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	(Oops, first attempt lost the article.)

	LOOK BACK IN ANGER, part II: They're lying to you.

	In part one we saw that no one sector monopolized the gains of the
1980s.  And those that risked the most gained the most.  Still, people will try
to tell you that: poverty rates increased, the "rich" payed lower taxes because
of the tax cuts, that the people on the welfare roles have less and less
each year, that the 1980s was a decade of "greed" and that capitalism is
unfair.

	They're lying to you.

	[Picking up again with the FORBES article from the FORBES 400 issue,
October 19, 1992, page 78-, by Lawrence Lindsey]

		...But statistical uncertainty as a result of sample size is
	only one problem with using the Fed survey to map wealth distribution
	patterns.  [See part I for more details --Brett]  In addition, two
	major components of household wealth were missing from the preliminary
	data reported earlier.  (The Fed is working to include this information
	in the future.)
		The first of these missing household assets is the value of
	workers' claims on pension plans.  This is serious money.  The
	estimated value of these assets, $3.7 trillion, plus an additional
	$400 billion in estimated military pension liabilities, is twice the
	survey's estimate of the value of stocks and bonds held by all of
	the nation's households.  If these holdings had been included in the
	survey, household wealth would have increased 24%.  Most of this gain
	belongs to the middle class.
		The second missing asset is what economists call "Social
	Security Wealth," the legal claims that most of us have on the Social
	Security System.  The discounted present value of these claims owned
	by active or retired workers is $5.6 trillion--an amount equal to
	one-third of all of the wealth reported in the Fed survey....

	$5.6 trillion!!  And another $4.1 trillion in pensions!  And the
_middle class_ holds most of it!  Yet people still try to tell us that the
"rich" hold all the marbles, only letting crumbs "trickle down" to the rest of
the nation.  If we incorporated all these assets into the net-worth figures,
the share of the top 1% drops from 36.2% to 25%.  Such figures make any
comparison of the 1980s to a decade of "greed" laughable.

	In addition to having deficiencies in counting the assets of the middle
class, the assets of the lower class are also undercounted.  When we look at
_income_ (that is, "approved" sources of income) and _expenditures_ for the
income quintiles, we see a startling difference:

		Income and Expenditure by Quintile

		Income before taxes		Average annual expenditure
		===================		==========================

Lowest 20%	$ 5,720				$12,119

Second 20%	 13,894				 17,616

Third 20%	 23,856				 24,476

Fourth 20%	 37,524				 34,231

Fifth 20%	 75,406				 53,093

[Source: The Seven Fat Years, page 272.]

	The reasons for the descrepencies for the bottom two quintiles, and the
bottom quintile specifically are: many entitlements are not counted as
"income", yet provide spendable funds for those people; significant portions of
the bottom two quintiles consist of either older people, who generally own
their own home, and live on a fixed income, and students, who have sources of
income (parents) outside of regular wages.
	Yet we are continually told that each and every person below the median
is "by definition", "poor".
	Not to discount the plight of the poor--it is real.  However, as we are
seeing, what the dealers of welfare are telling you and and what is reality are
two different things.  Like the political machines of old, the welfare system
has become a way to buy votes.  Votes are "bought" by stressing the amount of
welfare the dealer has provided for his "constituents" (addicts, really), and
how the other candidates will no doubt cut them off from their source of funds.
And to secure ever increasing sources of "votes", the welfare dealers must 
argue both ends: that welfare works, and that there are more people than even 
"in poverty", so they need more welfare money.
	This apparent contradiction aside, the dealers go on to tell us that
social welfare programs suffered "drastic cuts" during the 1980s, when no such 
cuts occurred.  Overall spending did not change:

	Social Welfare Expenditures Under Public Programs
		(in millions of dollars)

Year	Total social welfare	% of GNP	% of gov't outlays
==================================================================

Federal
=======
1960	 24,957			5.0		28.1
1970	 77,337			8.1		40.1
1980	303,276			11.5		53.2
1981	344,066			11.6		54.0
1982	367,691			12.0		52.5
1983	398,792			12.0		51.9
1984	420,399			11.3		50.2
1985	452,860			11.5		47.8
1986	472,364			11.3		47.6
1987	499,844			11.0		50.4
1988	532,144			10.9		49.1

State and local
===============
1960	 27,337			 5.5		60.1
1970	 68,519			 7.1		64.0
1980	189,720			 7.2		66.5
1981	206,774			 7.0		63.1
1982	228,178			 7.4		62.6
1983	243,285			 7.3		60.1
1984	251,569			 6.8		58.9
1985	277,540			 7.0		59.0
1986	298,158			 7.1		58.2
1987	344,601			 7.4		59.6
1988	362,622			 7.6		60.1

Total
=====
1960                            10.5		38.4
1970                            15.2		48.2
1980                            18.7		57.4
1981                            18.6		56.9
1982                            19.4		55.7
1983                            19.3		54.5
1984                            18.2		52.8
1985                            18.5		51.2
1986                            18.4		47.9
1987                            18.4		53.5
1988                            18.5		52.8

[Source: Information please almanac, 1991 edition.  Page 64.]

Graphically:

% of GNP
20|
  |                         X       X
18|         X       X                       X       X       X       X       X
  |
16|
  | X
14|
  |
12|
  |
10| 
  |
 8|
  |
 6|
  |
 4|
  |
 2|
  |
 0|____________________________________________________________________________
  1970    1980    1981    1982    1983    1984    1985    1986    1987    1988

				Total spending by year

	One is reminded of the grasshopper and the ant story:  while the ant
spends all spring, summer and fall producing food and storing it for the
winter, the grasshopper fritters away the time because food is "plentiful".
When winter hits, the grasshopper demands food from the ant, who justifiably 
feels that the grasshopper has reaped what it sowed: nothing.
	However, in the end, the ant does what the typical person in the US
would do: it charitably provides the grasshopper with food, hoping the lesson
has been learned.

