

Our initial reaction to this report is, if you start at the bottom there is only one direction you can go. If you are at the top, there is no more room to go. What to look for is whether or not the income distribution has changed. Is it as unequal now, or worse, than it was before?

Movin’ on Up, a Wall Street Journal editorial published November 13, 2007 babbles on about how all questions about the disparity between the rich and poor can finally be put to rest with the following statement and data:

“The study, to be released today, is a careful, detailed piece of research by professional economists that avoids political judgments.”

We have to agree the study was carefully researched. This administration has a history of tweaking and fine-tuning numbers until they squeal and this report is no exception to the rule.

So, how did they do it? How did they manage to come up with a report that contradicts what is a known fact, that the economic policies put forward by this administration have dramatically increased the wealth of the rich?