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TrekkieLP -> RE: The greater good of the Republican agenda (5/8/2012 6:57:13 PM)
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quote:
ORIGINAL: willbeurdaddy
Read it and weep
Reagan economy performed better on every criterion except savings rates
Oh, look. An "analysis" from the always neutral Cato institute. [:)]
I notice that one of the claims it makes is "This study also exposes 12 fables of Reaganomics, such as that the rich got richer and the poor got poorer, the Reagan tax cuts caused the deficit to explode, and Bill Clinton's economic record has been better than Reagan's.".
Let's look at those "fables", shall we?
"the rich got richer and the poor got poorer,"
Here's a link to a really good place that has data about income taxes, and tax collection, and so forth. (Actually, they're simply reprinting data from the IRS. But they break things down in all kinds of ways.)
(Note about their data: The IRS data breaks things down according to tax returns, not people. So a married couple filing jointly, who, say, make $50K each, gets counted as one return, with an income of $100K. I confess that I don't know of any way to adjust for this fact.)
(And these are calender years, not fiscal years. And they're tax years. So "1980" means "the taxes you paid on April 15th, 1981, on the income you made in 1980".)
In 1980, the top 1% filed 932,000 tax returns (Table 2, top line), and the top 1%, combined, had an adjusted income (meaning, an income after some deductions have been taken out of it) of $138B (Table 3, top line).
My handy calculator tells me that the average tax return in the "top 1%", therefore, had an income of $148K.
Doing the same calculation for the entire bottom 50% of returns, says that the average return in the bottom 50% had an income of $6,138
Again, in 1980, the incomes of the average "top1%", and the average "bottom 50%" were $148K, and $6K.
In 1988 (the last year Reagan was President), those numbers were $435K, and $8,560.
In 8 years, the average income in the top 1% went up by 193%. The average in the bottom 50% went up by 39%
Now, those numbers aren't adjusted for inflation. (And the data from the Tax Foundation stresses that the definition of "adjusted Gross Income" changed in 86.) So, there's some wiggle room, here.
If inflation during Reagan's 8 years averaged 4% or less, then the income of the bottom 50% did go up, a little. (If inflation was 4.2%, then it exactly cancels out that nominal "39% increase" that the bottom 50% got.
I know that inflation was higher than 4%, when Reagan took office, but I don't know if the average for his entire Presidency was 4% or more.
(I haven't found a really good site that would give me the numbers to adjust for inflation. What I'd really like is something like "to turn a 1980 dollar into a 2000 dollar, multiply it by this". Haven't found it.)
But any way. In short, it's possible that the statement "the poor got poorer" isn't quite true. (I think you'd find that, after inflation, the income of the bottom 50% either went up by like 1% a year, or went down by roughly the same amount.) It's possible that after inflation they actually gained 1% a year or so.
However, it's a fact that the incomes of the top 1% went up more than three times faster than the incomes of the bottom 50%. That's indisputable.
Upon further review. I think I've figured out how to reverse-calculate the inflation-adjustment numbers that usgovernmentspending.com is using to adjust all numbers into 2005 dollars. If I've calculated it correctly (and I'm pretty certain that I have), and if I pretend that tax year 2008 = fiscal year 2008 (they actually differ by two months), then the numbers I come up with are:
During the 8 years of Reagan, the average income of the top 1% went from $310K to $509K (both in 2005 dollars). An increase of 64%, after inflation.
And the income of the average person in the bottom 50% went from $12,854 to 10,010 (both in 2005 dollars). A decrease of 22%.
Looks like the claim that the rich got richer, and the poor (well, actually, the bottom 50%), was not only true, but dramatically so.
(I'll also observe that Table 8, on the Tax Foundation's page, says that, while the income of the top1% was going up by 64% (after inflation. It went up by 193%, without inflation), their tax rate (what percentage of their income did they send to the IRS) went from 34% to 24%. Whereas the bottom 50%, whose income, after inflation, was going down by 22%? Their tax rate went from 6.1% to 5%.)
(The top 1% got a 64% pay raise, and their taxes went down by 10% (10% of their income, not 10% of their taxes.) The bottom 50%, got a 22% pay cut, and a 1% tax cut.)
Or, if you'd rather, here's some data that compares "the 30 years prior to Reagan's election" vs "the 30 years since Reagan's election".
(I think that the site has an agenda. And I think that the entire site, by comparing the 30 years prior vs the 30 years since, kind-of implies that the only thing that changed in those 60 years was Reagan, which I think is just a tad of a reach. Still I to think that their data might me OK, if taken with some salt.)
