Wonkblog: Inequality

These four charts show how the SAT favors rich, educated families

These four charts show how the SAT favors rich, educated families

The College Board announced Wednesday that it is overhauling the SAT, dropping the timed essay and focusing less on fancy vocabulary in order to level the playing field a bit for high school students from a wider range of families. The organization's own data show that wealthier Americans, from more educated families, tend to do far better on the best. As do white and Asian Americans, and those students who had the opportunity to take the PSAT in high school before taking the SAT. Almost certainly, these four findings have common origins in that the SAT benefits families who can provide their kids with a better education and more test prep. But h ere are four charts that show how the SAT advantages specific demographics.

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Forbes says Bill Gates is the richest person in the world. Here’s why they’re wrong.

Forbes says Bill Gates is the richest person in the world. Here’s why they’re wrong.

Forbes is out with its list of the world's top billionaires, and Bill Gates is once again at the top of the list. His $76 billion puts him ahead of Mexico's Carlos Slim ($72 billion) and Amancio Ortega ($64 billion). The Forbes list calculates wealth by total assets, and that is certainly a reasonable way to do it, given that today's billionaires are global in nature. But it's also worth pondering geographic differences. If Gates buys most of his goods and services in the United States, but Slim consumes most of his goods and services in Mexico, Slim might be wealthier because you get a lot more for a dollar in Mexico.

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Communists have seized the IMF!

Communists have seized the IMF!

Mitt Romney, take out your wallet.

After decades of serving as the hard hand of global capitalism, the International Monetary Fund has taken another step in a tone-softening campaign that has already seen it shift gears in favor of letting developing countries control flows of private capital (once an ideological no-no) and acknowledging that it has been too harsh in some of the budget cutting it has doled out.

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Didn’t get a raise last year? Go smash some computers.

There's a riveting debate among economists about whether technological advances are permanently destroying jobs or merely changing the nature of the workforce in a way that increases rewards for highly-educated employees and decreases rewards for the working class. (And some argue that blaming technology for any of this is silly.)

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Here’s proof that making money makes you more right-wing and less egalitarian

Some people have long thought, and a number of studies have showed, that rich people tend to be more conservative and less likely to support government policies that spread the wealth around. But one open question has been whether it's simply correlation or causation. Do people who are right-leaning tend to make more money? Or is it the money that makes the person more conservative?

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Who was the richest man in all of history?

Who was the richest man in all of history?

It's fairly easy to figure out who the wealthiest person in the United States is. Just look at the Forbes 100, and you see it's Bill Gates, worth $67 billion. Carlos Slim, the Mexican titan, is worth $73 billion, a measly nine percent more. And with a bit of Googling, you could find similar answers for people across history. The famous Roman politician Marcus Crassus was thought to be among the republic's wealthiest, with a net worth of 200 million sesterces. Fast forward through time, and John D. Rockefeller is said to have had a peak of $1.4 billion in 1937.

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Obama won’t talk about the biggest thing he’s done to fix inequality: Raise taxes

Obama won’t talk about the biggest thing he’s done to fix inequality: Raise taxes

One of the many reasons why conservatives start to worry when President Obama talks about income inequality -- as he's likely to do in Tuesday night's State of the Union address -- is what Tracy Wilson is going through right now.

Wilson, 54, owns DeWils, a Vancouver, Wash.-based cabinet making company that's been in his family for more than half a century. His father, now in his 80s, still runs a retail kitchen appliance store, and his daughter is starting her own leather products business. That's just the kind of people they are, though it hasn't been easy in recent years -- the recession cut Wilson's $40 million in yearly revenue to $20 million, forcing him to lay off half of his 200-person staff and to consolidate two factories into one.

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10 startling facts about global wealth inequality

10 startling facts about global wealth inequality

1. On Monday, Oxfam published a startling report showing that the richest 85 people in the world are worth more than the poorest 3.5 billion.

2. The numbers Oxfam is using come from Credit Suisse's 2013 Global Wealth Report. There are a lot of amazing numbers in that report.

3. For instance, Switzerland leads in average wealth, with each adult worth, on average, $513,000. Australia is in second place, at $403,000. The U.S. is in the $250,000-300,000 range.

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Big business says only education can fix inequality. It’s just not sure what that means.

Big business says only education can fix inequality. It’s just not sure what that means.

