Brain Teaser of the Week

What's been happening to the real, pretax income of the middle class (...not to be confused with "real after-tax disposable income")?  You decide.  The two charts below should be self explanatory.

Comments

[Bob]

Steve:

You may have left yourself open on this one. Every Clintonite will point towards the upwards slope from 94 to 99 as well as hammering you that today we're off the peak of his term.

Nevermind the tech bubble and all the unsustainable companies and jobs. Forget about recessions, too. Ignore long term trends. Things were great under Bubba and they aren't now. That's their mantra, they're emotionally invested and have no intention of changing their minds.

[Rick Ballard]

Bob,

Setting the Bubbabubble aside, there is still the demographic tide which saw the ranks of those in their "best" earning decade (45-55) grow by 8.4 million between '90 and '00 while that same contingent will only grow by 4.3 million between '00 and '10. Using BLS and Census census data, it's rather simple to determine that the 45-55 year old contingent within the labor force grew by 20% between '90 and '00 (from 10% to 12%), whereas it will grow by only 8.3% (from 12% to 13%) between '00 and '10, after which it will decline by some 30% by '20.

The focus on the "median" is good political handwaving but closer attention to the age composition of the various cohorts of the working population provides a more reasonable explanation of the 'flattening' of the increase.

[Steve]

Bob:
You're right, I left it wide open. I offered no opinions, just facts. Any reader is wide open to interpret those facts as he or she sees fit.

I do have a prediction, however: one's interpretation will be highly correlated with one's political leaning. I predict the correlation will be close to 0.999, in fact. The universal human tendency called "confirmation bias" pretty much guarantees it.

[Bob]

Rick,

Bubbabubble....I love it. Now incorporated into my vocabulary.

[Don]

Steve,
While household income has risen over time, has it outpaced inflation? Given that I'm a relative econ neophyte, I took $37,000, which appeared to be the average income in 1967, and extrapolated that price to 1997 using the CPI calculator provided by the federal reserve, which indicated that those goods would be worth $178,000. According to my simple analysis, the median family in 1967 would be better off than today. I'm sure there are holes in this logic, and so I welcome your comments.

[Steve]

Hi Don:

Converting "current dollar income" to "real" income is an attempt to adjust inflation out of the numbers. They use the CPI (consumer price index) to do that. In theory, that means $1001 in 2007 is one real dollar more than $1000 in 1997, or 1987, or 1977.

Some experts say the CPI still overstates inflation by about 0.7 points, which would mean that real dollars are understated, primarily because it takes so long for the BLS to adjust for product quality improvements.

[Rick Ballard]

Don,

The $37K median is expressed in current dollars. "Actual" 1967 dollars would be $6,130. Most historical economic data presented by gov agencies will be either "chained" to a particular year or expressed in "current" dollars. There is all sorts of magic involved in median comparisons. Consider the cost of a "median" priced house in 1970 and a "median" priced house today - if no adjustment is made for the quantitaive (let alone qualitative) differences between the two some extraordinary conclusions could be drawn concerning "hyperinflation" and housing. Today's Median family prefers a house that is 40-50% larger than Grandpa Median thought comfortable in 1970 and chooses to devote a higher level of income to having more space.

Are they "richer" or "poorer"?

[Rick Ballard]

Don,

I had missed Steve's response prior to submitting mine. His definition of "real" corresponds more precisely to the definition given in the report from which the chart data is drawn

"All income values are adjusted to reflect 2006 dollars. “Real” refers to income after adjusting for inflation. The adjustment is based on percentage changes in prices between earlier years and 2006 and is computed by dividing the annual average Consumer Price Index Research Series (CPI-U-RS) for 2006 by the annual average for earlier years. The CPI-U-RS values for 1947 to 2006 are available in Appendix A and on the Internet at . Inflation between 2005 and 2006 was 3.3 percent."

The report - Income, Poverty, and Health Insurance Coverage in the United States: 2006 is also a secondary source for the information I referred to in my comment at 12:28. Page 5 contains data on median income by age group.

