One of the ways that the Obamamedia provides passive support (when the aren’t doing it outright) is by feeding a certain narrative. They do this by offering a shocking headline and supporting it with a couple of hot paragraphs at the beginning – or by posting a short “blog burst” with links that not everybody will take time to click through and read.
Try this CBS story on for size:
Study: American Households Hit 43-Year Low In Net Worth
Shocking, isn’t it? They use the first few short paragraphs to set it up:
The median net worth of American households has dropped to a 43-year low as the lower and middle classes appear poorer and less stable than they have been since 1969.
According to a recent study by New York University economics professor Edward N. Wolff, median net worth is at the decades-low figure of $57,000 (in 2010 dollars). And as the numbers in his study reflect, the situation only appears worse when all the statistics are taken as a whole.
According to Wolff, between 1983 and 2010, the percentage of households with less than $10,000 in assets (using constant 1995 dollars) rose from 29.7 percent to 37.1 percent. The “less than $10,000″ figure includes the numerous households that have no assets at all, or “negative assets,” which is otherwise known as “debt.”
Right. They establish authority and credibility by mentioning that this study was done by an economic professor at a recognized institution of higher learning and then they drop the bomb:
Over that same period of time, the wealthiest 1 percent of American households increased their average wealth by 71 percent.
Boom! A one-liner to lay the blame on the “evil rich”, to make it clear that the rich didn’t suffer as much.
Nice fit to the Democrat’s “soak the rich” argument in support of Obama, don’t you think?
Well, a little critical reading made me dig a little deeper. The statement about debt and negative assets clued me in to the fact that they were talking about net worth as a measure of wealth. Net worth is expressed as the total value of assets minus the total liabilities. Net worth can be reduced by either a decrease in the value of the assets or an increase in liabilities. It really is a simple mathematical equation.
One of the fastest ways that net worth can decrease is when the use of leverage (financing or borrowing) is employed to purchase an asset whose value is based on market pricing – like real estate. For example, if you buy a $200,000 home with a zero down loan (like was being handed out in the late 1990’s and early 2000’s), you start with zero net worth. If the market drops 10% and the value goes to $180K, your net worth goes negative by $20,000 because your loan amount is fixed until you pay it down.
So what did the study really say? Not quite what the CBS story implied:
The paper focuses mainly on how the middle class fared in terms of wealth over the years 2007 to 2010 during one of the sharpest declines in stock and real estate prices. The debt of the middle class exploded from 1983 to 2007, already creating a very fragile middle class in the U.S. The main interest here is whether their position deteriorated even more over the “Great Recession.” The paper also investigates trends in wealth inequality from 2007 to 2010, changes in the racial wealth gap and wealth differences by age and marital status, and trends in homeownership rates, stock ownership, retirement accounts, and mortgage debt.
Notice that the CBS story also set the time scale to “between 1983 and 2010” – and it is true that the report covered that period – but it also noted that the sharpest decline came between 2007 and 2010. Don’t you think that was really the news?
They also noted that debt in the middle class “exploded from 1983 to 2007”. It is a known fact that the government pressures on lenders to support their desires for greater home ownership and the irrational idea that it wasn’t fair to lower income people that they couldn’t buy a home just because they couldn’t pay for it drove the housing bubble and that it was common trend that started during the dotcom boom for people to live way beyond their means through credit and attempts to “cash flow” their way through life by making the minimum monthly payments.
Wealthy people didn’t get that way by being this stupid. Perhaps the rich did get richer but the poor got poorer based on their own financial decisions – decisions that the “rich” had nothing whatsoever to do with.
Now the people who played by the rules and lived within their means are targeted as selfish and evil in distorted comparisons like this one.