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Forum Post: FATAL FLAW: Scammersworld's recent assertion that the richest 2.08% held just 21.1% of all private US wealth in 2004 was based on a sample of the reported gross assets of the top 2.08% of adult tax filers. It should have been based on the net assets of th

Posted 12 years ago on Jan. 15, 2012, 1:03 a.m. EST by ModestCapitalist (2342)
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FATAL FLAW: Scammersworld's recent assertion that the richest 2.08% held just 21.1% of all private US wealth in 2004 was based on a sample of the reported gross assets of the top 2.08% of adult tax filers. It should have been based on the net assets of the top 2% of households.

FATAL FLAW: Scammersworld's assertion that the richest 2.08% held just 21.1% of all private US wealth in 2004 was made without consideration of the 9.5 trillion in debt owed by the lower 98% of households.

He has already admitted (sort of) that he failed to consider the first fatal flaw when making his assertion. His exact words were:

"Here is the "comprehensive study" by the IRS that say's exactly the same thing that I did (with a single exception, they listed the top as 1.2%, using the entire population as the comparison group....I can accept that, obviously newborns and toddlers COULD have "net worth)......"

Still he implied that "newborns and toddlers" made up nearly half of that top 2.08 percent of wealth holders that he previously referred to. This was an absurd implication to make.

None of his 'official sources' of data account for that remaining 9.5 trillion in debt owed by the lower 98% of households in 2004 (including home loans) In fact, his sources make no reference whatsoever to that lower 98% of households.

Like I said before, the ability to do basic math is worthless in this field unless you also have the ability to think critically.

Scammersworld should take a lesson from sociologist G. William Domhoff and economist Edward N. Wolff who know well enough to carefully consider all forms of wealth and debt from a number of sources when determining the actual distribution of wealth in America.

According to this comprehensive study (and others) the richest 1% alone held 34.3% of all private US wealth in 2004. In particular, they held 42.3% of all privately held financial US wealth.

http://www2.ucsc.edu/whorulesamerica/power/wealth.html

The Wall Street Journal reported the exact same statistic of 34.3% in April of 2006 along with another that the the next wealthiest 9% of American households held 36.1% of total private wealth in 2004. It would therefore have been mathematically impossible for the 2nd percentile of American households to hold any less than 4.011115% of total private wealth in 2004. Of course, this absolute minimum would indicate a nearly flat distribution of wealth across the 2nd-10th percentiles. Such an implication would be absurd.

http://faculty.morainepark.edu/jhalter/economics/docs/Wealth%20dist.pdf

Scammersworld's original assertion was that the richest 2.08% of Americans held just 21.1% of total US private wealth in 2004. I have just established that the richest 1% alone held 34.3% and the 2nd percentile alone could not possibly have held any less than 4.011115%. Of course, that 2nd percentile held much more.

Scammersworld's assertions have not been supported by a single comprehensive study of total US household wealth. He will swear otherwise with semantics, word games, and references to 'official data' but the truth is that none of his sources make a single side by side comparison of household wealth by percentile or class. They are based only on the reported assets of adult tax filers in a single given year. This includes non-profits.

If there is anytime in life when the rich will fail to report all of their assets, its tax time.

His sources include breakdowns of reported assets and liabilities of the richest 1.2% or 2.08% of adult tax filers in 2004 but do not include a single reference to any lower majority of households.

His assertions, based on those reported assets and liabilities of the richest 1.2% or 2.08% of adult tax filers in 2004 are off by 100% or more.

Every published study and report of the concentration of US household wealth with comparison by percentile or class in 2004 contradicts his outrageous assertions.

Every single one.

http://www2.ucsc.edu/whorulesamerica/power/wealth.html

http://faculty.morainepark.edu/jhalter/economics/docs/Wealth%20dist.pdf

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[-] 2 points by ModestCapitalist (2342) 12 years ago

Here is another one. A SENIOR ECONOMIST ON THE BOARD OF THE FEDERAL RESERVE went on record a few years back with a claim that approximately 1/3 of total US household wealth was held by the richest 1% in 2001.