Steve,

Is there any particular reason why HTML is not enabled for comments?

[PseudoNoise]

Looks to me like wages have been stagnant since 2000.

Seems like those Democrats at the debates have the numbers to back them up.

http://www.optimist123.com/optimist/2007/11/lets-kill-the-s.html

Of course, this was my point there as well -- most people by definition are doing -worse- than breaking even with their 2000 wage. That is why there's no push-back -- it's the truth, and most of use know it! (Half from experience, and a smaller fraction of those above the median who actually know what's going on with their fellow man).

[ilsm]

Considering three periods of graphed income growth roughly associated with Reagan, Clinton and Bush II, the one that did not have huge federal deficit financing is Clinton's.

What is the long term effect of borrowing our way to 'prosperity'?

[cahunga]

Fact: Real median wages for men have been flat for 33 years.

Fact: Growth in median household wages, represent a growth in the numbers of women entering the work force and a slow wage increase toward eqality with men.

Fact: Focusing on small variations in the overall trend misses the important point.

[muirgeo]

I guess I don't get it. Two post ago Steve claimed it was myth for the democratic nominees to claim that wages have been stagnant since Bush has been in charge. Now he proves them right???? So has the myth about the myth about stagnant wages been killed?

The simple fact is that what prosperity we have had the last 7 years was mis-allocated based on Bush's and Republican cronyistic policies. America understands that and they've had enough.

[Steve]

muirgeo:

Sounds like you processed those articles through a thick political filter. Let's test that. Here are two simple questions, followed by my guess at your answers:

1. The better measure of the real return per hour of work for a worker is: (a) the real hourly wage; or (b) real hourly compensation.

2. Interruptions in the real median annual household pretax income (not to be confused with hourly wage or compensation) have historically been highly correlated with: (a) Republicans, especially since the year 2000; or (b) recessions at the end of business cycles.

Now for my guesses at your answers: (a) and (a).

Did I guess correctly?

I thought so. Try googling "confirmation bias."

[Rick Ballard]

Muirgeo,

Funny, what I see is the bursting of the Bubbabubble followed by 9/11 (including it's aftermath) with a solid recovery thereafter.

I've never heard of rewarding the productive described as a "misallocation". Is there a planet where the occupations encompassed by Food Preparation and Serving Related, Building and Grounds Cleaning, Maintenance, Personal Care and Service, Installation, Maintenance, Repair and Transportation and Material Moving pay better than, say, Business and Financial Operations, Computer and Mathematical or Sales and Related?

'Cause those first named are what drags down the famous "median" while the latter keep rising in line with productivity gains.

Or do you just believe in wholesale inflation as the "cure" for lifting the incomes of those in occupations where productivity increases are close to impossible?

[muirgeo]

Yes Steve you guessed right but which of us has confirmation bias?

2 threads ago you showed us a graph labeled Workers Real Compensation, 1981- 2005. I don't see the big dips in that curve. Why?

First, I think policy DOES effect wage distribution. And I'm not just talking about tax policy. Yes history shows Republican policies generally transfer and concentrates wealth upwards to those who already have a lot as opposed to a shared prosperity more commonly seen with democratic policies.

Second I'd sure like to see the median wage trend look more like the trend in your Workers Real Compensation graphic. Why does it not?

Supposedly it is the rich who are rich because they take all the risk. Your two graph suggest the opposite. The rich continue upward while the working class bear the brunt of the downturns.

[muirgeo]

"...a solid recovery thereafter.

I've never heard of rewarding the productive described as a "misallocation"."

Rick Ballard

Rick,

Do you really consider this a solid recovery considering the liquidity issues and the housing bubble?

Regarding "the productive"....do you really consider it productive to underwrite subprime loans and package them along the way making billions of dollars off of a scheme that will bankrupt millions? If they are so productive how come they are needing the backing of billions and billions of dollars infused into the system by the fed? Seems to me they put all the risk on the average person while using the government to minimize their own risks.

