America's Growing Income-Gap Gaining Attention

[Nbadan]

By Peter Grier | Staff writer of The Christian Science Monitor


WASHINGTON – The income gap between the rich and the rest of the US population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself.

Is that a liberal's talking point? Sure. But it's also a line from the recent public testimony of a champion of the free market: Federal Reserve Chairman Alan Greenspan.

America's powerful central banker hasn't suddenly lurched to the left of Democratic National Committee chief Howard Dean. His solution is better education today to create a flexible workforce for tomorrow - not confiscation of plutocrats' yachts.

But the fact that Mr. Greenspan speaks about this topic at all may show how much the growing concentration of national wealth at the top, combined with the uncertainties of increased globalization, worries economic policymakers as they peer into the future.

more: CS Monitor (http://www.csmonitor.com/2005/0614/p01s03-usec.html?s=itm)

And another article from the NY Times (http://www.nytimes.com/2005/06/05/national/class/HYPER-...
) along the same thesis...

Richest Are Leaving Even the Rich Far Behind"
By DAVID CAY JOHNSTON
Published: June 5, 2005


*snip*

The people at the top of America's money pyramid have so prospered in recent years that they have pulled far ahead of the rest of the population, an analysis of tax records and other government data by The New York Times shows. They have even left behind people making hundreds of thousands of dollars a year.

Call them the hyper-rich.

They are not just a few Croesus-like rarities. Draw a line under the top 0.1 percent of income earners - the top one-thousandth. Above that line are about 145,000 taxpayers, each with at least $1.6 million in income and often much more.
~snip~

Maybe we all need to start paying more attention to the people we elect into office - Republican and Democrat...

http://www.opensecrets.org/pubs/law_wp/wealth07.gif

[The Ressurrected One]

Once again, the Democrats are unable to criticize the economy on the usual grounds, and therefore must fall back on inequality, as Paul Krugman (http://www.nytimes.com/2005/06/10/opinion/10krugman.html?n=Top%2fOpinion%2fEditorials%20and% 20Op%2dEd%2fOp%2dEd%2fColumnists%2fPaul%20Krugman) did in the column that appeared in the New York TImes on Friday. As usual, Krugman is hysterical. He writes, "The middle-class society I grew up in no longer exists," "Working families have seen little if any progress over the past 30 years," and "economic security is a thing of the past." Republicans are the chief demons: "Since 1980 in particular, U.S. government policies have consistently favored the wealthy at the expense of working families - and under the current administration, that favoritism has become extreme and relentless." And, as always, those who disagree with Krugman come in for insults, not factual rebuttal: "right-wing partisans try...to discredit anyone who tries to explain to the public what's going on"--that would be Krugman, I suppose; conservatives rely on "shaping, slicing and selectively presenting data in an attempt to mislead," and further engage in "scare tactics" and "name calling." As to scare tactics, I can't recall any conservatives claiming that middle class society no longer exists, or that economic security is extinct. And Krugman's reference to slicing and dicing data is an implicit rebuke to the Times' own Public Editor Daniel Okrent, who criticized Krugman for "the unfair use of statistics, the misleading representation of opposing positions, and the conscious withholding of contrary data."

Underlying the invective, of course, one would usually expect to find some facts. Normally if one were to proclaim the extinction of the middle class -- a surprise to the 80% or more of Americans who inhabit it -- one would look for some solid data to back up the claim. But Krugman has no such data. His column is almost fact free. Here is the sole statistical basis for his proclamation of the end of economic security:


Adjusted for inflation, the income of the median family doubled between 1947 and 1973. But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages.
Troglodyte that he is, Krugman doesn't link to his sources, so it's up to us to track down the data he refers to. In this case, it wasn't hard: he's relying on the historical Census Bureau data (http://www.census.gov/hhes/www/income/histinc/f07ar.html) on family incomes. His 22% calculation is correct for "all families."

Of course, that's partly an artifact of the dates Krugman arbitrarily chooses. 1973 represented a business cycle peak, while in 2003 the economy was coming off a recession. Competent economists do not do peak-to-trough comparisons. If, to take an example skewed in the opposite direction, we compare median family income in 1982 with the 2000 figure, the growth is 27%, not 22%.

