I have studied inequality way too much. I once ruined three months of my life sitting in the Boston Public Library in the 1970s, scanning microfilm of the 1875 Massachusetts State Census returns in order to measure wealth inequality. I eventually determined conclusively that most citizens had virtually no wealth and a few had a lot.
Which begs the question: So what? The key driver of Gini Coefficients, the standard measure of inequality, is whether the top people in the income distribution – the top 1% — are really rich or really, really, really rich. Whether they have 10% of total income or 20% will drive the Gini coefficient. Unlike such metrics as unemployment and inflation, Gini is a highly abstract statistic. If Jane Citizen is sweating on the subway to get to her pathetic $100,000 job in Manhattan, what does it matter to her whether this year Mayor Bloomberg earned $50 million or $500 million?
It may not matter much to Jane, but it matters a lot to three influential, or at least ubiquitous, liberal economists – Robert Reich, Joseph Stiglitz, and Paul Krugman. Because they are all men of the left, I’ll dub them the Marx Brothers. Here they are expounding on inequality:
Paul: “Inequality is a major reason the economy is still so depressed and unemployment so high. . . . the takeover of half our political spectrum by the 0.01 percent is, I’d argue, also responsible for the degradation of our economic discourse.” (May 3, 2012 NYT Column)
Joe bemoans “the large and growing inequality that has left the American social fabric, and the country’s economic sustainability, fraying at the edges: the rich were getting richer, while the rest were facing hardships that seemed inconsonant with the American dream.”
Rob: “I have never been as concerned as I am now about the future of our democracy, the corrupting effects of big money in our politics, the stridency and demagoguery of the regressive right, and the accumulation of wealth and power at the very top.”
With Mitt Romney in the political spotlight, the Marx Brothers tend to blame Wall Street for inequality. But the Street’s importance is easily exaggerated. According to an exhaustive study of IRS records, if we look at the income (including capital gains) of the top 1% of Americans, financial executives only earned 13.2% of Americans’ total income in 2005, up from 7.7% in 1979, when Wall Street was depressed. What about the infamous top 0.1% of income? The numbers are only a little higher – 17.7%, up from 11.2% in 1979.
Another fallacy of the Marx Brothers is that all the rich guys are on the “regressive right.” Haven’t they noticed that President Obama spends more time in Beverly Hills, Marin County, San Jose, Fairfax County, Westport and the Hamptons than he does in the White House? F. Scott Fitzgerald was right. The rich are different from you and me; they don’t need to worry about taxes.
Marx Brothers for Romney?
In any event, the Marx Brothers will be pleased to learn that Mitt Romney has a plan to reduce income inequality in America. New York Times reporter and liberal lion David Leonhardt recently demonstrated that while the rest of the country is struggling, Washington D.C. is booming:
- The unemployment rate is 5.7% in D.C. versus 8.3% for the overall U.S.
- Personal income per household in D.C. is 50% above the national average.
- “The average house price in the region is more than 10 percent above the 2009 nadir, while nationwide prices remain near a decade-long low.”
- According to Forbes, of the ten counties with the highest median household income, five are in the Washington area, and another, Los Alamos, also depends on Federal spending.
With Washington flourishing while America is foundering, it is clear that the surge in Federal spending and regulation that enriches bureaucrats, lawyers, lobbyists, and government contractors is a key driver of income inequality in the U.S. Therefore, Mitt Romney’s plan to cut Federal spending, repeal Obamacare, liberate fossil fuel from the EPA, and roll back other regulations will take a giant step toward reducing the relentless increase in income inequality that so perturbs the Marx Brothers. I’m confident that, once they recognize this, the Marx Brothers will become strong supporters of Romney’s candidacy.
On the occupations of top earners, see “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data” by John Bakija, Adam Cole, and Bradley T. Heim (April, 2012).