Is it productive to make billions off a war? Is it productive to have your lobbyist write the Medicare part D drug bill at a huge cost to the taxpayer?

Is it productive to require the whole of the US military to get your product to market spending trillions in dollars and lives along the way?

A lot of what you are calling productive I would call corporatism. And it is in direct conflict with free/ competitve markets and democracy.

[Rick Ballard]

"Do you really consider this a solid recovery considering the liquidity issues and the housing bubble?"

Of course it is. Schumpeter's machine is going to work as well as the bleeding hearts allow it to in breaking both those who lied to get those bad mortgages as well as those foolish enough to make them. It's very unfortunate that Moody's, S & P and Fitch won't take the hit they deserve but that's a regulatory issue that has existed for decades.

I hate to break it to you but Black Friday sales walloped predictions http://news.yahoo.com/s/ap/20071124/ap_on_bi_ge/holiday_shopping and construction just keeps chugging along http://construction.com/ResourceCenter/forecast/2007/Nov.asp.

"A lot of what you are calling productive I would call corporatism."

I don't doubt that - every socialist feels that way. Say, did you notice that Airbus is threatening its unions with suicide? http://www.ft.com/cms/s/0/1b848ae2-993a-11dc-bb45-0000779fd2ac.html

Now that's a true progressive environment.

Economic slow death.

[Syphax]

Back to the original question...

"Is the Middle Class (a) stagnating, (b) falling behind or (c) getting wealthier?"

The middle class is unquestionably wealthier, although median household income isn't a good measure of the performance of the middle class.

For one thing, there are less people per household(3.33 in 1960, now 2.57). This drags the median down quite dramatically making the "middle class" look poorer.

Second, the number of female headed households are up 50% since 1960 and the number of foreign born workers has doubled since 1960. This makes us look poorer.

Demographics have drastically changed since 1960 and have made the median household income measurement a very poor measure of "middle class" progress.

The fact is that 1960's households are completely different than today's households. People incorrectly leap to the conclusion that since median income per household hasn't increased(which as Steve showed isn't even true although I have heard people say this), the SAME workers in 1960 are worse, ignoring that immigrants have "brought down" the median and households have split up and have fewer people on average.

Find a way to compare similar groups of workers(based on education, age, years of experience etc.) from 1960, 1970, 1980, 1990, 2000, 2007 and get back to me... until then, stats on the "stagnation of the middle class" are universally garbage.

We are better off.

[muirgeo]

"A lot of what you are calling productive I would call corporatism."

I don't doubt that - every socialist feels that way.

It's there...when you admit to me you don't care about rampant corporatism that I know I'm far closer to being a supporter of true competitive markets then you. And I know that you are far closer to being a supporter of fascism then I a socialist.

[A Tanatar]

Rick Ballard, can we please have a look at real income, say, for lawyers? Did we see huge productivity increases for lawyers in the last couple of decades? Frankly, I'm inclined to think otherwise.

In fact, yes, perhaps we need a wholesale inflation. Inflation is as much a measure of relative value of past labour to current labour as anything else, not only the monetary supply/demad thing. Just as "asset inflation" in many senses is an opposite of "monetary inflation": the value of current labour relative to past labour decreases.

[AH·C]

Slightly O/T

Rick, regarding Airbus, note the last sentence of the article: "Unions urged governments to show support by pressing the European Central Bank to take action on the strengthening euro."

Yeah, that's the reality-based ticket -- they now want to weaken the Euro? Easier said than done for the ECB given the EU structure. Actually, Sarkozy will accomplish more for both Airbus & the Euro by busting the unions.

I recall posting somewhere a few years ago that Bush's strategy of weakening the USD had multiple direct benefits in speeding up the recovery from the Bubbabubble & 9/11 recession, mitigating US-based manufacturing losses, pump up employment rolls, increase tax revenues while leveraging dollarized imports from China etc all while reducing imports from Euroland and even help subsidize the GWOT. The bonus was to indirectly punish Schroeder & Cheinraq.

I shudder to think where we'd be if both the dotcom bubble burst & 9/11 happened on Bubba's watch. Price controls anyone?

