That's what I've been saying...

Professor Mark R. Rank of Washington University, co-author of Chasing the American Dream: Understanding What Shapes Our Fortunes, notes that far from a Feudal system, the United States is characterized by a great deal of variation in income.   Certainly, there is an inherited money, aristocratic class, but inter-class movement is quite common.

- More than half of all adult Americans will be at or near the poverty line at some point over the course of their lives; 

- 73% will also find themselves in the top 20%, and 39% will make it into the top 5% for at least one year. 

- Perhaps most remarkable, 12% of Americans will be in the top 1 percent for at least one year of their working lives.

The "top 1 percent", is such an unstable group that it makes no sense to lump them in a single group, or consider their actions over long (10- or 20- year) periods, because it does not contain the same group of people from year to year.

Citing tax scholar Robert Carroll’s examination of IRS records, Professor Rank notes that the turnover among the super-rich (the top 400 taxpayers in any given year) is 98% over a decade — that is, just 2% of that elusive group remain there for ten years in a row. Among those earning more than $1 million a year, most earned that much for only one year of the nine-year period studied, and only 6% earned that much for the entire period.

The IRS showed similar findings with respect to the top 400 taxpayers between 1992 and 2009. While 73% of people who made the list did so once during this period, only 2% of them were on the list for 10 or more years. These analyses further demonstrate the sizable amount of turnover and movement within the top levels of the income distribution.

Ultimately, this information blasts the notion of a rigid class structure in the United States based upon income. Rather, it suggests that the United States is indeed a land of opportunity, that the American dream is still possible. Poverty exists, for sure, yet rather than being a place of static, income-based social tiers, America is a place where a large majority of people will experience some form of wealth or poverty — but realistically both — during their lifetimes.

X-Factor

The X-Factor Gymnastics competition was held at our local High School. Us "volunteers" got to help convert the gym into a a competition studio, that was fun (not). Although they have watermarks on them from the professional photographer, here are the best shots of Em. Although she did not place, the NSGA team took first overall.

All-District Band

Katie's performance in the All-District Band concert. The concert displays the talents of the 5th, 6th, 7th grade middle school bands, plus each of the high school bands. The performance below is two pieces by the 8th Grade Concert Band. Frankly, this is a better shot that we had live. Katie has a "habit" of placing the music stand right in front of her face. As such, we see her friends play, and are mostly blocked from viewing her. He's in the front, playing flute. You can't miss her.

Income Inequality

Wonder Land 
Obama's Favorite Gini 
The left will never support the solution to income inequality.
By Daniel Henninger, The Wall Street Journal
Feb. 12, 2014 6:53 p.m. ET 

In one of his most major "major" speeches late last year, Barack Obama said income inequality "is the defining issue of our time." Or any other time.

Those of us who are yoked forever to the policy debates recall plowing this ground in the 1980s, before much of the Obama base was born. This year's panjandrum festival at Davos called income disparity the biggest risk facing the world in 2014 (which must have let Iranian President Hasan Rouhani smile himself to sleep in his Swiss hotel).

We will arbitrarily date the start of the modern income-equality debate to 1912, when an intense Italian statistician named Corrado Gini invented the "Gini coefficient," which ever since has been the universal mathematical measure of income equality anywhere. Gini also wrote "The Scientific Basis of Fascism," but his coefficient survived among economists.

 It was Gini's coefficient that Mr. Obama invoked without citation in his speech when he said "statistics show" that income inequality in the U.S. ranks with Jamaica and Argentina. Mr. Obama then said France, statistically, has greater income mobility than the U.S. More on French equality in a moment. Politics first. Corrado Gini, the godfather of income inequality.

I'm going to guess it was this assertion—the U.S. is no better off than Jamaica—that was on the minds of Democrats when they started hearing that Mr. Obama's State of the Union speech would be an income-inequality barnburner. Press reports said Democrats facing re-election beseeched the White House to soft-pedal the "income inequality" brimstone and put in more about "opportunity." Which he did.

Amid the fog of this subject—what is fair and does it matter?— two political points deserve notice. Income inequality is a total loser as a political issue. But we should talk about it to force the left to say exactly what policies it wants legislated or imposed. By coincidence, a major experiment in the politics and policies of income inequality visited Mr. Obama this week—the French President François Hollande.

