Number of Millionaires Down 40%

See The Wild Ride of the 1%: The once-stable incomes of America's biggest earners now fluctuate dramatically from year to year. And as go the rich, so goes much of the economy by Robert Frank, WSJ, 10-22/23-11. Excerpts:

"During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country's. When the economy falls, their incomes fall two or three times as much.

The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%—far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures."

"During the 1990 and 2001 recessions, the richest 5% of Americans (measured by net worth) experienced the largest decline in their wealth, according to research from the Federal Reserve. As of 2009, the richest 20% of Americans showed the largest decline in mean wealth of any other group."

"Only 27% of America's 400 top earners have made the list more than one year since 1994, one study shows."

"It wasn't always this way. For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.

Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%."

"This marked a new personality type in the history of wealth: the High-Beta Rich.

"High beta" is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market."

"Between 1947 and 1982, the beta of the top 1% was a modest 0.72, meaning that their incomes moved relatively in line with the rest of America. Between 1982 and 2007, their beta soared more than three-fold."

"...new communication technologies that allow the best workers and products to be scaled over larger markets, thus making them more sensitive to economic changes. Others cite globalization and the rise of "winner-take-all" pay schemes."

"...a different cause: the "financialization" of wealth. Simply put, more wealth today is tied to the stock market than to broader economic growth."

"The household debt of the top 1% surged more than three-fold between 1989 and 2007, to $600 billion, and grew faster than their net worth."

"The top 5% of earners now account for 37% of consumer outlays, according to Moody's Analytics. The top 1% of earners pay 38% of federal income taxes. The richest 1% of Americans own more than half of the country's individually held stocks, according to the Federal Reserve."

"The spending of the rich is even wilder than their incomes. The spending volatility of the top 10% of earners is now more than 10 times the spending volatility of the bottom 80%, according to one study."

"Since a high percentage of spending by the rich is discretionary—jewelry and vacations rather than toothpaste and milk—it rises and falls with their confidence and the stock market. Luxury is now the most volatile segment of the consumer economy."

Energy stimulus programs are like "attaching a lawn mower to a fire hydrant"

See Waste cited in energy stimulus program, 11-2-11, by CAROLYN LOCHHEAD of the San Francisco Chronicle. Excerpts:

"The Department of Energy's Inspector General said Wednesday that the 2009 stimulus program for green energy was so at odds with the realities on the ground that it was akin to "attaching a lawn mower to a fire hydrant.""

"...weatherization programs of such shoddy quality that more than half of those audited failed inspection because of substandard workmanship."

"... problems also plagued training programs for green jobs that were allocated nearly $500 million. Of the roughly 125,000 workers targeted for training, only 40 percent received it and only 8,035 participants landed jobs."

"... there is no difference between a plumber who installs a water-saving, low-flow toilet and a plumber who installs a standard toilet, other than the government's definition of the first job as green."

"..."in reality, few actual 'shovel ready' projects existed,"..."

"...as late as last month, 45 percent of the stimulus funds had not been spent."

:...bureaucratic hurdles such as the "literally thousands" of state and local officials, contractors and others involved."

"...the Energy Department "now confronts the unpleasant task of laying off significant numbers of the contractor workforce, many of whom had just recently been hired.""

"W. David Montgomery, a former official at the Congressional Budget Office and Energy Department who taught economics at Stanford University and the California Institute of Technology, said that trying to promote clean energy as a jobs program was misguided."

"..."loan guarantees such as the kind that Solyndra received "will amount to nothing more than pushing on a string," because there will be little market demand for alternative energy."

What Tax Dollars Can’t Buy

Click here to read this NY Times article by Ross Douthat. Excerpts:

"Remember that those tax dollars, once collected, would not be disbursed with perfect effectiveness to the most deserving members of the American middle class. Instead, they would be used to buy a little more time for our failing public institutions — postponing a reckoning with unsustainable pension commitments, delaying necessary reforms in our entitlement system and propping up an educational sector whose results don’t match the costs.

More spending in these areas won’t necessarily buy us more mobility. The public-sector workplace has become a kind of artificial Eden, whose fortunate inhabitants enjoy solid pay and 1950s-style job security and retirement benefits, all of it paid for by their less-fortunate private-sector peers."

"Yet even though government spending on K-to-12 education has more than doubled since the 1970s, test scores have flatlined and the United States has fallen behind its developed-world rivals. Meanwhile, federal spending on higher education has been undercut by steadily inflating tuitions,..."

"The story of the last three decades, in other words, is not the story of a benevolent government starved of funds by selfish rich people and fanatical Republicans. It’s a story of a public sector that has consistently done less with more, and a liberalism that has often defended the interests of narrow constituencies — public-employee unions, affluent seniors, the education bureaucracy — rather than the broader middle class."

"Rather, it should be a kind of small-government egalitarianism, which would seek to reform the government before we pour more money into it, along lines that encourage upward mobility and benefit the middle class. This would mean seeking a carefully means-tested welfare state, a less special interest-friendly tax code, and a public sector that worked for taxpayers and parents rather than the other way around."

Public School Teachers Are Overpaid by 52%

Great post by Mark Perry of "Carpe Diem."

"Andrew Biggs (AEI) and Jason Richwine (Heritage) in today's WSJ:

"In short, combining salaries, fringe benefits and job security, we have calculated that public school teachers receive around 52% more in average compensation than they could earn in the private sector.

The compensation premium is especially relevant today, as states and localities struggle with budget deficits. Restraining the growth of teacher compensation—in particular, pension and retiree health benefits that outstrip what comparable private-sector workers receive—could help balance budgets and perhaps restore school resources lost to rising labor costs. Broader pay reform should give school administrators greater flexibility to reward the best or most-needed teachers with high salaries and benefits, while encouraging the least effective ones to improve or to leave the profession.