In any case, now that Sarkozy & Merkle are friends, it'd still take time to turn the ship as it were to strengthen the USD and may yet be for naught depending on who wins 08.

[Grodge]

I find it odd that Steve has become so defensive of the generosity of employers who continue to provide health benefits for employees, even while the percentage of employers providing such benefits has decreased from 65% to 59%-- an almost 10% drop!

Opiners here and at Angry Bear do not seem to be castigating employers so much as recognizing the untenable position all of us are facing with the increasing cost of health care and other necessary goods and services. Is the quality of health care truly improved to account for the increased cost? The quality of gasoline? milk? meat? Please.

Sure, compensation has increased (and kudos to employers for that I suppose!), but the impact of creeping inflation is real, and those effects are especially felt by hourly employees who have seen no increase in wages over 7 years. Nobody is faulting individual employers so much as they at the Angry Bear are faulting the BLS for failing to recognize the negative impact of these inflationary factors and the Fed's failure to reign in inflation with it's piss-poor monetary policy.

I think that is the point of John Edwards' campaign "debate" speeches as well, although Steve did not furnish a link to the debate transcript (and I'll be damned if I could listen to those ridiculous "debates" live.)

Economic cycles are pretty much independent of which party occupies the WH and Congress. Clinton had about as much control over the dotcom bubble as Dubya had over the real estate bubble, although one could argue that the subprime mess could have been mitigated with proper bank regulation 2, 3 or 4 years ago.

Steve started the argument with a swipe at Edwards for recognizing the obvious: wages are stagnant. They are! So what!? Even if total compensation has increased, the median household take-home wage is stagnant and Joe Sixpack feels the pain as his cost of living rises at a greater rate than reflected in the government CPI. At least admit that!

The proper response is to say "the economic cycle will turn, and is turning." To make some grand political case over the issue is ludicrous.

[The Dirty Mac]

"And I know that you are far closer to being a supporter of fascism then I a socialist."

We are assuming that a fascist is not a socialist? I don't think so.

[Rick Ballard]

"Rick Ballard, can we please have a look at real income, say, for lawyers?"

Sure. Steve is looking at the period of '99-'06 and the BLS stats indicate an increase in compensation for lawyers of 26% over that period. Not as good as LVNs at 29% but better than elementary school teachers at 23% or wastewater treatment workers at 19%. The Fed calculator says CPI increased by 21% over the same period.

Personally, I think the wastewater workers are getting screwed. Absence of 80% the service they provide would be felt far more quickly and deeply than absence of 80% of the service provided by most occupations. Local government seems to think otherwise and persists in giving them the shaft - where's AFSCME when you need them?

Muirgeo,

You do realize that you are relying on a mistranslation of Mussolini's 'corporatismo' in order to make your silly point, right? Mussolini's use of the labor movement (sindalicalismo) to control means of production isn't exactly a secret.

[muirgeo]

Call it what you want Rick but when you support or ignore the fact that corporations are serving as organs of political representation and exercising control over persons and activities within their jurisdiction (Merriam-Webster for corporatism) as well as undermining the electoral and policy making process you have abdicated your claim to support competitive and free markets.

[Rick Ballard]

Muirgeo,

Aside from your vivid imagination, where (in your opinion) do these "competitive and free markets" exist?

Or will they come about when society recognizes the true Men Of The People and cede control to the unelected and incompetent?

[Aaron]

I think it is more useful to look at 1992 - 2000 very nice slope more as "the serious implementation of information technology and the internet in our economy leading to vastly improved productivity" rather than "Clinton and the Democrats do better in government."

Because, seriously, Muirgeo, do you think Clinton created Amazon.com? Did the Democrats pass laws requiring the use of e-mail and the internet to allow better outsourcing of production?

I don't think so.

[muirgeo]

Because, seriously, Muirgeo, do you think Clinton created Amazon.com?