But that's a relatively minor point. Here is a more fundamental problem with Krugman's calculation. When we compare "family income" figures over time, the figures are distorted by the fact that over the past three decades, families have fragmented. There are far more single-parent families now than in the early 1970s. Single-parent families generally have lower incomes than two-parent families, so this trend has depressed family income. If we factor out this demographic change, we find strong and steady income growth. Thus, the Census Bureau data show that for the category "Married-Couple Families," median income went from $46,723 in 1973 to $62,281 in 2003. (All numbers are in constant 2003 dollars.) That's a hefty 33% increase in real income. Meanwhile, incomes of families headed by either a man or a woman increased by 23.4%. But since there was a considerably greater proportion of such families in 2003 than in 1973, the aggregate increase on a "per family" basis was dragged down to 22%. (If you don't think that's possible, do the math.)

This is a solid record of income growth. But Krugman tries to minimize it by comparing the misleading 22% figure to alleged data for the average incomes of the top 1% and top .1% of Americans. There is a basic problem with this approach: the Census Bureau does not keep data on the top 1% or top .1% of families. So Krugman is getting these numbers somewhere else, meaning that he is comparing an apple and an orange. Worse, every calculation I have seen of incomes of the top 1% of wage earners has been a bogus partisan calculation, based on slicing and dicing IRS data. Since Krugman doesn't link to (or otherwise identify) his source for these numbers, there is no way to come up with a fair comparison to the Census Bureau data on median incomes.

As far as data go, that's it. Krugman doesn't offer another fact in support of his claim that middle class society no longer exists. The rest is pure hysteria. Krugman was once trained as an economist, but hardly a vestige of that training survives in his current work.

I can't resist this parting shot: Krugman writes darkly that "Since 1980 in particular, U.S. government policies have consistently favored the wealthy at the expense of working families..." Let's test Krugman's thesis by referring to his apparent gold standard, the Census Bureau's median family income data. Let's refer to the data for "Married Couple-Families" to avoid the demographic distortion described above. Here are the numbers: during the decade from 1970 to 1980, median income rose 13.4% in constant 2003 dollars. During the twenty years beginning in 1980, median income rose an average of 13.5% per decade. Which shows, I guess, how government policies devastated the middle class beginning in the last year of the Carter administration.

Deconstructing Democratic hysteria about "income inequality" promises to be just as much fun this time as it was ten years ago.

[Nbadan]

But that's a relatively minor point. Here is a more fundamental problem with Krugman's calculation. When we compare "family income" figures over time, the figures are distorted by the fact that over the past three decades, families have fragmented. There are far more single-parent families now than in the early 1970s. Single-parent families generally have lower incomes than two-parent families, so this trend has depressed family income. If we factor out this demographic change, we find strong and steady income growth. Thus, the Census Bureau data show that for the category "Married-Couple Families," median income went from $46,723 in 1973 to $62,281 in 2003. (All numbers are in constant 2003 dollars.) That's a hefty 33% increase in real income. Meanwhile, incomes of families headed by either a man or a woman increased by 23.4%. But since there was a considerably greater proportion of such families in 2003 than in 1973, the aggregate increase on a "per family" basis was dragged down to 22%. (If you don't think that's possible, do the math.)

So non-traditional families shouldn't count in family income averages because they generally fall behind two-wage earner families? That's absurd, and only helps to support the hypothesis that America is increasingly becoming fragmented between societies of haves and have-nots.

[Cant_Be_Faded]

As long as we keep letting foreigners come into the country to take jobs as Doctors and Computer Engineers, im sure this will alleviate the problem!

[Nbadan]

As far as data go, that's it. Krugman doesn't offer another fact in support of his claim that middle class society no longer exists. The rest is pure hysteria. Krugman was once trained as an economist, but hardly a vestige of that training survives in his current work.

Who needs data that can be interpreted in many different ways? Just take a drive around 410 in San Antonio and you'll see the effects of growing income inequalities with your own eyes.

[Clandestino]

As long as we keep letting foreigners come into the country to take jobs as Doctors and Computer Engineers, im sure this will alleviate the problem!

it's called globalization... it is going on in every part of the world...

