James Pethokoukis of the American Enterprise Institute responds to my criticism of his misleading post on “why income inequality is a myth.”
At least Pethokoukis has walked it back a bit. A week ago, he wrote that inequality (and the fact that it has risen) doesn’t really exist:
5 reasons why income inequality is a myth — and Occupy Wall Street is wrong
Now inequality does exist, it’s just exaggerated:
Sorry, liberal media, income inequality really is way overblown
Which is progress, I suppose. You can at least make an argument that inequality has been overblown by the fact-based press or whatever. That’s an unfalsifiable opinion, however wrongheaded. What you can’t do is make an argument that it doesn’t exist or that it hasn’t grown dramatically over the last few decades. That’s as false as they come.
Pethokoukis quoted the economist Robert Gordon in his original post to show how “income gains were shared fairly equally,” which wasn’t true, as Gordon himself said in the first sentence of his paper and in its charts:
The New Republic’s Matt O’Brien called up Gordon and confirmed his real view:
“The evidence on the long-term increase of inequality within the bottom 99 percent is ambiguous and complex, but what stands out like a searchlight is the unprecedented and increasing inequality between the bottom 99 percent and the top 1 percent,” Gordon told me.
Today Pethokoukis quotes Gordon again (emphasis is Pethokoukis’s):
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.
My dispute wasn’t with Gordon’s research (I’m no economist) but with Pethokoukis’s relaying of it. It’s worth noting that even this Gordon paper specifically notes 2005 research of his finding that between 1966 and 2001 “only the top 10 percent of the income distribution had a gain in real income equal to growth in labor productivity.”
Even then, it’s unclear how productivity measures show that income inequality is overblown. This may be stating the obvious, but the best way to look at income inequality is to look at income (wealth inequality is even more dramatic largely because the poor have little to save). Again, the CBO:
Kevin Drum: posts this chart:
And writes:
Income inequality is mostly a phenomenon of the top 1%. This is absolutely true. The top 10% have done well over the past 30 years and the top 20% have done OK. Nothing spectacular though. The real action has been elsewhere: an enormous movement of income from the bottom 80% to the top 1% (see table at right). I’m not sure why Pethokoukis thinks this is evidence against the growth of income inequality, though. In fact, it’s evidence that it’s even worse than you think.
Here’s Pethokoukis’s second point in today’s post:
Chittum really likes studies from the union-backed EPI. 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:
Pot kettle black coming from the American Enterprise Institute, but we’ll go with it. Maybe union-backed think-tank studies are inherently less reliable about income inequality than ones from banker-run regional Feds (it’s worth noting that no fact or methodology is disputed, but bias is asserted)
Dear Mr. Chittum,
I enjoyed your articles re the debunking the income equality myth. however, I
wanted to call your attention to a potential argument that you may not
have considered. In your article you mention a paper by Bruce Meyer
and James Sullivan regarding income and consumption inequality. I
believe a more careful examination of this paper lends some very
strong support for your arguments. One of the conclusions of this
paper is that consumption inequality is less than income inequality.
They also note that consumption equality dropped significantly between
1998 and 2008. This was exactly the same period in which there was a
massive debt fueled consumption binge in the United States. There are
two obvious conclusions to me from the is paper: first that the
majority of debt held by households is significantly riskier than
aggregate debt and income statistics; second, it is likely that the
majority of debt is owed by those who earn less to those who earn
more. This second point fairly clearly refutes the goal of the study
which is to suggest that American society is less unequal than than
income measures would suggest. The fact that those on the bottom have
been forced to borrow heavily to maintain their standard of living
suggests that society may be even less equal than one would infer from
the income distribution. Ultimately then the decisions made by our
government to intervene and manipulate asset markets, to postpone the
necessary restructuring of obligations have essentially acted as a tax
on those who earn and have less to the benefit of those who earn and
have more.
