• Class Warfare

      In his speech yesterday, Obama brought up income inequality to justify higher taxes on the rich.

      In the last decade, the average income of the bottom 90% of all working Americans actually declined. The top 1% saw their income rise by an average of more than a quarter of a million dollars each. And that’s who needs to pay less taxes?

      But even if the numbers are accurate, Obama portrays a much more divided America that really exists, because -- as economist Russ Roberts notes on his blog -- today’s top income earners today are often completely different people from yesterday’s top income earners.

      The group Pew Charitable Trusts followed families from 1970 to 2000 and found that people usualy broke out of poverty. Of children who were born to the poorest fifth of Americans in 1970, more than half of them rose out of that group by the year 2000. Similarly, being born to a rich family didn’t guarantee success: 61% of the kids born to the richest fifth of Americans in 1970 were no longer in that group thirty years later. That also means that 61% of the richest fifth in 2000 came from poorer families.

      The names of some of those people are familiar. Steve Jobs dropped out of college and Oprah Winfrey was raised in poverty. Forbes magazine says that most of the billionaires on its list “made their fortunes from scratch.”

      This graph shows how, while nearly all groups got wealthier from 1970 to 2000 (the data do not yet go to 2010) the children of poorer parents gained the most:

      Chart from Pew Charitable Trusts

      Tune in to Stossel tonight at 10pm to hear about entrepreneurs who generate real wealth – unlike politicians, who just steal from one person to give to another.