The U.S. Chamber of Commerce is not a fan of redistributive programs to deal with rising income inequality in the United States — they're like using band-aids to treat a disease, the business lobby's bigwigs said at their annual State of American Business shindig this morning.

"Do you want to take the drug that might make you feel better, but might make your nose fall off?" asked Martin Regalia, the chamber's chief economist, arguing that extending unemployment benefits will just prolong the job search (despite manifold evidence to the contrary). To the extent that inequality is problematic — which Regalia disputed, saying the gap has come mostly from gains at the top rather than a decline in the fortunes of the poor — the stopgap fixes won't help. "Unemployment insurance is not likely to affect the distribution in a long-term way at all," he said. Same goes for raising the minimum wage, he added.

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Britain’s chamber of commerce says corporations should share their new prosperity with line workers. Wait, what?

Britain’s chamber of commerce says corporations should share their new prosperity with line workers. Wait, what?

John Cridland is not a redistributionist. As director-general of Britain's biggest business lobby group, the Confederation of British Industry, he's lately railed against the Labor party's regulatory agenda, and, around this time of year, usually issues a new year's address condemning new taxes and rules that restrict free enterprise.

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Congress lowers the ceiling on contractor pay. It could affect more workers by lifting the floor.

This week, the Senate is expected to vote on a budget that will likely -- at long last -- lower the amount that a federal contractor's salary can bill the federal government. That will be the first decrease since the Government Accountability Office started tracking the pay cap, in 1998:

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Full employment, not inequality, should be the top economic priority

Full employment, not inequality, should be the top economic priority

My Friday column arguing that inequality shouldn’t be elevated to “the defining challenge of our time” — or even the defining economic challenge of our time — has elicited a lot of really interesting responses. See Brad DeLong, Jared Bernstein, Paul Krugman, Larry Mishel, Ashok Rao, Matt Yglesias and Dean Baker, to start. I’ll add a few points.

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Inequality isn’t ‘the defining challenge of our time’

Inequality isn’t ‘the defining challenge of our time’

It’s increasingly clear that the organizing economic concern of the American left is — or is becoming — income inequality. It's the issue that led protestors to occupy Zucotti Park. It's the anxiety that powered Bill DeBlasio's campaign for mayor of New York. Last week, President Obama called it -- and the decline in social mobility it heralds -- "the defining challenge of our time."

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American inequality is on the rise. But global inequality is falling.

American inequality is on the rise. But global inequality is falling.

If you wonder where your Christmas bonus went, it may just be in the pockets of a worker in one of China’s cities who, until 20 years ago, was struggling to feed the kids.

Boiled down to brass tacks, that’s the finding of a major new World Bank study on global income inequality. The researchers have found that over the last two decades China and some other parts of the world have enjoyed upward income mobility while developed countries have seen comparative stagnation.

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The government is the only reason U.S. inequality is so high

The government is the only reason U.S. inequality is so high

While the rhetoric in President Obama's big inequality speech Wednesday was characteristically soaring, the policy proposals were largely rehashes of past administration initiatives. What's more, a surprising number of them had little to do with tax or transfer programs. Things like increasing exports, reducing certain regulations, boosting spending on scientific research and other investments, and raising the minimum wage are intended to reduce inequality before taxes or transfer programs like Social Security and the Earned Income Tax Credit come into the picture.

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Is inequality bad for economic growth?

Is inequality bad for economic growth?

On Wednesday, just as President Obama was giving his big speech on inequality and the economy, the Center for American Progress, a liberal think tank, released three new papers on this very topic.

Perhaps the most interesting paper here is economist Jared Bernstein's exploration (pdf) of whether rising income inequality in the United States is bad for economic growth. His conclusion: There are compelling reasons to believe that inequality can harm growth, but it's surprisingly difficult to prove this is happening.

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Wonkbook: Obama takes on ‘the defining challenge of our time’

Wonkbook: Obama takes on ‘the defining challenge of our time’

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Wonkbook's Number of the Day: 29,000. That's the number of people who have enrolled in health-insurance coverage via HealthCare.gov during the first two days of December. It's more than the number that enrolled in all of October.

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The best speech Obama has given on the economy

The best speech Obama has given on the economy

The speech President Obama delivered this morning at THEARC in D.C. is perhaps the single best economic speech of his presidency. That's in part because it exists for no other reason than to lay out Obama's view of the economy. His other speeches on the subject have been about passing legislation, defining campaign themes, or positioning himself against Republicans. But Obama's done running for office. He's not getting anything through this Congress. And he's not negotiating with John Boehner. This is just what he thinks. I'll have more to say on it later. But it's worth reading it for yourself first.