[MannyIsGod]

it's called globalization... it is going on in every part of the world...
It's called the average American has more to lose than gain out of this. The corporations however, new markets and cheap labor? Bring it on! The day we start thinking about the people instead of the corporations will be a good day indeed.

[The Ressurrected One]

Okay, let's see if I can drive home the absurdity of Krugman's premise...

Liberalism is more or less synonymous with pessimism, so every time we point out something good, it feels like a subversive act. I'm thinking of this in part because I spent the day in a meeting in Washington -- a quick in-and-out trip that wasn't long enough to do more than admire the scenery while taking the subway from Reagan to my destination and back.

It was a warm and humid day there, but I was really struck by the air quality. I worked for a federal agency back in the late 70's and spent some time in D.C. At that time, when you drove into D.C. in the morning, you could see a brown cloud bank hanging over the city most days. The air you breathed generally had the acidic tang of sulphur dioxide. Today, that's all gone: no brown cloud, no atmospheric pollution to speak of. That is true in city after city across America. The environmental improvement in the last thirty years has been astonishing, but is often unrecognized.

What does that have to do with Krugman and his silly "chicken little" article in the New York Times. It struck me that I had not articulated anything like the real scale of the improved standard of living over the past thirty years:

I missed an even more basic critique of the Krugman opinion piece.

Earlier, I wrote, "the Census Bureau data show that for the category "Married-Couple Families," median income went from $46,723 in 1973 to $62,281 in 2003. (All numbers are in constant 2003 dollars.) That's a hefty 33% increase in real income."

Well, I was wrong. The increase in "real income" would be hundreds of times that 33%, once you take into account the value of what you can now buy.

Riddle me this:

In 1973, how many households could afford a desktop computer with hundreds of megabytes of RAM?

Answer: None.

How many could afford a portable telephone that fits in a pocket? Or for that matter, how about a portable computer terminal?

Answer: None.

How many could afford to have genetic diseases in their children repaired by gene therapy?

Answer: None.

How many childless couples could afford in-vitro fertilization?

Answer: None.

How many could afford to have diseases diagnosed with Positron Emission Tomography or treated by laser surgery? How many could afford to have Lasik corrective eye surgery? How many could afford to have depression or anxiety cured or controlled by selective serotonin reuptake inhibitors (SSRIs) like Prozac, Zoloft, Paxil, Luvox or Celexa? How many could afford to have their teeth repaired by composite resin fillings? How many could afford laser microsurgery, radio-telemetry surgery, foetal-abnormality surgery, minimally-invasive surgery, robotic surgery, or "beating heart" cardiac surgery?

Answers: None.

How many could afford to start their own "magazines" that could be read by tens or hundreds of thousands of people each week without even being distributed?

Answer: None.

How many could afford a luxury family vehicle suitable for offroading adventures?

Answer: None.

How many breadwinners could afford to telecommute?

Answer: None.

How many could afford a Mint Mocha Chip Frappuccino? How many could buy fat-free potato chips? How many could afford NutraSweet? How about lactose-free milk? How many could afford to go out routinely for Pad Thai, Japanese sushi, Armenian khorovatz, Ethiopian aleecha, Chorizo Argentino, Lebanese hummus and shawarma, or even a nice, simple blueberry bagel?

Answers: None.

And on and on and on... The point should be clear: it is impossible to legitimately compare buying power in 1973 with buying power today, for the simple reason that a huge proportion of what we buy today simply did not even exist thirty years ago. This is more obvious when you try to compare today's economy with the economy of the Middle Ages: the strides in technology and society are so staggering, they swamp any attempted calculation of monetary value: how many emperors in A.D. 750 could afford antibiotics?

Claiming that "working families have seen little if any progress over the past 30 years," as Krugman claimed, is so manifestly preposterous -- even before taking economics into account -- that I don't question his veracity so much as his sanity. Is he mentally ill?

On the last question. Answer: no comment.

[Clandestino]

It's called the average American has more to lose than gain out of this. The corporations however, new markets and cheap labor? Bring it on! The day we start thinking about the people instead of the corporations will be a good day indeed.

totally false... unless you want to pay $300 for a pair of jeans, or $10 a pound for strawberries, etc... then you are better off with globalization.