	However, in the real world, welfare is year-round, and those attempting
to work for the future are penalized.  Despite this, people are still
charitable: charitable giving _grew_ at an annual rate of 5.1% a year during
the 1980s.  Compared with 3.5% for the _previous_ 25 years.
	In addition, Lawrence Lindsey summarizes in _The Growth Experiment_
(page 210):
		The Tax system offers a better approach (than government
	funding).  Economic research shows that charitable giving is very
	sensitive to its tax treatment.  Every 1 percent reduction in the
	after-tax cost of charitable giving produces an additional 1.2 percent
	to 1.3 percent in donations.  Stated differently, every $1 the
	government spends in _increased_ tax incentives produces an additional
	$1.20 to $1.30 for charities.*

[* An excellent review of this literature is given by Charles Clotfelter and
Eugene Steuerle, "Charitable Contributions" in _How Taxes Affect Economic
Behavior_, ed. Henry Aaron and Joseph Pechman (Wash., D.C.: The Brookings
Institution, 1981), 403-446.  Also highly recommended is Charles Colfelter's
_Federal Tax Policy and Charitable Giving_ (Cambridge: National Bureau of
Economic Research; Chicago: University of Chicago Press, 1985).]

	This despite paying more in taxes:

	Percent of Federal Individual Income Taxes Paid by High and Low Income
Taxpayers, 1979 and 1989.  Source: Information Please Almanac, page 75. (1991)

Highest||||||||||||||||||||||||||||||| 43.6%               |||||| 1989
5%     |________________________| 37.6%                    |____| 1979
       |
Highest||||||||||||||||||||||||||||||||||||||| 54.5%
10%    |________________________________| 49.5%
       |
Highest||||||||||||||||||||||||||||||||||||||||||||||||||||| 76.5%
25%    |_________________________________________________| 73.1%
       |
Highest|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| 93.9%
50%    |________________________________________________________________| 93.2%
       |
Lowest |||| 6.1%
50%    |___| 6.8%
       |
Lowest || 0.7%
25%    || 0.5%
       ------------------------------------------------------------------------
       0     10     20     30     40     50     60     70     80     90     100
			Percent of Total Income Tax Paid

		Top Earners Still Pay Largest Share of Income Tax Bill

		The top-earning ten percent of US taxpayers paid nearly 55% of 
	the Federal individual income tax bill in 1989, according to a Tax
	foundation analysis fo the recently released 1989 IRS tax return data.
	Despite all the major tax legislation witnessed over the decade of the
	1980s, the fraction of income taxes collected for this top ten percent
	varied only slightly from year to year between 1979 and 1989 but
	_inched steadily up during the decade_.... [emphasis mine --Brett]

		Trends in Progressivity

		The Federal income tax system has remained progressive.  Top
	earners continue to pay a larger share of tax collections _despite
	the alleged upper-income bias of the tax cuts and rate reductions
	under ERTA of 1981 and TEFRA of 1986_. [emphasis mine --Brett]
		Growth in the income base itself has been increasing faster
	at the upper end of the income scale, resulting in increased income
	tax receipts from top earners.  Naturally, this also results in a
	higher proportion of the entire population's income being taxed at
	the highest rate.
		The 112 million returns filed for tax year 1989 reported an
	increase in AGI (adjusted gross income) of $194 billion over 1988.
	The largest percentage gain was from _Individual Retirement Account
	distributions_, up 24.3% from 1988.  [emphasis mine --Brett]
	Social Security benefits rose 22.4%, and taxable interest increased
	15.5%.  Salries and wages, which constituted 71.6% of total positive
	income for 1989, rose 5.5% over 1988.  All told, 1989 total individual
	income taxes rose $23.3 billion over 1988 for a record $439 billion
	take.

	Yet another reason why tax revenues increased throughout the 1980s.  As
predicted by supply-side economics, lower rates stimulated the economy,
producing more revenue; increased the tax base, producing more revenue; and via
lower rates, increased compliance, producing more revenue.

	But what about poverty you say?  Both the rate and the total number of
people under the poverty line declined:

[Source: Statistical Abstract of the US, page 458-9.]
[1988,89 % computed from 1980 census figures]

Year	% below poverty line	number below poverty line (millions)
====================================================================
1979	11.7			26.1
1980	13.0			29.3
1981	14.0			31.8
1982	15.0			34.4
1983	15.2			35.3
1984	14.4			33.7
1985	14.0			33.1
1986	13.6			32.4
1987	13.0			32.2
1988  	12.8			31.7
1989	12.7			31.5

	Far from the massive increase in poverty some would have you believe
occurred.


	So we've seen that far from looting the nation during the 1980s, the
"rich" and middle class paid most of the taxes.  Charitable giving increased
steadily, social spending was level during the decade, and the welfare dealers
are using smoke and mirrors to extort money from the taxpayers to buy votes.

	In part III we'll examine what some of the leading figures in US
politics have to say about this new era of envy.  We'll look at the hunt for
scapegoats, personified by the S&L scam, what role the media has played in the
last year and in part IV, how to change things for the better.

Brett
===============================================================================
80s: 18 million new jobs, deficits down (%GNP), tax rates down, tax revenues up
GNP up, inflation down, unemployment down, interest rates down, cold war won
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