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Spinning us into a bad economic mood
Posted by: McQ on Tuesday, August 21, 2007

David Cay Johnston tells us in the New York Times today:
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While technically correct, it is a very misleading statement.

Why? Well look at the chart he uses to accompany his article:

Notice anything?

Yup, for the third consecutive year since 2000, average income has been rising. Makes sense after the 9/11 induced recession, right? And, in fact, it's within the a few hundred dollars of the 2000 peak.

Now, go into the article and find any mention of 9/11. The closest you'll find is this:
Tony Fratto, a White House spokesman, attributed the drop in average incomes to “the significant wrenching hits that our economy took in 2001 and 2002, so no one should be surprised that what a bubble economy created in the late 1990s and 2000, where economic data were skewed, would take some time to recover.”
If you weren't paying attention you might not know what that "wrenching hit" was.

The Boston Globe also ran a story much like the NYT piece. James Pethokoukis of US News & World Report sums it up nicely:
It might have also been nice had either story mentioned the great likelihood that the Internal Revenue Service data the newspapers relied on will show further income gains for 2006 and 2007, given the state of the economy and the continuing rise in real wages. I would have also liked to have the seen the two stories give a nod to the fact that government numbers tend to overstate inflation, and thus real incomes probably did even better than the official numbers show. How about this for a fair headline: "Incomes Grow for Third Straight Year, Though Still Below 2000 Peak"?
Oh, no, that would be way too fair, James. We're talking the New York Times, for heaven sake.

UPDATE: Oh man, Lance at A Second Hand Conjecture shreds the Johnston argument that we're still lagging behind 2000. Go. Read. Well worth your time.
 
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Comments
Off the topic of average incomes, but on the topic of biased journalism, Confederate Yankee does a great job again today deconstructing a bogus AP story.
 
Written By: Aldo
URL: http://
Wow, flat incomes during an expansion, you must be very proud... tax cuts worked!!!

Class warfare!

 
Written By: Captin Sarcastic
URL: http://
tax cuts worked [sarcasm]
Actually, after-tax income has been above the 2000 year mark for several years BECAUSE of the tax cuts. Johnston is knowingly writing about pre-tax income. Johnston knows about the after-tax income results and chooses to ignore it.
 
Written By: JWG
URL: http://
Actually, after-tax income has been above the 2000 year mark for several years BECAUSE of the tax cuts. Johnston is knowingly writing about pre-tax income. Johnston knows about the after-tax income results and chooses to ignore it.
Would that be average or median?


 
Written By: Captin Sarcastic
URL: http://
Cap,

It doesn’t matter whether the tax cuts worked or not, the story is misleading.

Since you bring it up, if you follow the link at my site to backtalk you can see that in fact the lower quintiles did better after the tax cuts than the upper end. Was that because of the tax cuts? To some extent, but the popping of the bubble contributed to the rich losing more as well. So it is not a simple story.

Either way it it doesn’t defend a misleading portrait. I have more on this coming.
 
Written By: Lance
URL: www.asecondhandconjecture.com
"after the 9/11 induced recession"

Pretty sure the recession was over by 9-11, but I take your point (and 9-11 wasn’t a huge help to the expansion).
 
Written By: Sean
URL: http://www.myelectionanalysis.com
So, we’re being told economic matters are less good than they really are?

Seems to me an extension of the issues we’re seeing on lending...

 
Written By: Bithead
URL: http://bitsblog.florack.us
actually it is surprising that average income is not dropping like a stone, and I am dubious about the measurements of the data. It only stands to reason that with upwards of 1.25 million poor people streaming into the country EVERY YEAR, has got to put downward pressure on average incomes.

Of course if they are only counting citizens then it might not show up in the data, but its misleading since we are never going to get rid of those who come in, so for all intents and purposes they are Americans.
 
Written By: kyleN
URL: http://impudent.blognation.us/blog
I see that Lance linked to Engram, who also has an excellent take on Johnston’s piece, looking at median after-tax household income overall and then looking at the four lower quintiles. Give credit to Johnston for replying in several blog threads, but it’s clear that his storyline (and his editors’) was seriously shredded.
 
Written By: Charles Bird
URL: http://www.redstate.com
I seem to remember a "Dot-Com Bust" that went hand in hand with the AGI numbers.

One could simply explain that the losses have finally filtered out of the system.

I know. I took mine last year after waiting to see if they would abate a bit. Took a bath on LUcent.
 
Written By: Neo
URL: http://
Geeze Kyle, don’t tie paying an ever increasing number of illegals at deflated wages with flat or decreasing income for the reporting population. Cap’ll blow a gasket.
 
Written By: looker
URL: http://
I personally love the use of the benign phrase "make ends meet." Most Americans are doing far better than making ends meet, unless the writer means some Americans have to go without all 20 HBO channels.
 
Written By: Grimshaw
URL: http://
Geeze Kyle, don’t tie paying an ever increasing number of illegals at deflated wages with flat or decreasing income for the reporting population. Cap’ll blow a gasket.
Thanks for thinking of me. It certainly can’t help wages to have people who can be so easily compromised into illegal employment conspiracies.

Not to mention the millions that pass themselves off as legal and simply add to the legal labor pool. Supply and demand.

But as I’ve said, I don’t think the geographical happenstance of one’s birth entitles them to a job, or a wage. But I do think that political decisions affect wealth redistribution, and it’s not always top to bottom.

Cap
 
Written By: Captin Sarcastic
URL: http://

 
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