Income Inequality analysis from our Favorite Economist

by Laura Ehrenberg-Chesler on March 26, 2015

in deficit spending,lifestyle,politics,United States of America

Marilou quoted Ed Yardeni in her post this week, and since he is our favorite economist, and tends not to be too political, I thought his discussion on income inequality was worth repeating on our blog.

From his research Thursday:

Income equality is easy to achieve by making everyone but the ruling class poor. That has been and continues to be the modus operandi of totalitarian regimes. Capitalist systems are often infested with corrupt cronies, but true capitalists tend to prosper when their customers have more income to spend.


Meanwhile, the income inequality debate continues to rage on today. Progressives claim that it has worsened in recent years. They typically show a chart of real median household income, which has declined 9% from a record high of $56,900 during 1999 to $51,900 during 2013 In addition, they show that the share of income going to the top 1% is at a record high.


I’ve previously noted that the degree of income inequality may be exaggerated by demographic changes. For example, the percentage of singles in the adult population (i.e., aged 16 years and older) increased to 50% during February, up from 47% and 44% 10 and 20 years ago. Households composed of a single person tend to have lower incomes than those of a married couple. Young singles tend to be just starting their careers. Older singles tend to be retired and living on their savings, dividends, interest income, and government support. As the Baby Boomers age and their longevity increases, they could significantly distort the extent of income inequality.


Which raises an interesting question about the income inequality debate: What are we arguing about? The median household income data so frequently used to show that standards of living are stagnating for most Americans do not include government support payments. Could it be that the Progressives are right about worsening income inequality, but are ignoring the fact that the problem continues to be fixed by the very government programs that they implemented during their New Deal and Great Society heydays?”


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