If social security has done anything for older Americans, it has made them exceedingly wealthy. Of course, not all older Americans are wealthy, and of course, there are the young wealthy. But on the whole, the last 30-40 years has seen the greatest transfer of wealth, but it's not necessarily from poor to rich, as liberals love to claim, but young to old. This transgenerational transfer has major political ramifications as we try to reform social security while others entrench themselves, steeling for a fight to the death.

What has happened? Who are the rich and who are the wealthy?

First, let's separate the rich from the wealthy. Statistics are often misused purposefully to confuse and obfiscate. For example, one of the oft cited claims is about unequal income distribution.

Looking at the chart, we see, as of 2001, some trends. We see that since 1967, the share of aggregate income of the top one-fifth has risen from 43.8% to 50.1%, while at the same time, the income of the top 5% has gone from 17.5% to 22.4%. Are the rich getting richer? In a manner of speaking, yes. At the same time, the aggregate shares for the lowest fifth, second fifth, and third fifth have fallen from 4.2%, 11.1%, and 17.5% to 3.5%, 8.7% and 14.6% respectively.

What exactly does it mean to be rich versus being wealthy? As the two are used interchangeably, and incorrectly, a fair examination is in order. John C. Weicher writes in The Rich and the Poor: Demographics of the US Wealth Distribution:

Wealth is measured as the value of assets minus the value of liabilities, both defined broadly. In my experience, financial assets, particularly stocks, come first to mind when “wealth” is mentioned, among both economists and laymen, but wealth also includes the value of unincorporated business and investment real estate (rental housing and commercial buildings), and the value of owneroccupied homes, and automobiles.

The Federal Reserve Board of Mineapolis Quarterly Review, Summer 2002 Vol.26 No. 3:Updated Facts on the U.S. Distributions of Earnings, Income, and Wealth:

The Poor and the Rich
Earnings, income, and wealth inequality is essentially about the differences between the poor and the rich. However, the meanings of these two words are somewhat ambiguous. When we talk about the rich, it is not clear whether we are referring to the earnings-rich, the income-rich, or the wealth-rich, and the same ambiguity applies to the earnings-poor, the income-poor, and the wealth-poor.

Clearly, there is a significant difference between the wealthy and the rich as well as the rich and the poor. A classic example is the farmer, who owns a large amount of land, i.e. wealth, but might be in a negative cash flow situation. The "poor" farmer would be what the authors would call the Earnings-Poor or Income-Poor and is in sharp contrast with the "poor" urban single mother who rents.

Weicher identifies the "rich":

They are basically similar at each date. Most heads of households in this group are middle-aged or elderly. Married couples predominate; fewer than 5 percent were never married. The age distribution is reflected in the fact that a large majority have had children, but a minority now have children living at home. Married couples in which the head is under age 45 typically have children living at home; those in which the head is 55 or older typically do not; in the 45-54 age group, about one-half have children at home and one-half do not. Most rich households are headed by college graduates.

and the "poor":

In many respects besides wealth, the poor are almost the opposite of the rich. They are much younger, and they have had much less education; 35 to 40 percent have not finished high school. Compared to the total population as shown in Table 2, these poor households are substantially younger. Fewer are married, but more have children. The incidence of single women with children among the poor households is more than double the incidence of such households in the general population. The incidence of minorities is also disproportionately large. These patterns appear to be generally stable over time; perhaps the most notable and surprising change was a modest increase in the proportion of poor household heads who were white during the 1989-92 recessionary period, and a corresponding decline in the proportion who were black.

Thus, the rich and poor are diametric opposites in every way. As concerns this argument, the most notable is age. Weicher notes that for the poor, "The median age of these households rose slightly over time, but only by a few months for each passing year—a finding which suggests that the same households are probably not poor from one survey to the next." In other words, the less well off are younger, and more importantly, poverty is a temporary situation. Period. Why?

As Weicher later explains:

As is true for the richest households, age is highly correlated with wealth. Households typically build wealth from a very low starting point during the years when their adult members are working and then draw it down in retirement.

and:

Wealth clearly increases as people age, until they start to reach the retirement years. Households with heads aged about 58 to 63 in 1983 experienced a decline in wealth during the next six years, and households with heads aged about 53 to 58 in 1983 experienced a decline during the next nine years. These patterns are surely related to retirement. Households with heads in their 70s in 1983 also drew down their wealth over time.

Shocking. People start off at the lower end of the spectrum, then work their way up to higher levels of wealth. Then, after they retire from work, they draw down the accumulated wealth in their "golden years". What's next, the sun rises in the east?

Most significant are Weicher's conclusion:

Concern over the concentration of wealth should be tempered by the apparent fact that “the rich” are a changing group, even over rather short periods, and by the fact that they are not coupon clippers, but entrepreneurs. Economists, journalists, and even business men and women seem to think first of stocks when discussing wealth, in my experience, but publicly traded stock is a minor share of wealth for rich people as a whole.

