Don't Quit Your Day Job…

Been reading DQYDJ for a while? Good. You know that looking at data from a different angle yields very interesting insights.

Here’s one interesting thing: the federal income tax code benefits 18 to 35 year olds at the expense of 45 to 65 year olds. How do I figure? The IRS helpfully posted data for 2009 (links are xls files) on both the amount of income made by age group and the amount of Federal income taxes paid after credits. So, should the Silent Generation and Baby Boom Generation be mad at Generations X and Y? Partially! Read on.

If you read this web site the odds that you are also living under a rock are pretty small. That probably means you already know that over the weekend the so-called Deficit Reduction Supercommittee failed to reach an agreement (and had to admit its failings on Monday). A little back-story: the Debt Panel was trying to find deficit savings in excess of $1.2 Trillion over the next 10 years. A little more back-story: the entire concept and execution of the debt panel was a disgusting farce. The entire $1.2 Trillion was to be cuts from ‘baseline spending’, also know to the rest of us as ‘planned future spending increases’.

Why not go for the gold?  I already asked you if lower salaried majors should pay higher rates on student loans and if higher salaried majors should pay higher tuition.  Inspired by a recent post on the Freakonomics blog, I present to you another controversial (yet interesting) question for you to ponder.  Should the less attractive receive benefits commensurate with their disadvantages due to their looks?

Thomas Jefferson once said, “I’m a great believer in luck, and I find the harder I work the more I have of it.” Wise words from a man who died with the equivalent of $1,000,000 in today’s dollars worth of debt – but his words still ring true today. I wrote this article on a whim when I tried to find data on the amount of hours worked per week broken down by individual income. Let me save you some time; that data is nowhere to be found. I can tell you this… the average American private sector worker works 34.3 hours in an week. I can also tell you that the average American worker making an income from $100,000 to $149,999 puts in 45.09 hours in a usual week, 34.3% more than the average worker making between $10,000 and $19,999. So I ask you, dear reader, how many hours a week do you work?

“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

What is less certain is what those taxes will be called – the tax code continues to get more and more complex every year. The IRS puts out a data report annually about their fiscal year which includes tax collections by the type of tax (Table 6). These numbers are not the final numbers – those numbers are arrived at once all credits and refunds are complete. However, the chart that results is instructive, and it allows us to visualize how the tax code has change over the years to collect revenue from the country in different ways.

In the chart that follows, you can turn off individual categories so you can see how individual categories stack up. Note the relative size of the estate and gift taxes. For the amount of interest they receive, they are an insignificant portion of total tax collections.

Oh no! The Social Security Administration recently released it’s Wage Statistics for 2010 to little (official) fanfare. To read a little financial press, it’s the end of the American Dream (buy guns and gold!), however. Here’s a little secret: the problem isn’t that employers are colluding to ratchet down the income of the United States. The true reason for the reduction in median income is the shifting demographics of employed workers. You can break it down in many ways, but I’ll break it down into age brackets… and you should be convinced that while unemployment is a problem, the falling wage is just a symptom of everything else, and not something you should spend too much time worrying about (let DQYDJ do it for you!).

I recently came across Jodi Beggs’s awesome (and tongue in cheek, and that’s a compliment from a site called DQYDJ!) economics site, “Economists Do It With Models“. Perusing her recent history, I came across an article entitled “Adventures in Fact-Checking, GOP Debate Edition” where Jodi fact checked some statements made by Mitt Romney and Newt Gingrich and found them, on the surface, to be false. Fair enough – the candidates both made statements to the effect that Ben Bernanke is the most inflationary Fed Chair ever. Playing fast and loose with the facts is wrong, but I don’t entirely like how Ms. Beggs ranked the Chairmen – by annualized inflation during their term. To explain why I’ll turn to an unlikely (yet, strangely appropriate) place- baseball.

“Oooh-yeah just like this
Come on little miss and do the twist” – Chubby Checker, The Twist
I thought the quote was pretty clever, but you could also attach one of a couple of subtitles on this post: “Why Thomas Sargent Deserves Half the Nobel Prize” or, if you like classic entertainment, “A Funny Thing Happened on the Way to the Dance”! Let’s stick with Thomas Sargent, who just won the Nobel Prize in Economics for his work in the field of “Rational Expectations”. “Rational Expectations” in Economics, as you might guess, refers to the changing expectations of the market (investors, citizens, whomever) to policies that will affect them. Basically, you cannot assume that the reaction to a new policy will have the desired effect.

One of the things we like to do here at Don’t Quit Your Day Job is to reveal interesting things hiding in plain sight. One of those things: subtracting the Daily Treasury Real Yield rate from the Daily Treasury Yield rate gives you a good idea of the market’s expectations of inflation. Even though media prognosticators won’t agree on whether we’re in for a deflationary era, hyperinflation, or a whole lot of nothing, you can get a reasonable prediction from market data. Our explanation is below, along with the limitations of this method.

Well, probably not the death of free checking accounts, but a little hyperbole never killed anyone, right?

DQYDJ already gave you a “view from 35,000 feet” analysis of new debit card transaction caps in our last article, but we wanted to follow it up with something deeper, for those interested in how the sausage is made. We’ve dug into two of the more recent Bank of America investor releases and are ready to share our thoughts on why Bank of America’s move is rational – and you can expect other banks to follow. Yes, likely even online banks and credit unions. However, first up is Citibank, who is eliminating free checking… unless your account is over $6,000.