Class Warfare versus Income Inequality: Are the Rich Really Getting Richer?

Posted on March 6, 2012 by thefactfile

In his speech described as a 21st century echo of President Theodore Roosevelt’s “New Nationalism” address, President Obama stated that the growing inequality of wealth in the United States is “the defining issue of our time.” With that speech, President Obama kicked off a flurry of charges of class warfare that is framing the 2012 election to some extent.

President Obama went on to state that, in recent times, “those at the very top grew wealthier from their incomes and investments than ever before.” This point was, perhaps, inadvertently reinforced and made more political by Mitt Romney’s tax returns and Rick Santorum’s response.

Of course, the notion that the rich are getting richer has also been presented in a recent Census Bureau report on income inequality. The Occupy Wall Street movement also drew attention to this subject. The question remains, is this just political rhetoric–populist class warfare–or are the rich really getting richer while the poor are getting poorer?

Rather than simply relying on one of the two opposing arguments, we decided to look at the facts using the gold standard in U.S. income measures, the Current Population Survey administered by the US Census Bureau. Using this data, we looked at income disparity. First, we used a standard technique used by economists and checked the difference between the upper income of lowest fifth of households and the lowest income of the highest fifth of households in the United States; essentially looking at the richest and the poorest. The following chart shows this data in graphical form:

Source: Current Population Survey, US Census Bureau

In short, the data show two divergent trends: when we adjusted incomes for inflation by putting everything into 2010 dollars, we noticed that the highest income of the bottom fifth had not changed since 1967 and had actually been declining for most of the last decade. In contrast, the lowest income of the top fifth had increased by almost 67 percent over this period. In 1967, the lowest paid of the top fifth earned about six times the top pay of the bottom fifth. By 2010, the lowest paid in the top fifth earned about nine times the top pay of the bottom fifth.

In addition, we decided to take a look at the rest of the population to see if only the richest of the rich were prospering or whether the wealth had trickled down, but had not yet reached the bottom fifth.

Source: Current Population Survey, US Census Bureau.

As shown in the chart, we divided the population into quintiles by income (this chart includes the middle three quintiles) and again found the same flat line, with a decade long downward trend through the first three quintiles. In fact, the second quintile of households saw their incomes increase at a slower pace than the lowest fifth (13.9 percent versus 16.80 percent). It would appear that the disparity is increasing, especially between the top fifth and all other groups of households.

Comparison of Tax Rates & Income of Past/Present Presidential Candidates

Posted on January 30, 2012 by thefactfile

Throughout the month of January, one of the biggest questions in the race for the GOP presidential nomination was if, and when, Mitt Romney would release his tax returns. Starting at a January 16 GOP debate, and culminating in a disastrous (for Romney) debate 3 days later, Romney was assailed on all sides for hiding his wealth by refusing to release his tax returns. (Romney’s initial position, which may well have cost him the South Carolina primary, was that he would probably release them in April). In the end, he eventually was forced to succumb and released a tax return for 2010 and an estimated return for 2011; returns that showed incomes in excess of $20 million a year and effective tax rates of around 14%.

While the media has given a substantial amount of attention to this issue in the past week, little analysis has been carried out comparing Romney’s tax rates and total income with that of past presidential contenders. To fill this gap—and in so doing, hopefully put Romney’s wealth in context with that of past candidates—we scoured the internet for tax returns of contenders starting from the 1988 presidential election.

First some notes on methodology: (1) where possible, we relied on tax returns from two years before each election—the exceptions being Dukakis (1987), Bush (1987), and Kerry (2003); (2) for Kerry (2003) and McCain (2006), both of whom filed separately from their wives, we combined total income and total taxes with that of their wives as if they had filed combined tax returns; and (3) we excluded sitting presidents.

The first chart, below, compares tax rates (total tax divided by total income) for the 11 candidates in our sample (Democrats are in blue, Republicans in red). Perhaps contrary to what many would guess, Romney doesn’t set the mark for the lowest effective tax rate: in 2003, John Kerry and his wife paid even less, with a tax rate of just 13.15% compared to Romney’s 13.89%. That said, Romney’s tax rate is around half that of other recent contenders, including Gingrich (31.45% in 2010), Obama (27.99% in 2006), and McCain (28.69% in 2006). (These results are also consistent when looking at other tax returns not included in this sample).

