Income Was Too Good To Be True

Seeking Alpha ^ | September 28, 2016 | Rodney Johnson

[proxy_user]

The Census Bureau reported that median income jumped 5.2% last year. As I pointed out last week, that's a solid increase, but still leaves us short of the record in 1999.

Still, something about the gains struck me as wrong. Even with cities, states and some businesses bumping up their minimum wage, 5.2% seemed like a lot.

So I went digging. And the more I dug, the more disappointed and frustrated I became. As usual, the source of my angst was the federal government.

Long-time readers know my ongoing annoyance with the Bureau of Labor Statistics (BLS) when it comes to unemployment figures and their birth/death adjustment. Now the Census Bureau is getting in on the act, estimating numbers where respondents don't give answers.

But the bureaucrats don't stop there. In addition to filling in blanks, they're also double-counting income from previous years, and the problem is about to get much worse.

In previous surveys, respondents were asked if they held certain types of accounts or received different streams of income, including wages, interest, pensions, government assistance, etc. The details provided were pretty good, but the statisticians suspected they were missing some buckets of cash.

So in 2013, they tested a new set of questions, and compared the answers to the traditional survey. Sure enough, there was more money! By their calculations, incomes were a full 3% higher than had previously been estimated.

[proxy_user]

People are always claiming: "Oh, the government juggles statistics to make the economy look better". I had always pooh-poohed this, but this article provides a reasoned assessment of the exact nature of the changes and how they would impact the numbers.

Don't expect to see this sort of analysis in the NYTimes or the WaPo.....unless everybody starts talking about it online.

[KarlInOhio]

Summary: The government counts money you sock away in a retirement account as earnings when you earn it. Then they count the principal as earnings again when you withdraw it.

I wonder if they count it again when you transfer it from your 401k to an individual IRA when you change jobs.

[proxy_user]

Well, some parts of the government, such as the Bureau of Labor Statistics, do. The IRS doesn’t count it as part of your AGI until you withdraw it.

And the author’s point is weakened by the earnings in the IRA or 401K. Unless the un-withdrawn gains are counted as income by the BLS, then some of what is withdrawn is NOT double-counted. Of course, if you lost money in your retirement account, then it is even worse.

[Vigilanteman]

Back before everything became totally politicized, they actually hired competent people. My former company bought a lot of carbon black. There was a guy in the government statistics office who knew everything there was to know about this commodity. On a slow day, I could call him and he'd be amazingly helpful.

Now, you talk to people who know less than you do about critical raw materials because they are such political hacks.

[Snowybear]

My income went up about 2%. Why? Because I got laid off and then got a better job for that much more money.

No thanks to you, Obummer.

[Travis McGee]

Reminds me of old Pravda headlines.

“GRAIN HARVEST SMASHES RECORD!”

[SunTzuWu]

Bookmark.

[mad_as_he$$]

Easy answer. If it is from .gov it is a lie. Saves a great deal of time.