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The real loser of the recession is rural America

There's been a lot of chatter in recent years about the ascendance of cities: They're more fertile places for innovation and productivity, have higher-skilled and more remunerative employment bases, and they've started to network with one another and the international world to trade in goods and services.

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The typical American household is richer than 93 percent of the world

A few weeks ago I posted a couple of startling charts by the World Bank's Branko Milanovic, demonstrating that however bad inequality is within the United States, it's far, far worse at a global scale, and determined overwhelmingly by the country (which determines 60 percent) and economic class (20 percent) in which you were lucky (or unlucky) enough to be born. Matt Mitchell at the Mercatus Center has turned those charts into an easy-to-follow video that's no less shocking:

You can read more in Milanovic's book or papers.

The global upper class makes 32 times as much as the global lower class

The global upper class makes 32 times as much as the global lower class

If you've ever seen a chart or map or animated gif map or something about economic inequality, chances are it uses something called the Gini coefficient. It's the standard measurement, but it's also way too complicated to explain, as the Center for Global Development's Alex Cobham illustrates in this video:

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The world’s leading development economists can’t agree on how to tackle inequality

The world’s leading development economists can’t agree on how to tackle inequality

A quick quiz on income inequality:

Wages are flat here at the Washington Post because a) we do a bad job, b) Jeff Bezos is worth $23 billion, c) we work in a business where technology has severed the link between the product and money.

In a perfectly equal world where everyone can choose their job and everyone gets paid the same, there would be a) too many rock stars, b) not enough garbage collectors, c) all of the above.

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Watch the growth of U.S. income inequality with this animated map

Watch the growth of U.S. income inequality with this animated map

Here's a fascinating visualization of how inequality in the United States has evolved over the years. Red means lower inequality within a state, green means higher inequality:

The map was created by John Voorheis, a graduate student at the University of Oregon, and was passed along by Mark Thoma of Economist's View. More specifically, the map shows the change in Gini coefficients — a measure of income inequality — within states over time.

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Does your family make over $232,000? Congrats, you’re in the top 5 percent

Does your family make over $232,000? Congrats, you’re in the top 5 percent

Not a whole lot changed regarding median household incomes, poverty, and health insurance between 2011 and 2012. Inflation-adjusted median incomes for family households and nonfamily households in 2011 and 2012 were not statistically different; both were about 8.3 percent below 2007, before the recession. Same for earnings, the poverty rate, and the percentage of people getting private health insurance or Medicaid. The percentage of people getting Medicare increased, as did the share of people getting any kind of health insurance, but that's a normal consequence of aging.

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This is how everyone’s been doing since the financial crisis

This is how everyone’s been doing since the financial crisis

It's not really a happy anniversary. But we're coming up on the five-year mark for the financial crisis, which accelerated dramatically with the implosion of Lehman Brothers on Sept. 15, 2008.

So it's time to assess how the country has fared since. There are certainly some — those in the finance industry, for example — who can look back and basically breathe a sigh of relief. But many others don't have much reason to celebrate. Here's a rundown:

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How the 1 percent won the recovery, in one table

How the 1 percent won the recovery, in one table



This table comes courtesy of UC Berkeley’s Emmanuel Saez and the Paris School of Economics’ Thomas Piketty, everyone’s favorite inequality-tracking researchers (thanks to Annie Lowrey for pointing out the paper). They’ve added preliminary 2012 numbers to their dataset on growth in Americans’ — and in particular rich Americans’ — incomes, which gives us three years of data (2010, 2011, 2012) during the recovery, in addition to the full 2007-2009 span of the Great Recession. That lets us compare what happened to incomes in the recovery to what happened in past recoveries, and what happened during the recession to what happened in past recessions.

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401(k)s are replacing pensions. That’s making inequality worse.

The once-dominant defined benefit pension plan--which pays out a fixed amount after an employee retires--is on its way to becoming an historical artifact. More and more employers are offering 401(k) plans instead, which require employees to pay into their own accounts, sometimes with and sometimes without a matching contribution. And according to a new analysis from the labor-oriented Economic Policy Institute, the effect has been a stratification of retirement savings by education, income, and race--which could deepen inequality among the elderly as the population ages.