Now, contrast this with the "findings" of Income Distribution of Older Americans (.pdf).

Although many older Americans are financially comfortable, with a significant group being well off, the largest share of elderly (defined as persons aged 65 or older) households has low incomes. Income inequality among older households persists despite more than 30 years of growth of income transfer programs designed to reduce poverty and improve the economic status of elderly persons. This gap highlights the importance of analyzing the income distribution of the elderly to determine the nature and extent of any inequalities that appear in it. Although government transfer programs have substantially enhanced the well-being of many of the elderly, numerous older persons continue to suffer low incomes.

This is a specious argument on so many levels. Looking at the exact same data, Income Distribution by age, we find that in 2001, the median (middle) income for ages 15-24 was $28, 196 and the mean (average) income was $36,148. For ages 25-24, it increases to $45,080 and $55,414; ages 35-44, $53,320 and $69,088; at 45-54, $58,045 and $74,722; ages 55-64 $45,864 and $63,523; ages 65 and older, $23,118 and $35, 298. All this proves is that older Americans earn less "income" than younger Americans. But this addresses the entirely wrong issue as income is what you earn when you work. When you retire, naturally your income will decline. But this has absolutely nothing to do with wealth or standard of living.

A more appropriate measure would be to look at the Minneapolis' Fed Summer 2002 article, specifically Table 8, "Other Dimensions of US Inequality" for the average level of earnings, income, and wealth for different age groups. (all 1998 dollars)

At 25 and under, the earnings, income, and wealth breaks down to $18,336, $19.931, and $17,953. At the 36-40 bracket, it rises to $52,916, $56,443, $162,264 then shoots up to $64,759, $77,361, $470,694 for age bracket 51-55. Income peaks but wealth continues to rise until it peaks at $609,059 between 61-65. Then, over 65 earnings drop dramatically to $8,383 as wealth drops to $381,643. Nothing here should come as a surprise as we accumulate wealth throughout life, and given compounding interest, at retirement our wealth should be several times than that of our youth.

Now, a much more striking situation appears when we look at the percentages of source of income. In every single age bracket, the percentage of income declines with age, while the percentage from capital (i.e. wealth) increases with age. In the last bracket, 61-65, half of all income is from labor with just 18.2% from capital. However, after age 65, income from labor plummets to under 18% while income from capital almost doubles to 30.5%.

Even more significant than that is the transfers column, i.e. payments from annuities, that skyrockets from a mere 14% in bracket 61-65 to 43% in the 65 and over category. Simply put, this means that once we stop working, our assets, i.e. our wealth, savings, stocks, bonds, 401k's, etc., provides for us. The drop in wealth simply reflects a drawing down of this wealth. There is absolutely no "income inequality" to speak of.

Social security supporters have claimed that it is the most successful government program ever. Perhaps. It depends on how one measures success. If it means consolidation of wealth from the young to the old, then it most certainly has been, as it has played a part. Does this mean that the social security system is solely responsible? No. But, is has factored significantly in this.

Payroll taxes used to finance the social security system deplete the pool of funds from the young that the could be used to invest OR buy a house, the source of wealth accumulation for millions of Americans. Income taxes are heavily graduated, where the higher income earners pay the vast majority of taxes. According to the Congressional Budget Office, Effective tax rates, in 2001 the share of Income tax liabilities breaks down like this (table 2):
Fourth Quintile 14.3%
Highest Quintile 82.5%

In other words, the top 40% of all income earners pay almost 97% of all income taxes. Projected out until 2014, the situation hardly changes, where they'll pay 91%. What impact does this have? As you progress up the economic ladder, and therefore gain ability to create wealth, you are burdened with both social security AND income taxes at a confiscatory level. Thus, wealth creation is exceedingly difficult and out of reach of majority of income earners.

Thus, extenuating factors such as age, marital status, education level, and other lifestyle decisions have an even greater impact on wealth creation than they otherwise would. For public policy makers the answer should be clear. We need policies that promote wealth creation now, not promises of transfer payments later. Social security reform is going to be a difficult and politically explosive issue the next few years. Without a doubt, there are a great many entrenched interests for whom reform is a mortal threat.

Even groups like the AARP have come to acknowledge what should now be obvious: "The most recent Federal Reserve wealth survey confirms the large increase in family net worth that has occurred in the past three years, and shows that the biggest winners have been families headed by persons over age 65." (emphasis mine) Though in many aspects they might not be "rich", they are without a doubt, "wealthy".