I don't think so.
Posted by: Aaron

Aaron,

You are really reaching. The economy was great under Clinton but it should have been disastrous because he is a democrat right? Likewise the 20 year rule of the republicans at the beginning of the last century lead to a Great Depression. 20 years after FDR our economy was the envy of the world and the middle class was stronger then ever.

You guys seem to like to look for any other reason to explain away the success of Clinton or FDR but try to give all the credit of the current economy to Bush. Two problems with that . One, the current economy looks headed for a serious crash...AGAIN.....and no democrats have been in charge the last 7 years or even really since Reagan. Two, to borrow you logic...yeah like the Bush administration had anything to do with the success of Haliburton....oh wait they did....

[AH·C]

muirgeo,

I think Clinton was triangulated by the "long boom", a repub congress and endless mini-scandals. That left the Dems without much capital for advancing their cherished, and disastrous socialist experiments.

I hardly think Clinton acted to cut welfare rolls out of any core beliefs, rather it was to stay in front of the issues so as to "lead". Better to co-opt a winning opposition plan than to go down on principle. To wit, never revisiting the failed HillaryCare initiative.

At least you acknowledge that the Dems haven't really been in charge since Reagan. Actually, I'd say it was since Carter that they more or less had Carte Blanche. Ever since then, it's been a series of win a few, lose more.

Anytime someone brings up the canard Halliburton succeeding because of Bush, I know they're either not serious and/or bamboozled by Waxman. Especially, since it was in Bosnia, under the Clinton admin that Halliburton won a special sole-source contract for about $400 million after they lost an open competition bid under LOGCAP. Some consolation prize. Clinton/Gore/Perry went out and insisted it was a good, cost-effective and necessary thing that was win-win. In 99, Halliburton won LOGCAP when it was recompeted with an estimated value of $900 million

Please do educate thyself to the truth of "no-bids"
http://www.nationalreview.com/york/york070903.asp

[Aaron]

"The economy was great under Clinton but it should have been disastrous because he is a democrat right?"

No. What I am saying is the political party in power has very little control over the economy. (That's why we call it a free market economy.) They can only work at the margins, with taxes, regulation,reforms, etc.

Nobody wakes up one day, reads in the paper that the Dems are raising taxes to be responsible or that the GOP is going get rid of the estate tax and says, "Ok, this was the signal I needed to go and create a company that will sell books over the internet."

p.s. Please explain why you are giving credit to FDR for the economy 20 years after he left office, but not for the disastrous numbers while he was in office? Does this means the recession of 2008 should be blamed on who was president in 1988? Or note that in the first chart who was president when the line starts to tank? And why no mention of Jimmy Carter? Didn't his economy really deliver, like all Democrat administrations should in your world-view?

[Luis Busquets]

Why don't you put the graph in EUROS?
This would result in how the economic power of the medium American family has changed in relation to the average European family.

I wish the Republicans win again!! That will be the perfect boost for Europe.

[A Tanatar]

Aaron, you don't seem to get one thing: a big question is *who* creates the company that sells books over the internet: a guy who has this great idea and is a programmer or a guy with tons of money. And this tricky question largely depends on tax structure: i.e. how costly the education is, what the tax structure is, how covered a new guy socially in business, cash availability and more.

Largely, the "failure" of the current administration is that they created conditions favourable to people who are wealthy already rather than to new businesses.

[Rick Ballard]

"Largely, the "failure" of the current administration is that they created conditions favourable to people who are wealthy already rather than to new businesses."

Hogwash. From the SBA "Overall, self-employment (as a primary occupation and including incorporated ventures) rose 12.2 percent from 1995 to 2004, with 10.2 percent of the 2004 work force choosing self-employment. The number of self-employed overall declined somewhat from 1995 to 2000, and then increased considerably from 2000 to 2004" The trend continued in '05-'06 but the SBA only has preliminary numbers available.

I'm sure happy I don't live in Fantasy USA - progressive dystopias are spirit killers.

[AH·C]

Luis wrote "This would result in how the economic power of the medium American family has changed in relation to the average European family."

What kind of fantasy spin is that?