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Why is the U.S.'s 1 percent so much richer than everywhere else?

Why is the U.S.'s 1 percent so much richer than everywhere else?

It's been nearly two years since Occupy Wall Street took over Zuccotti Park, and the academic establishment is still chewing through questions it raised about how to understand the 1 percent in America. In particular, how did they get so darn rich? And what would happen if we took some of their money away?

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Why 'The O.C.' was the definitive show about the 2000s economy

Why 'The O.C.' was the definitive show about the 2000s economy

A dialogue of nerdiness.

To: Mike Konczal, Dylan Matthews

From: Jim Tankersley

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Obama says the typical family income 'barely budged' between 1979 and 2007. It grew at least 15 percent.

Obama says the typical family income 'barely budged' between 1979 and 2007. It grew at least 15 percent.

During his big economic speech Wednesday, President Obama declared, "The link between higher productivity and people's wages and salaries was severed the income of the top 1 percent nearly quadrupled from 1979 to 2007, while the typical family's barely budged."

The problem, as James Pethokoukis pointed out, is the latter statement is not true. Admittedly, "barely budged" is a pretty vague term, but according to the Current Population Survey's Annual Social Economic Supplements (ASEC) — a Census Bureau publication tracking income, health coverage, and poverty — the real median American family income increased by 17.7 percent between 1979 and 2007, and the real median household income (which includes people living alone and unrelated roommates) grew by 14.7 percent:

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Dude, where's my Porsche: How the luxury car market is lapping Detroit.

The headlines from the past few days of automotive company earnings releases sure have been rosy. In the first half of 2013, it looks like Americans are buying cars at a rate not seen since before the recession, at an annualized rate of 15.7 million. The comeback was particularly strong in pickup trucks, which reflects a red-hot housing market; contractors have been busy. (Historically low auto loan rates may also have helped.)

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Congrats, CEOs! You're making 273 times the pay of the average worker.

Want to know exactly how much richer the average chief executive is than you and me? Take a look at the Economic Policy Institute's latest white paper, which tracks the growth of CEO compensation over the last half century. Here are the major takeaways:

  • Average pay for the CEOs of the top 350 firms, including the stock options they exercised, was $14.1 million in 2012--up 37.4 percent from 2009.
  • That's a bit higher than it would be if you just measured stock options granted. "Firms apparently pared back the value of new options granted because CEOs fared so well by cashing in options as stock prices grew," the report's authors write.
  • The ratio of CEO pay to average worker pay is 273-1, down from a high of 383-1 in 2000, but up from 20-1 in 1965.
  • CEO pay has increased faster than wages to high-skilled workers, suggesting that the salary market isn't very efficient. "Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment," the report concludes.
  • CEO pay is now also closely tracking the S&P 500 index, which didn't used to be the case.

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Washington has missed the real inequality story

Washington has missed the real inequality story

There are two main schools of thought on income inequality: the fatalists, who contend that rising inequality is the ineluctable result of a changing economy, and the redistributionists, who blame a skewed tax system and lethargic government. Perhaps it's time to consider a third.

The fatalists

The fatalist case rests on technology: As we replace human toil with networked computers and tireless robots, those who own the technology or learn to master it benefit, and those whose jobs are displaced by technology suffer. The ease with which we outsource jobs, ship goods and videoconference to China helps people who own companies but hurts those whose jobs are shipped out. The winner-take-all economy is a boon to people who can market themselves or their product globally and a bust for those who can't.

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The complacency of the meritocrats

The complacency of the meritocrats

I like Greg Mankiw. He's a great teacher who has produced excellent macroeconomic research. I admire his Pigouvian gas tax proposal. But he has a huge blind spot when it comes to inequality.

Mankiw was an economic adviser to Mitt Romney, whose party platform and vice presidential candidate endorsed deep cuts in Pell Grants, Medicaid, nutrition and housing assistance, and other programs that benefit poor and low-income Americans. These proposed cuts were matched by deep tax cuts at the top of the income distribution.

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Giant uvulas, a $34 million rug, and what Art Basel tells us about wealth and the economy

Giant uvulas, a $34 million rug, and what Art Basel tells us about wealth and the economy

Welcome a new contributor to Wonkblog. Katherine Boyle covers museums and art for the Post Style section, and has agreed to write occasional pieces on what the art world can tell us about economics, wealth, inequality, and financial markets. Here, she looks at what the most-anticipated art event of the season tells us.

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Alan Krueger on how the music industry explains inequality

Alan Krueger on how the music industry explains inequality

It is exceedingly rare for a White House chief economist to give a speech on rock-and-roll. But Alan Krueger is scheduled to do just that Wednesday evening at the Rock & Roll Hall of Fame in Cleveland. His talk there (a text was made available in advance) is a terrific window into how the music business explains the forces shaping our collective economic fortunes.

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The black/white marijuana arrest gap, in nine charts

The black/white marijuana arrest gap, in nine charts

As you're probably aware, black Americans are arrested for marijuana possession far more frequently than whites. You may also know that there's not much evidence that black people consume marijuana with greater regularity than whites do.

But the extent of the disparity between the rate of arrest and the rate of use for white and black Americans may surprise you. The ACLU has an absurdly comprehensive new report tracking marijuana possession arrests for blacks and whites at the national, state and county level. Sure enough, they find that black and white people use marijuana at roughly the same rates:

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Surprise! When the rich get richer, taxes go lower

Surprise! When the rich get richer, taxes go lower

As you're probably aware, the share of income in the U.S. held by the top one percent has grown considerably in recent decades. The latest data by inequality experts Thomas Piketty and Emmanuel Saez estimates that the top one percent has gone from taking home a low of 8.87 percent of total income in 1975 to taking 19.82 percent in 2011. And it was even higher pre-crisis; their 2007 share was 23.5 percent.

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Here are 315 charts on poverty and inequality. Satisfied yet?

Merry Christmas, nerds: the OECD is out with its latest disposable income, poverty and inequality numbers for all its member states. The full data are here, but it's more fun to play around with the awesome interactive they created for the occasion:

The takeaways aren't all that surprising. The United States still has greater-than-average inequality and relative poverty than the typical OECD country.

But I always find the pre-tax/transfer section of these kinds of reports really interesting. The United States actually has less pre-tax/transfer poverty than a number of places, including France and Germany, and about equivalent pre-tax/transfer inequality to those countries.

It's government policy that makes the difference, and not mainly tax policy. The United States has one of the most progressive tax systems in the world, but other countries have much more progressive spending habits than we do, so their systems are more progressive on average.

The shocking truth behind the saddest chart in Congress

The shocking truth behind the saddest chart in Congress

There are great charts, and then there are sad charts. On Tuesday, Rep. Mark Pocan (D-Wisc.) unveiled this monstrosity on the House floor:



Credit to Politico's Seung Min Kim for the catch. And here's Pocan's excuse for his sad chart:

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How much money do you make?

How much money do you make?

Hey, how much money do you make?

What an obnoxious question for a stranger to ask you, right? But I'm going to up the jerk ante. I don't even care about how much money you make, but rather I want to know what you take into account when you answer the question.

In case you haven't noticed, people on the internet often argue about inequality and incomes. But disagreements that seems to be about income stagnation, poverty or inequality are often really about what we are counting. For instance: When conservatives argue that average workers are doing fine, they're basing that on a measure that includes income from the very same government programs they're trying to cut.

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How an anti-rentier agenda might bring liberals, conservatives together

How an anti-rentier agenda might bring liberals, conservatives together

Throughout the late 19th century, the political economist Henry George argued that a main reason there was so much poverty amidst prosperity was the large presence of people collecting unearned income, or what he called "rents". His particular focus was on land, and his solution was taxes. It's difficult to overstate his influence on turn-of-century reform movements, providing both the theoretical basis for those looking at other problems in the new industrial era and a concrete set of solutions for organizers building new mass political movements.

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'Romney is Wall Street's worst bet since the bet on subprime'

'Romney is Wall Street's worst bet since the bet on subprime'



Correction: A previous version of this post misspelled the last name of Yuri Milner, a Russian billionaire who set up a prize in theoretical physics. This version has been corrected.

Chrystia Freeland is editor of Thomson Reuters Digital and author of "The Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else." We spoke Tuesday about how the plutocrats she reported on for the book were handling Mitt Romney's loss. A lightly edited transcript of our conversation follows.

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Good news for people who like bad news about inequality

Good news for people who like bad news about inequality

So here's some bad news: The rise in wealth inequality? It's permanent.

"Permanent," here, is a technical term. The other option would be "transitory." If the inequality we were seeing was merely transitory, it would mean that in any given year, sure, inequality is really high, but five years down the line, the families at the bottom of the income distribution might have moved to the top, or vice versa.

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This viral video is right: We need to worry about wealth inequality

This viral video is right: We need to worry about wealth inequality

Here's a sentence I didn't expect to write Wednesday: Dan Ariely and Michael Norton's 2011 study on wealth inequality went viral on YouTube this week.

Do you remember the Ariely and Norton study? It's a beautiful piece of work. First, they asked Americans what their ideal distribution of wealth would be. The answer? Much more equal.

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How the ultra-rich are pulling away from the 'merely' rich

How the ultra-rich are pulling away from the 'merely' rich

Thomas Piketty and Emmanuel Saez have for a decade now maintained the world's best database on income inequality in various industrialized countries, and in the U.S. in particular. Their newest update (Excel), which extends the dataset to 2011, just came out last month. Here are five things to take away from it.

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Yes, the middle class really is falling behind

Yes, the middle class really is falling behind

There's a provocative new op-ed Thursday in the Wall Street Journal from economists Donald Boudreaux and Mark Perry, who argue that the middle class isn't stagnating, even though middle-class incomes have flatlined for decades. Their basic point is that middle-class living standards keep going up and that middle-class consumers have "more buying power than ever before."

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Ten ways to reduce inequality without raising tax rates

Ten ways to reduce inequality without raising tax rates

More than anything, President Obama wants to fight inequality. As my colleague Zach Goldfarb has reported, that's become the president's major priority for his second term. To that end, he's pushing hard to raise top marginal income tax rates back to where they were under Bill Clinton. But House Republicans have made it clear that they won't have that, even if they concede that more revenue is necessary.

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Obama's economic philosophy, in 8 charts

Obama's economic philosophy, in 8 charts

If you look at President Obama's biography and policies, you see one unifying theme more than any other: Obama wants to reduce income inequality.

His policies seem designed to achieve other objectives. The 2009 stimulus sought to end the recession. The 2010 Affordable Care Act strove to expand health-care coverage as widely as possible. And in the upcoming tax policy debate, Obama is seeking to shrink the nation's deficits over time. But in each case, Obama is also trying to reverse three decades of growing income disparity in the United States.

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Romney is Wall Street's worst bet since the bet on subprime'

Romney is Wall Street's worst bet since the bet on subprime'



Chrystia Freeland is editor of Thomson Reuters Digital and author of "The Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else." We spoke Tuesday about how the plutocrats she reported on for the book were handling Mitt Romney's loss. A lightly edited transcript of our conversation follows.

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Abraham Lincoln and the costs of inequality

Abraham Lincoln and the costs of inequality

I saw "Lincoln" over the weekend and thought it was both great fun to watch and weirdly amateurish, as if Hollywood's A-list had all decided to pitch in on a community theater production about Abraham Lincoln.

At the same time, I've been reading Stephen B. Oates's Lincoln biography, "With Malice Toward None." Early on, Oates recounts Lincoln's courtship of Mary Ann Todd (later to become Mary Ann Lincoln). At the time, Lincoln is, by any stretch of the modern imagination, a catch: Born to nothing and still a young man, he's built himself a thriving legal practice, gotten himself elected and reelected to the Illinois legislature, and already achieved some national renown as a Whig orator. This isn't just a young man on the make. It's a young man who seems to have made it.

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The income gap between the rich and poor is growing. So is the gap in how much they buy.

The income gap between the rich and poor is growing. So is the gap in how much they buy.

Everyone knows that the rich have been pulling away from the poor in terms of income and wealth. Thomas Piketty and Emmanuel Saez, not to mention the CBO, have established that pretty definitively.

But Kevin Hassett (a key Romney adviser) and Aparna Mathur at the American Enterprise Institute argue that that doesnt matter. Even if the rich are making more and more, they arent spending more and more. Hassett and Mathur claim, citing their own work as well as research by Dirk Krueger and Fabrizio Perri, that theconsumption gap across income groups has remained remarkably stable over time.

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How China is fighting inequality — in the United States

How China is fighting inequality — in the United States

You can be pretty confident that U.S.-Chinese trade relations will come up in Monday night’s foreign policy debate, and in particular the effect that China’s exports have had on the American economy. Both candidates have expressed a desire to crack down on Chinese trade practices. Republican presidential nominee Mitt Romney says that if elected he’ll label China a currency manipulator on the day he takes office. President Obama’s administration has filed trade enforcement cases against China and has proposed tax breaks for U.S. manufacturers who export overseas and who have lost a fair number of jobs to consumers’ preference for lower-cost goods from China.  

