SebastianJer

Big Lies in Politics

Posted by: sebastianjer, 11:43 AM GMT on July 31, 2012

Big Lies in Politics

By Thomas Sowell

The Nazi philosophy of lying to the public prevails in the current administration.

It was either Adolf Hitler or his propaganda minister, Joseph Goebbels, who said that the people will believe any lie, if it is big enough and told often enough, loud enough. Although the Nazis were defeated in World War II, this part of their philosophy survives triumphantly to this day among politicians, and nowhere more so than during election years.

Perhaps the biggest lie of this election year, and the one likely to be repeated the most often, is that the income of "the rich" is going up, while other people's incomes are going down. If you listen to Barack Obama, you are bound to hear this lie repeatedly.

But the government's own Congressional Budget Office has just published a report whose statistics flatly contradict this claim. The CBO report shows that, while the average household income fell 12 percent between 2007 and 2009, the average for the lower four-fifths fell by 5 percent or less, while the average income for households in the top fifth fell 18 percent. For households in the "top one percent" that seems to fascinate so many people, income fell by 36 percent in those same years.

Why are these data so different from other data that are widely cited, showing the top brackets improving their positions more so than anyone else?

The answer is that the data cited by the Congressional Budget Office are based on Internal Revenue Service statistics for specific individuals and specific households over time. The IRS can follow individuals and households because it can identify the same people over time from their Social Security numbers.

Most other data, including census data, are based on compiling statistics in a succession of time periods, without the ability to tell if the actual people in each income bracket are the same from one time period to the next. The turnover of people is substantial in all brackets -- and is huge in the top one percent. Most people in that bracket are there for only one year in a decade.

All sorts of statements are made in politics and in the media as if that "top one percent" is an enduring class of people, rather than an ever-changing collection of individuals who have a spike in their income in a particular year, for one reason or another. Turnover in other income brackets is also substantial.

There is nothing mysterious about this. Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience.

Politicians and media talking heads love to refer to people who are in the bottom 20 percent in income in a given year as "the poor." But, following the same individuals for 10 or 15 years usually shows the great majority of those individuals moving into higher income brackets.

The number who reach all the way to the top 20 percent greatly exceeds the number still stuck in the bottom 20 percent over the years. But such mundane facts cannot compete for attention with the moral melodramas conjured up in politics and the media when they discuss "the rich" and "the poor."

There are people who are genuinely rich and genuinely poor, in the sense of having very high or very low incomes for most, if not all, of their lives. But "the rich" and "the poor" in this sense are unlikely to add up to even ten percent of the population.

Ironically, those who make the most noise about income disparities or poverty contribute greatly to policies that promote both. The welfare state enables millions of people to meet their needs with little or no income-earning work on their part.

Most of the economic resources used by people in the bottom 20 percent come from sources other than their own incomes. There are veritable armies of middle-class people who make their livings transferring resources, in a variety of ways, from those who created those resources to those who live off them.

These transferrers are in both government and private social welfare institutions. They have every incentive to promote dependency, from which they benefit both professionally and psychically, and to imagine that they are creating social benefits.

For different reasons, both politicians and the media have incentives to spread misconceptions with statistics. So long as we keep buying it, they will keep selling it.

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1. sebastianjer 12:11 PM GMT on July 31, 2012
My Apologies: The White House is Always the Last to Know John Ransom Dear Fannie Mae, It’s not you; it’s them. The other day I wrote in a column, The Reddest of All Presidents, that a “host of economists, who always seem to be the last to know, have cut GDP growth forecasts recently, in light of rising unemployment and falling manufacturing output. The latest to see the light at the end of the tunnel in its proper context as a speeding train coming right at us is Fannie Mae’s chief economist, Doug Duncan. Fannie Mae always seems to be the last-est of the last to know.” Please accept my apologies, Mr. Duncan. I was wrong. The White House is always the last to know. But, you know how busy the White House is building an economy “built to last,” while the rest of us don’t build anything. On Friday, the White House surreptitiously revised downward their Gross Domestic Product forecast for the rest of year to 2.3 percent for the full year 2012, and 2.7 percent for the year 2013. Given the subpar GDP growth already on the books for the year -1.75 percent before they revise the estimate downward again, which of course they WILL do- that means that the White House is projecting 2nd half economic growth of over 2.8 percent; and then an economic slowdown after that. And THAT means the White House still has no clue. The White House is predicting that the economy will speed up in the fall- based on what? Occupy Walmart spending?- and then slowdown for 2013. Riiiight. The Obamaconomy has only averaged about 2.2 percent annually in three and a half years of failed policies, says Jim Pethokoukis of the American Enterprise Institute who compares Obama’s economy vs. Reagan’s. Pethokoukis also says that falling below the 2 percent GDP threshold- which I predicted back in December we would do this year- is a bad sign of things to come. “Indeed, research from the Federal Reserve finds that that since 1947,” writes Pethokoukis, “when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time. The U.S. economy remains in the Recession Red Zone.” GDP growth is not one of those things that you can’t just jawbone via a teleprompter. Nor can you just borrow money and throw currency at the problem. In all of 2010, when stimulus spending was supposed to be supercharging our economy, the Bureau of Economic Analysis' revised estimate released in July 2012 says that economy grew at a rate of 2.4 percent, far below what Obama thinks a do-nothing Congress can do in the second half of this year by getting Obama to do, um, nothing, finally. And therein is the problem for Obama. If you dig into the numbers, GDP, job growth, income and even tax revenues have been remarkably bad for an economy that is now spending a super-Keynesian 40 percent of GDP on super-charging GDP. By the end of Obama’s first term, the country will have borrowed close to $5 trillion dollars, only to see that money return about 12 cents to the economy on every dollar borrowed- even if using the White House’s most hilarious gag-book estimates. And the White House thinks that we should be borrowing more money so we can super-duper-charge the economy. You’d really have to try hard to borrow $5 trillion and get back only $580 billion. But that’s the type of math that Obama’s given us. To put it another way, a twenty-year Treasury note, now at historically low rates, has offered better rates through the month of July- mostly- than all the fake “investing” Obama has done creating an economy “built to last” that “you didn’t build.” If you take out the cost of financing all that growth, the country is in the hole. They have borrowed all that money to support a presidency that has bought us less than zero. You and I know it, because we live out here in flyover country and have to build businesses and pay for groceries and try to get raises to send our kids to college, while also supporting the 40 percent of government that drags down our GDP. But in Washington, they are always the last to know. You know? Yes, you do. Member Since: August 26, 2005 Posts: 1030 Comments: 11197