For decades now wealth has been transfered from young to old, while social security and the promises of thereof, have been used to facilitate this. We will hear in the coming months how vital to the elderly social security is because of "income inequalities" between the young and old. Don't buy it for a moment. Sure, there are elderly for whom social security is necessary. And for them, nobody would ever contemplate eliminating their checks. In fact, that would make it more in line with FDR's original goal of a supplemental source of income. But the real issue is the accumulation of wealth in the older population and the need for younger people to create wealth as well. And that should be the focus of reform.

I like Tom Friedman. I really do. I don't know him personally, I'm sure he's a nice guy. I like that he really believes Iraq is vital to our security, the war on terror, and peace. I like that a democrat can be honest and put national security above politcis. Well, almost.

In Calling all Democrats, he tries to waken his party up to the promises of a free, democratic Iraq.

What Iraq is now embarking on is the first attempt - ever - by the citizens of a multiethnic, multireligious Arab state to draw up their own social contract, their own constitution, for how they should share power and resources, protect minority rights and balance mosque and state. I have no idea whether they will succeed. Much will depend on whether the Shiites want to be a wise and inclusive majority and whether the Sunnis want to be a smart and collaborative minority.

There will be a lot of trial and error in the months ahead. But this is a hugely important horizontal dialogue because if Iraqis can't forge a social contract, it would suggest that no other Arab country can - since virtually all of them are similar mixtures of tribes, ethnicities and religions. That would mean that they can be ruled only by iron-fisted kings or dictators, with all the negatives that flow from that.

But - but - if Iraqis succeed in forging a social contract in the hardest place of all, it means that democracy is actually possible anywhere in the Arab world.

Democrats do not favor using military force against Iran's nuclear program or to compel regime change there. That is probably wise. But they don't really have a diplomatic option. I've got one: Iraq. Iraq is our Iran policy.

If we can help produce a representative government in Iraq - based on free and fair elections and with a Shiite leadership that accepts minority rights and limits on clerical involvement in politics - it will exert great pressure on the ayatollah-dictators running Iran. In Iran's sham "Islamic democracy," only the mullahs decide who can run. Over time, Iranian Shiites will demand to know why they can't have the same freedoms as their Iraqi cousins right next door. That will drive change in Iran. Just be patient.

How can one so insightful also be so blind? The Bush administration has had to fight two enemies, one foreign and one domestic. And of all places, the battle has been fought on the front pages of Mr. Friedman's very own paper. Anything that undercut the war effort was plastered all over page one, while anything that was positive was buried.

He says we need patience, but all his fellow democrats ask for is a timetable. He calls Iraq our Iran policy. Don't you think the Bush administration figured that one out as well? Or was it just plain dumb luck?

In the past week, I've received several e-mail notes from Democrats about the Iraq elections, or heard comments from various Democratic lawmakers - always along the following lines: "Remember, Vietnam also had an election, and you recall how that ended." Or, "O.K., the election was nice, but none of it was worth $100 billion or 10,000 killed and wounded." Or, "You know, we've actually created more terrorists in Iraq - election or not."

That is the "heart and soul" of the democratic party: Vietnam. And it's also the "heart and soul" of the press. You might know a few of them. You're sure to bump into them in the coffee room, the halls, the bathrooms, the elevator, the stairs, etc.

You know Mr. Friedman, we could win this war if more of your compadres were like you. But they're not. They're too wrapped up in defeatism and hatred to even think straight. I particularly like this line:

But those who suggest that the Iraqi election is just beanbag, and that all we are doing is making the war on terrorism worse as a result of Iraq, are speaking nonsense.

Was that aimed at Teddy (hiccup) Kennedy? Or John Kerry? Or Howie Dean? Or Babs Boxer? Or .......

Wouldn't it be nice if a few more demcorats were actually in the camp of Lieberman and Biden? Sure. And the war would go alot better if we didn't have to fight petulance at home along with terrorism abroad?

Imagine if this crowd was around in 1943? By the end of '43, we had just gotten badly bloodied on Tarawa, stopped long range bombing of Germany, and were bogged down in Italy. And the war effort was just starting. We were what appeared to be years away from victory. I just googled for "FDR" and "timetable". Guess what, there wasn't one.

"Democrats need to start thinking seriously about Iraq." Mr. Friedman, wake up please. I too want a demcoratic party equal to the task of fighting the war. One day, one of them just might get elected. And right now, that's a fearful thought.

Regarding Jordan's claim about shooting reporters:

I asked"The real question we should be asking is why is anyone surprised anymore?"

Powerline asks"Is the blogosphere being petty?"

As the saying goes, "do the math".

In Powerline, deacon writes:

If the U.S. military were targeting journalists for death, it would be the story of the decade (Abu Ghraib to the 100th power). Accordingly, doesn't a false claim that the military is doing this, made by the head of the world-wide leader in news reporting, constitute a reportable story? Jordan apparently back-tracked to some extent. But he still seems to be insisting that the military intentionally killed journalists.

