Who Says 60 Million Americans Live on $7 a Day?
A recent Los Angeles Times editorial claimed that one-fifth of Americans live on $7 a day -- barely enough for a trip to Starbucks. Annie Jacobsen searches for the truth behind this dubious statistic and finds a tangle of shoddy analysis along the way.
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The Los Angeles Times is running a series of editorials called American Values and the Next President, the sixth installment of which is a piece entitled “Domestic Tranquility.” Reading through a section under the heading “Poverty,” I came across this line - which I found hard to believe: “In our America, 60 million people survive on $7 a day.”
That means that one in five people in the U.S. live on less that $2,555 a year.
The Los Angeles Times linked to its source, The Global Research Center - a Canada-based website whose “writers, scholars, journalists, and activists research and report on globalization” - where writer William Shanley boldly asserts that “a 2004 analysis of data by the U.S. Census reports that 60 million Americans now live on less than $7 per day.” In addition to the fact that 2004 is no longer “now,” this alleged statistic is a radical departure from these pertinent statistics from the U.S. Census Bureau in 2004:
- There were 37 million people in poverty in 2004
- There were 7.9 million families in poverty in 2004
- Poverty for a family of 4 in 2004 meant having an income of $19,307
- Poverty for a family of 3 in 2004 meant having an income of $15,067
- Poverty for a family of 2 in 2004 meant having an income of $12,334
- Poverty for unrelated individuals meant having an income of $9,645
If there are a total of 37 million people in America living in poverty, how could there be 60 million people living on $2,555 a year?
I called the Los Angeles Times and reached Jim Newton, editorial page editor, in his office. I asked Newton about the line in “Domestic Tranquility,” the one that says, “In our America, 60 million people survive on $7 a day.”
“That is an interesting and controversial statistic,” Newton said. He referred me to William Shanley’s article and called it “the source.”
“How comfortable are you with that source and his facts?” I asked Newton. I explained that the premise of the piece I was writing for Pajamas Media is that this “statistic” appeared to be cooked, bogus - flat out wrong.
“I was the editor on the piece,” Newton said. “But Lisa Richardson wrote it.” Newton gave me Lisa Richardson’s phone number.
I called Lisa Richardson and left her a message. While I was waiting to hear back, I reread “Domestic Tranquility,” specifically the part of the article where the editors opine about what poverty in America means to them today. “No less than James Madison, the Constitution’s principal author, saw the dangers inherent in a society that treasured equality but practiced inequity.”
No doubt, if one-fifth of America was making in a year what 15 Los Angeles City Council members reportedly make in five days, then James Madison would roll over in his grave and shout inequity. But what is also inequitable is a newspaper presenting phony facts under the guise of those facts being simply controversial.
To find out more, I read up on the Los Angeles Times‘ source, William Shanley, at his webpage. Shanley says he is a “writer and media producer” whose favorite activities include “amusement parks, beachcombing, and hot tubbing.” His cause is “life enhancement” and his political leaning is “very liberal.” He also has this to say about himself in his profile: “William Brandon Shanley, iconoclast, dreamer of dreams, hatcher of schemes, shatterer of graven images and neocon socio-war-mongering-psychopaths!”
Was his statistic - 60 million Americans living on $7 a day - a William Brandon Shanley-hatched “scheme”? I called William Shanley at his home in Connecticut to find out. (Fact checkers take note: I was able to locate William Shanley’s home phone number in about the same amount of time it took me to get the 2004 poverty facts and figures from the U.S. Census Bureau - seven minutes per fact). No answer, but I left Shanley a message.
In the meantime, I Googled Shanley’s line, “Americans live on $7 a day” to see where he might have gotten his information. Based on his web info, he did not seem like the type of quantitative data analyst that one might hope to see conducting such research at the Times. The first link from Google sent me to the World Socialist Web Site. This headline screamed out at me:
60 million Americans living on less than $7 a day
US income figures show staggering rise in social inequality
By Jerry White
12 December 2006
The World Socialist Web Site article predated Shanley’s article by five months. Shanley may or may not have used it as a source. But unlike Shanley, the World Socialist Web Site reporter credited his source - which turned out to be the New York Times. “According to the [New York] Times analysis, this means the poorest 60 million Americans have reported incomes of less than $7 a day!” writes Jerry White. This figure comes from a November 28, 2006, article written in the New York Times entitled “‘04 Income in U.S. Was Below 2000 Level.”
Here is the problem: for starters, the New York Times reporter, David Cay Johnston, does not use data from the U.S. Census Bureau to come to his conclusion. Instead, the facts and figures in his piece refer to “the total income Americans reported to the tax collector” - i.e., the IRS. But far more important is that the New York Times’ figure does not come from actual IRS data, but from “analysis of the IRS data by the New York Times.”
To understand exactly what “analysis of the IRS data” might mean, I interviewed a professor at a University of California campus who, as a department chair, “specializes in quantitative analysis.” This professor blogs under the pen name Engram at Back Talk (he asked to remain anonymous; his information was fact checked for this article). Engram has written “Misleading Income Statistics, Courtesy of the New York Times,” in which he argues convincingly why analysis of IRS data by the New York Times is suspect. According to Engram, he has also conversed with New York Times reporter David Cay Johnston about this.
I asked Engram whether I should believe this New York Times “analysis” which postulates that “60 million Americans live on $7 a day” - which is based on data that is not sourced. Here is what Engram said:
“That number is exasperating and misleading. When analyzing IRS data, you have to ask, are you talking about pre-tax or after-tax? Are you talking about average income or median income? The average Joe does not understand, and David Cay Johnston might not understand, that there are many sources of income data that must not be overlooked when coming up with this kind of a figure. For example, in reporting to the IRS, people often leave out welfare benefits or food stamp benefits, benefits that dramatically alter their supposedly living on $7 a day. There are also benefits that an employer might provide. You need to take into account all sources of income. You cannot just take a figure and jump to a conclusion. It is not seeking the truth. It is jumping to a number to support a conclusion that you started off with already.”
