Monday, January 13, 2014

The Crazy (and misleading math) that Pathological Altruists Use

Ed Yardeni explains:
(1) Income before entitlements. The Paradox of Progressivism is that all of the government’s spending on redistributing income and fighting poverty doesn’t seem to be working, requiring even more spending to win the war on poverty and income inequality. That’s because progressives tend to measure progress by focusing on measures of income that exclude the government’s spending to boost the standard of living of people with low incomes!

So they invariably focus on inflation-adjusted mean and median household and family incomes. These measures have stagnated for the past 15 years, but they don’t include entitlement payments and benefits. According to the official source of the data “money income does not reflect the fact that some families receive noncash benefits” such as food stamps, health benefits, and subsidized housing.

(2) Income after entitlements. The monthly measure of personal income includes “government social benefits to persons,” which totaled a record $2.4 trillion during November, doubling since the end of 2001.They account for 17.0% of personal income and 16.5% of total National Income, which includes compensation of employees, corporate profits, rents, interest, and dividends.

So while wages and salaries are down to a record low of 49.0% of National Income--with total compensation to employees (including supplements) back down near its record low at 60.8%--total personal income continues to fluctuate around 100% of National Income, as it has been doing since the early 1980s thanks to entitlements.

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