bostonbubble.com

[john p]

http://www.massbudget.org/growing_gap.pdf

[JCK]

Thanks for posting this.

These types of studies always bring up more questions than they answer. The poor aren't getting poorer, but the rich certainly are getting richer.

I'd be curious to see how this correlates with geography. I assume most of the wealth is in the eastern part of the state. Are income stagnating state-wide in the lower levels, or is this true in certain areas, and not others?

Also, what does the rich:poor income ratio really mean? I see states like Tennessee and North Carolina as being worse than Mass, but I also see New York and California too.

The states at the bottom (lowest gap) all appear to be predominantly rural. So is the income gap the result of having concentrations of wealth in urban areas in state that has lower income rural areas, or is it something that's occurring more locally within cities or metro areas?

Because this is "family" income, how much of this is due to the increase in women working? I'd bet there are many more two-income professionals today in Massachusetts than 20 years ago.

[admin]

Here's one more question to pile onto all the good ones JCK brought up: how big of an overlap is there between the individuals who are rich in each time period? Somebody made an interesting point in a book I read awhile back that the lists of richest people have a tremendous amount of churn. Many people fall off the list who could have maintained a spot with paltry returns on their previous wealth. I don't really know how this might translate to the much broader top quintile, though. The top income brackets have surely seen tremendous growth, but how many people are in those brackets consistently as opposed to those who just have a good year or two?

- admin

[Guest]

I hate these studies. They never offer any Historical perspective.

A. 1982 -200? - Was has been the biggest and longest Stock market Bull market in the history of the Country.

People in the upper income levels - people who have saving - due well during Bull Markets because they have enough money to own assets that increase with inflation as Assets (inflation in value when there is lots of Money being created) during Bull Markets.

B. These studies never look at the Income disparities of previous time. Look at the tremendous wealth the was created during the 1870s-1880s.

Railroads and the telegraph were the booming Industries.

In the 1890s the Economy sank into one of the worst recession/depressionary periods of the USA.

In the 1890s if you were on the low end of the Income - you were in real trouble:
You wouldn't have any of the safety nets of today like:

1. The Earned Income Tax Credit
2. Food Stamps
3. There was No Section 8 Housing
4. No School lunch progam
5. No school care for your children - Actually, there was probably no schooling for your child because going to school was optional.
6. No Public Housing Projects
7. No Free Medical Treatment for the Poor in the 1890s - unless you ran into a nice Doctor.

B. Lets look at the income disparity between the Poor and the Rich in the 1930s. Even though the Depression left 25% unemployed there were still 75% that were employed.
I would bet there was a GREAT Disparity between the upper 25% and the bottom 25 %. Look at the Kennedy Family - I suspect their Income was 100 times or more greater than the bottom 25%.

Meanwhile the foundations that create these stories never offer to disclose the Salaries of their Executive team - that would have my interest.

[john p]

Ok, based on salaries in the last couple of years:

Given inflation, and given the average salary increases in the private sector and the private sector's ability to pay more taxes, and given the really nice pension the public sector gets, and given the fact that public sector employees have to pay to heat their houses too:

What bump/cost of living would you give municipal employees in Massachusetts and would that change in Boston and the Suburbs. 1.5%, 3% etc.?

Prop 2 1/2 requires towns to not spend more than 2.5% more than the previous year unless they do an override or debt exclusion. Because inflation has outpaced 2.5 percent, communities either need more State local aid, spend less on articles like fire trucks in order to let the higher wages eat into them or they take on more debt.

Now, if private sector wages haven't kept pace, higher taxes to subsidize public sector wage increases will eat more into their take home pay.

What I'm starting to learn is that those that actually participate in town meetings and politics get dealt the better hand.

[BK]

John,

Exactly. You (the Public) can not really afford to give Public sector employees a raise.

The big thing that have to happen - but, won't.

Public Sector/Municipal Employees have to be move to a 401K. I'm an optimist and I know this won't happen until there is a complete fiscal melt down.
Why? Selectmen and Council men/women and Mayors all participate in chowing down at the Public trough.

Let's look at your typical Town selectmen -

He or She is often a lawyer and employee for the State or Town.
The Selectmen gets a small salary - I think it may be $10,000 - $15,000 - and granted it is small for the work required. But, it puts you in the State Pension plan eligibility pool $$$$$$. Pension for life is a Great Deal.

If you are the Lawyer you get your small salary and Healthcare benefits (additional $9K-$15K tax free benefit). If you can get yourself another part-time state or local job you start accrueing more and more of a Defined pension benefit and Life time Healthcare benefits.

When the voters don't understand the Game and the Insiders are representing the Voters are getting the goodies - Things aren't going to change until there is a real crisis.

So, lets hope that the foreclosure crisis puts a few towns into Bankruptcy (Vallejo-California is within a few months of having no Money). Then you can fix the broken system - Maybe.

[john p]

BK: Thanks, pointing out the "game" is right on and it is kind of like the fox guarding the henhouse to some degree.

I'm an optimist too so I think that if citizens are given the appropriate data, the majority will do the right thing. The problem is that nobody creates the data for certain things.

Ideally I'd like to see two relatively comperable roles personally fiancially modelled out over time and see who's better off in a 20 year period. I think that if people get this information they will have a better fundamental basis for understanding policy and our future as taxpayers.

Do you have any ideas of where to look to find any of these models and comparisons.

Some town's I've researched are like the familes that appear are paying their bills with credit cards.

http://www.mass.gov/Ador/docs/dls/mdmstuf/aag/aag252.doc

Check out page 3, Schedule A: Rockport spends $451,588 on Fire Dept. and $3,438,147 on Debt Service. I also read that they want to build a new Senior Center. Jeez, I wonder how many of their citizens have any idea how much of a load they are carrying and if it is a good idea to build a new building with staff....

From a real estate perspective, we do have to be cognizant of the 3,000lb gorilla in the room. Some towns are in better health than others. Think about that highrise condominium by the Aquarium and all of the residents got hit with the new HVAC costs. I'd bet most of those folks had no idea that capital improvements weren't included in their condo fee...

[john p]

http://www.massbudget.org/Property_Taxes_in_Massachusetts.pdf

see page 4 figure 3. Look at the widening gap of incomes and local taxes...

[john p]

http://www.massbenchmarks.org/statedata/data/ddq208.pdf

check out page 8 right column