In the Los Angeles Times piece “Domestic Tranquility,” the editorial board writes “In our America, 60 million people survive on $7 a day.” But really, they should have written, “In the America according to William Shanley…” or “In the America according to the World Socialist Web Site…” or “In the America according to the analysts at the New York Times, 60 million people survive on $7 a day.”
But that is not James Madison’s America, now is it?
Lisa Richardson of the Los Angeles Times did not return calls. David Cay Johnston of the New York Times did not return email. William Shanley later called me back and explained, “No, I did not look at the U.S. Census Bureau figures. I used the World Socialist Web Site as my source. They source the New York Times. Certainly, no one questions this as an official source.” He later called back to amend his statement: “You are right. In my piece, I said it was [information from] the U.S. Census Bureau. It was from the IRS.”
Annie Jacobsen writes about aviation security and homeland security for a variety of newspapers, magazines and blogs. She is the author of the book, Terror in The Skies, Why 9/11 Could Happen Again.
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57 Comments
NeverCertain:“You’re entitled to your own opinions. You’re not entitled to your own facts.” (Daniel Patrick Moynihan). Too few people make this distinction.
Jan 10, 2008 - 3:00 am Fred Beloit:But of course we all know that the highly professional, Columbia-trained, journalists must be correct, no matter how improbable their stories seem. The amateurs of the blogesphere simply can’t measure up to the fact-checking going on at the major media outlets.
Jan 10, 2008 - 4:08 am Larry J:If future journalists don’t want to come across as a bunch of morons, I suggest they take more classes in economics, mathematics in general and statistics in particular, and the sciences and fewer in the School of Journalism. Current journalists either need remedial education or a new career.
Jan 10, 2008 - 5:41 am Ubu Roi:Great article, Annie, very amusing, nice to see someone take the LA Times to task. The comments from Jim Newton were particularly revealing. If David Simon (The Wire) wants to know the real reason why so many once-great newspapers are falling apart, he need look no further than this drivel from the Times. Newspapers are losing educated readers because they no longer employ educated writers. From my experience at the university, the journalism students were the second dumbest bunch of campus, eclipsed only by the education majors.
Jan 10, 2008 - 6:26 am Rubicon:Seems to me, journalists of today need to return to classes at university and take numerous continual ethics courses.
Jan 10, 2008 - 7:30 am Brutus:The LAT quotes a guy who quotes world socialists. World socialists quote the New York Times. The NYT quotes analysis of incomplete & perhaps unrelated IRS data.
Now, why is it the public is abandoning the old establishment mainstream media in droves?
The media love affair with socialism, global governance, the United Nations as the one world government, and extreme liberal ideals, ignore many historical realities & they ignore the most obvious reality that people do not want to be led or controlled.
Eventually people discover “the truth” and when they realize they’ve been had, they get very angry.
You can fool some of the people, some of the time. You can even fool all of the people some of the time. But you cannot fool all of the people all of the time!
Perhaps the LAT, World Socialists Federation, the NYT, and even the IRS will one day come to realize this before the public dumps all of them!?
I hope not. I want all who are responsible for past numerous distortions & dissembling, brought to an end by the ultimate judge, the people!
The only problem I have with this story is the headline.
I requent my local Starbucks, and it’s the least expensive cup of coffee in my town. You must have a regular coffee confused with those “coffee drinks” that the hausfraus with 3.2 children take 30 seconds to order!
Jan 10, 2008 - 8:01 am David Cay Johnston:Annie Jacobsen,
You question the accuracy of my article in The New York Times back in 2006, on then newly released IRS data. Your commentary starts off with a fact in other articles that you trace back to my report.
My article as accurate, and my official sources were all cited. You can verify the numbers yourself by just doing the math from the data tables, which are at irs.gov/taxstats.
My article stated that the average incomes of American as reported on income tax returns, when adjusted for inflation, was smaller in 2004 than it was in 2000. (I also wrote a number of articles about the 2005 data, all available free at nytimes.com.) I quoted a White House spokesman as saying this was “predictable.”
My 2006 New York Times article also carefully noted that the figure does not include government benefits such as welfare, disability and most Social Security payments.
I also reported that the poor were the only group whose average income rose, in real terms, from 2000 to 2004. The poorest fifth, the 26 million taxpayers (and 60 million people) saw their incomes rise in real terms by 2.4 percent on average, the data I analyzed showed.
Way down in the 15th paragraph I reported that the bottom fifth reported on their tax returns incomes of $11,166 or less and that their average income was $5,743. These are my calculations, but you can do from the same IRS tables, dividing income by taxpayers.
Keep in mind that the bottom half reported incomes of $30,122 or less on their tax returns for 2004 and that the average income for the bottom half was less than $15,000.
You can see the first number and calculate the second from data going back many years (NOT adjusted for inflation) posted by the Tax Foundation, a group that seeks lower tax burdens, at taxfoundation.org/taxdata/show/250.html
Since the bottom half averaged less than $15,000, it should not surprise that the bottom fifth averaged less than $6,000 of income, as reported on tax returns.
So the $7 per day figure comes right out of the IRS tables so you can do your own math.
Before my article ran I carefully checked and cross-checked that numbers, including speaking to the supervising statisticians who prepared the tables.
The White House found nothing controversial in the numbers I reported — nor would anyone else who works with and is familiar with the various government sources of income data. (I also quoted the similar response of the official administration spokesman in my comparable report on 2005 incomes.)
The accurate numbers I reported are carefully presented in context, citing sources and limitations, contrary to the anonymous Engram, on whom you rely and whose own report is rife with faulty assumptions, errors, conflating.
People who posted in response to your writing also make false assumptions.
I never was trained at Columbia. I have been a reporter for more than 40 years and my work has been the subject of all sorts of independent inquiries from lawsuits involving others to Congressional hearings and history has shown that my work stands up.
One poster, not having read my work, asserts I should study economics, I studied economics at the University of Chicago graduate school for two quarters in 1973 and at six other colleges.