A SENIOR FUCKING ECONOMIST ON THE BOARD OF THE FEDERAL RESERVE! WHAT DO YOU HAVE TO SAY ABOUT THAT SCAMMERSWORLD?

Let me guess. You don't approve of his methods? Thats what I thought you would say. But as I've told you over and over and over, your 'official data' from the IRS based only on the 'reported assets' of millionaires just doesn't cut it.

A SENIOR FUCKING ECONOMIST ON THE BOARD OF THE FEDERAL RESERVE WENT ON RECORD WITH A CLAIM THAT APPROXIMATELY 1/3 OF AMERICA'S TOTAL HOUSEHOLD WEALTH WAS HELD BY THE RICHEST 1% in 2001.

A quote from the report:

"In 2001, the division of wealth observed in the SCF attributed about a third each to the wealthiest 1 percent, the next wealthiest 9 percent, and the remaining 90 percent of the population."

Sorry Charlie. The evidence is stacking up pretty high. You're wrong.

http://www.federalreserve.gov/pubs/oss/oss2/papers/concentration.2001.10.pdf

[-] 2 points by JadedCitizen (4277) 12 years ago

Maybe somebody can buy slammersworldisback a calculator for his birthday, maybe then he can get the numbers right.

[-] 2 points by ModestCapitalist (2342) 12 years ago

He may already have one. But it will take more than a die-hard conservative partisan puppet with a calculator to discredit dozens of prominent economists and researchers who understand that the distribution of total US 'household wealth' can not be determined from a single IRS report from a single given year.

Scammersworld swears that you can determine the volume of water in a pond by measuring the depth at one specific point on one specific day and multiplying by dimension.

The rest of us know that its not that simple.

[-] 2 points by JadedCitizen (4277) 12 years ago

You can lead a horse to the pond of water, but you can't make him drink reality.

[-] 1 points by ModestCapitalist (2342) 12 years ago

More evidence of concentration. This from an 'official' government source:

The CBO report I am about to make reference to breaks down shares of net American income by quintile. Since a quintile represents 1/5, the middle quintile would certainly represent the 'middle class'. But we'll expand further out to all 5 quintiles just to cover all bases. Keep in mind these statistics represent income AFTER taxes.

Between 1979 and 2007, the share of net income for the lowest quintile dropped by 27.9 percent. Does that prove the expansion of the lowest class? Damn near it but lets eliminate all doubt.

Between 1979 and 2007, the share of net income for the second quintile, dropped by 23.6 percent. Does that prove the expansion of the lower class? Isn't it possible that the lowest two quintiles were always the lower class and the middle class had always represented just 1/5 of the US population? Well, thats what justhefacts would swear so lets eliminate that last shred of doubt. Lets move onto the middle quintile. The indisputable 'middle class'.

Between 1979 and 2007, the share of net income for the middle quintile dropped by 14.5 percent. There you go. Indisputable proof that at least 3/5 of Americans lost their relative share of net income between 1979 and 2007. Indisputable proof that America's middle class had shrunk and its lower class had expanded between 1979 and 2007. Indisputable mathematical proof. Still, lets move onto the next quintile.

Between 1979 and 2007, the share of net income for the fourth quintile dropped by 10.3 percent. There you go. Indisputable proof that at least 4/5 of Americans lost their relative share of net income between the years 1979 and 2007.

Bankruptcy and consumer debt rose significantly during this time frame. By 2007, consumer debt alone rose to nearly $2,000,000,000,000. Thats NEARLY TWO TRILLION DOLLARS.

So we've proven the actual shrinkage of the middle class and the actual expansion of the lower class. We've clearly established a loss of financial assets.

So where did the money go? The highest quintile? Lets take a look.

Between 1979 and 2007, the share of net income for the fifth quintile rose by 23.8 percent. Should we blame them? The highest quintile? Do we really want to blame a full 20% of the American population?

Not in my book. Lets take a closer look.

