The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (16 comments)

  1. Doesn’t this chart only show data up to 2000? Somehow, I trust the CBO’s data. Unfortunately, there’s a ton of deliberate misinformation out there, including this post.

    1. Whatever doesn’t fit the left-wing narrative is “misinformation”? Sounds like cognitive dissonance to me. Lefties are theory first, facts later. If the facts don’t fit the theory, time to jettison the facts, right?

  2. Um figure 2 excludes the last 11yrs, which according to figure 1 is when inequality spiked.

    1. Um figure 2 excludes the last 11yrs, which according to figure 1 is when inequality spiked.

      No, actually it isn’t. “Inequality” began to spike in the mid 1990s reaching a peak almost as high as the 2007 spike. What the “inequality” brigade want to ignore is that it tends to increase during boom times, but obviously declines precipitously in bad times. “Inequality”, especially between the 1% and the 99% is lowering, not rising.

      And yet everyone trumpeting inequality just leaves it at that. No discussion of that is actually bad, and if so, why, nor any discussion of whether or not ALL income levels are benefiting. Nope. No analysis. Just “Inequality rising = bad”. Conclusion ? Raise taxes and eat the rich. Yeah, brilliant.

  3. The “inequality alarmists” will inevitably use this study you want to make the focal point of discussion- but haven’t.
    This is a counterpoint, and not a rebuttal. That is, instead of disputing the claim, you’ve answered a study that you admit wasn’t a matter of discussion. Straw man overboard.

    Pretty sloppy for such a high-profile blahg.

    Where does the income go, if it’s not creating wealth?
    It’s not taxes, as the tax rate has decreased for your intended audience. It’s not hiring, as your audience has refused to reinvest those bailout cash flows into America’s future and put those “slackers” in Zuccotti Park back to work- maybe on something that consumers want to buy, or improving infrastructure so people can more easily spend their most equal distribution of wealth, or funding research so that more people can be put to work keeping us ahead of the Chinese.

    If this is the best argument against the inequality claim, it’s clear that the contrary argument has a valid claim, because your conclusions amount to no more than a cop-out.

  4. So you took one quote from Kopczuk that fits yours story here, but overlooked the rest of his point- silly move. Either you did not understand his commentary or you have absolutely no dignity in ensuring accuracy of your work. Kopczuk point is that wealth, in previous decades when the 1% held 40% of wealth, was largely driven by “passive income”. However, wealth currently is self-driven, and therefore if we REALLY want to look at income inequality, which is on the rise. In summary, you oversimplify the inequality discussion here, and in doing so you produce an incomplete and largely irrelevant narrative here.

    1. WTFE, Nicole. When the facts don’t fit the theory, time to revise the theory. That’s the point of the sparse commentary. We can come to our own conclusions, Nicky dear, and discuss them amongst ourselves without a left-wing “referee.” If you’ve got lucid and relevant points, feel free to share them with us. I am still not sure why lefties have ANY credibility at all on economic matters. Keynesianism is a joke, Marxism is a nightmare, where do you line up, Nicole?

  5. Just to make it easier for your readers to get the context of the quote you cite above, and the actual argument which you tried to misrepresent, here it is: “First, we now know that this growth is about increase in “permanent” inequality—if we look at inequality defined over longer term (say five years), the patterns emerging are the same (documented in a recent paper by myself, Emmanuel Saez and Jae Song2). Second, trends in inequality are driven by current labor or business income. There is no (significant) rentier class at the moment (or, at least not enough to make a big difference) so that most of the growth in inequality that we see is about active earners. This is important because it highlights that comparison to the 1920s and 1930s may be misleading—the structure of top incomes at that time was very different, with most of them taking the form of capital income, arguably very passively earned.

    A common statement is to equate the increase in income concentration with an increase in wealth concentration. While one would expect that over longer term one leads to another, the longer term is yet to come: there is no compelling evidence that wealth concentration has significantly increased, in fact it does not appear to have changed much since the early 1980s. How can it be? In the recent paper,3 Lena Edlund and myself present evidence that strongly suggests that we are in a period of increased self-made wealth but declining inherited wealth. The wealthy nowadays derive their net worth from their own businesses and careers, while until the 1970s they derived it from inheritances. This of course complements the previous observation that it is active rather than passive incomes that are responsible for income inequality growth.”