I have also written two best-selling books on the American economy, specifically how its tax and subsidy systems actually work, as opposed to the myths perpetrated by politicians of all stripes.
The first book, Perfectly Legal, was reviewed by experts across a broad spectrum with near universal praise. My latest book, Free Lunch, out just two weeks, has been favorably described by an equally broad spectrum of readers from libertarians to progressives.
You write that I did not respond to your email. My email address is on the Internet and so are my office and personal telephone numbers. Where did you send your email?
I forthrightly correct actual errors in my work.
The White House, Treasury and IRS had not even a quibble about my report when it came out — and these agencies do not hesitate to complain about not just errors, but matters of nuance.
My report mentioning the $7 per day income figure for the poorest fifth of is accurate and was presented in context.
Jan 10, 2008 - 8:24 am The Old Media:Dear Annie,
What is this “interviewing” of which you speak?
Regards,
The Old Media
Jan 10, 2008 - 8:51 am Kevin:Does the report consider age? Teens who live at home and are declared as dependents still have to fill out tax returns. Most teen jobs are predominately minimum wage jobs. Since their taxes are separate from their parents, this can skew any analysis. So, did the raw data or analysis take this into consideration?
Jan 10, 2008 - 9:06 am Kevin:Does the report take into consideration teenager income? Even though teens are most likely to be declared as dependents, they still have to file their own tax return if they work. Since teens generally work part-time minimum wage jobs, would this not skew the results? So, was teen income taken into consideration?
Jan 10, 2008 - 9:11 am Kevin:Sorry for the double post.
Jan 10, 2008 - 9:13 am peterike:Mr. Johnston, your reponse makes it clear what’s going on here. Since I’m not really interested in hacking through all the numbers, let us grant you the $7 a day figure. The problem is not your analysis, the problem is that people took that number and then spouted drivel such as “60 million Americans LIVE ON $7 a day.”
This is patent nonsense, designed purely to work as agitprop. Indeed your own response includes the following: “the figure does not include government benefits such as welfare, disability and most Social Security payments.”
In other words, does not include sources of income that people are “living on.” Indeed, for the people in that bracket these are likely their major sources of income.
So the Los Angeles Times in its editorial is, in fact, spewing lies, and lies meant to promote a particular political agenda. Your reporting did no such thing, and I didn’t see anywhere in your original piece statements about what Americans “live on.”
Your work has been misused in ways that are all too predictable.
Jan 10, 2008 - 9:14 am David Cay Johnston:(the preview version of my response was posted, this is the one that should have been posted)
Annie Jacobsen,
You question the accuracy of my article in The New York Times back in 2006, on then newly released IRS data. Your commentary starts off with a fact in other articles that you trace back to my report.
My article was accurate, and my official sources were all cited. You can verify the numbers yourself by just doing the math from the data tables, which are at irs.gov/taxstats.
My article stated that the average income of Americans as reported on income tax returns, when adjusted for inflation, was smaller in 2004 than it was in 2000. (I also wrote a number of articles about the 2005 data, all available free at nytimes.com.) I quoted a White House spokesman as saying this was “predictable.”
My 2006 New York Times article also carefully noted that the figure does not include government benefits such as welfare, disability and most Social Security payments.
I also reported that the poor were the only group whose average income rose, in real terms, from 2000 to 2004. The poorest fifth, some 26 million taxpayers (and 60 million people) saw their incomes rise in real terms by 2.4 percent on average, the data I analyzed showed.
Way down in the 15th paragraph I reported that the bottom fifth reported on their tax returns incomes of $11,166 or less and that their average income was $5,743. These are my calculations, but you can do the numbers from the same IRS tables, dividing income by taxpayers.
Keep in mind that the bottom half reported incomes of $30,122 or less on their tax returns for 2004 and that the average income for the bottom half was less than $15,000.
You can see the first number and calculate the second from data going back many years (NOT adjusted for inflation) posted by the Tax Foundation, a group that seeks lower tax burdens, at taxfoundation.org/taxdata/show/250.html
Since the bottom half averaged less than $15,000, it should not surprise that the bottom fifth averaged less than $6,000 of income, as reported on tax returns.
So the $7 per day figure comes right out of the IRS tables.
Before my article ran I carefully checked and cross-checked the numbers, including speaking to the supervising statisticians who prepared the tables.
The White House found nothing controversial in the numbers I reported — nor would anyone else who works with and is familiar with the various government sources of income data. (I also quoted the similar response of the official administration spokesman in my comparable report on 2005 incomes.)
The accurate numbers I reported are carefully presented in context, citing sources and limitations, contrary to the anonymous Engram, on whom you rely and whose own report is rife with faulty assumptions, errors, conflating of issues.
Some people who posted in response to your writing also make false assumptions.
I never was trained at Columbia. I have been a reporter for more than 40 years and my work has been the subject of all sorts of independent inquiries, from lawsuits involving others to Congressional hearings. History has shown that my work stands up.
One poster, not having read my work, asserts I should study economics, I studied economics at the University of Chicago graduate school for two quarters in 1973 and at six other colleges.
I have also written two best-selling books on the American economy, specifically how its tax and subsidy systems actually work, as opposed to the myths perpetrated by politicians of all stripes.
The first book, Perfectly Legal, was reviewed
by experts across a broad spectrum with near universal praise. My latest book, Free Lunch, out just two weeks, has been favorably described by an equally broad spectrum of readers from libertarians to progressives.
You write that I did not respond to your email. My email address is on the Internet and so are my office and personal telephone numbers. Where did you send your email?
I forthrightly correct actual errors in my work.
The White House, Treasury and IRS had not even a quibble about my report when it came out — and these agencies do not hesitate to complain about not just errors, but matters of nuance.
My report mentioning the $7 per day income figure for the poorest fifth of Americans is accurate and was presented in context.
Jan 10, 2008 - 9:16 am Fat Man:Mr. Johnston, who must Google his name hourly, to the contrary notwithstanding, IRS statistics really cannot say very much about the lives of the bottom tier of the income distribution in our society.
