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Republican Economist Asks "Retraction" – But Our Facts Stand

Official statistics still show most US families lost income in 2002 even after taxes, despite misleading GOP claim to contrary.

December 22, 2003

Modified: December 23, 2003

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Summary

 

A Republican economist on the staff of the Joint Economic Committee of Congress, Christopher Frenze, says FactCheck.org made “multiple and blatant factual errors” in an article we published Dec. 5, and he says a retraction is required.

We don’t think so – but we are happy to post the full text of his letter (see “supporting documents” in the right column) along with our responses to his main points.

Analysis

 

Our Dec. 5 article dealt with a misleading news release issued by the House Republican staff of the Joint Economic Committee which bore a bold headline claiming that “Median Household Income Increased In 2002 After Taxes.” The problem with the release is that the Census Bureau was telling the public in a news briefing on the same day that “Median household income after taxes fell by 0.8 percent.”  (Emphasis added)

The GOP release claimed Republican tax cuts had saved US families from a drop in take-home pay. But official Census figures say otherwise. After-tax median income dropped in 2002 by $310, to $37,066. Half of US households earned above that level and half below.

We pointed out that the GOP release was not based on the official, published measure of after-tax income, but used instead an unpublished “experimental” measure from Census that, among other things, does not take account of income from capital gains.

Now the author of the release, Christopher Frenze, has written us saying our article contained “serious factual errors that require its retraction.” We think his objections fall short of the mark.

Mr. Frenze faults us for saying that all of the Census Bureau’s official, published definitions of before- and after-tax income fell without pointing out that only six of them fell by amounts large enough to be outside the margin of error for sampling accuracy and thus statistically significant. But our article didn’t say all the changes were statistically significant -- only that they all went down. That's still true.

All 17 are shown in the table below, taken directly from Table 6 on page 14 of the Census publication Income in the United States: 2002 . Of most relevance, note that the official measure of after-tax income (definition 1b) was among those large enough to be statistically significant, not some random fluke of sampling. That's the one that contradicts the headline in Mr. Frenze's news release.

Median Household Income by Income Definition: 2001 and 2002

Definition of income

Median income

% change in real income

2001

2002

1. Money income excluding capital gains (losses) (MI) . 42,900 42,409

*–1.1

    1b. Definition 1 plus realized capital gains (losses) less taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,376 37,066

*–0.8

2. Definition 1 less government cash transfers . . . . . . . 39,630 39,102

*–1.3

3. Definition 2 plus realized capital gains (losses) . . . . . 40,190 39,268

*–2.3

4. Definition 3 plus health insurance supplements ….. 42,004 41,294

*–1.7

5. Definition 4 less social security payroll taxes . . . . . . 39,390 38,602

*–2.0

6. Definition 5 less federal income taxes (excluding EIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,456 36,278

–0.5

7. Definition 6 plus the earned income credit (EIC) . . . 36,646 36,453

–0.5

8. Definition 7 less state income taxes . . . . . . . . . . . . 35,482 35,280

–0.6

9. Definition 8 plus nonmeans-tested government cash transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,242 39,099

–0.4

10. Definition 9 plus the value of medicare . . . . . . . . . . 41,281 41,169

–0.3

11. Definition 10 plus the value of regular-price school lunches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,300 41,183

–0.3

12. Definition 11 plus means-tested government cash transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,468 41,363

–0.3

13. Definition 12 plus the value of medicaid . . . . . . . . . 42,031 41,928

–0.2

     14a. Definition 13 plus the value of other means-tested government noncash transfers less medicare and medicaid (MI-Tx+NC-MM) . . . . . . . . . . . . . . . . . . . . .  39,553 39,426

–0.3

14. Definition 14a plus the value of medicare & medicaid 42,194 42,061

–0.3

15. Definition 14 plus imputed return on home equity 43,925 43,760

–0.4

*Significantly different from zero at the 90% confidence level.
Source: U.S. Census Bureau, Current Population Survey, 2002 and 2003 Annual Social and Economic Supplements.

 

(Mr. Frenze has us on one thing -- we said Census published 16 definitions of income, not 17. We miscounted. We’ve updated our Dec. 5 article to reflect that. It only strengthens our point about the misleading nature of Mr. Frenze's release.)

Our Dec. 5 article noted that Mr. Frenze’s news release failed to mention that the numbers he quoted came from an “obscure, unpublished ‘experimental’ measure.” Mr. Frenze objects to our use of the word “obscure”, saying that measuring “after-tax” income is “not an obscure notion of income, but is probably closest to what typical Americans consider to be the best measure of their income” We agree. What we called “obscure” was Mr. Frenze’s data series, not the idea of after-tax income.

Mr. Frenze defends his use of an income measure that doesn't include capital gains by saying that Census doesn't attempt to adjust capital-gains income for inflation. Yes, profits from sale of stocks or real estate held for many years in part reflect the general rise in prices, but so what? A dollar of capital-gains income buys just as much today as a dollar earned in salary.

Mr. Frenze further says that he "clearly labeled" the source of his data in his release, "so that anyone could check the source.” Actually, what he did was quote “Table RD-1” as his source, without mentioning that the table is not the official measure of after-tax income. It would take a lot of digging for anyone to "check the source" and discover what table RD-1 really is. Digging up such facts is our job, and we did it.

Sources

 

Christopher Frenze, Chief Economist to the Vice Chairman, Joint Economic Committee of Congress, letter to Brooks Jackson, Director, FactCheck.org 19 Dec. 2003.

US Congress,  Joint Economic Committee House Republicans, Income Increased in 2002 After Taxes,   news release 26 Sept 2003.

Carmen DeNavas-Walt, Robert Cleveland and Bruce H. Webster, Jr., U.S. Census Bureau, Current Population Reports, P60-221, Income in the United States: 2002, U.S. Government Printing Office, Washington, DC, 26 Sept. 2003. 

Dr. Daniel H. Weinberg, Chief, Housing and Household Economic Statistics Division,U.S. Census Bureau, Press Briefing on 2002 Income and Poverty Estimates  26 Sept. 2003.

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