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Thursday, October 22, 2009


Today's Buggy Topic . . .

Was inspired by a linked article and commentary, plus posted comments, in a thread at Economist View  on US income inequality and mobility over the last three decades or so .

As it happens, the linked article relies on a recent Brookings Institute book that was published too late to to use the  thorough, detailed analysis of IRS data published by the US Treasury Department in November 2007.  Entitled "Income Mobility in the United States from 1995 to 2005", that Treasury study found more or less parallel trends in income mobility that it tracked between 1979 and 1988: the US remains, contrary to left-wing views, an unusually mobile society for the 117.1 million American taxpayers whose income tax-returns it followed in the ten years after 1995. 

What Else Did the Study Find?

Lots of surprises, all encouraging.  Not least, as you'll see from the two long buggy comments posted in the Economist View thread, around half of all low-income households moved up from the bottom quintile of cash-income --- including welfare cash transfers and taking into account social security payments and income taxes --- to either the second or higher quintile.   Equally desirable, those Americans who started out in the bottom quintile of income saw their median income rise more in percentage terms than those in the highest income quintile. 

Something else is relevant here.  The US Treasury report refers only to cash benefits for welfare-recipients.  It does not cover non-cash benefits like food-stamps, rent-subsidies, educational subsidies, Medicaid, and the like.  Generally, if these non-cash benefits are included, they reduce the level of poverty in the US from about 12.3% in 2007 at the start of the recession by about a third.  One recent study referred to by an economist with the Federal Reserve Bank of St. Louis found that the cash-value of these non-cash benefits might raise the median income of poor people not by just a third but by 50% or so.

Click here for the buggy posted comments.