Effective reform, however, requires knowing all the facts about teacher pay. Policy makers and the public should not accept at face value that the typical teacher earns far less than he or she would in the private sector. The evidence points to a very different conclusion.""

IRS Data from 1992-2008 on the Top 400 Show Significant Turnover: 73% Remain for Only 1 Year

See Great post by Mark Perry of "Carpe Diem."

"In Table 4 of the IRS bulletin "The 400 Individual Income Tax Returns, 1992-2008," they report the "Frequency of Appearing in the Top 400 Tax Returns for Tax Years 1992-2008."

Over the 17 tax years between 1992 and 2008, there were a total of 6,800 tax returns analyzed (400 per year), and because some individuals appeared in the top 400 for more than one year, there were 3,672 unique taxpayers. Here is what the IRS found about the ever-changing group of the top 400 taxpayers:

1. Almost three out of four of those individuals (2,676 or 72.88%) were in the top 400 taxpayer group for only a single year over the 17-year period.

2. Only 439 individuals, or 11.96% of the total, remained in the top 400 for two years. Therefore, almost 85% (or 3,115 of the 3,672 total) were in the top 400 for only one or two years.

3. Only 1% of the sample group (37 out of 3,672) stayed in the top 400 for 14 years or more, and only 4 taxpayers (or about 1/10 of 1 percent or 1 in a 1,000) stayed in the group for the entire 17-year period.

MP: The IRS study of the top 400 taxpayers over a 17-year period provides additional evidence of significant income mobility over time. Individuals do not remain stuck in the same static income groups, quintiles, percentages or brackets over their careers or lifetimes, but instead move dynamically both up and down through those statistical groups from year to year."

Wal-Mart brought much-needed competition to financial services.

See Walmart Serves Underserved and Unbanked Customers with Everyday Low Banking Fees by Mark Perry of "Carpe Diem."

"YAHOO FINANCE -- "Four years ago, Wal-Mart abandoned its plans to obtain a long-sought federal bank charter amid opposition from the banking industry and lawmakers, who feared the huge retailer would drive small bankers out of business and potentially conflate its banking and retail operations. Ever since, Wal-Mart has been quietly building up à la carte financial services, becoming a force among the unbanked and “unhappily banked,” as one Wal-Mart executive put it.

Jennifer Tescher, chief executive at the Center for Financial Services Innovation, which focuses on finding financial services for those not well served by banks, said Wal-Mart brought much-needed competition — and lower fees — to financial services.

“I think it’s one of the best things that has happened in the last 10 years for underserved consumers,” she said. “There is now much more choice in the marketplace for consumers, where they can vote with their feet.”

Even before the recent outcry against banks, the services had become popular with cash-poor customers, many of whom never had a bank account and found the services more affordable than traditional check-cashing operations. Now newcomers to the ranks of the banking disaffected are helping to swell the numbers, Wal-Mart officials said."

MP: Gotta love Walmart for improving the lives of millions of low-income Americans on a daily basis."

China does not appear to be dumping solar panels

See America Waking to Light of Chinese Sun? Pot calls kettle green in solar dumping petition by Tim Cavanaugh of Reason. Excerpts:

"Trina Solar Ltd., a Chinese manufacturer, tells BusinessWeek that even the well-known largesse of China’s Marxist government is modest compared to the pork dispensed by the American republic:

Jifan Gao, chief executive officer of Changzhou-based Trina, said China Development Bank Corp. charges interest at the “market’s average level” of 6 to 7 percent. That exceeds the average rate of about 5 percent offered to Solyndra on $70 million the U.S. panel maker borrowed in 2011 before filing for bankruptcy protection in September, according to Bloomberg calculations based on filings by a U.S. Treasury bank.

Gao’s comments are the clearest defense yet by a Chinese solar executive against accusations they’ve used more than $30 billion in state subsidized loans to dump panels on overseas markets. U.S. manufacturers led by SolarWorld AG asked the Obama administration to slap duties of as much as 100 percent on more than $1 billion in Chinese imports to counter what they called illegal aid. That added to the debate in the U.S. over publicly funding solar companies that exploded with Solyndra’s collapse.

A look at the documents on ITC’s website (search for investigation number 701-481) supports Trina’s claim. Out of a total of 74 documents so far filed in the solar dumping petition, 46 of them—62 percent—are confidential. And the 28 that can be viewed contain plenty of oddities.

At one point, SolarWorld notes, for example, that the Shandong Province Energy Fund provides RMB 2.133 billion in order to “finance renewable energy developers, supporting activities ranging from manufacturing to technology developers.” That sounds like a lot, and it is a lot. It comes to $337,509,217.11—about 64 percent of what U.S. taxpayers lost on Solyndra alone. The Department of Energy’s Energy Efficiency and Renewable Energy (EERE) program lavished $2.2 billion on domestic manufacturers in 2010, and DOE’s 2012 budget request jacks that up to $3.2 billion."

"But one solar industry observer points out the paradox of heavily subsidized American companies seeking to punish Chinese manufacturers (via American consumers) for winning the same game they themselves are trying to play. John L. Whisman, CEO of VeriSol, Inc., a solar marketing, development consultant, points out that the United States is a net exporter of solar technology by a margin of about $1.9 Billion.

“This is simply a self interested play by a group attempting to protect their businesses,” Whisman said in an interview. “I think it's shortsighted because economics is a long run game. [SolarWorld and its co-complainants] know that they may achieve some favorable result based on the idea that politics is a short run game.”"