First Climate Change Denial, Now Income Inequality Denial

The steps people will take to protect their wealth and justify the good fortune of being wealthy seem boundless.  Climate change was denied for many years in order to preserve the status quo and avoid making necessary changes to the operation of the economy.  Reality has finally muffled that nonsense.  Now appears an attempt to minimize the degree of economic inequality that is inevitable in the form of capitalism now operating.  The Economist, usually a conservative proponent of conservative economic dogma has noticed a debate between opposing teams of economists over the rate at which income inequality is increasing in the USA (Why economists are at war over inequality).  They were thrilled to side with the team that claimed the income share of the top 1% has not been growing as quickly as most had assumed.  This led them to produce articles such as Welcome to a golden age for workers and A new age of the worker will overturn conventional thinking.  They even produced this image to promote the so-called “golden age for workers.”

 

 What is really going on?  The Economist recognizes that tallying income, and its inequality, is challenging.

“You might think that analysing trends in income inequality would be straightforward. Don’t people’s tax returns tell researchers all they need to know? But although tax returns are useful, they can mislead. Americans who are partners in a company, or hold investments, often have enough trouble estimating their own income. Now imagine trying to estimate the incomes of millions of people over several decades, accounting for overhauls to the tax code. Researchers then need to account for the 30-40% of national income that is not even reported on tax returns—including some employer-provided benefits and government welfare. Researchers’ methodological choices have huge effects on the results.”

It should also have been mentioned that income, or gain in wealth, that is fraudulently hidden from tax collection must also be estimated in order to be complete.  One should also recognize the general conclusion that economists, like other researchers, tend to find the results they initially expect to find. (“There are lies, there are damned lies, and there are statistics.”)

“Research by a trio of French economists—Thomas Piketty, Emmanuel Saez and Gabriel Zucman—has popularised the notion that American income inequality is soaring.”

“Others have cast doubt on the trio’s findings, however—notably Gerald Auten of the Treasury Department and David Splinter of the Joint Committee on Taxation, a nonpartisan group in Congress.”

Capitalism’s cheerleaders are thrilled to see the latter couple come up with a lower estimate of the income earned by the top 1% of income earners.

“All in all, they find that after tax, the top 1% command about 9% of national income, compared with the 15% or so reported by Messrs Piketty, Saez and Zucman.”

So, should anyone be surprised that there is uncertainty in determining the accumulation of wealth by the extremely wealthy, particularly when the goal of the wealthy is to avoid any taxable income.  And does the difference between 9% and 15% really matter?  Does it change anyone’s perspective on income disparities in our economy?  The disputed finding that really titillates capitalism’s boosters is the claim that the 9% level has been holding constant for a very long time.

“Whereas the trio conclude that the share of the top 1% has sharply increased since the 1960s, Messrs Auten and Splinter find practically no change.”

This assumption, plus the recent boost in income for the lowest wage earners as the demand for their services surged as we emerged from the pandemic, prompted capitalism boosters like The Economist to gloat about how the rising tide has been lifting all the boats.  The stagnant workers’ wages of the past 60 years are just a figment of the imagination.  Don’t mess with markets, they always know best.  The worst thing you can do for workers is to try and help them.

“If the blue-collar age endures, the effect will be profound. The idea that capitalism fails workers is so pervasive that it may explain why people consistently tell pollsters they are unhappy about the state of the economy—even as they themselves continue to spend freely and to benefit from low unemployment. The idea has shaped views on everything from the dangers of immigration and low-cost manufacturers, to the desirability of more handouts and higher tariffs.”

“The bonanza for workers, though, shows governments need not shackle markets for workers to do well—and that the best route to prosperity for all is to increase the size of the economic pie. If you fight too much over distribution, you risk bringing the golden age to a premature end.”

Is this something to be proud of, something to produce the glee The Economist exhibits?  What the claim of a stable share of the income by the wealthy means to the workers of the nation is that for many years the wealthy enjoyed much higher untaxable income than we had thought. 

Isn’t that delightful!  Don’t mess with anything when you are living in this “golden age.”