So clearly, Romney has some rivals when it comes to the competition for the lowest tax rate. But how about when it comes to his vast income? The next chart compares the incomes of the 11 candidates, adjusted for inflation to represent 2011 dollars. Once again, Romney ends up in second place, with his $22.3 million income in 2010 falling just short of George W. Bush’s income from 1998 (adjusted for inflation) of $25.5 million. However, both of these candidates’ incomes far exceeded all other candidates: for example, Romney’s income in 2010 is approximately 20 times that of Obama (2006), 3 times that of McCain (2006), and a whopping 104 times that of Dukakis (1997).

NOTE: We used the BLS inflation calculator to adjust incomes to 2011 dollars.

In short, by any measure, Romney is one of the richest candidates ever to run for office. And while a lack of data prevented us from looking at the net worth of candidates, we would certainly expect similar results on this measure as well. (Romney himself estimates his net worth to be in the range of $150 million to $200 million). In an election that will certainly bring attention to the growing income inequality in the U.S., Romney’s wealth—and what it means for his ability to represent the average American—is an issue we’re sure to hear more of.

Sources: “An Embarrassment of Riches in Campaign ’88: Bush, Dukakis and their running mates are men of wealth,” Newsday, August 21, 1988; “CAMPAIGN ’96 : Tax Returns Show That Doles Are Millionaires,” Los Angeles Times, January 20, 1996; “John Kerry’s Bright Financial Picture,” National Review, April 14, 2004; “1998 Taxes: Clintons’ Tax-Exempt Income Declines,” The Bond Buyer, April 15, 1999; Tax History Project, accessed January 28, 2012.

2012 New Hampshire Primary: Trends in Last Night’s Voting

Posted on January 11, 2012 by thefactfile

As we did last week following the Iowa caucuses, today we look at the major voting trends from last night’s voting in the New Hampshire primary. In some aspects, we see similar trends as last week: for example, Ron Paul once again dominated the youth (18-29) vote, while Romney dominated among voters with the highest family incomes. In other aspects, however, voting patterns differed from what many of us expected.

The following are some of the most interesting voting trends (using MSNBC polling data) from last night’s New Hampshire primary:

Gender: Mitt Romney received nearly 38% of the male vote and 40% of female, distancing himself from Paul who received 26% and 20%, respectively.
Age: As at the Iowa caucuses, Ron Paul once again dominated the youth vote by receiving a near majority (47%) of votes casts in the 18-29 age range. This support waned, however, in older age groups: among 30-44 year olds, Paul received 32% (compared to Romney’s 36%); among 45-64 he received 19% (compared to Romney’s 42%); and among 65+ he received only 12% (compared to Romney’s 42%). The other candidates saw less variation across the ages, though both Gingrich and Huntsman received more support the older the age group.
Marital status: Perhaps a testament to his massive sex appeal, Ron Paul received much more support from the unmarried—35% supporting him, more than any other candidate—than the married (19%). This result is unsurprising, however, given that Paul garners most of his support from younger (and thus unmarried) voters.
Total family income: Romney dominated the upper income bracket, receiving 51% of the vote from voters with family income of $200,000 or more. His support weakened as family income lessened, with a low of 31% from voters with family incomes under $30,000 (compared to Paul’s 36%).
Political ideology: Somewhat surprisingly, Romney received a plurality of the votes in all of the categories of political ideology, including “very conservative”. Among “very conservative” voters he received 33% (runner-up with Santorum with 26%), and among “somewhat conservative” and “moderate or liberal” voters he received 48% and 37%, respectively.
Support for tea party: Also surprising (and in contrast to the polling data from the Iowa caucuses) is that Romney gained the most support from voters who strongly support the Tea Party movement, with 36% compared to Paul’s 21% and Santorum’s 20%.

The New Hampshire Primary: A Primer

Posted on January 9, 2012 by thefactfile

After months of speeches, debates, hand shaking, baby kissing , and all the other political gestures that we’ve all come to love(?), we’ve finally reached the New Hampshire primary—the first primary election held in the United States. Together with the Iowa caucuses (which we profiled last week), the New Hampshire primary is one of the most important events in a presidential election year, creating momentum for some campaigns, while killing it for others. (As we mentioned previously, every candidate that has won both Iowa and New Hampshire has gone on to win the nomination; only George McGovern (D) in 1972 and Bill Clinton (D) in 1992 won the nomination after losing both).

This article provides some background on this event for our readers who (perhaps like ourselves only hours ago) know very little about this primary, and who wonder why such a small state has such a large role in the nomination process.

Background

While primaries are normally either “open” (e.g., allowing all voters, regardless of party identification, to vote in either party’s primary) or “closed” (e.g., allowing only registered party members to vote in their party’s primary), New Hampshire is often called “semi-closed” in that people registered in one party can’t vote for the other, but “undeclared” voters who are not officially registered in either party can vote in either. Like general elections, voting is done entirely by secret ballot, with the state’s 12 delegates being divided among the candidates with the most votes through proportional representation.

Voter Turnout

Compared to the Iowa caucuses, turnout for the New Hampshire primary is very high. In 2008, 527,350 people (51.3% of the total voting population in the state) voted, with 287,557 voters in the Democratic primary and 239,793 in the Republican primary. These numbers are comparable with national voter turnout in a typical general election, which normally hovers around the 50% mark.

For this year’s primary, the turnout will undoubtedly be much lower as a result of having only one contested primary. (Democrats will also have a primary, but the 13 challengers to President Obama are weak, to say the least.) To get some sense of the expected level of turnout in this year’s primary, we have to look back to 2004, when Bush was running for reelection as an incumbent. In that election, 29.2% of the voting population turned out: 219,787 on the Democratic side, and 67,624 of the Republican side.

The following table shows in graphical form the percentage of the total voting population that has voted in the past 3 presidential primaries:

Sources: Presidential Primary Election Results, Federal Election Commission, 2000, 2004, and 2008; “Annual Estimates of the Resident Population by Sex and Age for States: April 1, 2000, to July 1, 2009,” US Census Bureau, June 2010.

Finally, it must also be noted that the voters who participate in New Hampshire differ from those in Iowa: whereas the Iowa caucuses tend to attract party activists and donors, the “semi-closed” primary rules in New Hampshire has the effect of attracting more independents, even taking into account the fact that the majority of these “undeclared” voters actually self-identify as either Republicans or Democrats (as polling data from the University of New Hampshire has shown).

How representative is the population to the US as a whole?

Finally, as we did with Iowa, we wanted to look at the social/economic/demographic characteristics of the population in New Hampshire to get some sense of how representative it is to the US as a whole. (We accept that almost no state is perfectly representative, but it is useful to get a sense of how far a given state is from the mean).

Starting with economics, New Hampshire is clearly better off than most other states in the U.S. According to survey data from the US Census Bureau’s American Community Survey, the median household income of $63,033 (in 2009 inflation-adjusted dollars) far exceeds the US average of $51,425. And like Iowa, the unemployment rate is low relative the rest of the country: at 5.2%, New Hampshire has the 4^th lowest unemployment rate in the country at 5.2%, well below the US average of 8.6%.

Turning to demographics, as the next chart makes clear, the population in New Hampshire (like Iowa) is remarkably homogeneous with 94.8% white, followed by Asians (1.9%) and Blacks (1.1%).

Source: U.S. Census Bureau, 2005-2009 American Community Survey

In terms of education, New Hampshire is much more highly educated than the US average, with 90.5% graduating high school (compared to US average of 84.6%) and 32.4% receiving a bachelor’s degree or higher (compared to US average of 27.5%).

In short, in many ways New Hampshire is not representative of the rest of the country. The question is: does it matter? Should candidacies be made or undone based on the preferences of one small New England state? We’ll leave that for you to discuss.