#1 Posted by James Dollinger, CJR on Mon 31 Oct 2011 at 09:23 PM
Oh, right. income inequality has grown? Sure. What's next on the commie pinko news agenda? "Earth is Globe-Shaped?" "Evolution is True?"
#2 Posted by Edward Ericson Jr., CJR on Tue 1 Nov 2011 at 02:53 PM
Like far too many people in Washington and Wall Street AEI doesn’t get it. It isn’t Mr. Chittum who’s in denial its AEI.
I find it unbelievable that some people still think what happened on Wall Street is okay, that capitalism is alive and well. Like hell it is! If we could bring Adam Smith back and ask him to judge the fruits of his works, he would be utterly appalled at what's been done in his name. He was, after all, a moral philosopher, and he would understand there's nothing moral about the greed that has come to characterize Wall Street and Washington – and, to be fair, too many too people in this country who see value determined only by wealth.
I wonder what AEI would say about our world as seen by Gandhi:
Wealth without Work
Pleasure without conscience
Knowledge without Character
Commerce without Morality
Science without Humanity
Religion without Sacrifice
Politics without Principle
George Mitrovich
San Diego
#3 Posted by George Mitrovich, CJR on Tue 1 Nov 2011 at 06:28 PM
"Income inequality"? Let's talk about the effort inequality that's plaguing our nation, since the so-called "income inequality" is a direct consequence of sloth.
The bottom 20% of income earners on average work less than 15 hours a week. The top 20% income earners on average work more than 34 hours a week.
That's right, commies. Twenty percent of American adults work less than two days a week on average. And less than 7% of this lazy bottom quintile of income earners work full-time.
LESS THAN 7%
And they wonder why they aren't making any money? For real?
Work more, earn more. What a concept! Whoda thunkit?
Want more money? DO MORE WORK!
Get off your oversized, mooching asses, produce something people need and wealth will ensue.
It isn't complicated, commies.
#4 Posted by padikiller, CJR on Wed 2 Nov 2011 at 08:47 AM
Plot the "income inequality" graph with the trade deficit graph and see what happens.
You will see that they coincide and correlate nicely.
When we were a productive economy (making more stuff than we consumed) and had a trade surplus, labor was worth more, relative to management.
When we began a trade deficit, labor became worth less, relative to management and the service sector.
60,000 people working in the RCA plants in Camden have been replaced by 40,000 people on welfare. Similar stories around the country. And some are actually wondering whence cometh the "income inequality"?
The best way to reduce "income inequality" is to put people to work making things or providing services that can compete in the domestic and global economies.
The problem we face in doing that is, as noted above, 80 years of commie welfare policies have created an obese, dependent underclass that will riot, steal, rob, loot and even kill before it will voluntarily do any work.
#5 Posted by padikiller, CJR on Wed 2 Nov 2011 at 09:01 AM
Jesus. Where do you start.
How about "Hey Padi, how was 'commie-liberal' policy responsible for the free trade, anti-inflation policies responsible for the trade deficit? It wasn't welfare that devastated the manufacturing middle class, welfare had to pick up the slack for conservative sourced policies that destroyed much of the labor movement and the factory jobs they had. Then the clinton new democrats trimmed those programs further while putting forth a strong dollar policy which killed exports. Did that all slip your mind?"
Ps, can someone please tell me when a strain of repetitive commenting goes from "thoughtful contribution" to spam?
#6 Posted by Thimbles, CJR on Wed 2 Nov 2011 at 02:08 PM
You can argue all day long over the cause of the trade deficit. But if you plot "income inequality" with the trade deficit... See what you get.
Fundamentally, the commies can't seriously wonder why it is that the lowest quintile of Americans make less money when they only average 14 hours of work per week.
Time to cut the umbilical cord for this undertasked and overfed quintile.
Now I'm not talking about the truly disabled Americans who lack the resources or family support to care for themselves. These people should be institutionalized at government expense and cared for humanely and compassionately.