Between the years 1979 and 2007, the share of net income for the top decile (one tenth) rose by 40.2 percent. Thats a 16.4 percent spread just within 10 percent of the population. Lets take a closer look.

Between the years 1979 and 2007, the share of net income for the top ventile (one twentieth) rose by 61.9 percent. Thats a 21.9 percent spread just within 5 percent of the population. Interesting. Now, lets take a look at the final piece of the puzzle from this particular time frame.

Between 1979 and 2007, the start of the Great Recession and the worst financial crisis in nearly 80 years, the share of net income for the top centile (one hundredth, top 1%) rose by 128.0 percent. Thats a spread of 66.1 percent just within 5 percent of the population.

The actual income of the richest 1% nearly tripled. The actual buying power of the richest 1% more than doubled.

I did have a link here but the page has been replaced recently.

[-] 1 points by ModestCapitalist (2342) 12 years ago

"In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010).

Table 1: Distribution of net worth and financial wealth in the United States, 1983-2007 Total Net Worth Top 1 percent Next 19 percent Bottom 80 percent 1983 33.8% 47.5% 18.7% 1989 37.4% 46.2% 16.5% 1992 37.2% 46.6% 16.2% 1995 38.5% 45.4% 16.1% 1998 38.1% 45.3% 16.6% 2001 33.4% 51.0% 15.6% 2004 34.3% 50.3% 15.3% 2007 34.6% 50.5% 15.0%

 Financial Wealth

Top 1 percent Next 19 percent Bottom 80 percent 1983 42.9% 48.4% 8.7% 1989 46.9% 46.5% 6.6% 1992 45.6% 46.7% 7.7% 1995 47.2% 45.9% 7.0% 1998 47.3% 43.6% 9.1% 2001 39.7% 51.5% 8.7% 2004 42.2% 50.3% 7.5% 2007 42.7% 50.3% 7.0%

Total assets are defined as the sum of: (1) the gross value of owner-occupied housing; (2) other real estate owned by the household; (3) cash and demand deposits; (4) time and savings deposits, certificates of deposit, and money market accounts; (5) government bonds, corporate bonds, foreign bonds, and other financial securities; (6) the cash surrender value of life insurance plans; (7) the cash surrender value of pension plans, including IRAs, Keogh, and 401(k) plans; (8) corporate stock and mutual funds; (9) net equity in unincorporated businesses; and (10) equity in trust funds.

Total liabilities are the sum of: (1) mortgage debt; (2) consumer debt, including auto loans; and (3) other debt. From Wolff (2004, 2007, & 2010)."

http://www2.ucsc.edu/whorulesamerica/power/wealth.html

"The top 1% held 33.4% of the nation's net worth in 2004, up from 32.7% in 2001, but still lower than a peak of 34.6% in 1995. Although the increase from 2001 is small, the data suggest that the upper strata, who saw their share of net worth decline between 1998 and 2001 as stock prices crashed, regained some of those losses by 2004. The new figures on net worth -- the difference between assets and liabilities -- come from the Fed's Survey of Consumer Finances, a triennial survey based on interviews of 4,522 families that excludes those listed on the Forbes 400 list of wealthy individuals. Fed economist Arthur Kennickell noted that some respondents interviewed in the survey had wealth greater than the lowest value on the Forbes list, however. The survey identified 715 families in the top 1%, corresponding to 1.1 million nationwide, and said the minimum net worth for the group was $6 million. In 2004, the wealthiest percent owned 70% of bonds, 51% of stocks and 62.3% of business assets. After the richest 1%, the Fed found that the next wealthiest 9% of families held 36.1% of net worth in 2004, down from 37.1% in 2001. Below them, families in the top 50% to 90% held 27.9% of net worth in 2004, a slight increase from 2001, while families in the bottom half saw their share fall to 2.5% of net worth in 2004 from 2.8% in 2001."

http://faculty.morainepark.edu/jhalter/economics/docs/Wealth%20dist.pdf

Thats two entirely seperate reports of studies conducted by different groups using different methods. Both contradict Scammersworld's assertions drastically.