In 2012, French voters elected Mr. Hollande president to replace Nicolas Sarkozy. Mr. Hollande's campaign theme was, "The soul of France is equality." His solution to re-equalize France: Raise the top marginal rate on the wealthy to 75%, raise taxes on corporations, raise taxes on incomes above €150,000, and tax capital gains as ordinary income. This broad, rising tax trendline would be a key element of any set of progressive policies in the U.S. to address income inequality.

By last November, before Mr. Hollande's peccadillo problems, his approval rating had fallen to 15%. In a speech delivered New Year's Eve Mr. Hollande reversed course. The tax burden, he said, was "too heavy." He would cut it. He also would cut public spending because the state was "too heavy, too slow, too costly." The income-inequality left in France is screaming "betrayal." What did they want, political suicide? Probably.

In New York, Gov. Andrew Cuomo, up for re-election in November, is resisting higher taxes on the rich pushed by Mayor Bill de Blasio, the progressive poster boy whose "tale of two cities" campaign produced victory in somnambulant New York City with 17% of the electorate voting. Hillary Clinton, whose campaign operation is filling with progressive operatives, has to hope Bill de Blasio's magic moment doesn't sink into Hollande land by 2016.

What would a progressive income-inequality policy agenda look like in the U.S.? Joseph Stiglitz, the Nobel laureate economist, offered a summary in a 2011 article for that famous journal of income inequality, Vanity Fair magazine. " Franklin D. Roosevelt, a purebred patrician," Mr. Stiglitz wrote, "understood that the only way to save an essentially capitalist America was not only to spread the wealth, through taxation and social programs, but to put restraints on capitalism itself, through regulation." He added that Richard Nixon "invested" in Medicare, Head Start and Social Security.

 We think we get it: Raise taxes and reflow the money into spending by the federal government on public programs. Merits aside, one may ask: What has the federal government done in recent memory to be entrusted with any such massive, permanent transfer of wealth? Perhaps we should consult first with the high Gini-coefficient French.

Let's cut to the chase: The real issue in the American version of this subject is the low incomes of the inner-city poor. And let's put on the table one thing nearly all agree on: A successful education improves lifetime earnings. This assumes one is living in an economy with better than moribund growth, an assumption no one in the U.S. or Western Europe can make anymore.

If there is one political goal all Democratic progressives agree on it's this: They will resist, squash and kill any attempt anywhere in the U.S. to educate those low-income or no-income inner-city kids in alternatives to the public schools run by the party's industrial-age unions.

 Reforming that public-school monopoly is the litmus test of seriousness on income inequality. That monopoly is the primary cause of America's post-1970s social-policy failure. And that monopoly will emerge from the Obama presidency and de Blasio mayoralty intact. So will income inequality.

Vail

Great trip to Vail. Five Minnesotans and one from Denver. It snowed prior to our arrival, and every day we were there. As you will see, the snow was awesome. Getting home was a different story. Our crappy 2-wheel drive SUV barely made it over the Vail Pass. They closed the road behind us, and a roughly 2 hour trip took more like four. Oh well.

Final JV Competition

Jazz competition

Kick competition

Winterfest

Emily's first gymnastics competition.

I could literally watch this all day.

The Price of the "slight" Tax Increase

In typical popular rhetoric, we were told that a "slight" increase in taxes on those that "could afford it" was the right thing to do. The market continues to question why the Federal Reserve keeps pumping money into the system (QE 1, 2, 3...). The reason is they had to. The following graph show the impact on nominal GDP of the Obama tax increases. Note that the increases were only half of what he originally sought. GDP gas continued its upward trend, but only thanks to the enormous economic stimulus being provided by the Fed.

Soccer time

Katie's soccer team finished the season against Waconia. They lost two of their best players this Fall to another team, so scoring was a struggle. Here is a couple clips of her.

Dance time

Prior to heading out to competitions in the Winter, the Dance Team practices by performing at halftime of the football games. Katie is one of three eight graders on the team. Those three are unfortunately relegated to the back row. As such it's tough to find/see her sometimes.   But she's there.   See:

North Shore Demo Day

Emily's gymnastics program runs a mock competition to get the kids used to the meet format.   It is also a chance to show off for the parents who aren't normally supposed to take video during class sessions.



Although unclear whether she was invited to join, or we asked if she could join, but the instructor for one of the team programs came up to us about Emily moving on from her class programs to the girls Xcel Team starting this Summer.

Katie's 7th Grade "Graduation"

grad·u·a·tion  (grj-shn)  n.

1. a. Conferral or receipt of an academic degree or diploma marking completion of studies.