But you want to make the bulk of these able-bodied, lazy sponges richer? Stop paying them not to work. Stop paying for their houses. Stop paying for their Snickers bars. Stop paying for their procreative medical care. Put them in jail if they rob, steal or loot. Take their kids away from them if they can't support them and charge them with child neglect.
Only when they get hungry enough, or cold enough, will these lazy able-bodied mooches will look for a legal process to make some wealth.
Speaking of which.... There is indeed this strange wealth-producing process called a "J O B" that productive people seem to grasp more readily than the obese 20 percenters do. If you get one of these "job-thingies" and keep it, it will produce wealth. It's like the Money Fairy that liberals think the government can send to give free stuff to people, only this "job" thing actually does make wealth.
The solution to most of our societal problems (and unquestionably our "income inequality" (non)problem) lies in persuading our obese, dependent underclass to do WORK instead of mooching.
It's just that simple.
#7 Posted by padikiller, CJR on Wed 2 Nov 2011 at 03:39 PM
This reminds me of AEI's global warming studies. Those are bunk too. Debating without name calling would be nice too as I see the same resident loudmouth troll is still yelling slurs from under the bridge. Ye reaps what ye sows.
#8 Posted by Mark A. York, CJR on Wed 2 Nov 2011 at 04:15 PM
Dr. York, Government Scientist Type wrote: Debating without name calling would be nice too as I see the same resident loudmouth troll is still yelling slurs from under the bridge
padikiller responds: So I guess "loudmouth troll" isn't "name-calling"?
You guys are a hoot.
#9 Posted by padikiller, CJR on Wed 2 Nov 2011 at 04:29 PM
Hey, that reminds me. Koch-funded science confirms climate change science:
http://arstechnica.com/science/news/2011/10/climate-skeptics-perform-independent-analysis-finally-convinced-earth-is-getting-warmer.ars
Science be praised!
#10 Posted by Thimbles, CJR on Wed 2 Nov 2011 at 06:03 PM
I'm worried about the effect of global warming on the OWS Hissy in Zucotti Park.
When the glacial meltwater inundates the park, the polar bear carcasses will make the place smell better and attract the homeless bums that the pasty white OWS kids chased out.
#11 Posted by padikiller, CJR on Wed 2 Nov 2011 at 06:42 PM
Dear Thimbles and all
Thank you. For your humanity. I appreciate intellligent, factual and humanistic arguments. As long as we dont delve into petty character attacks and resorting to gross generalizations and stereotypes about those different from us, in theory, a responsible and moral community that works together is actually possible.
#12 Posted by A Henry, CJR on Wed 2 Nov 2011 at 07:07 PM
And what about "tax inequality"?
The wealthiest 1% of Americans control only 18% of the wealth of the country, but pay 38% of the federal income taxes.
The bottom 50% paid only 3% of the federal income taxes.
How about some equality here, people?!
#13 Posted by padikiller, CJR on Wed 2 Nov 2011 at 09:16 PM
Just to nail down the commie position here...
You guys want "income equality", but you don't want "effort equality" or "tax equality". Right?
In essence, you want the bottom-earning quintile of Americans (who currently pay a whopping 0.8% of the federal income tax) to get free money from the gubmint, courtesy of the productive people in the top quintile who work more than twice as much on average, and who already pay 70% of the federal income tax.
And you don't expect the bottom quintile to work more than the 14 hours a week they currently work for this free money.
GOTCHA.
Yeah... This plan's gonna fly on Main Street, alright. You commies won't have a hard time selling this crapola to the average voter.
Up twinkles for everybody!
#14 Posted by padikiller, CJR on Thu 3 Nov 2011 at 10:33 AM
Jared Bernstein, of course, famous for the ill-fated Stimulus Plan that was to have lowered unemployment under 8 percent.
#15 Posted by Max Cred, CJR on Fri 25 Nov 2011 at 11:34 PM