On the CBO’s Income-Differences Report

by Don Boudreaux on October 28, 2011

in Data, Inequality, Myths and Fallacies, Video

Here’s a letter to the Washington Post:

Eugene Robinson is made apoplectic by the CBO’s report that, between 1979 and 2007, the growth in incomes for households in the top income-earning groupings (such as the top quintile, or even the top one percent, of income-earning households) was much larger than it was for households in middle- and lower-income groupings (“The study that shows why Occupy Wall Street struck a nerve,” Oct. 28).

For too many reasons to list here, Mr. Robinson is completely out of line to suggest that this study shows that most Americans are victims of “theft” by upper-income Americans.  But consider just two such reasons.

First and most obviously, the vast majority of rich Americans – people such as Kobe Bryant, Jeff Bezos, Sergey Brin, and Ralph Lauren – steal from no one.  They create valuable goods and services that millions of people voluntarily pay for.

Second, Mr. Robinson mistakes statistical categories for being flesh-and-blood people.  As University of Michigan (Flint) economist Mark Perry reports about a study that tracks the fate of actual individual households over time, in even as brief a period as 2001-2007 50 percent of households moved from one quintile to another.  Most relevantly, 44 percent of households in the lowest quintile in 2001 had moved into a higher quintile six years later, while during this same time 34 percent of households that were in the top quintile had fallen into lower quintiles.

Of course, the data reported in the previous paragraph aren’t the end of the story.  They can (and should) be questioned, parsed, examined in detail, and put into context.  But the same can (and should) be said about the CBO data that Mr. Robinson latches onto, so utterly uncritically, as confirming his bias that the marginal-tax-rate reductions and (rather modest) deregulation that we’ve had in the U.S. over the past three decades cannot possibly have helped any but the richest Americans.

Donald J. Boudreaux

And check out also this video of the WSJ‘s Mary Anastasia O’Grady discussing this CBO study.


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