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Enough with the income inequality stuff!

Posted: November 29, 2014 at 7:45 am   /   by

Reprint:  Originally published on Nov 1, 2011

I must say, I find it distasteful in the extreme, this use of “income inequality” as some sort of populist talking point and means to acquire more power. Its focus on envy, and then its use of theft to rectify the supposed injustice, is immorality masquerading as some great moral for-the-people kind of cause.

But it’s also got the flaw of being very misleading:

The first sentence of the study, which Chittum highlights in his post: “The evidence is incontrovertible that American income inequality has increased in the United States since the 1970s.”

But lots of studies make that claim. It is the next part that I found interesting:

This paper shows that the rise in American inequality has been exaggerated in at least three senses.  First, the conventional measure showing a large gap between growth of median real household income and of productivity greatly overstates the increase compared to a conceptually consistent alternative gap concept, which increases at only one‐tenth the rate of the conventional gap between 1979 and 2007. … Second, the increase of inequality is not a steady ongoing process; after widening most rapidly between 1981 and 1993, the growth of inequality reversed itself and became negative during 2000‐2007.   

It’s kind of like the global warming thing—it stopped several years ago, but they do keep talking about it.

No, Virginia, the middle class is not struggling:

But when I looked at the issue of middle-class stagnation, I went with analysis from the Federal Reserve, more likely free of political influence. And here is what a Minneapolis Fed researcher found:

 I calculate that median Census income per person rose by 50 percent. … The claim that the standard of living of middle Americans has stagnated over the past generation is common. An accompanying assertion is that virtually all income growth over the past three decades bypassed middle America and accrued almost entirely to the rich. The findings reported here … refute those claims. Careful analysis shows that the incomes of most types of middle American households have increased substantially over the past three decades.

Pethokoukis has been doing yeoman’s work on this subject of late.

Vincent Carroll adds more useful data at the Denver Post:

Of course, focusing on CEOs is easier for the protesters because they’re not as well liked as entertainers, athletes and college presidents, and the political left needs a bogeyman to buttress the thesis that growing income inequality is destroying the middle class and requires higher taxes on the rich to rectify the trend. The CBO report provides mixed news for this storyline: It actually undermines the claim of a disappearing middle class, while somewhat supporting the view that federal tax policies have contributed to inequality.

It turns out that every income group saw its average real (inflation-adjusted) after-tax household income grow between 1979 and 2007, according to the CBO. The top 20 percent did very well, with income growing by 65 percent, in contrast to an 18 percent rise for the bottom 20 percent. But income growth for the 60 percent in the broad middle class, at nearly 40 percent, was nothing to scoff at, either. That growth obviously occurred before the past decade, when household income stalled or declined because of two recessions, but it hardly suggests the death of the American dream.

Carroll again:

I don’t quite understand the obsession with income disparities so long as the economic tide is lifting most boats, which it usually does (the last decade being an exception). But income gaps clearly are an obsession on the left, and will have to be addressed in any bipartisan budget deal.

I’ll take it one step further. I do understand the obsession, and it is extremely unseemly. Morally wrong, in fact.

 

Christopher Cook
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Christopher Cook

Managing Editor at Western Free Press
Christopher Cook is a writer, editor, and political commentator. He is the president of Castleraine, Inc., a consulting firm providing a diverse array of services to corporate, public policy, and not-for-profit clients.

Ardently devoted to the cause of human freedom, he has worked at the confluence of politics, activism, and public policy for more than a decade. He co-wrote a ten-part series of video shorts on economics, and has film credits as a researcher on 11 political documentaries, including Citizens United's notorious film on Hillary Clinton that became the subject of a landmark Supreme Court decision. He is the founder of several activist endeavors, including AnyStreet.org (now a part of Western Free Press) and Liberatchik.com. He is currently the managing editor of and principal contributor to WesternFreePress.com.
Christopher Cook
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Enough with the income inequality stuff!