Old Europe (England, Germany & France) is dogged by high unemployment and the average middle class family has half the living space. Sure makes me pine for their greener pastures.

If you're talking about Eastern Europe & Ireland, I should hope that they are escalating economic power & wealth, since their tax burdens are far less tan the US.

[AH·C]

"Aaron, you don't seem to get one thing: a big question is *who* creates the company that sells books over the internet: a guy who has this great idea and is a programmer or a guy with tons of money."

The answer is usually both.

For the entrepreneur, it also doesn't depend on how costly the education, or how socially connected. Otherwise, many from Bill Gates on down to Facebook founders should have never flown so high based on their degrees & pedigree.

Cash availability is predicated on investors & venture capitalists keeping more of their money, thus free to reinvest as they deem fit. The more they are allowed to keep, the more willing they will be to invest n risky plans.

The key to more new businesses is wealth. Wealth is not the golden egg, it is the goose to businesses.

[A Tanatar]

Aaron, I agree that "usually both" is an answer. However, it's the wrong kind of answer: the right kind of answer is proportion of founders among money bags and the actual interpreneurs. Economy has to allow new blood in business, otherwise USA will follow the path of USSR.

Wealth is not a key to new businesses; capital availability for new enterprises is. If capital is too concentrated, it becomes a capital monopoly and gets inefficient. And capital for new enterprises is much more complex than just cash: we need human capital, cost of risk, amount of money needed to start a new company and more.

And, by the way, Bill Gates is exactly "degree and pedigree" - check out who his mother was and what people were in Microsoft when the company started.

[A Tanatar]

Rick Ballard, comparing unemployment is a bit tricky. If we look at workforse participation rate, however, than we will find out that Europe is behind mostly in youth employment (see http://www.pc.gov.au/__data/assets/pdf_file/0008/60479/workforceparticipation.pdf, table A.3), where the entry into workforce is more painful, than in US. However, in "prime" range of 25 to 55 US is by far not the top country.

[Rick Ballard]

"However, in "prime" range of 25 to 55 US is by far not the top country."

Of course it isn't. There is no other country in the world where so many have made enough so that they may choose to stop working before fifty. The socialist countries want to keep their worker units in harness until they can be exterminated through rationing of medical services.

No surprise there.

[A Tanatar]

Rick Ballard, then it would only be logical to assume that this will cause US labour participation be lower in higher age brackets. Unfortunately, it is among the highest.

[Rick Ballard]

"then it would only be logical to assume that this will cause US labour participation be lower in higher age brackets."

No, it would be logical to assume that it would be lower among those who understand that self-actualization requires a sufficiency of capital. Many people in the highest brackets find personal satisfaction derived only by acquisition of material wealth, others find different ways.

At the moment there is over $17 trillion sitting in private retirement accounts here in the US and there are millions of Americans who can do the appropriate calculations concerning prudent withdrawal rates coupled with $700K IRAs or 401Ks.

It's mostly socialists that have to stay hitched to the plough until they drop.

[B]

Aha! I see that there are some of your attempting to have a rational
debate with Muriego.

Hi Muriego. How ya doin'? No worries. Assuming you are an American citizen you get to vote before too long. Most likely you will have a choice between Mrs. Bubba and someone else. You can vote for her and all will be right with your world. The DJIA will get to 30,000, the dotcoms will come roaring back, health care will be free and all those nasty corporations and rich people will pay the piper. In her first term, the Israelis and Palestinians will smoke a peace pipe, oil will drop
to $20, Congress will attempt to regulate the financial industry by making it illegal to conjur up high risk alchemy and the Cubs will win the World Series.

That's because Bubba will be back in the WH and things are ALWAYS better with Bubba.

[AH·C]

A Tanatar, you were responding to me, not Aaron.

Anyway, you wrote: "However, it's the wrong kind of answer: the right kind of answer is proportion of founders among money bags and the actual interpreneurs. Economy has to allow new blood in business, otherwise USA will follow the path of USSR."
-----------------------
Huh? What on earth are you psycho-babbling about? "Proportion of founders among money bags and the actual interpreneurs"??? Spend a little time at the SBA website, then compare the rate of entrepreneurship here compared to socialist Europe. Heck, there are probably more European entrepreneurs here in America than back home.

