Alan Reynolds Suggests That Middle Class Incomes Have Not Been Stagnating

See The Mumbo-Jumbo of ‘Middle-Class Economics’: The statistics used to claim that average incomes have stagnated since 1980 also show stagnation since 1968.

"NPR displayed the same bottom 90% data and stretched it even further, claiming that “after 1980, only the top 1% saw their incomes rise.”"

"Amazingly, these same statistics also show there has been no increase for the “bottom” 90% since 1968."

"This is totally inconsistent with the data the Bureau of Economic Analysis uses to calculate GDP. For example, real personal consumption per person has tripled since 1968 and doubled since 1980, according to the BEA."

"Measured in 2013 dollars, after-tax median income rose briskly from $46,998 in 1983 to $70,393 in 2008 but remained below that 2008 peak in 2011. The sizable increase before 2008 is partly because the average of all federal taxes paid by the middle fifth has almost been cut in half since 1981—from 19.2% that year to 17.7% in 1989, 16.5% in 2000, 13.6% in 2003 and 11.2% in 2011.

Census Bureau estimates of median “money income,” on the other hand, do not account for taxes, so they miss a major source of improved living standards. They also exclude realized capital gains, public and private health insurance, food stamps and other in-kind benefits. Even so, the Census Bureau’s flawed estimate of median income rose 13.7% from 1984 to 2007 before falling 8% from 2007 to 2013."

"The Piketty and Saez data are crucially flawed. The total income reported on individual tax returns, which is the basis of their estimates, is substantially less than any official measure of total income, and the difference keeps getting wider. In their original 2003 study, Messrs. Piketty and Saez mentioned one rapidly expanding source of missing income—disappearing dividends in tax-return data."

"The same is true of interest and capital gains accumulating inside such tax-free savings accounts. These have grown to nearly $20 trillion"

"Messrs. Piketty and Saez shrink the total income numbers further by subtracting all transfer payments"

"The Piketty-Saez measure [of total income] excluded 24% of NIPA [National Income and Product Accounts] ‘personal income’ in 1970, but it excluded 37% of ‘personal income’ in 2008.” It excluded 40% of personal income by 2011."

"Piketty and Saez estimate that in 2013 the “other 90 percent”—meaning all incomes smaller than $114,290—had an average income of only $32,341. That number is not remotely credible."

"According to the CBO, that $32,341 would have been below the $34,000 needed to escape from the poorest fifth of two-person households in 2011, when half of all households earned more than $75,200 before taxes."

"average income for the middle fifth was $72,641 in 2013, and half of us earned more than $51,939."

"the Piketty-Saez average of all incomes below the top 10% is far lower than any official estimate of incomes among the middle fifth of the income distribution."