Power Line Agrees with Me!Their take on Paul Krugman's column from last Friday:
Of course, that's partly an artifact of the dates Krugman arbitrarily chooses. 1973 represented a business cycle peak, while in 2003 the economy was coming off a recession. Competent economists do not do peak-to-trough comparisons. If, to take an example skewed in the opposite direction, we compare median family income in 1982 with the 2000 figure, the growth is 27%, not 22%.My take:
But the best method of forecasting with a chart like this would be to draw a line between the peaks and another line between the troughs, extend them forward, and say that the future is somewhere between those lines. What Krugman has done is draw a line between a peak (a recession began in 1973) and a trough (2003 appears to be a cyclic low for MHI) and encouraged his readers to assume that the future will follow that line.And I hit on the point about single-parent families as well, but they do it better by going to the actual data:
But that's a relatively minor point. Here is a more fundamental problem with Krugman's calculation. When we compare "family income" figures over time, the figures are distorted by the fact that over the past three decades, families have fragmented. There are far more single-parent families now than in the early 1970s. Single-parent families generally have lower incomes than two-parent families, so this trend has depressed family income. If we factor out this demographic change, we find strong and steady income growth. Thus, the Census Bureau data show that for the category "Married-Couple Families," median income went from $46,723 in 1973 to $62,281 in 2003. (All numbers are in constant 2003 dollars.) That's a hefty 33% increase in real income. Meanwhile, incomes of families headed by either a man or a woman increased by 23.4%. But since there was a considerably greater proportion of such families in 2003 than in 1973, the aggregate increase on a "per family" basis was dragged down to 22%. (If you don't think that's possible, do the math.)They also contribute a
link to the data, which I will take a look at in a bit.
