Michael Barone: Let’s Base Policy On Real Facts, Not Misleading Statistics

From All those lists of the best books of 2022? Here’s one that could change public policy discourse for the better. It’s “The Myth of American Inequality,” The three authors are two. Ph.D. economists, former Sen. Phil Gramm And his long-ago Texas A&M colleague Robert Ekelund, and former Bureau This is Labor Statistics assistant commissioner John Early. Their subject is government statistics — and how they present a misleading picture of recent economic history.

And The authors conclude that there have been long-standing complaints about the American economy — that the rich are getting richer and the poor poorer, that we declared war on poverty and poverty won — are wrong.

How Is that possible?

The First, it is because Census Bureau Statistics on income, upon which almost everyone depends, don’t include two-thirds government transfer payments. That It made sense in 1947, when it was first introduced. Census started reporting the number, and most transfer programs — food stamps, Medicare, Medicaid, Earned Income Tax Credit, the child tax credit — didn’t exist.

But Today, they do. The bottom quintiles of income (each quintile is one fifth of households) receive 59% to 24% of their incomes through government transfers.

Second, Census Income statistics don’t account for taxes people pay. Since The United States has the most progressive national tax system of any advanced economy — because other advanced countries rely heavily on flat rate value-added taxes — the bottom two quintiles of Americans The bottom quintile pays 83% of federal income taxes revenue, while most people pay no income tax.

When We take into account taxes and government transfers. “Myth” If so, then the “government takes and redistributes enough resources to elevate the average bottom quintile household into the American middle class.” The The incomes of the bottom three quintiles are comparable, and those of the second-highest quintile are not too far behind them.

In Dollar terms: The lowest three quintiles after-transfer and –tax incomes range from (rounded up) $50,000 to $66,000. The second quintile, at $88,000 is the highest, and the top quintile, at $197,000. That’s The difference in earned income between lowest and highest quintiles ($5,000), since half of them don’t work, is far greater than the difference between the two.

So The ratio of top quintile and bottom quintile incomes comes from the Census Bureau’s 16 to 1 reductions Gramm, Ekelund And Early’s 4 to 1

And The poverty rate, which government statistics put at 12% is only 2% when government transfers are included. Many These are people who “lack the basic mental and physical capabilities to care for themselves and their children” You don’t need income. “specifically tailored programs to address their specific needs.”

The Authors also expose another myth, that of the “The Other Side of the Moon”. AmericansThe incomes of the last two generations have stagnated. The reason again is misleading government statistics — inflation indexes, especially the oft-quoted CPI-U, that consistently overstate inflation and thus understate real economic growth.

These Inflation indexes tend not to take into account new products or quality improvement and assume static market baskets. In Real life: When apples become too costly, consumers switch to oranges. And How do you assess the value of medical care innovations and the capabilities of the most recent cellphones?

The Arguments against the adjustment of government statistics include that it could lead to political tampering. The U.S. statistical agencies pride themselves on having resisted this. But As an additional source of information, you can use other government statistics to augment your indexes. “Myth” Fair game is to account for government taxes and transfers.

If You can compare that to the average hourly earnings of production and nonsupervisory employees. This statistic is often used by critics to portray a static economy. “real average hourly earnings would have risen 74% over the last fifty years rather than the official reported number of 8.7%.”

Policy implications? One We already have plenty economic redistribution. Additional Spending, such the Biden COVID package can lead to inflation and encourage idleness Advocates Today, universal basic incomes are like John Maynard Keynes In the 1930s, it was imagined that people would be able to read great books and listen to classical music if they were free from the monotony of work.

InsteadWe see jobless men addicted to opioids or video games, which results in lower life expectancy, reduced family formation, and decreased community involvement.

To This can be reversed Gramm, Ekelund And Early Recommend work requirements similar to those in the 1990s welfare reforms, which increased work effort and earned income, and ensured family stability. Would Is there a backlash against the withdrawal of such benefits? The There is no blowback from the end of the phasing out Biden Child tax credit does not suggest otherwise.

Other Unneeded occupational licensing requirements can be eliminated. There is more school choice than ever, which is already popular and necessary to repair the damage caused by teacher union-forced school lockdowns to disadvantaged students.

There’s room here for debate — and debate conducted based on real facts, not misleading statistics — to which “The Myth of American Inequality” Makes a useful contribution.

Michael Barone Senior political analyst at the Washington Examiner, resident fellow of the American Enterprise Institute Co-author for many years The Almanac This is American Politics.

Photo credit: 12019 at Pixabay

*As an Amazon Associate I earn from qualifying purchases