1. b. A ceremony at which degrees or diplomas are conferred; a commencement.
 

Not so sure I  buy into the use of the word, but Congrats to Katie for completing the 7th grade, and thus Grandview Middle School.   It was not long ago that I couldn't believe she was going to middle school.  Now Emily is finishing her 1st year there, and Katie is moving on to the High School.  Yikes!

Middle Singers

Friday night, both Emily and Katie participated in the Middle Singers Cabaret. Middle Singers is an after-school program at the Middle School. The kids work with the instructor to pick a song, and then create their own choreography. Each had a group performance and a solo (if they wished). A few kids in the production chose not to do a solo.

Emily was assigned a tough song to sing, but did an admirable job with it. To be honest, Katie shocked us. She was in the school play, but had few speaking/singing lines. This is from the same kid that was unable to walk down the aisle for her pre-school graduation for fear of being in front of people. Yet, watch her amazing stage presence and lovely voice. She rarely - if ever - practiced at home, so her performance was a total surprise.

Rand Rubio

Speeches from Marco Rubio and Rand Paul at CPAC 2013. A good preview of the 2015 race (not including Bobby Jindal). I have always liked Rubio. His speech is good, and he is solid. I'm not a huge fan of Rand's father, Ron Paul. As a result, I have often viewed Rand with some skepticism and distance. His speech was good, especially when talking about some of the pork. Other parts are naive and populous. Both of the Pauls' libertarian roots take a right-sided populous view without thought for unintended consequences. The speeches are worth listening to:

Winter Activities Summary Video

Yup

Bobby Jindal's Funny Speech at the Gridiron

I've always had a bit of indifference towards Bobby Jindal, but I like him that much more after reading these exerts from his Gridiron speech:


I’m honored to be here tonight, and to have this opportunity to represent my people.
As you know, my people are one of our nation’s most accomplished minority groups – doctors…lawyers…business owners…and of course, I’m referring to the Republican Party.

They say this is a place where you can come and tell jokes about the President…poke fun at yourself…set political ambition aside and just generally say anything you want.
Kind of like the Romney campaign.

I spoke to Mitt the other day…told him that I was doing the Gridiron dinner…he said that 47 percent of you can’t take a joke.

This of course is the night for the Washington press corps and the President to kick back, share a few laughs, not take things seriously and just generally enjoy each other’s company.
 Kind of like the President’s interview on 60 Minutes.

The Gridiron Dinner used to be known as the night the media and the administration set aside their differences — back in the days when they had some.

I was on the treadmill the other day and I caught something about the supreme and infallible leader ordained from on high stepping down, and I got all excited, but then I realized it was just the Pope not the President.
...
But…what a difference a day makes…now some people have asked me if I intend to run for President in 2016?

And the answer is that I have no plans to run. I’ve made that clear, over and over again…in Iowa…in New Hampshire…and in South Carolina.

...
The truth is – I am too skinny to run. At least that’s what my friend Chris Christie keeps telling me.
Chris pointed out that my biceps are half the size of Obama’s guns. Not the president’s, Michelle’s.
...
I was one of Rick Perry’s strongest supporters. I supported Rick because he’s a loyal friend, a great governor, and…oops…I forget the third reason.
...
You’ll have to excuse me for a second. I’m drying up. I need a drink of water.
I was hoping to finally meet Mayor Bloomberg here tonight………that’s a lie
I was also hoping to see Harry Reid…..that’s another lie
...
The Menendez scandal is disturbing. Soliciting prostitution is completely unacceptable. We would never put up with that in Louisiana.

Great to see the new Senator from Massachusetts – Elizabeth Warren. My staff tells me we’ve got a lot in common.

Well from one Indian politician to another, I want to wish you all the best in your new job.

I ran into Joe Biden earlier today. I don’t think he recognized me though. He asked me to go get him a Slurpee.
...
I see Eric Holder is with us tonight. I actually heard a rumor that due to sequestration, the attorney general can only afford to ship a couple hundred illegal guns across the border this year.

I saw a bumper sticker on the way over here that said, “Honk if you’ve been released by Janet Napolitano.”
I understand that to save money – the President’s Secret Service detail is being replaced by Joe Biden with a shotgun.

Mr. President, I see a lot of famous people here tonight. Some of our top journalists. I don’t see Bob Woodward, though. He sends his…regrets.
...
You know, a lot of people warned me that if I voted for Mitt Romney, a Wall Street robber baron who hid his money in secretive Grand Cayman bank accounts would end up running the U.S. Treasury.

