Study Undermines Liberal Media's 'Inequality' Meme

Randy Hall
April 18th, 2012 12:10 PM
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Members of the “mainstream” press have worked hard to promote what President Barack Obama calls an “income-inequality crisis” based on studies claiming that the middle class is shrinking and got left behind in the greatest economic expansion in modern American history.

However, a new, more comprehensive investigation indicates that the earlier research isn't wrong, it's just “incredibly, massively incomplete.”

Obama has been saying, and the liberal media have unquestioningly parroted, comments like this:

What drags our entire economy down is when the benefits of economic growth and productivity go only to the few, which is what’s been happening for over a decade now, and gap between those at the very, very top and everybody else keeps growing wider and wider and wider and wider.
 

The president's claims are based on the initial research on income inequality from 1913 to 1998 by economists Thomas Piketty and Emmanuel Saez, and an updated report by Saez. According to them, median American incomes rose just 3.2% from 1979 through 2007, with all figures adjusted for inflation.

Citing the same study, Washington Post Opinion Writer Harold Meyerson stated in a March 27 column that while the Occupy Wall Street movement isn't known for precise economic analysis, the group's “sloganeering provides a stunningly accurate picture of the economy” with the gap between the top 1 percent and the other 99 percent growing ever wider.

While never putting a premium on economic equality, America has always prided itself on being the preeminent land of economic opportunity. If all of this nation’s wealth is captured by a narrow stratum of the very rich, however, that claim is relegated to history’s dustbin.
 

However, a new study entitled “A Second Opinion on the Economic Health of the American Middle Class” by Cornell University researchers led by Richard Burkhauser, found that when properly measured, the median household income rose 36.7%, not 3.2%.

So why the significant difference? The Cornell economists state that Piketty and Saez made many “odd choices” about what to measure and how to measure it. They focused on something called “tax units” rather than households, a move that ignores the impact of couples who live together, kids who move back in with their parents after college, and senior parents who live with their adult children.

And that's not all. In the earlier study, Piketty and Saez also ignored the value of all government transfers, including welfare, Social Security, and other government provided cash assistance, along with the value of health-care benefits and tax returns.

“ So the tax and regulatory polices of the past three decades did not lead to stagnation for the middle class at the hands of the rapacious rich,” James Pethokoukis stated in his article on the new research.

Claims to the contrary—such as those made by Obama, the Occupy movement, and many liberal economists—never really passed the sniff test of anyone who lived through the past few decades. And now we know why:

Even more interesting is an article written by Alexander Eichler for the Huffington Post Website that has as its headline: “ Income Inequality Worse Under Obama Than George W. Bush.”

That means the rising tide has lifted fewer boats during the Obama years—and the ones it's lifted have been mostly yachts.
 

Ed Morrissey stated in his post on the new study that “the bottom line is clear: there is no income-inequality 'crisis.' At best it’s a misunderstanding of the data based on incomplete and irregular analysis, and at worst, it’s a demagogic lie intended to divide Americans along false lines. In fact, it’s most likely both.”