2. meteorologistkidFL 12:20 PM GMT on July 31, 2012
Obama did good for our country! Its the previous president who messed us up! And Mitt Ronemy was to make it worse, giving tax cuts to the rich and raising taxes on us! We should RE-ELECT the president. We can do more as ONE UNITED NATION! The lies other people make about Obmama like: '' He added 4 Billion in Debt EVERYDAY.'' are misleading and UNTRUE! He wants to save our country. For example, Obamacare helps people with NO Health insurance! REMEMBER There are trying to make him bad by making them look good! VOTE YES FOR OBAMA Member Since: June 23, 2012 Posts: 0 Comments: 10

3. theshepherd 12:50 PM GMT on July 31, 2012
RE: "Please accept my apologies, Mr. Duncan. I was wrong. The White House is always the last to know." AND "2. meteorologistkidFL 8:20 AM EDT on July 31, 2012 +0 Obama did good for our country! Its the previous president who messed us up!" ******************************** Maybe, "this" White House is the last to know. To wit: The White House Warned Congress About Fannie Mae Freddie Mac 17 Times In 2008, Alone September, 21, 2008 The White House attempts to set the record straight: For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems. 2001 April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.” 2002 May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02) 2003 January: Freddie Mac announces it has to restate financial results for the previous three years. February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that “although investors perceive an implicit Federal guarantee of [GSE] obligations,” “the government has provided no explicit legal backing for them.” As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. (“Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO,” OFHEO Report, 2/4/03). September: Fannie Mae discloses SEC investigation and acknowledges OFHEO’s review found earnings manipulations. September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements. October: Fannie Mae discloses $1.2 billion accounting error. November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” To reduce the potential for systemic instability, the regulator would have “broad authority to set both risk-based and minimum capital standards” and “receivership powers necessary to wind down the affairs of a troubled GSE.” (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03). 2004 February: The President’s FY05 Budget againhighlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83) February: CEA Chairman Mankiw cautions Congress to “not take [the financial market's] strength for granted.” Again, the call from the Administration was to reduce this risk by “ensuring that the housing GSEs are overseen by an effective regulator.” (N. Gregory Mankiw, Op-Ed, “Keeping Fannie And Freddie’s House In Order,” Financial Times, 2/24/04). June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying “We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.” (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04). 2005 April: Treasury Secretary John Snow repeats his call for GSE reform, saying “Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system.” (Secretary John W. Snow, “Testimony Before The U.S. House Financial Services Committee,” 4/13/05). 2007 July: Two Bear Stearns hedge funds invested in mortgage securities collapse. August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, The White House, 8/9/07). September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before. September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before. December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, The White House, 12/6/07). 2008 January: Bank of America announces it will buy Countrywide. January: Citigroup announces mortgage portfolio lost $18.1 billion in value. February: Assistant Secretary David Nason reiterates the urgency of reforms, says “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08). March: Bear Stearns announces it will sell itself to JPMorgan Chase. March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08). April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08). May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further. “Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08). “[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08). “Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08). June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08). July: Congress heeds the President’s call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing. Member Since: September 11, 2008 Posts: 9 Comments:** 8221

4. spathy 11:24 PM GMT on July 31, 2012
Shep that was very kind of you to give the illinformed a glimpse of the truth. I sure hope the kid reads it. But sadly I dont think that will happen. Perhaps the video generation will watch B Frank in full spittle denial mode. I will see if I can find one. Member Since: June 8, 2008 Posts: 65 Comments: 10490

5. spathy 11:31 PM GMT on July 31, 2012
Notice the statement at the end. Obama didnt weigh in on the bill. Member Since: June 8, 2008 Posts: 65 Comments: 10490

6. Ossqss 1:36 AM GMT on August 01, 2012
Never forget where we came from as a country. Then think of the remainder of what this perceptive person saw and thought.....and there are 10 of these, sorry :) Mr. Milton Friedman would be 100 years old today. I thank him for his vision and understanding of why we are "Free To Choose" Member Since: June 12, 2005 Posts: 6 Comments: 8154

7. Ossqss 1:44 AM GMT on August 01, 2012
As a small business owner, I am still very offended by what our POTUS actually did say! We are not China yet! Remember to VOTE! Member Since: June 12, 2005 Posts: 6 Comments: 8154

8. theshepherd 9:36 AM GMT on August 01, 2012
"7. Ossqss 9:44 PM EDT on July 31, 2012 +0 As a small business owner, I am still very offended by what our POTUS actually did say!" But..... But..... But, he says he didn't say that. "It was taken out of context." Who are you gonna believe? Your own ears or the monkey in the empty suit? Member Since: September 11, 2008 Posts: 9 Comments: 8221

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