There is good reason for this. Numerous citizens who subsist in that stratum are simply not required to file tax returns nor are the ones, who do, required to report major sources of cash to them.
IRS Pub. 915:
“If the only income you received during 2007 was your social security …, your benefits generally are not taxable and you probably do not have to file a return.”
IRS Pub. 525:
“Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments due to blindness.”
===============
Thus a retire living on Social Security payment and the interest on $50,000 of savings may appear to be living on less than $7/day.
An Amish subsitence farmer may report $2300 of taxable income from his truck patch and have plenty of cash for his needs.
The $7 a day number is typical liberal fog from the NYTimes. True but totally irrelevant.
*Former NYTimes “Public Editor” Daniel Okrent on the topic of Mr. Johnston:
Q:”The only person you really single out in the intro is business reporter David Cay Johnston, who started a campaign against you for being on a corporate board.”
A. “Yeah, he was very single-out-able. I didn’t mention this in the book, but when I had my troubles with Johnston, one of the senior editors said to me, ‘There are three things you must understand about Johnston: He’s a Pulitzer Prize winner, he’s a unique talent, and he’s an @$$h01e.’ I’m convinced that at least two of those are correct.”
====================
“They source the New York Times. Certainly, no one questions this as an official source.”
Reuters, AP, NYTimes, the rantings of the Inmates of the Asylum at Charenton, what difference does it make? If you read something in the newspaper, see it on TV or the internet, your reaction must be:
“That is very interesting, I wonder if it is true.”
Trusting your fellow man and believing what he says are social virtues, but you never want have someone say to you after the house of cards has collapsed:
“And you believed them?”
Jan 10, 2008 - 9:34 am TomB:Mr. Johnston, how can you use the IRS for information on a segment of the population that does not, as a rule, file tax returns?
In addition, if you do not includle “government benefits such as welfare, disability and most Social Security payments”, how can you make the claim that people “survive on $7 a day”? It makes no sense.
Jan 10, 2008 - 9:45 am cubanbob:“Way down in the 15th paragraph I reported that the bottom fifth reported on their tax returns incomes of $11,166 or less and that their average income was $5,743. These are my calculations, but you can do from the same IRS tables, dividing income by taxpayers.”
Reported income: this is the tip off. The numbers may be accurate but without the true context of the total cash and cash equivalents recieved by this group outside of the reported numbers, the numbers themselves are meaningless and convey a false impression.
Jan 10, 2008 - 9:49 am Rachel Cohen:Johnson’s article got some online attention the first time around, too.
Jan 10, 2008 - 9:55 am Engram:David,
Nice of you to join the fray, once again. It speaks well of you.
You said (of me):
“The accurate numbers I reported are carefully presented in context, citing sources and limitations, contrary to the anonymous Engram, on whom you rely and whose own report is rife with faulty assumptions, errors, conflating of issues.”
I don’t cite my sources? Actually, I link directly to my source so that any reader who doubts what I have to say can very easily perform the analyses for himself or herself. I realize that you can’t do that in an article for the New York Times (most readers are not interested in that level of detail), but if you plan to continue writing articles about analyses that you perform yourself, I recommend that you create a corresponding web site that reviews the details of your analysis and links to the sources (so readers don’t have to spend hours trying to figure out the exact data set you used and the exact calculations you performed). You imply that you make it very easy for interested readers to check your work, but, in truth, it is exasperating (as I have learned from experience). I am not confident that you are qualified to perform the analyses you report to the world — often without even clearly indicating that you, yourself, performed the analysis. Perhaps you are, but making all of the details more readily accessible would help to establish that fact.
And I wonder how my own analyses are misleading. Is it misleading to draw a distinction between pre-tax and after-tax income? Is it misleading to emphasize all sources of income? Is it misleading to use the income statistics provided by the Tax Policy Center? I have searched hard for the best source of data, and that’s the best source I have found. If the raw IRS data offer a more accurate view, I’d be interested in knowing why.
I’m not really on a mission to prove a particular point of view. I’m on a mission to find the truth, and that starts with finding the best source of data. If my data source is questionable, I’d like to know, so if you have any information about that, please present it. It really looks to me as if the Tax Policy Center has worked hard to get the income information assembled in proper fashion. I detect no agenda in their work (even though I believe the associated think tanks lean to the left), and I did nothing more than plot up what they reported (not what I, myself, calculated). Yet you imply that you are accurate and that I am misleading. I am genuinely interested in knowing how it is misleading to simply report in a chart the results of an income analysis performed by the Tax Policy Center.
Jan 10, 2008 - 10:01 am gringo:David,
The real question to David is simple - do 60 million Americans live on $7 or less a day or not? You claim to be an highly esteemed journalist, and a trained economist - so by your estimation, what is the ACTUAL number of Americans who’s income is less than $7 a day?
BTW, quick question - if I am a rich guy, who owns 10 factories, and who actually lost 100 million dollars in a particular year - would he be counted as a person who lives on less than $7 a day on that year based on your article?
Lastly, David, would you provide a much more accurate estimation on the number of Americans who SPENT less than $7 dollars a day annually?
Jan 10, 2008 - 10:37 am David Cay Johnston:Folks, read my article.
Read what I actually wrote, and see how it was presented in context.
Its on the Internet, with the chart, free — as are many other articles by me on IRS, Census, Tax Policy Center and other sources of income data.
The Tax Policy Center’s data, which I rely on often, is superb and Treasury has gone out of its way to praise its reliability. But it measures income differently than tax return data, which is based on statements signed under penalty of perjury. That is why it is important to report on the many different ways income is measured.
All data sources have limitations and in my articles I explain those, as people who read my work regularly know.
Actual readers are capable of applying their own experience and knowledge to the specific set of facts in any article.
Income data at the top, as I have shown in other articles, also leaves out a lot of income.
So those posters who think the limitations of income among those at the bottom are misleading should be aware that the only area where we have highly accurate data is wages, dividends and interest income. The IRS says 99% of wage income is reported, compared to as little as 70% of other forms of income where no independent verification is required.