So, since the transcripts and video are unavailable from Davos, we are relying on testimony of Congressman Frank, Senator Dodd, et al., all of whom I assume were quite upset that such things were said. It appears Jordan's claim is that the military is targeting jouranlists.

Let's assume for a moment that this is true.

This "policy" would have been approved at a rather high level, perhaps the pentagon. It would have to be passed along the chain of command, from Washington to Iraq. Then, it owuld be passed along to the battalion commanders, to the company commanders, to the platoon commanders, down to the sergeants and corporals. The sheer number of personnel involved is staggering. In effect, thousands and thousands of people would be "in the know", and not one of them bothered to speak up. Even the abuses at Abu Ghraib were first reported by a soldier.

Even if they decided to use special forces, the number of people in the know are far too large to keep it secret.

For Jordan, the devil really is in the details. For a story to have a chance at credibility, it actually has to be credible. Perhaps he meant that some reporters have been shot. That would probably be true. For the military to be targeting reporters just defies common sense.

It is really a simple math problem. The difficulty of keeping a secret grows exponentially in relation to the number of people who know. And for this little scenario, you'll need a computer.

1492 and all that, by Robert Royal, reevaluates the notion that Columbus was rapacious killer and propagator of cultural hegemony. "1968 and all that", if such book was written, would debunk the myth that the American media "spoke truth to power".

The recent Jordan/Davos flap is just another epsiode in the long winding road to obscurity that the media is traveling. And that it should be from an employee of CNN is not surprising. It is in a long line of disgraces including Tailwind and Baghdad Peter.

The real question we should be asking is why is anyone surprised anymore?

Since 1968 and Cronkite's treasonous lie after Tet, the press has been in full attack mode. From Watergate to Ra^thgate to Davosgate, the media has not been the fourth estate, but the fifth column of American life. Only now we know, and fortunately we now have alternatives.

The implosion of the democratic party not coincidentally mirrors the implosion of the American media, as the two have been one in the same for three decades. The same thing happened to the Soviet Union, another example of an institution whose unquestioned views were suddenly exposed as fraudulent. The resulting collapse was attributable as much to the complete loss of confidence from the people as much as a complete loss of ability to govern.

Claptrap from Reid's, "This budget is part of the Republican plan to cut Social Security benefits while handing out lavish tax breaks for multimillionaires," to Pelosi's, "The president's budget is a hoax on the American people" simply highlight the three card monty that the press has been playing with the truth for years. And sadly the democrats were playing role of ringer, always knowing where the ace was, while acting ignorant. They played the game, sucked in unsuspecting victims, and now, the cards are transparent. Yet, they know no other game.

No better example of this is the press and Newt Gingrich. Instantaneously, "starving children" became public policy. And the press was at the lead, taking cues from democratic politicians. Or was it the other way around?

1968 and all that.

Another good article by Paul Campos on the Ward Churchill affair.

Churchill has said at various times that he is either one-sixteenth or three-sixteenths Cherokee, yet genealogical reporting by the Rocky Mountain News and others has failed to turn up any Cherokee ancestors - or any other Native Americans - in Churchill's family tree.

Why should we care one way or another? We should care because Churchill has used his supposed Indian heritage to bully his way into academia. Indeed Churchill lacks what are normally considered the minimum requirements for a tenure-track job at a research university: he never earned a doctorate, and his only degrees are a bachelor's and a master's from a then-obscure Illinois college.

Churchill's lack of conventional academic credentials was apparently compensated for, at least in part in the eyes of those who hired him at the University of Colorado, by the "fact" that he contributed to the ethnic diversity of the school's tenure-track faculty.

All of this misses what is essentially the biggest issue, and yet the simplest question:

What the hell is "ethnic studies" and why does it warrant not only a professor, but an entire department at a university?

The fact the Churchill doesn't have a doctorate probably indicates that no serious university would actually offer a doctorate in such nonsense. I do believe however that such degrees were granted in Germany during the 1930's. (Thus maybe Churchill's unique insight?)

I asked the other day:

Has the age of moral relativism and equivalency completely saturated university thought?

The inundation of our universities with intellectual Rasputins, conjouring up their mysticism of pablum masquerading as academics casts a pall upon the entire higher education system. The fact that a professor of "ethnic studies" has the same stature as a professor of physics, history or mathematics is frightening. It diminshes the degrees conferred and makes scholarly pursuits more an object of ridicule that serious intellectualism.

In addition to addressing "academic freedom" issues, tenure, and staffing, more thought needs to actually go into exactly what the schools are going to teach. This is especailly true for public universities.

It seems that the only place that tolerate such tripe is our universities. That in itself it is a far more telling indictment of them than anything.