I see Jack Lew is here tonight. Good thing that job went to you instead, Jack.
...
This may surprise you, but I’m looking forward to President Obama’s second term.
It will be refreshing to hear him stop blaming all the country’s problems on the last four years.

People say that the President and I both have trouble laughing at ourselves.
We can’t laugh at ourselves. That would be racist.

Driving Factors of Income Inequality

In January of this year, Economist Thomas Hungerford released his study, "Changes in Income Inequality Among U.S. Tax Filers Between 1991 and 2006: The Role of Wages, Capital Income, and Taxes"   Yes, quite a title.

Back in September 2012, he was the author of a study by the Congressional Research Office,  “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.” The study was used by Obama as basis for his economic tax policies, and criticized by conservatives for partisan language about tax cuts.   He also personally gave thousands of dollars to both Democrat campaigns of 2008, and 2012.   He is hardly a tax conservative.

He has a number of points in his January paper - as seen by his title.  However, I found a number of interesting conclusions in his final remarks.

He notes that gross wages as a percentage of income significantly decline from 92% in 1991 to 77% in 2006.    The largest gains that eat bigger chunks of the pie are capital gains/dividends and business income.



The gross numbers add up to more than 100%, because they are before deduction of taxation.  It should be noted that despite significant tax law changes, individual taxation was not materially different between the two years.  However, 2001, the year before the Bush Tax cuts, individual taxes were the highest of any of the four groupings.   The biggest decline over the fifteen years was payroll taxes, which is an equitable progressive savings decline across income groups.

Income inequality does widen between 1992 and 2006; however, the reasons are not based in salary.  In Hungerford's words, "Wages had no or a small disequalizing effect when other incequality [sic] measures are used. Overall, changes in labor income does not appear to be a significant source of increased income inequality between 1991 and 2006."

What about tax policy? "Federal individual and corporate income taxes had an equalizing effect on inequality regardless of the inequality measure. Federal taxes had a slightly greater equalizing effect in 2006 than in 1991—taxes appear to have been slightly more progressive in 2006 than in 1991."  That is AFTER the Bush Tax Cuts. He continues, "The top marginal tax rate in 1991 was 31% compared to 35% in 2006; the lowest tax marginal rate was 15% in 1991 and 10% in 2006."  Another benefit of the Bush Tax Cuts often overlooked.  "[T]he increased equalizing effect of the individual income tax is likely due to bracket creep—more income is taxed at the highest rates—than to tax law changes."

So why the progression of income inequality?  Investment.  

The highest earners are making more money by investing in growing businesses, or taking equity in their own businesses.  Individual investment made leaps and bound between 1991 and 2006 (and beyond).  As you can see in the chart above, income from capital gains/dividends rapidly increased over the 15 years.  Some of that is the CEO options effect.  CEOs and higher level managers received options grants that are not considered wages.   So a CEO who once made $1.2 million a year, now makes $2.0 million plus significant equity grants.   Many argue that CEOs are paid too much, and maybe they are.  However, in most cases today, they aren't making the huge sums unless they are creating value - preferably long term, although the 2008 bubble showed that too much was short-term.

It's not all CEOs and Hedge Fund Managers.  Obviously, the highest income earners have the greatest ability to make investments.  The improved investment income isn't a zero sum game.  Investment is improving our standard of living significantly.  The poorest quintile of income earners all have cars, cell phones, cable TV, DVRs, and xBoxes.  That's from innovation, which is a direct result of investment.   The top earners are benefiting from investment gains, but society is benefiting from job creation and improved standards.

On a side note, the study was done in 2006.  Part of capital gains is real estate.  2006 was close to the height of the real estate bubble.  Therefore, the increased effect of capital gains may be substantially overstated.  Every house flipped was a capital gain, and those in the highest income brackets tend to have the most expensive homes.

Second note, one flaw with income inequality arguments is that the participants don't remain the same.  The U.S. has one of the greatest income bracket mobilities of any country on earth.  The average taxpayer in today's top 1% isn't likely to be in that group again.  Similarly, many in the bottom quintile and not likely to be in that quintile when surveyed again. 

Income mobility makes the numbers very difficult to draw conclusions from.   Yes, the rich are getting richer, but 1. it's not the same people, and 2. it's a result of how their money is invested.

Classic Schadenfreude

Reposting from Ace of Spades: