You Can Keep Your Wealth (NOT)

In his State of the Union Message, President Obama said the following:

And let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth. We can use that money to help more families pay for childcare and send their kids to college. 

This is an utterly bizarre statement any way you cut it.  It was lifted from the transcript, so it was not a mistake he made orally.  

First of all, there are no taxes on accumulated wealth. There are taxes on income that wealth may produce, but if you put your wealth into a checking account that pays zero interest, there are no taxes on it. This is not a "loophole"in the tax law. It is the tax law. 

Secondly, "loopholes" (even if they existed) do not produce inequality. What causes economic inequality are disparities in the ability to produce things of value for which others pay you. Inequality of skills and abilities has been the rule since recorded time. Yet the President thinks that inequality of wealth comes from something that the government does?

Thirdly,"we" can use that money? That is, that money you earned (after taxes) does not belong to you. Therefore it something that "we" can use for things that "we" feel like.

This is a very scary man who is not well connected to reality who mouths discredited Communist manifestos as if they were obvious givens. 

  

Household Income Has Fallen. People's Income May Not Have

This chart appeared in an article in the Wall Street Journal today. What it shows is actually true. The implications that the WSJ writer derives from it are not. Those not statistically literate (which is to say 95% of the population and 99% of journalists) would look at this chart and conclude that people are earning less now than in 2000.



A statistician would look at this and ask the question, "I wonder if the composition of households has changed since 2000?" It has.




The number of people per household who are actually earning an income has dropped quite a bit since 2000. Here's a simple example. Suppose you live in a neighborhood of 20 households. The median income per household is $70,000. The husband and wife in one household separate. Now there are 21 households in that neighborhood that, collectively, are earning exactly the same amount of money as they were before. The median income of that neighborhood has dropped, although nothing else as changed,.

It's important (even for journalists) that in examining data that you at least ask the question, "what else might be going on here?" before you leap to a conclusion.

Creating Jobs By Making Workers More Expensive to Hire

In the Bizarro World in which the President lives, the way you create more jobs for low-wage workers is to increase the cost to employers of hiring them. In no other universe do people spend more on something as the cost goes up.

The Queuing Economy in Venezuela

Hugo Chavez and his socialist successors in Venezuela have indeed created jobs for lower skilled workers there. You can now be employed as a "queue worker".  A queue worker is someone who gets paid to stand in line to purchase basic items -- such as mile, sugar, diapers, shampoo  -- that are in short supply due to government economic policies. Read the article here. It's a little hard to see how you could build a vibrant economy based on paying others to stand in line, but apparently the Venezuelan government is determined to try.

The Income Tax is More Skewed Than Ever

President Obama announced that in his State of the Union Message he would propose  to raise income taxes on The Rich. This announcement came in the same week that the IRS published new data for 2012 that show that income taxes are more skewed than ever before. Now we know facts and analysis are not the President's strong suit, but wasn't there anyone on his staff who could read charts for him? Or maybe it's the same staff that told him that Obamacare would reduce healthcare costs by $2500 per year? Or (more likely) the President just doesn't care much about the truth.

Why Government Continues to be "Floppy"

An article in The NY Times describes the efforts of Megan Smith to bring technology practices in the White House into the 21st century (they still use floppy disks there for example).

My prediction is that Ms. Smith will largely fail. Large, stodgy companies may be somewhat slower to adopt technology than those in Silicon Valley, but they do so at lightning speed compared to government. They don't do it to be "cool". They do it because it makes them more efficient. They do it because they are competing against other companies. They do it because it is profitable. None of these drivers are at play in government.

Instead, what drives government are political considerations that are often counterproductive. Exhibit A. In this article we learn that Ms. Smith is greatly concerned about what? Recruiting more female technologists. Can someone (Ms. Smith?) please explain why if the primary objective were to introduce technology for greater efficiency it would make one iota of difference what chromosomes are possessed by those designing the systems and writing the code? No doubt there will also be a push to recruit black technologists, Hispanic technologists and homosexual technologists. All of whom will continue to use floppy disks.