Where Do Those Numbers Come From?

You hear it all the time from politicians and news anchors:  97% of scientists agree on climate change; women are paid 79% of what a man is paid for the same job; and the rich are getting richer while the poor get poorer.  But where do these numbers come from?

I found more information about the first number in a Forbes article written by Alex Epstein.  Now Epstein is the author of A Moral Case for Fossil Fuels, so he definitely is not unbiased.  But he says that a 2013 paper by John Cook and others “found that over 97 percent [of papers he surveyed] endorsed the view that the Earth is warming up and human emissions of greenhouse gases are the main cause.”

To begin with the 97% refers to papers reviewed, not to scientists or even to all papers on the subject.  To get to 97% Cook developed three categories.  The first, “explicit endorsement with quantification,” refers to papers stating that at least half the problem is attributed to human activity.  This appears to be a small number of the papers.  The second category, “explicit endorsement without quantification,” includes papers that did not specify how much of the problem was due to human activity.  In the final category, “implicit endorsement,” are papers that only imply but do not state outright that some of the global warning is man-made.  Add all these categories up to get 97% of papers reviewed.  The only papers excluded were those that explicitly denied any man-made factor.

Epstein goes on to quote some of the authors of the reviewed papers who say Cook’s interpretation is not representative of their views.  So the source of this number gives no evidence that 97% of scientists agree and makes no mention that warming will be catastrophic, a thought the politicians and media automatically assume.  Finally, a reading of the paper itself shows that its stated purpose was to influence public opinion.

The pay issue is an easy one if you think it through.  The 79% number is probably accurate, but unfortunately meaningless.  It compares the pay of all women working full time to that of all men working full time.  It does not compare women in the same job to men in the same job.  In comparing the whole population, it doesn’t distinguish between the type of job, time on the job, or other factors (other than discrimination) that may affect pay level.  A more statistically accurate number is around 95.5%, which is still not acceptable but much closer to the truth.  And in some careers women earn more than men.  But even the department of labor publishes this bogus percentage as an argument for equal pay.

This Time article, written by a woman, gives good reasons for calling the 79% statistic a myth, but does not offer a more correct figure.

Finally we get to the earnings and wealth of the Top 1%, the rich who keep getting richer.  Well it’s true, the rich do continue to get richer, but the actual people in that category tends to change over time.  But I did wondered exactly how rich are they.  Do they have enough money to support all the programs that everyone wants to bill them for through higher taxes?

This should be an easy calculation – find out what percent of wealth they have and multiply by the total wealth in the US, a number probably available from census figures.  As it turns out, it is not so easy.  I looked up the percent of wealth held by the 1% in several different sources and found that it was almost 40% in April 2000, 35.4% as of 2010, 35% in 2007, but also 42% in 2007 (from another source), 40% in October 2011, and also 40% in 1995.  Where do these numbers come from?  They can't all be right.  Who do you trust?

It is also interesting that to be in the top 1% by income, you must earn more than about $470,000 per year.  So that evil top 1% by income, who are not paying their fair share, includes everyone playing in the NBA and all but the minimum salaried rookies in the NFL and top golfers and your favorite movie and TV stars, not just hedge fund managers and bankers on Wall Street.

With a little critical thinking, it turns out that numbers everyone throws around so confidently have problems.  And, by the way, the poor are not getting poorer.  According to a Congressional Budget Office report, the growth in average real after-tax household income for the bottom quintile of wage earners from 1979 to 2007 was about 18 percent, not a lot, but not poorer either.  ("Real" means inflation-adjusted.)

Richest 1% Own Nearly Half of World’s Wealth

This news headline from last week was designed to elicit negative reactions.  The gap between the rich and the poor continues to grow, not only in the US but in the majority of countries.  "In the last thirty years seven out of 10 people have been living in countries where economic inequality has increased," and we don’t have the political will to curb the growth.

Wow.  This situation sounds very serious.  Who are these cheats and swindlers?  Where did their money come from?  Why are they getting richer while the rest of us are not?  It’s not fair!

To answer these questions, at least for the US, I went to the Forbes list of the richest 400 people in the country.  This helpful reference tells how much they have and the source of their wealth.  