Jan 10, 2008 - 10:40 am Fat Man:See, he does Google his name hourly.
Jan 10, 2008 - 10:49 am David Thomson:“The real question to David is simple - do 60 million Americans live on $7 or less a day or not?”
They do not live on $7 a day. This is merely another example of O.J. Simpson attorney type of argumentation. One must read the small print. The $7 is merely the money they have to spend on an average day. It does not include the other benefits they receive from the government or private charities like housing and medical care.
Jan 10, 2008 - 11:18 am Fat Man:“It does not include the other benefits they receive from the government or private charities like housing and medical care.”
Or cash, for that matter.
Jan 10, 2008 - 12:23 pm Annie Jacobsen:David Cay Johnston,
Thank you for your email this morning which appeared in my in box at 4:38 a.m. If only you’d responded so quickly to my first inquiry. (To answer your question, I sent my email as per the instructions attached to your article at the New York Times — on December 27, 2007. Your editors thanked me, in an email, and stated that they’d be passing my email along to you the following day, at 8:00 a.m.)
In any event, had you contacted me earlier, I would have asked you the same question I ask now, and the question most readers have figured out is the real question at hand: How can you stand behind your “analysis” that 60 million Americans live on less than $7 a day when the statistics from the U.S. Census Bureau state that there are 37 million people (not families) in poverty in the U.S.? Where did these 23 million other, wildly impoverished people come from?
Your long-winded response sounds like a lot more smoke and mirrors. It’s a simple question and I’d love to hear a simple answer.
I repeat my simple question: How do 37 million people suddenly become 60 million people? How does $9,645 a year suddenly become $2,555 a year?
I was surprised to see you take a pot shot at Engram. You and I both know exactly who he is, and what his qualifications are. You and I have both had lengthy conversations with Engram long before this article went to print. Just because someone asks to remain anonymous doesn’t mean they aren’t accredited.
Annie Jacobsen
Jan 10, 2008 - 12:40 pm Frazetta_girl:Well, I know how tax filers can live off less than $7.00 per say.
My son made less than $2500 dollars last year working before he left for college. He filed his taxes and got his refund.
Poor thing, he hardly has time to worry about how poor he is, since he lives in a very nice home, watches movies on our HD TV, snookers me into buying him lattes, and spent Christmas day defeating Call of Duty 4 on his Xbox 360.
Perhaps Mr. Johnson can tell us how he removed teenagers like my son from the IRS data.
Jan 10, 2008 - 1:39 pm George:I’m not going to delve into Johnston’s tortuous methodology. Let me simply present some IRS statistics from 2005:
AGI from 1 to $5,000:
11.5 million returns (8.5 percent of total)
AGI from $5,001 to $10,000
12.1 million returns (9 percent of total).
But that is ***ADJUSTED GROSS INCOME***. Adjusted Gross Income is NOT total income, is not even close, as I would think any trained economist and best selling author would have a clue about. In 2005, it excluded a MINIMUM standard deduction of $5,000 and a $3,200 personal exemption.
So that is, at a MINIMUM, $8,200 in additional income not included in your total.
Jan 10, 2008 - 3:08 pm always right:Ms. Jacobson,
I can explain the part of 37 million jump to the 60 million, but I still can’t figure out the math (of $7 per day).
NYT or Mr. Johnston must have some internal source on estimating the “invisible, illegals (undocumented immigrants)”.
If the “publicly accepted” number is at 11 or 12 million, the real number must be twice that much at least. Therefore, the REAL poor people here in the States (”Americans” is just a general term, the NYT etc want to push these poor souls to become citizens anyway.) is a minimum of 60 million.
Not much of a mystery, really.
Jan 10, 2008 - 3:13 pm TomB:So those posters who think the limitations of income among those at the bottom are misleading should be aware that the only area where we have highly accurate data is wages, dividends and interest income. The IRS says 99% of wage income is reported, compared to as little as 70% of other forms of income where no independent verification is required.
It seems to me that we should have EXCELLENT data on exactly who receives welfare, social security and other government handouts.
You seem determined to ignore this information. Why is that?
Jan 10, 2008 - 3:53 pm David Cay Johnston:More erroneous information posted above.
George, your understanding of AGI is wrong. AGI is the last line on the front page of your tax return — it is AFTER this that the standard deduction and personal exemptions are then applied (on the back page of Form 1040).
Always right, the number is a simple calculation from the data IRS tables, as explained above. But you can do the math from the data in my story: $5,743 times 26 million (tax returns), then divide the product by 60 million (people who are taxpayers and dependents) and then divide that product by 365 days and you will get $7 rounded.
Tax return statistics do not identify people as legal or illegal, immigrant or tenth generation and in any event are not relevant to the story I wrote back 14 months ago.
TomB, we do have excellent data on Social Security income. My report was on what the latest IRS tables show, not on the broader issues you raise, some which I have covered in other articles and in books. I used my 1,116 words to pack in a great deal of information that was relevant to the just released data tables I wrote about.
Read the story, for free, and see the chart, at http://www.nytimes.com/2006/11/28/business/28tax.html
The relevant portion says:
**Analysis of the I.R.S. data by The New York Times found that average reported incomes fell or were virtually flat at the end of the period at every level of income except for the poorest 26 million taxpayers, the bottom fifth. Those impoverished taxpayers made less than $11,166 each in 2004 and had an average income of $5,743, up $135 or 2.4 percent, from the year 2000.
A taxpayer can be a single individual or a married couple. The poorest taxpayers consist of nearly 48 million adults and about 12 million dependent children. This means that the poorest 60 million Americans reported average incomes of less than $7 a day each….
The I.R.S. data does not include the value of government benefits like food stamps, the earned-income tax credit for working families and subsidized medical care.
It also excludes unreported income, which the Treasury Department and the I.R.S. have said is a major and growing problem among the highest-income Americans, especially those who own businesses, invest in stocks and have overseas financial interests.**
As I show above, the math is transparent and as the quoted language shows, people who read the article were informed as to the data limitations.