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A closer look at the pay gap, in charts

A closer look at the pay gap, in charts

The historian Stephanie Coontz argues in Sunday’s New York Times that while the male-female pay gap has shrunk, this reflects a “convergence in economic fortunes, not female ascendance.”

If anything, that’s too optimistic. Over the past decade, there are signs the pay gap has grown entrenched, even as male wages have fallen. Convergence won’t happen for another few decades, at least.

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Inequality across the country, in two maps

Inequality across the country, in two maps

The Census has calculated the Gini coefficients — the standard measure of income inequality — for each state, and the results aren’t necessarily what you’d expect:

The dark purple areas are highly unequal and the light blue ones highly equal. New York is the most unequal state, followed by Connecticut, Louisiana and New Mexico (a motley crew if ever there was one), and Wyoming, Alaska, Utah, Hawaii and Vermont are the most equal. To some extent, this is a rural/urban divide. New York City has both a lot of poor people and a few extravagantly wealthy people, whereas there’s no metropolis in Wyoming full of extremely rich folks. More generally, top earners tend to live in cities, as do the poor, so it makes sense that urban areas would be more unequal.

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Would Obama or Romney redistribute more?

Would Obama or Romney redistribute more?

So we’re talking redistribution now? Alright. Let’s start with some basic facts.

When most people hear the word “redistribution,” they think of one kind of redistribution: From the rich to the poor.

But the government redistributes resources in all sorts of ways. It redistributes from the healthy to the sick, and the young to the old. Those forms of redistribution are also pretty well known.

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The Clinton economy, in charts

The Clinton economy, in charts

Former president Bill Clinton is speaking at the Democratic National Convention tonight, and is sure to spark a lot of commentary about the contrast between the economic boom times of the Clinton administration and the rough economy of the last decade. But what actuallywas Clinton’s economic record?

The labor market was strong

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How much can taxes curb inequality?

How much can taxes curb inequality?

The Wall Street Journal’s David Wessel has an excellent piece Monday on what academic research tells us about taxes and inequality in the United States. The short version: Inequality has exploded in the past three decades. Taxes, meanwhile, have gotten more progressive — though not enough to counteract that increase in inequality.

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The rich are different than you and me: They spend more.

The rich are different than you and me: They spend more.

For years now, the exciting field of inequality studies has been puzzled by a seeming inconsistency in the data. Income inequality is clearly going up. But consumption inequality — that is to say, the difference between how much rich people and poor people spend — isn’t.

Some said this meant income inequality wasn’t really going up, or if it was going up, it didn’t really matter. “We eat bread, not paychecks,” wrote Will Wilkinson. Others argued that poorer Americans were going into debt to sustain their consumption, or that the fact that richer Americans weren’t spending much more was irrelevant to the fact that they were making much more. But a new paper by Orazio Attanasio, Erik Hurst and Luigi Pistaferri says we’ve got it all wrong: The data we were using is bad, and consumption inequality is going up alongside income inequality.

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In 2010, 93 percent of income gains went to the top 1 percent


(Mike Konczal)
In recent months, some commentators wondered whether the national conversation over inequality was coming too late. Early data suggested that the top 1 percent’s share of national income had dropped from 23.5 percent to 18.1 percent in the early years of the recession. “We don’t want to spend years focused on income inequality, only to learn that the financial crisis fixed it for us,” wrote the Atlantic’s Megan McArdle.

The latest update to Emmanuel Saez and Thomas Piketty’s income data suggests we need not worry. Timothy Noah summarizes:

In the first year of the recovery, 93 percent of all income gains went to the top 1 percent.

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Q&A: CEA Chair Alan Krueger on inequality

Q&A: CEA Chair Alan Krueger on inequality

On Friday morning, Alan Krueger, the Princeton economist who is on leave serving as chairman of the White House Council of Economic Advisers, gave a speech at the Center for American Progress on the causes and consequences of inequality. Excerpts here, full speech here. On Thursday night, I spoke with Krueger about the speech, his past as an inequality skeptic, and Rep. Paul Ryan’s allegation that the Obama administration is looking for “equality of outcomes.” A lightly edited transcript follows.