[image]http://www.wweek.com/portland/imgs/media.images/3909/lede_3723_(reverse).jpg[/image]
Yea, what the first column says is that in the 30 years prior to Reagan, income of the bottom 90% went up by 75% (that's 75%, after allowing for inflation), whereas in the 30 years after Reagan, their income has risen 1% more than inflation. (Not 1% per year. 1% in 30 years.)
Whereas, the top 0.01% saw a raise of 80% in the 30 years prior to Reagan, and a raise of 408% in the 30 years since.
Next "fable": the Reagan tax cuts caused the deficit to explode
Well, let's go to my favorite source for charts on all things having to do with federal revenue and spending.
(OK, the charts from usgovernmentspending.com are PNG files, and looks like collarchar doesn't allow embedding of PNG files. Guess I'll have to stick with links.)
Now, I'll point out. The data in those charts are fiscal years. So, when Reagan took office, FY81 was almost half over, already. I'm going to call FY81 a pre-Reagan year, since it was half over when he took office, and because the Ship of State doesn't turn on a dime, so he really can't control what happens for the second half of FY81, all that much.
Average deficit for the five years pre-Reagan? $137B (that's in dollars that have been inflation-adjusted to 2005 dollars. Otherwise, inflation would tend to make later deficits look bigger, even if they weren't.)
Average deficit for Reagan's 8 years" $285B. Slightly over double the deficit of the horrible Carter years.
Oh, and let me guess. The traditional myth used at this point is to try to claim that the evil Congress (which we conveniently forget, the Republicans controlled one house of) forced Reagan to spend more than he wanted.
Untrue (and already dealt with, in one of my previous posts.)
Congress actually spent less than Reagan proposed. But, to see past the smoke and mirrors, you have to understand something about the budget.
Roughly half of the federal "budget" isn't really a budget, it's a forecast.
For parts of the budget, Congress sits down and says "Next year, the FBI will spend one billion dollars". They pass it, the President signs it, it becomes law. The FBI has exactly that amount to spend, no more, no less.
(This part of the budget, in Washington-speak is called "discretionary spending". I don't like the term, but that's the term they use.)
But the other part of the budget, doesn't really get a budget. Unemployment is an example. Instead of passing a law that says "this year, we will spend exactly this amount on unemployment", Congress passes a law that says "any worker who gets fired, will receive a check for $x a month, for Y months". The law says who it applies to, and what the formula is for determining how much he gets.
But the actual amount spent is unknown. If nobody gets fired for the entire year, then the amount that gets spent is zero. If unemployment doubles, then the amount that gets spent on unemployment doubles.
(This part of the budget is called "mandatory spending". I don't like that label, either, but that's the label.)
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Now, the budgets that Congress passed were almost identical to the budgets Reagan requested. (I've seen claims that they differed by something like 4%, and that most of that 4% difference consisted of taking money from one line item and moving it to another.)
What Reagan did was, every year when he submitted his budget proposal to Congress, he made a lot of completely bogus predictions about how great next year's economy was going to be. Making predictions like predicting that unemployment was going to drop by 1/3, instantly.
Every budget he submitted, assumed that there would not be a single natural disaster, anywhere in the US, and therefore no federal disaster funds would be spent, anywhere in the nation, next year. At the height of the S&L crisis, he predicted that the FDIC would not need a single dollar to prevent a failed S&L from going under.
And then, when his predictions of a trickle-down Utopia didn't come true, he'd point at how actual spending didn't match his rose-colored forecast, and claim that it was Congress' fault this his prediction didn't come true.
Now, as to the third "fable" that this piece says they're going to prove untrue? "Bill Clinton's economic record has been better than Reagan's"
Let's see, how to measure something as vague as "economic record"?
I'd say that the first, most impartial, place to look, would be "average annual rate of growth in GDP".
Fortunately, my handy-dandy site allows me to look at GDP figures, by year. And the numbers are adjusted for inflation, so that later years don't artificially appear bigger. And they're per capita GDP. That will adjust for inflation and population growth.
(This site doesn't let you make a chart of GDP. But if you look at their raw data, shown below the chart, GDP is shown there.)
I'm going to be consistent, when dealing with fiscal years. Since a President takes over when a fiscal year is half over, I'm going to say that that "split year" is "owned" by the outgoing President. Since I don't think it's fair to judge a President by looking at a year that was half over before he even sat down behind a desk. Using that rule, it would mean that Reagan "owns" 82-90, and Clinton "owns" 94-02.
By that scale, under Reagan GDP went from 26,183 to 32,302. An increase of 23%, or 2.66%/year.
Same rules, Clinton went from 33,023 to 40,108, An increase of 21%, or 2.46% a year.
Reagan wins that one by a bit.
[image]local://upfiles/1109314/CFBFEA7811654A5286A3D92FCF9D0E6D.jpg[/image]
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