Jan 10, 2008 - 5:16 pm David Thomson:“This means that the poorest 60 million Americans reported average incomes of less than $7 a day each….
The I.R.S. data does not include the value of government benefits like food stamps, the earned-income tax credit for working families and subsidized medical care.”
My point has been proven. David Cay Johnston’s central argument is essentially meaningless. He was indeed originally arguing like an O.J. Simpson attorney. These people were not living on $7 a day. Conventionally ignored was the help they received from the government, private charities, and other sources. Gosh, isn’t it nice that we got that out of the way?
Jan 10, 2008 - 7:27 pm michael from canada:Hi folks: I read two news papers a day and spend hours on the internet at night. I have one question - who the hell is David Cay Johnston? and why the hell do you care what he writes. As for his college degrees, they do not mean squat.
Jan 10, 2008 - 8:44 pm Dan in Seattle:If I understand this correctly: the IRS data show that in 2004, 26 million tax returns were filed, with an average AGI (adjusted gross income) of $5,743.
There are several problems with the article, based on this.
These returns are not necessarily from the ‘poorest’ people, in the sense that ‘poor’ is usually understood. These returns are the people who managed to find the smallest AGI to report to the IRS, after adjusting for business and other losses. This difference may not be insignificant. Notice the 1.8 million returns with negative income. Also notice the amount of dividend income, even in groups with the smallest positive AGI. There are a lot of returns in the lowest 20% that do not correspond to poor people.
I assume that the comment regarding high-income people hiding income was particularly directed at this point - people may show up as low-income, but be actually be well-off.
Returns with a low AGI do not necessarily reflect people living from income reported on the return, not only because they may receive other payments, but also because they may be dependent members of other households. Notice that for an AGI of $1 to $5000, the number of returns on which no exemptions are claimed, not even for the filer. This presumably means that the return is filed for someone who is a dependent on another return.
It is hard to tell how many low-AGI returns are filed by people who are not poor, but it appears to me that at least 4-5 million returns out of the 26 million do not appear to reflect people who are poor. This effect is particularly pronounced among the lowest-income returns.
However, there is a further problem: going from 26 million returns to 60 million people. This assumes that each return reflects 2.3 people. This is obviously wrong for the low-AGI returns. The total number of exemptions claimed on all tax returns is approximately 264 million, reflecting on the order of 1 exemption per person in the US. The total number of exemptions claimed by the lowest 20% of returns is no more than 27-28 million. These exemptions reflect people claimed to be dependent on the income.
So, I calculate the actual AGI per person for the lowest 20% of the returns as being around $15/day. If corrected for returns that do not reflect people who are poor (for example, people claimed as dependents on other returns), the number would rise.
Jan 10, 2008 - 10:38 pm TomB:TomB, we do have excellent data on Social Security income. My report was on what the latest IRS tables show, not on the broader issues you raise, some which I have covered in other articles and in books. I used my 1,116 words to pack in a great deal of information that was relevant to the just released data tables I wrote about.
But Mr. Johnston, by making the $7 a day statement, you are indeed discussing the “broader issues”. You make a sweeping statement about 60 million people, yet you choose to exclude most of the data about those very people.
Can’t you even begin to understand how weak that is?
Jan 11, 2008 - 3:19 am CS:Mr. Johnson, if you’re still following, could you address Dan in Seattle’s dependent-filer point? Did you consider including it in your discussion of bottom-quintile demographics and omit it for reasons of space? I’m sure the issue must have occurred to you, given your long experience writing about tax. Thanks.
Ms. Jacobson, did your research include any sources with a tax background? I don’t think Engram quite counts. Again, thanks.
Jan 11, 2008 - 8:41 am David Cay Johnston:TomB,
I understand the reasons that people who did not read the article in context, and came to it by reading this blog, would have strong reactions.
When the piece ran 14 months ago, people read my report in context. Many sent me emails, letters and voicemails. The piece ran in newspapers across the country that subscribe to The New York Times News Service.
These readers expressed a wide variety of insights and reactions, none of them like the ones here from people who read a single number out of context and then made assertions about my knowledge, ethics, etc. Some here assert that I used some strained methodology when all I did was multiply and divide.
Context matters.
Jan 11, 2008 - 8:47 am TomB:When the piece ran 14 months ago, people read my report in context. Many sent me emails, letters and voicemails. The piece ran in newspapers across the country that subscribe to The New York Times News Service.
These readers expressed a wide variety of insights and reactions, none of them like the ones here from people who read a single number out of context and then made assertions about my knowledge, ethics, etc. Some here assert that I used some strained methodology when all I did was multiply and divide.
Your response is nothing more than an Appeal to Popularity, and thus a logical fallacy. I really don’t care at all how many other people liked or didn’t like your article.
And your repeated attempts for us to look at the numbers “in context” is bound to fall on deaf ears. We weren’t the ones who originally took your number out of context, it was the LA Times, when they wrote “Domestic Tranquility”.
I would think a simple comment to the effect that the number you came up with “needed context” would be in order.
Although I’m really not sure what that “context” would be.
Jan 11, 2008 - 10:36 am MCPO Airdale:“context” and “nuance” is just journalistic parlance. It usually translates into, “You caught me.”
Jan 11, 2008 - 12:09 pm Rob Crawford:Some here assert that I used some strained methodology when all I did was multiply and divide.
Um, was simply multiplying and dividing the right approach? Was there other data (other sources of income and support, for example) that may be important to the issue?
Jan 11, 2008 - 12:49 pm Ubu Roi:So the LA Times cribs a figure from an intellectual lightweight, who, in turn, lifted it from the World Socialists who took it “out of context” from Mr. Johnston, who, it would appear, served it up to the NY Times with more than a passing suspicion that it could be misinterpreted to mean that 60 million Americans actually live on $7 a day.
Jan 11, 2008 - 2:40 pm David Cay Johnston:Ubu Roi,
After my taking time to respond to people here, unlike most journalists who ignore people who raise questions about their work, your remarks are more cynical than the cynical journalist of myth.