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We read so you don’t have to: CEA Chair Alan Krueger’s inequality speech

This morning, Alan Krueger, the chairman of the President’s Conuncil of Economic Advisers, gave a speech on inequality at the Center for American Progress. Prepared remarks here. Charts here. These are the parts that caught my eye:

- “I used to have an aversion to using the term inequality. The Wall Street Journal ran an article in the mid-1990s that noted that I prefer to use the term ‘dispersion’. But the rise in income dispersion – along so many dimensions – has gotten to be so high, that I now think that inequality is a more appropriate term.”

- “As the Congressional Budget Office noted in a recent report, the top 1 percent of families saw a 278 percent increase in their real after-tax income from 1979 to 2007, while the middle 60 percent had an increase of less than 40 percent.”


(Alan Krueger)

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The top 1 percent since 1990: getting richer

The Center on Budget and Policy Priorities charts it internationally:


(OECD data)

Oh, and it gets worse. This data doesn’t include income from capital gains and dividends. “If you include these income sources, the top 1 percent of U.S. income earners received 23.5 percent of the nation’s income in 2007, up 9.2 percentage points from 1990, and the top 0.1 percent received 12.3 percent, up 6.5 percentage points from 1990,” the OECD reports.

Paul Ryan’s inequality plan increases inequality


Rep. Paul Ryan(R-Wis.) is chairman of the House Budget Committee. (Joshua Roberts - BLOOMBERG)
Paul Ryan’s 15-page response to the Congressional Budget Office’s inequality report can be summed up in two sentences: Inequality isn’t a problem. But if it is a problem, then the ideas I’ve been pushing all along will solve it.

And I applaud him for it.

For one thing, it’s important for Republicans to join the conversation over inequality. This is more evidence that Occupy Wall Street, whatever its eventual fate, has forced the political system to pay attention to issues it was previously neglecting.
(Congressional Budget Office)

Ryan’s paper also makes some good points. He emphasizes the CBO’s finding that government transfers are more regressive than they were 30 years ago and that that’s largely due to Medicare and Social Security taking up a larger portion of the federal budget and spending a fair amount of their money on wealthy seniors rather than poorer households. If you worry about equity — either between rich and poor households or between different generations — you should worry a lot about the unchecked growth of Medicare and the structure of Social Security. We can and should do better.

But more broadly, Ryan’s paper tries to create a false choice between reducing income inequality, encouraging economic mobility and accelerating growth. Toward the end, Ryan actually says the debate over inequality breaks down into two groups:

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Wealth inequality: also going up


(Mother Jones Magazine)
Of late, James Pethokoukis, the American Enterprise Institute’s resident economics blogger, has been attempting to “close the case on the inequality myth.” Wednesday’s edition argues that it doesn’t really matter if income inequality has gone up because wealth inequality fell after World War II. I don’t agree with that, but put it aside for a moment.

The paper Pethokoukis quotes argues that “the first and perhaps most obvious factor is the creation and the development of the progressive income and estate tax.” I note this only because Pethokoukis and the American Enterprise Institute are loud, committed advocates for eliminating the estate tax and moving toward a less progressive tax code. They host events on the subject and praise plans for a flat tax that would make the tax code less progressive and put an end to “the death tax.” Over the last decade, they’ve been winning. And wealth inequality, predictably, has been rising.

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Notes on income inequality

Notes on income inequality

A bit later today, I’m heading over to the Government Accountability Office to give a talk on income inequality. Here are my notes:

- What are we worried about, exactly? The incomes of the top one percent? The income of the top 0.1 percent? The incomes of the 25th and 50th percentiles? The gap between the rich and the poor? The gap between the rich and the middle?

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Inequality in New York City

“Out of the twenty-five largest cities, it is the most unequal city in the United States for income distribution. If it were a nation, it would come in as the fifteenth worst among 134 countries ranked by extremes of wealth and poverty...It is the showcase for the top 1 percent of households, which in New York have an average annual income of $3.7 million. These top wealth recipients—let’s call them the One Percenters—took for themselves close to 44 percent of all income in New York during 2007 (the last year for which data is available). That’s a high bar for wealth concentration; it’s almost twice the record-high levels among the top 1 percent nationwide, who claimed 23.5 percent of all national income in 2007, a number not seen since the eve of the Great Depression...But here’s the most astonishing fact: the One Percenters consist of just 34,000 households, about 90,000 people.” -- Christopher Ketcham, ‘The Reign of the One-Percenters’.