Society and Economics
CBO report

Millionaire for a day ... an argument with very little substance

COMMENTARY

Peter Burgess

Millionaire For A Day

I see from comments here and elsewhere that the usual obfuscators are rolling out the old income mobility defense: sure, a few people get a lot of the income, but it’s different people every year, so no harm. I think it’s coming from the Tax Foundation this time.

But if you actually read the CBO report, it already deals with that issue:

Household income measured over a multiyear period is more equally distributed than income measured over one year, although only modestly so. Given the fairly substantial movement of households across income groups over time, it might seem that income measured over a number of years should be significantly more equally distributed than income measured over one year. However, much of the movement of households involves changes in income that are large enough to push households into different income groups but not large enough to greatly affect the overall distribution of income. Multiyear income measures also show the same pattern of increasing inequality over time as is observed in annual measures.

Translation: sure, many people who have incomes greater than $1 million one year fall out of the category the next year — but that’s typically because their income fell from, say, 1.05 million to 0.95 million, not because they went back to being middle class. And the new millionaires are typically people who were making just shy of a million the year before, not Horatio Alger stories.

And if you’d been following this subject you would know that this fallacy has been well understood for decades.

Look, let me make a public service announcement: if you rely on bought and paid for sources on income inequality, you’re going to embarrass yourself again and again. These people never get it right, because their whole reason for being is to obfuscate. You should never, ever, trust what they say on this issue.

Peter Burgess
New York NY and Poconos PA

I understand the issue being described, and agree with the conclusions. I find it interesting that some powerful Democrats come from relatively old wealth and many on the Republican side come from relatively new wealth. If grandfather made the money that is one thing ... if I have made the money in my one generation, then don't mess with the money I've made. I cannot pretend this was a huge study, but it was enough to suggest this pattern, starting off with those on the SuperCommittee