Income mobility in the U.S.

Today I was looking at a report on income within quintiles, and see that in the bottom, about 50% move up, quite a few to the top. But in the top, many move down. Their real income went down. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. There's still a lot of mobility in the USA. However, the report was for 2007, and I checked and can't find anything newer from Treasury. I think it's just too painful for the O-admin to see it. Better to whine about a gap than praise mobility.

http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

The key findings of this study include:
• There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
• Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
• Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
• The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
• Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

This would never happen to you or me

"LA Times: Though he was a prodigy in the world of economics, Timothy F. Geithner underwent an IRS audit in 2006 and ended up paying back taxes for a mistake in two years' worth of filings. That was embarrassing enough.

But just as he was about to be named to head the Treasury Department, a more awkward fact came to light: Geithner had made the same error in two earlier tax years and failed to fix it even after the audit."

Someone at IRS gave Geithner a pass Go, do not go to jail card, because he was too big to fail. It was the Obama team vetting him that found the error. The IRS let him off the hook. Another too big, too brilliant to fail, Washington insider. When will we learn? We are about to have a tax crook as head of Treasury! Wasn't this Madoff's problem? Wasn't this the story with the Indian Enron guy? [B. Ramalinga Raju of Satyam] A different set of rules for our buddies? The little guy is hounded, charged interest, and fined for even a minor infraction of "forgetting" a tax rule. When our son needed to dip into his IRA a few years back to pay his bills, he carefully (he thought) paid the penalty and taxes due. But something was overlooked (don't ever try to figure out those rules without an accountant or lawyer), and shazam, down came the IRS on him 2 or 3 years later with a fine and interest. He had the additional cost of hiring a lawyer. Geithner gets into trouble, and the IRS doesn't even follow through. Dual set of rules. And then there's the domestic staff issue. Why do all these Democrats get caught by this? Why can't they figure out why that domestic is such a bargain? Wasn't that a Clinton staffing problem too.

And all these Democrats and media talking heads excusing him for being "sloppy," or "overlooking" something. Would they be so kind to a Republican appointee, or even my son?

Cooking the books

"Shocking exposé hit the Street last week about one of the best-loved, all-American companies: Fannie Mae, the mortgage and financial services giant. The report, written by the company's regulator, the Office of Federal Housing Enterprise Oversight, offered a litany of accounting improprieties at the company. You might call it "In the Kitchen With Fannie: How to Cook the Books for Fun and Profit.""

That was the story four years ago, Sept. 26, 2004 in the NYT. But even with this report, Franklin D. Raines, the company's chief executive 4 years ago, and his predecessor, James Johnson, got their bonuses. (NYT Sept 26, 2008)

Then in April of this year, paying much less than the government ask for: "Raines, former Fannie chief financial officer Timothy Howard and former controller Leanne Spencer were accused in a civil lawsuit in December 2006 with manipulating earnings over a six-year period at the company, the largest U.S. financer and guarantor of home mortgages.

Raines, a Seattle native and prominent Washington figure who was President Clinton's budget director, is relinquishing company stock options, proceeds from stock sales and other benefits. His part of the settlement is worth $24.7 million. . ." He'd worked in two different Democratic administrations, made over $91 million from 1998-2004, and blamed the Bush Administration for his problems. [Does anyone in the government from the janitors to the President ever accept the blame for mistakes?] "Raines, the first black CEO of a Fortune 500 company, has been trying to restore his reputation and challenge shareholder suits. Raised in a Seattle family that relied on welfare checks, Raines broke through racial barriers to become an adviser to President Carter and head of the U.S. Office of Management and Budget from 1996 to 1998 under Clinton." (Seattle Times, April 18, 2008 [AP])

Breaking through racial barriers to be a first anything is not necessarily a guarantee of success. And just fining the perps more millions than the rest of us can imagine obviously doesn't solve the problem either.

So what did the Office of Federal Housing Enterprise Oversight report to the Congress [Chris Dodd, Chair of Banking, Housing and Urban Affairs and Barney Frank, Chair of Financial Services, both Democrats, now squawking and pointing fingers at Republicans] this year--four years later? Well, Fannie and Fred were rising to the challenge, the Director said.

"[Fannie and Fred] were able to fulfill their key mission of providing stability and liquidity to the conventional conforming loan market. Their support of the mortgage market grew by 15 percent in 2007 versus 8 percent growth in 2006, to a total of $5.0 trillion in guaranteed mortgage-backed securities outstanding and mortgage investments. Their market share of total mortgage originations grew from 37.4 percent in 2006 to 75.6 percent by the fourth quarter of 2007. There is increasing pressure for Fannie Mae and Freddie Mac to do even more to support the mortgage market, which is problematic in absence of GSE reform legislation to strengthen the regulatory process."

Do you feel stable yet? Did GSE reform legislation [that means Congress has to do something] happen? Did the Chris and Barney dog and pony show just toss the report into the circular file? And the press release explaining how they plan to get to root causes doesn't make me feel any better. Sort of sounds like the Secretary of the Treasury will be the most powerful man in the world. Don't remember electing him, do you?