Phil Hauck's TEC Blog

Tuesday, March 11, 2014

Bogus Inequality

The fact is:  Studies from Columbia University and the Congressional Budget Office and others in the last two years indicate that Inequality has actually lessened ... not increased ... over time because of the impact of government transfer payments to the poor and other benefits they can access.  What most irritates people is that the 1% have been able to stretch their lead even more, especially thru the recent downturn.  
Studies show:
•  From 1993 to 2006, "inequality actually declined 1.8%," according to Ohanian and Hagopian in their Policy Review paper, "Mismeasure of Inequality."
•  Even President Obama says that the percentage of people within the definition of poverty has declined since 1965 to 16% from 26%.
•  When they speak of a "decades-long slide in equality," people are referring to pure "money income," which doesn't include the impact of relative taxes, and such transfer payments as Medicaid, food stamps, Unemployment Comp, the Earned Income Tax Credit, and such.  When those are considered, inequality has declined.  The measure is called the Gini coefficient; look it up.
•  Upward Mobility still exists, according to Treasury Dept. studies which track the same people over time.  In the decade of 1996-2005, roughly half of those defined in poverty in 1996 had moved to a higher quintile by 2005.  This is in sync with what happens in Green Bay; people in poverty strive and move through it.
•  During the higher economic growth years of the 80s and 90s, every quintile of income increased its income at a rate higher than inflation.  To be sure, the top 20% increased more than the next quintile, and that one more than the one lesser than it.  But none got their increase at the expense of another.  They were all able to gain.  The key to increasing the welfare of the poor, studies show, is policies and an environment that fosters job creation.  Growth economies have improved the relative status of the poor more than any other factor.

Conclusion:  IF the goal is to deliver higher family income and better standards of living, then it will best be done via economic growth with opportunities at all wage levels ... not through redistribution of wealth.  To the degree we need to take care of the poorest, those programs have been sufficiently in place for some time.

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