So, to be clear, I stand by what I wrote, it was accurate, you can verify its accuracy yourself and, yes, context matters.
I am proud of my work, all of which I have signed for more than 40 years and which has been recognized repeatedly with the highest honors in my field, has saved lives, brought criminals to justice, freed an innocent man from life in prison after I hunted down the real killer, exposed government abuses at every level, exposed misconduct by some of the richest and most powerful people and institutions in the world, caused two TV stations to be forced out of business because of news blackouts and manipulations, and….. I could go on here for enough to fill a book.
People make bizarre and jaundiced interpretations every day. I have received letters on the same story accusing me of diametrically opposite, and mutually exclusive, things.
I do not hold people to standards I do not myself meet, I take great care in my work, I forthrightly correct actual errors even if no one reports them and I do not lurk behind a screen name.
Now, farewell, I have important work to do…
Jan 11, 2008 - 3:14 pm David Cay Johnston:Ubu Roi,
After my taking time to respond to people here, unlike most journalists who ignore people who raise questions about their work, your remarks are more cynical than the cynical journalist of myth.
So, to be clear, I stand by what I wrote, it was accurate, you can verify its accuracy yourself and, yes, context matters.
I am proud of my work, all of which I have signed for more than 40 years and which has been recognized repeatedly with the highest honors in my field, has saved lives, brought criminals to justice, freed an innocent man from life in prison after I hunted down the real killer, exposed government abuses at every level, exposed misconduct by some of the richest and most powerful people and institutions in the world, caused two TV stations to be forced out of business because of news blackouts and manipulations, and….. I could go on here for enough to fill a book.
People make bizarre and jaundiced interpretations every day. I have received letters on the same story accusing me of diametrically opposite, and mutually exclusive, things.
I do not hold people to standards I do not myself meet, I take great care in my work, I forthrightly correct actual errors (even if no complains) and I do not lurk behind a screen name.
Now, farewell, I have important work to do…
Jan 11, 2008 - 3:15 pm Merovign:Shorter David Cay Johnston:
“I can’t defend what I did in any substantive way, so I will simply boldly state my innocence and purity, drop an occasional accusation, list a bunch of impressive accomplishments that don’t relate to the matter at hand, and then declare my departure loudly.”
You really should have ended with “Good DAY, Sir!”
And no, 60 million Americans don’t live on $7 a day. The assertion is laughable, no matter what mathematical operations you used to arrive at it.
It is simply the sort of abuse of language that we have come to expect from so-called journalists - to paraphrase Jack Nicholson’s “Joker,” “this profession needs an enema!”
Jan 11, 2008 - 3:34 pm TomB:I am proud of my work, all of which I have signed for more than 40 years and which has been recognized repeatedly with the highest honors in my field, has saved lives, brought criminals to justice, freed an innocent man from life in prison after I hunted down the real killer, exposed government abuses at every level, exposed misconduct by some of the richest and most powerful people and institutions in the world, caused two TV stations to be forced out of business because of news blackouts and manipulations, and….. I could go on here for enough to fill a book.
None of which, of course, has ANY bearing on the issue at had.
Mr. Johnston, I’d suggest you take those wonderful investigative skills and look at the circulation figures for newspapers as well as polls on the public’s trust for journalists.
Jan 11, 2008 - 3:50 pm Fraggle Rock:Now, farewell, I have important work to do…
Yes. It seems he got some documents faxed to him that state GW Bush was AWOL from the Texas Air National Guard. The font looks sort of funny, but that doesn’t mean anything….
Jan 11, 2008 - 3:58 pm Dan in Seattle:As David Cay Johnston points out, his article does not state that people live on $7/day. He was clear about what he meant. If other people decided to misinterpret what he wrote, that isn’t his problem. Those same people also changed the IRS to the Census Bureau. When I file my taxes, I try to avoid confusing the two.
As I discussed in my previous post, Mr. Johnston’s results are off. However, he used good data, documented his sources, and described his calculations. I can’t ask for more.
I am disappointed by the many complaints about David Cay Johnston, who wrote a good article and responded in useful ways to comments on this blog. He doesn’t deserve those complaints.
The Los Angeles Times deserves far more complaints than it received on this blog. The editorial cited by Ms. Jacobsen states as she quoted “In our America, 60 million people survive on $7 a day.” Even minimal checking shows this to be wildly incorrect. The source of the statement, as Ms. Jacobsen points out, is an article that is obviously not a reliable source of information. To me, The Onion seems more believable. Standards at the Los Angeles Times must be extremely low.
Jan 11, 2008 - 11:08 pm Ken Hahn:I have it figured out. There are at least 60 million minor children in the United States who have no income. If you ignore what the other family member make you can say they live on less than $& a day
Jan 12, 2008 - 12:17 am la reader:This is S.O.P. for all LA Times’ writers. Report what you want to believe (like Dan Rather in Memogate), and “cite your source” when challenged, no matter how ridiculous the premise is.
Jan 12, 2008 - 8:45 pm David:Well, Annie; this is on a different theme than you usually write but it’s as good as anything you’ve ever produced.
Perhaps Shanley’s article flows from the same bias as those who spent the 80’s complaining about how Reagan created the homeless problem; then POOF, when Clinton took office, the problem was gone. CNN has an ongoing “War on the Middle-Class” bit that seems similarly motivated. I have a $1.00 bet with the bartender at my favorite pub that that bit will disappear if a Democrat is elected in Nov ‘08.
Cheers, Annie. Good work.
Jan 14, 2008 - 8:49 am Susan:Well, if they used IRS data, then I would fit their criteria. Since I was deployed to Iraq for most of 2006, my taxable income was less then $2000 and I had four dependents. My kids have long suspected that we live in utter poverty compared to their friends - now they have proof!
Jan 14, 2008 - 12:35 pm Mike Sorensen:I love Annie Jacobsen! It is so exciting to read about the actual facts rather than the narrative.
Thank YOu.
Jan 14, 2008 - 12:49 pm Bruce Anderson:If the 26 million AGI of $5,743 is average, then half of them were greater than this figure. Half of your population just went away. Second news flash…half of US population has an IQ below 100!