  6. There is too much focus on the top 1%. During the Gilded Age, there was still opportunity for upward mobility. It doesn’t matter how wealthy the top 1% are or how much annual income they have as long as there is a chance for new people to join the ranks of the top quartile.

    With education levels up around the globe and more competition than ever, we can’t afford to have large amounts of our workforce poorly educated. As long as unions and the educational establishment block real reform, upward mobility will increasingly suffer.

  7. Rand Guerera

    Also, nice work on the table. In addition to making a chart on data that clearly disagrees with other sources, you also omitted data between 1962 and 1983, when the share of wealth held by the top 1% hit a low of 20%.

    As a counterpoint, here is a site that, whether or not you agree with the politics, at least presents the data fairly:

    1. WeekendAtBernankes

      Okay Rand… First of all, that guy is a sociology professor, not an economist. It’s little secret that sociology and psychology types are are woefully under-trained in statistical analysis, which is apparent in the clear bias and flaws of a fair number of those graphs.

      Further, a quick Wiki search of the author reveals all we need to know about him:
      -controversial book about U.S. domination by an “elite ownership class” since the ’60s
      -Spends his time writing books like “Finding the meaning in my dreams,” and “The Scientific Study of dreams”

      Finally, I’d like to point out the irony where you say the author here omitted data from between 1962 and 1983. If one follows the link you posted it’s clear that the data on his page is cherry picked as the intervals are different on nearly every one.

      Nice try though.

    2. WeekendAtBernankes

      BTW you should take a look at this inequality graph, from an actual economist:

    3. Yes, that website presents the data as “fairly” as you would expect from an article title “Who Rules America?” written by the Sociology department of the University of California.

      The thing that stands out the most to me is the graph comparing actual wealth distribution to “ideal” wealth distribution – which is obviously a purely scientific concept, I’m sure the political beliefs of the sociologists have no bearing whatsoever in determining that the richest people should have a total wealth of no more than three times that of the poorest people, and declaring that to be an economic fact.

      Besides that, we have lots of graphs comparing percentage ownerships of various types of wealth – surprise surprise, the wealthiest hold a higher percentage of business equity, trusts, etc than the poorest groups. But then these are compared side-by-side with things like bank deposits and real estate as if each category were equal. I’m guessing that the types of wealth owned overwhelmingly by the “rich” (for example, financial securities) are smaller in size than the ones more equally distributed (for example, pensions) – but that would spoil the point the authors are trying to make.

      The most amazing thing is that, even though they are obviously trying to manipulate the data as hard as possible, they still can’t manage to make the percentage of taxes paid by the rich go lower than the percentage of income they earn! It’s nice to know that even these experts can only stretch the truth so far.

  8. Charles Steber

    This change in income disparity is not really a surprise. What it is is an indicator of the disparity in educational outcomes provided by a combination of the public school system and the mixed public-private university system. Intelligent and motivated public school students learn in spite of the poor quality of teaching and text books used. Students turned off by the poor teaching in public schools are almost permanently ruined before they get to high schools and don’t do well in any college even if they get into one. Well back before the age of rapid and efficient transportation and efficient transfer of data and knowledge, the poorly educated (and not so poor as now back then) of the US could get a substancially higher relative wage to workers in developing and undeveloped countries. NOw they have to compete with those foreign workers and that is driving them out of work or driving their wage levels down.

    1. Did you read the article? It’s pointing out that there is no real difference or change in income distribution for over 30 years.

  9. There is no evidence of any secular upward trend in share of wealth or consumption by the top 1-10%. This raises a question about the Piketty and Saez graph showing the top 1% share of (pretax, pretransfer) income and capital gains. If the top 1% have so much more income, what did they do with it? If they saved it, their share of wealth would be way up. But it isn’t. If they spent it, then their share of consumption would be way up. But that didn’t happen either. The real problem is with using income reported on tax returns as a proxy for overall income, as shown in my latest paper.

Comments are closed.

Sort By:

Refine Content:


Additional Keywords:

Refine Results

or to save searches.

Refine Content