You will find none to support his lowball assertions which again are based only on the reported assets of the richest 1.2% of tax filers in a single given year. Not total US household wealth.

None whatsoever. Zero. Nada.

[-] 1 points by ModestCapitalist (2342) 12 years ago

The following are quotes from the CBO (Congressional Budget Office) which confirm the rapid rise in inequality and the growing concentration of wealth.

"FACT: The CBO Study Notes That Rising Income Inequality Slowed During Recessions But Points To Different Causes

CBO: Income Inequality Rose Over 30-Year Period, Except During Recessions. From the Congressional Budget Office's report, "Trends in the distribution of Household Income Between 1979 and 2007": "The dispersion of household income rose almost continually throughout the nearly 30-year period spanning 1979 through 2007 except during the 1990-1991 and 2001 recessions. The recent turmoil in financial markets, the prolonged recession that began in December 2007, and the ongoing slow recovery may have caused a pause in that upward trend, but the present analysis does not extend beyond 2007." [Congressional Budget Office, October 2011]

CBO Report Measures Change In Income Inequality From 1979 To 2007 Because Those Years Both Preceded Recessions And Therefore Had "Similar Overall Economic Activity." From the Congressional Budget Office's report, "Trends in the distribution of Household Income Between 1979 and 2007": "To assess trends in the distribution of household income, the Congressional Budget Office (CBO) examined the span from 1979 to 2007 because those endpoints allow comparisons between periods of similar overall economic activity (they were both years before recessions)." [Congressional Budget Office, October 2011]

Despite Similar Economic Forces In Both Years, Income Inequality Has Risen "Substantially." From the Congressional Budget Office's report, "Trends in the distribution of Household Income Between 1979 and 2007": "The distribution of after-tax income (including government transfer payments) became substantially more unequal from 1979 to 2007 as a result of a rapid rise in income for the highest-income households, sluggish income growth for the middle 60 percent of the population, and an even smaller increase in after-tax income for the 20 percent of the population with the lowest income."

The Congressional Budget Office also included in its report the following chart showing the share of after-tax income enjoyed by each quintile in 1979 and in 2007:

CBO share of income

[Congressional Budget Office, October 2011]

CBO: "Major Reason" For Rising Income Inequality Between 1979 And 2007 Was Wealthier Households' Share Of Market Income Increased. From the Congressional Budget Office's report, "Trends in the distribution of Household Income Between 1979 and 2007":

The major reason for the growing unevenness in the distribution of after-tax income was an increase in the concentration of market income (income measured before government transfers and taxes) in favor of higher income households; that is, such households' share of market income was greater in 2007 than in 1979. Specifically, over that period, the highest income quintile's share of market income increased from 50 percent to 60 percent (see Summary Figure 2). The share of market income for every other quintile declined. (Each quintile contains one-fifth of the population, ranked by adjusted household income.) In fact, the distribution of market income became more unequal almost continuously between 1979 and 2007 except during the recessions in 1990-1991 and 2001. [Congressional Budget Office, October 2011]

CBO: Change In Market Income Occurred Because Sources Of Income Became More Concentrated With The Wealthy And Because Capital Gains, Which Are Skewed Toward The Wealthy, Grew. From the Congressional Budget Office's report, "Trends in the distribution of Household Income Between 1979 and 2007":

The market income of households can become more unequally distributed over time if individual components of income become more highly concentrated or if the composition of income shifts so that a greater share of total income comes from components that are more highly concentrated.

Over the 1979-2007 period, the first of those factors was the primary reason overall market income became less evenly distributed: All major sources of market income became more highly concentrated in favor of higher-income households. Labor income was the biggest contributor because it is by far the largest source of income, even though the increase in the concentration of labor income was smaller than the increase in concentration for other sources.

A shift in the composition of income also contributed to the growing concentration. A decrease in the share of total market income from wages and other labor compensation and an increase in the share from capital gains contributed to the increase in market income inequality because capital gains are much more concentrated among higher-income households than is labor income. [Congressional Budget Office, October 2011, emphasis added]"

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