Jan 14, 2008 - 1:43 pm BD:I haven’t read all the comments, so I don’t know if this was mentioned before, but if David Cay Johnston had run the numbers last year, based purely on tax data, I would be one of his people living on less than $7 a day.
You see, I am a military officer, and quite happy with my financial situation. However, I spent the majority of 2006 in a tax exempt combat zone. As a result, my taxable income, AGI, and every other number on my 1040 was microscopic.
That certainly doesn’t make me poor. In fact, having very little of my income taxed leaves me much better off!
How many hundreds of thousands of people are in the exact same situation as me in any given year?
Jan 14, 2008 - 2:13 pm Neo:No, it’s accurate - I know an American citizen who survives on less that $7/day - he has no income, no govt assistance, no welfare, no medicare, nothing!
Of course, he’s 10 years old and lives at home with his parents, but you put enought of these together and surely you can skew the numbers….
Jan 14, 2008 - 2:26 pm Jerhad:Actually, the biggest issue not being addressed here is the use of IRS figures to imply anything about the US economy or the well-being of its citizens. Economist Alan Reynolds does an excellent job of criticizing the use of such data and its manipulation by the left in his book, Income and Wealth.
Most of 16+ million college students in the US work at least part-time during the summer for limited annualized wages. Should that imply that they are poor? When starting a new business, I lived off of savings for a year and reported less than $1,000 on my tax return. I was very poor by IRS data standards but certainly not in reality. My grandmother lives very comfortably on almost no taxable income through social security, her pension, and money from sold properties. The IRS data makes her look impoverished though. The list goes on.
The journalists at the LA Times and the NY Times will not rest until we are all earning $7 per day in a socialist utopia anyway. Except for them, of course. Leaders of the socialist revolution require more than the rest of us.
Jan 14, 2008 - 2:52 pm Joan:I have no problem with David Cay Johnston’s article. He appears to present all the facts, and a careful reader can draw accurate conclusions. The problem is that it turned into a game of “Telephone.” Subsequent articles presented the information selectively, particularly the attention-getting $7 a day. Headline writers then skimmed the articles and decided that it means people “live on” that amount - when in fact it’s the amount reported to the IRS, before supplementary benefits from the government. If I were Johnston, I’d be angry at the way my facts were twisted by other writers, not with Annie Jacobsen’s article.
Jan 14, 2008 - 3:35 pm Bill:David Cay Johnston’s article of course does not claim what some very sloppy folks, in a subsequent game of “telephone” as observed by another poster, concluded and ultimately reported as fact.
However, based on the version of the article that Johnston pointed us at at the NYT, its sloppy wording and unsupported editorial commentary sets up a chain of easily made incorrect assumptions that other lazy or biased reporters were likely to misinterpret. In particular, consider the following paragraph:
The first sentence discusses I.R.S. data about “reported incomes” - fair enough. Then, it switches to discussing what a subset of those taxpayers “made” (I now assume, but do not know, that Johnston meant “reported” based on his comments above about “context”). Although somewhat vague, in all common usage “made” means something very different from “reported to the I.R.S. as AGI”. As a casual reader, I would assume the word “reported AGI” would have been used in the second sentence if that was what was meant. For one example, IIRC a person who receives $10K in interest from Federal tax free muni bonds would have a “reported” I.R.S. income of zero from that source while a person who receives the same amount of income from taxable interest would report it as $10K. Surely it isn’t the case the first person “made” nothing on their interest while the second person “made” $10K (indeed, from most people’s view, since the first person’s after-tax net was higher than the second person, most people would consider the first person to have “made” more from their interest payments).
Similarly, the “reported income” mysteriously switches to just “income” in the second sentence.
In an apparent act of switching from factual reporting and fact based analysis to editorializing, Johnston tells us that filers whose reported (adjusted gross?) income falls in the lowest quintile of (reported adjusted gross?) income are not only the “poorest”, but are actually “impoverished”. It’s completely unclear how this conclusion is supported by the I.R.S. data as someone whose reported AGI is low may have a substantial assets and may even have a very adequate earned “under the table” or unreportable income. He admits that a number of things are legitimately omitted from the reported income, yet seems to conclude that low reported income must imply “impoverishment” (many retirees who live fairly well must be “impoverished” by Johnston’s standards in spite of having net worths of a few million dollars).
As well, it does not appear to me that the implied point of the article was even supported by the facts presented as they imply that a statistic from the I.R.S. can be used to reliably determine much. The headline completely omits the word “reported” (which is a critical omission) - although I will charitably assume that the headline is not written by the author so Johnston probably doesn’t deserve any blame on this point (the NYT does though).
Upthread, Johnston consistently prides himself on his many years of experience and integrity while trumpeting his ability to using his “1,116 words to pack in a great deal of information”. Unfortunately, his integrity does not seem to expand to refusing to write about issues he can’t adequately cover in 1,116 words. If his integrity is as strong as he asserts, hopefully this will be a lesson that one should pick integrity, and hence clarity, over arbitrary word counts and make a decision to cover the local street festival if that’s all he can cover accurately in his 1,116 alloted words. At a minimum, with his vast integrity and years of experience, he should negotiate final approval of anything published under his byline (i.e., if he doesn’t agree with a hack job done on his work by editors, he should be sure he has the power to insure it’s not published under his byline). Hopefully, as he drifts into retirement, he will try to do better in his last few articles.
The Gray Lady is now clearly not what she was once (perhaps incorrectly) purported to be. The deathwatch of the conventional “authoritative” print media seems to be paralleling the arrogant professional death spiral of Dan Rather.
Jan 15, 2008 - 12:31 am cathyf:Years ago my dad worked for Rand, and one of his colleagues was reporting a statistic on the number of Americans who are illiterate. The percentage seemed improbably high… At which point someone asked, “So how many of these illiterate Americans are under the age of 5?”
I bet that a whole bunch of those illiterate toddlers are making less than $7/day, too!
Jan 15, 2008 - 6:50 am