Starting with the top 10 we find Bill Gates.  He’s rich because we all like our computers and most of us use MS products to run them.  We make choices.  Next is Warren Buffet, who made money investing in companies that sell us things either directly or indirectly.  Both are famous for their charitable efforts and don’t seem to be bad or greedy people.  Next is Larry Ellison, also in software (Oracle).  Then come the Koch brothers who have a private company, which means they took all the risk with their own investment and were successful.  They are also identified as “mega-donors.”  The next four are members of the Walton family.  If you resent the fact that they are rich or think it’s unfair, stop shopping at Wal-Mart.  They made their money selling you things you wanted at bargain prices while providing jobs for over 2.2 million.  Some may disagree about the quality of the jobs, but their employees have the option to quit just as their customers have the option to shop elsewhere.  Michael Bloomberg rounds out the top 10.  He also started a company, has given away almost $3 billion and is so "evil and unpopular" that he was elected Mayor of New York City.

The next page shows a similar group:  Jeff Bezos of Amazon, two founders of Google, and three members of the Mars family – the candy company.  If we resent their wealth we can stop shopping on line, stop eating M&Ms and use a different search engine.  Everyone knows how Mark Zuckerberg became number 20.

Down the rest of the list are those who made their money through hedge funds, investments and real estate, but they didn’t make much money off the little guys.  We also run into Jerry Jones at 164 (Dallas Cowboys), Charles Schwab at 88, George Lucas at 109, Oprah at 184 tied with Robert Kraft (NE Patriots).  The list of sources of wealth includes familiar names like Nike, Menards, SC Johnson, Campbell Soup and Little Caesar’s Pizza.

These people did not make their money by lying or cheating or ripping people off.  Most of them made it by working hard to give us what we wanted at a price we were willing to pay.  Some of it we didn’t even need, like $200 sneakers, but we were willing to stand in line or even fight our way to the front of the line to get it. 

Sure, there might be some crooks and scoundrels and some people who are making a lot more than they deserve to be paid.  Sure, there may be some unfairness or misalignment of priorities, but nobody seems to be concerned about that when cheering for the quarterback making $50 million or the golfer making $78 million.  Most of these people got their money from us, and we happily parted with it.  It didn't fall from trees.

A New One Percent

Last year protests against the one percent, the fat cats on Wall Street, failed to gain much momentum.  Now we have a new 1%.  According to a recent CNN Money report:  “Consumers who shop online and don't pay a sales tax at the time of purchase are supposed to pay the tax to their home state. But estimates are that only about 1% of buyers comply with those widely unenforced laws.”

A bill passed in the U.S. Senate on Monday (69-27) is expected to put a stop to that.  If the House agrees and the President signs it into law, 45 states with a sales tax could require online retailers with annual sales of over $1 million to collect tax on purchases made by their residents.  This will amount to an estimated $12 billion in additional annual tax collections for those states.

All along residents have been required to report online purchases as use tax on their state income taxes, but 99% didn’t bother.  Perhaps they considered it a benefit of shopping on line, or perhaps they considered it an offset to the shipping charges.  For many, it was a conscious choice.  “Close to 30% of online shoppers surveyed by advisory firm AlixPartners recently said they would shop more at brick-and-mortar retailers if the tax became reality.”  In any case, the free ride is coming to an end.  The government is stepping in with another law. 

Paying the tax was never rocket science.  The first step in income tax preparation, whether you are doing it yourself or taking it to a tax preparer, is to get your records together.  A computer is both a communications tool and a filing tool.  I like to shop on line, and every time I do I received an acknowledgement through e-mail with all the necessary information.  How difficult is it to store or print that page?  Instead online companies must track all state and local sales tax rates (along with any changes) and calculate that into their bill.  Who do you think will pay for the extra costs involved?

One of the recurring lessons of responsibility is that when we don’t do our jobs, someone else, often the government, will step in and do it for us.  Understanding the economic process teaches us that additional costs imposed on businesses will eventually find their way back into our pockets.  So it's no surprise that avoiding the $12 billion in taxes likely will cost us more in the future, the tax itself plus the price increases to cover added administration on the part of the sellers.  In addition, we will have reinforced the government's assumption that we are not capable and that they must fix things for us.

The Real One Percent

Yesterday was Thanksgiving Day in the US.  Although some people think it’s about watching football, over-eating or sitting outside for hours to be first to the bargains, Thanksgiving is really about perspective.  We are asked to stop for a moment to be grateful for the good things in our lives:  family, friends, health, basic necessities, and living in America.

Despite talk about a widening gap between the rich and the rest, most of us are relatively well off.  Relative to the whole world, not just our isolated corner, more than half of the top 1% by income live in the US.  Spending power for people in most other counties pales in comparison.  We should spend some time being thankful for what we have instead of envying those with more.

We should even be thankful for things we take for granted, like indoor plumbing. Last Monday was World Toilet Day, to highlight the need for basic sanitation for almost one-third of the world’s population.  It sounds to us like a joke, but it’s deadly serious.  I found this article with a good summary of the situation.