The four keys to encouraging entrepreneurship here compared to over there are 1) easy access to capital, 2) don't need as much, 3) it's ok to fail and try again, and 4) you can try anything here unless there's a law against it, whereas over there, unless it's specifically allowed by law, you can't try it (subtle but significant difference psychologically & in practice).

======================

"Wealth is not a key to new businesses; capital availability for new enterprises is. If capital is too concentrated, it becomes a capital monopoly and gets inefficient."
--------------------
Again. Huuh? Without wealth, you don't have capital. No one is going to invest anything if everything they earn goes directly towards surviving and/or the next round of bills. There is a truth to the adage that the rich get richer, but not for reasons ascribed to by nutroots. The rich get richer because they plow excess wealth back into generating more wealth -- by putting it to work wherever they think they might get the best returns.

Please show me an example of capital monopoly, especially in an information-driven economy. You'd have a minor point if you were talking about an industrial economy where infrastructure is expensive. Even then, it's a lousy example because the middle class came into being precisely because of the industrial revolution. In any case, how is the govt even able to determine when capital becomes inefficient. That's an oxymoron.

And don't get me started on charity, since we freely donate more per capital than any other country. We do so because we chose to share our wealth, w/o the State deigning to do so forcibly. Altho, in this day and age, the gubmint seems to have developed a taste for taking more from us on behalf of others.

======================
"And capital for new enterprises is much more complex than just cash: we need human capital, cost of risk, amount of money needed to start a new company and more."
-------------------
You must think starting a business makes one a demigod given the "complexities". And I can assure you that an American can take a given sum and run with it further than a socialist European can, where the barriers to business startup is deliberately set high. Are you even aware of how many US sustainable small businesses start on a shoestring & a prayer?

============================
"Bill Gates is exactly "degree and pedigree" - check out who his mother was and what people were in Microsoft when the company started."

Bill didn't succeed because he had a degree, and the pedigree only helped as a source of financial backing, rather than serving as an entre to an exclusive "ole boys club". He still had to prove himself on the merits. The point is that many a success story made it big by dint of sweat, blood and tears equity (that's your human capital), where a lack of degree or pedigree didn't slow them down.

[muirgeo]

Anytime someone brings up the canard Halliburton succeeding because of Bush, I know they're either not serious and/or bamboozled by Waxman.

Posted by: AH·C

In fact , AH-C it is you who are bamboozled. You the supposed libertarian or fiscal conservative arguing to me the merits of government no bid contracts with a 4 year old article.

During the 2nd world war a democratic Senator (Truman) complained to his democratic President (FDR) that much war profiteering was going on. Investigations followed and the guilty taken care of. That's the way it should happen. But you vested more in your party then truth and liberty attack a guy like Waxman.

Currently every single tax dollar paid to this government by those making $100,000 or less per year (94% of Americans) is spent on government contracts. Much of it indeed necessary ad much useful but very large sums spent on cronyism, political favors and corporate welfare. All being stolen and redistributed from the worker to the corrupt politician and his backers.

Again you are now defending the indefensible. You're arguing the merits of no-bid contracts with a liberal like myself. You have truly lost your way, you have bamboozled yourself and put your politics and hate of Clinton and democrats ahead of your country and even ahead of your very own ideology.

[AH·C]

I said nothing about hating Clinton. I followed and understood the contracting processes back in the 90s before liberals like you even heard of Halliburton. The point is that Bush-Cheney did not originate "no-bid" contracts. In fact, Waxman is the one that pegged IDIQs as no-bids which is patently false. Your talking points ignore that there are several other companies with "no-bid" contracts larger than Halliburton by an order of magnitude, in order to put your politics and hate of Bush and GOP ahead of country, but not ideology. In any case, I rest my case.

