In my column for the December 11th, 2011, edition of the Pittsburgh Tribune-Review I challenged some popular means of assessing economic inequality . You can read my column, in full, beneath the fold.
Errant assessments of ‘income inequality’
President Obama is again waging class warfare. His message now to the great majority of Americans is, “You’re poor because the rich are rich. Re-elect me and I’ll take from the rich and give to you, the poor.”
This message appeals to three groups of people with much overlap among them.
The first are folks who want to get rich(er) quickly. And what better way to do so than to have Uncle Sam take from rich people? Any guilt that they might suffer about hiring an agency (government) to confiscate wealth from strangers is assuaged by reassurances issuing from the head honchos of this agency (people such as Mr. Obama) that the people whose wealth will be confiscated became rich only by stealing from you. Such confiscation, therefore, isn’t theft — it’s repayment!
Second are those advocates of “social justice” who, lacking sufficient understanding of economics, naively believe that the amount of wealth in society is fixed and bestowed on humans by nature rather than by human creativity, effort, risk-taking and sacrifice. So, taking from Smith to give to Jones doesn’t affect the amount of wealth in society; it affects only wealth’s “distribution.” And because wealth comes naturally from nature, there’s no good justification for Smith to have more than Jones.
Third are those people who fancy themselves helping with the task of redistributing all this wealth. Politicians and bureaucrats all have more prominent roles to play when the state is committed to actively adjusting the distribution of wealth.
As I explained in my previous column, however, the data used to show that only the rich grew richer in America over the past 30 years are far less clear than Mr. Obama and “progressive” pundits pretend. Research by several scholars reveals that the incomes of “the 99 percent” actually rose far more impressively than the Occupy Wall Street narrative insists.
Adjusting for inflation more realistically — to better account for improvements in the quality of goods and services — shows that middle-class incomes haven’t really been quite so stagnant. Also, accounting for the fact that the number of residents per typical American household has fallen over the past 30 years shows that the income available to each person per household has grown more than Mr. Obama would have us think.
Another important consideration centers on changes over the past several decades in the composition of American households.
When I graduated from high school in 1976, nearly two-thirds of households were headed by married couples. Today, only about half of all households are headed by married couples. As a result, about half (rather than, as was true in 1976, one-third) of households today are headed by only one adult breadwinner.
This substantial reduction in the portion of households headed by married couples — and the corresponding rise in the portion of households headed by only one adult — naturally drives the median-household-income figure down. If Mom and Dad divorce and each sets up a separate household, the income for each of their households will be lower than was their household income when they were together. But this statistical fact doesn’t mean that the economy is faltering.
Don’t expect, though, Mr. Obama to point out these nuances.