“Despite all the advances in technology and modern conveniences, over 2 billion people around the world still do not have access to toilets. More than 1 billion people defecate out in the open! Lack of adequate sanitation is not only humiliating, it is a serious health issue that causes thousands of deaths every day.

“Diarrhea is the second leading cause of death for children under 5 which is attributed to the lack of accessible toilets. 1 child dies every 20 seconds.”  Without perspective, these facts are easy to ignore.  Even average Americans have a lot to be thankful for.

On a personal note, there’s not enough space to list all that I am thankful for, but I want to mention my gratitude to you, my readers.  When I started this project in June 2011, I was lucky if 4 or 5 people read my opinions each day.  By the beginning of this year I reached my first 1,000 pageviews, and by the middle of July I was up to 4,000.  As of yesterday morning I surpassed 20,000. with pageviews running at a pace of about 50,000 per year, most from the US, but also from 60 other countries.  Now that’s peanuts compared to the big websites, but still I am thrilled to be able to share my thoughts with so many.  So thank you, all!

Don't Listen To Me!

As I walked through the mall a few weeks ago, it occurred to me that if everyone listened to me we would be in big trouble!  If we all suddenly developed perspective, began living out our values that people are more important than things and suddenly stopped reacting to advertising hype and peer pressure, half the retail establishments would go out of business - and with them the jobs.  The stock market would tank and with it our retirement investments – so many IRAs, 401(k)s and union pension funds.

What if we all started buying things because we needed them, not because someone else told us that we needed them?  What if we stopped trying so hard to impress our friends and neighbors?  How many shoe stores would one mall need?  Would people rush to buy the latest electronic gadget the day it came out or fight over the latest athletic shoes or pay outrageously for fashions with a designer label or logo?  Would we continue to buy four-dollar cups of fancy coffee?   Instead would we have a nice bowl of cereal packed with fiber and vitamins in the morning and make ourselves a sandwich for lunch a few days a week, saving money and feeling healthier instead of living on a fast-food diet?  Would we be willing to pay those high prices to watch millionaire athletes, actors or singers perform, camping outside the door for hours; or would we wait until the prices seemed more reasonable, more in perspective, forcing those entertainers and promoters to meet (rather than set) our expectations?

Think about it –how many of the 1% that the occupiers rail against were able to join the top1%  because we met their price or kept their companies in business by buying stuff that we could have easily lived without?  Whose spending drove the housing bubble, the Internet bubble and all the other bubbles that made someone else rich?  How many people have basements and garages full of things they once “needed” but now rarely look at – and storage containers rented to accommodate the overflow?

But let’s not all get perspective at once!  There are common folks out there whose jobs depend on Americans buying new cars every few years, stopping in for fast food and a cup of coffee, making a meal with our family a special event instead of a regular practice, preferring designer labels on everything they buy, putting appearance ahead of substance, and planning their lives around what others think of them.  It’s OK if a few try this perspective thing, but let's not get carried away.  If it spreads too far too fast, we are all doomed!

Occupy?

What’s with these Wall Street protests?

Is it a failure of Critical Thinking – a protest against the fact that life is not fair, with no one able to agree on the definition of success or fairness?

Is it a failure of Perspective – able to afford to take the time and make the trip to participate in a gathering that was organized via computers and smart phones, not grateful for what they have, but jealous because they don’t have as much as someone else?

Is it a failure of Responsibility – unhappy with circumstances but marching to demand that someone else fix the situation?

Perhaps it’s a combination.  Just who are these 1% people they are protesting against, anyway?  When they are nameless, faceless entities characterized as Wall Street fat cats, it’s easy to demonize them as evil, greedy and deserving to be singled out and punished for being rich.  According to this CNN article and other sources though, only about 14% fall into the financial category, Wall Street types; and I’m sure not all of them are evil and greedy.  The top 1% also includes people like Peyton Manning, Oprah Winfrey, Lady Gaga, Tiger Woods, Justin Bieber, Leonardo Dicaprio, Eminem, Kobe Bryant, Dr. Phil, Steven Spielberg, Katie Couric, Larry the Cable Guy and many other favorites from sports and entertainment.  I don’t think the animosity against the rich extends to this group.  If you resent the fact that they are rich, stop buying their music, watching the games, and going to the movies.  Look at the Forbes list of richest Americans.  Most of them got there by providing us with products or services that we gladly paid for.


These people aren't necessarily evil.  They are just a lot better than you and me at figuring out ways to make money,  but of course, that's not fair!