[Bob]

So, Muriego has come out of the closet and fessed up to be a confirmed lib. Well, at least your bias is now official.

Re: no bid contracts.

All depends which side of the fence you are on. I spent a good amount of time in a sales career. Much time, energy and training spent to position myself and the company in a strength position to avoid low bid deals (we called it "read 'em and weep" deals). Nothing shady went on but every time I could prevent business going out for bid, I did so.

If I were a sales person for Sikorsky it would be relatively easy to show how it would cost more for the customer to switch suppliers. And, I'll wager that the author of this blog saw more than one instance of a no bid contract for the company he worked for.

Low bid does not always equate to low cost of ownership.

[muirgeo]

In any case, I rest my case.

Posted by: AH·C

Indeed your case has been laid to rest. True fiscal conservatives don't argue in favor of cronyism, corruption and its attendant run away spending of the public treasury and then go and claim, "I've never heard of rewarding the productive described as a "misallocation". Productive like a bank robber!! You have a decided lack of logical, moral and ideological consistency.

[AH·C]

Bob, I too hate low-ball bids. If it were up to me, I'd hold the low-bidder to the cost basis. The real problem in most contracts is that the govt fixates on overall cost proposal and not on the composite rates.

For instance, company A bids on a project to cost $15 million, using a staff of 70, company B bids $13.5 using a staff of 55. Which one is really cheaper, especially if the workforce is actually dependent on production thruput? IOW, what if it really takes 35, 55, or 80 or even 100 workers? The key is the composite labor rate, in which case company A is actually cheaper.

However, "no-bids" are a different creature and when used in context of govt contracts, it's usually about sole-source contracts. All that means is that the govt wants to award a contract for a product or service that only one or two companies can provide. In that case, once it's been established thru a drawnout list of congressionally mandated review/evaluation process, the govt can award a contract without "bidding" it. Even so, the govt is obligated to announce the bid proposal, in the rare event someone pops up out of nowhere who can compete against the intended sole-sourcee.

To wit, if the govt needs a bunch of Cisco routers due to some performance advantages, they will announce a sole-source solicitation. Our oblivious friend muirgeo can denounce this as a corrupt no-bid to his hearts content. However, Cisco has to show the govt its true cost of production, other fees and the intended profit margin. Usually, there will be some negotiations as the govt tries to squeeze as much as they can. All the while, Cisco can never be sure that someone has read the solicitation specs and decided to go toe-to-toe against Cisco.

If Cisco wins, the clueless protester assumes it was a corrupt no-bid contest. If the challenger gets it, then people wonder if it was a low-ball contract.

The other "no-bid" type is the "logical follow-on", where no one but the incumbent ever sees the solicitation. Again, the rules are specific about when & how this can be invoked, ie Halliburton & Clinton admin, plus it can only be used a couple of times before it has to be fully re-competed.

But is any of it, as muirgeo claims, cronyism, corruption and its attendant run away spending? Sometimes, but most often not. Presidents don't make the rules, Congress does. If there is a problem, then it's up to congress to fix any and all of the reams of pages of laws that they specifically wrote for contracting.

How convenient that congress wrote some laws so as to ram earmarks thru forcing agencies to buy stuff they don't even want from the earmarker's constituents. Fancy that.

Bottomline, contracting is a business and w/o profit, there's no business. The customer just has to ensure that they are getting the best bang for the buck.

For the whole duration that the nutroots have screamed bush-cheney-halliburton cronyism, there have been other bigger cases of real corruption & cronyism that have been discovered, investigated & abjudicated with the guilty fired and/or haul off to the hoosegow. To wit the Boeing 767 Tanker scandal.

Yet the Halliburton urban legend refuses to die and no smoking gun ever found.

[Nom de Blog]

I lost two IQ points reading the posts muirgeo left above. He literally sapped the intelligence out of my brain with his rants and name calling.

I must away before it drags me down to its level.

[Jason]

Where's the graphs of the "upper" and "lower" class. By itself this graph is meaningless, you need the context of the other "classes" for a proper comparison.