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Getting Straight the Facts About Americans’ Economic Fortunes

My latest column for AIER is the first of a two-parter inspired by Phil Gramm’s, Robert Ekelund’s, and John Early’s splendid 2022 book, The Myth of American Inequality. A slice:

The picture gets even prettier when account is taken of the fact that higher-income households generally have more members than do lower-income households; specifically today, households in the top income quintile have an average of 3.10 members while households in the bottom income quintile have an average of only 1.69 members [quoting Gramm, Ekelund, and Early (GEE)]:

On a per capita basis the top quintile has only 2.2 times as much income per person living in the household as the bottom quintile, a considerably smaller difference than the 4.0 times as much without any adjustment for household size. But the blockbuster finding is that on a per capita basis the average bottom-quintile household receives over 10 percent more than the average second-quintile household and even 3 percent more than the average middle-income household!

About what they call “the blockbuster finding,” GEE correctly argue that it is evidence that government transfer payments dampen many Americans’ work incentives – a dampening that over time likely prevents these household-income figures from being even more encouraging than they already are.

What about absolute poverty? GEE make clear that in America it has been all but eliminated:

Among families defined as poor, hunger has been virtually eliminated, inadequate housing has all but disappeared, and the amenities of daily life have expanded. These data constitute definitive, independent verification of the vast historical reduction in poverty from 17.3 percent of our population as the War on Poverty began to only 2.5 percent in 2017.

These positive facts about the American economy, like those that I’ll report in my next column, are not welcomed by professors, pundits, and politicians who itch to subject the economy to greater government control. If the economy is doing well for almost all Americans rather than for only the superrich – if income inequality isn’t very high or growing – if absolute poverty is nearly conquered – the case for interventions such as income redistribution, industrial policy, and a larger welfare state collapses. So facts such as those that are amply reported by Phil Gramm, Bob Ekelund, and John Early must either be dismissed or ignored. Dismissing these facts is impossible, as these are assembled with scholarly integrity into a compelling picture of American economic success. The only remaining option is to ignore them – an option that I trust readers of this column will not choose.

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