TheFactFile.com: The Week in Review

Posted on January 7, 2012 by thefactfile

TheFactFile.com is a non-partisan fact-checking site that analyzes the facts behind the big issues of the day. Our goal is to let facts and data speak for themselves, regardless of whether that makes us appear “liberal”, “moderate”, “conservative”, or something else entirely. This first week has been a lot of fun for the staff at TheFactFile.com, seeing our dream come to life. If you had seen the excitement when our first retweet happened and our first comment arrived you would have retweeted and commented all day.

While we work on more articles for next week, we decided to give you an easy way to catch up with what was up on TheFactFile.com this past week.

Monday:

Fact Checking the Fact Checkers - In this article, we answer the big question of why we decided to start TheFactFile.com.

The Iowa Caucuses: A Primer - The Iowa caucuses mark the start of the election season. But what is a caucus? And how important is Iowa in selecting nominees for president?

Tuesday:

The Iowa Caucuses: Voter Turnout - This article analyzes past trends in voter turnout for the Iowa caucuses. And the result? Turnout is extremely low, even in “hot” years.

The Iowa Caucuses: Is Iowa Representative of the Rest of the U.S.? - Is Iowa representative of the rest of the US? Here we analyze official demographic/economic data to show that the answer is… yes and no.

Wednesday:

2012 Iowa Caucuses: Trends in Last Night’s Voting - This article looks at how demographic and economic characteristics affected voting in the 2012 Iowa caucuses.

Income Inequality in the U.S.: Are the Rich Really Getting Richer? - Is income inequality increasing the the US? Here we answer this question by examining CPS data from 1967-present. The short answer: yes.

Thursday:

The Endless Campaign for the Presidency - If it seems like presidential campaigns are getting longer, well…they are. Here we look at the average length of campaigns from FDR to today.

Friday:

New Year’s Resolutions: Six Days and Counting - 75% of people who make New Year’s resolutions fail within 6 months. This article looks at research on the determinants of success or failure.

Please remember to register so you can comment on TheFactFile.Com without having to fill out the captcha box each time—it is free and easy!

2012 Iowa Caucuses: Trends in Last Night’s Voting

Posted on January 4, 2012 by thefactfile

The Iowa caucuses have come and gone, and while we all know the big (?) winner of last night—Mitt Romney—we were left wondering about the underlying demographic and socio-economic trends from last night’s voting. Did one candidate dominate the youth vote? Did educational backgrounds affect one’s choice in candidate? And how about income?

Among the most interesting results found in MSNBC’s exit polling are the following:

Age: Ron Paul dominated the youth vote, receiving 48 percent of the votes among 17-29 year olds compared to 23 percent for Santorum and only 13 percent for Romney. Conversely, Romney received the most support among voters 65 and over with 33 percent, compared to 20 percent for Santorum and only 11 percent for Paul.
Education: The top three candidates received similar shares of the vote across the “more than a high school graduate” and “high school graduate or less” categories. Santorum received the highest share of votes from those in the “more than high school graduate” category with 26 percent, compared to 25 percent for Romney and 22 percent for Paul. Romney received the most votes from high school graduate or less with 22 percent versus Paul’s 20 percent and Santorum’s 19 percent.
Income: As with age, there were big swings in support depending on the voter’s total family income. Paul received the most support of voters with incomes under $50,000 with 31 percentcompared to Santorum’s 19 percent and Romney’s 16 percent. Santorum received the most votes in the $50,000-$99,999 category with 29 percent compared to Romney and Paul’s 21 percent. Finally, Romney received the most votes among those with incomes of $100,000 or more, with 36 percent compared to Santorum’s 24 percent and Paul’s 14 percent.
Ideology: The largest swings among the three top candidates were seen in voters’ political ideology. Among those self-identifying as “very conservative,” 35 percent supported Santorum with Romney (14 percent) and Paul (15 percent) trailing far behind. In contrast, Romney received the most support among “somewhat conservative” voters, with 32 percent compared to Paul’s 21 percent and Santorum’s 19 percent. Finally, Paul narrowly edged Romney among “moderate or liberal” voters with 40 percent of the vote compared to Romney’s 35 percent. (Santorum’s support among this group dropped to only 8 percent.

In short, what we saw last night are large vote swings depending on one’s demographic and economic characteristics. Support varied the most depending on one’s age, income, and political ideology.

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