New York Times economics columnist David Leonhardt has a new column (2/17/15) headlined:
Inequality Has Actually Not Risen Since the Financial Crisis
This is mostly, if not entirely, BS.
Leonhardt’s argument—based on a paper by Georgetown economist Stephen Rose—can be summed up in one graph:
Leonardt explains his graph, which depicts average pre-tax income:
The income of the top 1 percent—both the level and the share of overall income—still hasn’t returned to its 2007 peak. Their average income is about 20 percent below that peak. Yet we have all become so accustomed to rising inequality that we seem to have lost the ability to consider the alternative. Maybe it’s because many liberals are tempted to believe inequality is always getting worse, while many conservatives are tempted to believe that the Obama economy is always getting worse.
Or maybe people think inequality hasn’t stopped rising because it hasn’t. The problem with Leonhardt’s argument is that it’s cherry-picking: If you start from 2007, which was the height of a financial and real-estate bubble that mostly benefited the wealthy, then of course the income of the wealthy won’t return to where it was; a bubble is by definition unsustainable. (If the recovery amounts to reinflating the bubble, as some observers fear, that would be bad news for the elite as well as for the rest of us.)
New York Times chart shows the ratio of the average disposable income of the top 1 percent to that of the middle quintile—a longer view that shows how meaningless a focus on the post-2007 era is.
Leonhardt provides a non-cherry-picked chart in the “to be sure” section of his column—from which it’s easy to see that when you set aside the peaks of the dotcom and housing bubbles, inequality has been increasing at a more or less steady pace since the late 1970s—just as “many liberals are tempted to believe.”
The more meaningful part of the first chart comes after the inevitable popping of the bubble, as the top 10, 1 and 0.01 percent quickly make up most of the ground they lost while incomes for the bottom 90 percent stagnate. In other words, after the crisis, inequality continued to increase. (As Leonhardt notes, the downturn for upper incomes in 2013 is misleading, as tax changes made it more appealing to realize capital gains in 2012 rather than in 2013; the “true” increase in upper-class income is probably somewhat less for 2012 and more for 2013.)
This makes Leonhardt’s statement that “the steps that the federal government took in response to the crisis…have mostly helped the nonwealthy” highly dubious. The biggest intervention that the US government carried out during the economic crisis was to prop up the giant financial firms that otherwise would have gone bankrupt—an operation that moved around trillions of dollars to ensure that that 0.01 percent would continue to be in a position to see their incomes go up and up and up. Trust me, if the US government put that kind of effort into boosting the fortunes of the nonwealthy, their incomes would not be continuing to flatline eight years after the bubble burst.
Leonhardt can sometimes be an effective debunker of conservative spin, but the trick of starting your measurement of inequality from an unrepresentative peak is reminiscent of the chicanery of Wall Street Journal editorial page editor Robert Barkley, who wrote an entire book, The Seven Fat Years, based on manipulating the timeframe of economic comparisons. As Steve Rendall and I (Extra!, 9/95) wrote in 1995, the book
gets its title from the idea that the Reagan years were a time of great prosperity compared to the Carter years. Bartley derives this by measuring from the trough of the early ’80s recession in 1982 to the peak of the recovery in 1989—finding a growth rate of 3.8 percent for the “Reagan years”—while measuring the “Carter years” from the 1973 growth peak to the 1982 trough (1.6 percent)…. An honest economist will tell you that you have to compare similar phases of the business cycle: From the 1973 peak to the 1979 peak, there was a growth rate of 2.8 percent; from the 1979 peak to the 1989 peak, there was a growth rate of 2.5 percent. So much for the “seven fat years.”
It’s even more similar to the climate change denier’s favorite trick of measuring global temperature from the most recent abnormally warm year—so poof, global warming disappears. Leonhardt’s economist makes inequality vanish just as completely—and just as spuriously.
Is anyone doing anything to help these job creators? I had no idea that they were in such trouble. Has Washington simply turned their backs on our top 1%? For one minute, can our government stop its preoccupation with helping the poor, and give a hand to the few, the expatriate, the rich?
Another problem is looking at incomes entirely in terms of percentage change, rather than dollar change:
Suppose Ms. A has $40,000 income in year 1, and $45,000 in year 2; and Ms. B has $10,000,000 income in year 1, and $11,000,000 in year 2. A’s income has risen by 12.5 percent; B’s, by only 10 percent. By Leonhardt’s criteria, income inequality has decreased. But B’s gain is 200 times as large A’s, so are they really more equal after year 2? B’s wealth will have likely increased a lot; A’s, not at all.
FUN FAIR QUIZ – FUN FOR THE WHOLE FAMILY!!
How does Naureckas characterize Hamas?:
A. Anti-Semites who love to cite the Protocols of the Elders of Zion.
B. Brutes who applauded the murder of a three-month-old baby.
C. Terrorists who insist that Jihad is the only solution for every problem.
D. None of the above.
IF YOU GUESSED D, YOU’RE CORRECT! ACCORDING TO A RECENT NAURECKAS ARTICLE (2/3/15), HAMAS IS IN FACT A VICTIMIZED “POLITICAL MOVEMENT”!!
STAY TUNED FOR MORE FUN FAIR QUIZZES – FUN FOR THE WHOLE FAMILY!!
@William:
And how does your claim about Hamas (the elected government of Gaza too) have much to do with the lies that David Leonhardt published in the New York Times about how the very rich, in the USA, have suffered more in the recession than the poor, who’ve been so helped by the government?
David G:
Right, I saw Leonhardt playing that percent more game too.
The idea that he’s on his way to being a senior editor at the New York Times is not good.
The idea that the $5000 less may deny someone nutrition or needed care, or a new roof or a necessary car repair, but that the $1000000 less means the other party has to perhaps sell one of many houses, or borrow, or just not get the new Ferrari seems to really confuse Leonhardt.
David G:
Right, I saw Leonhardt playing that percent game too.
The idea that he’s on his way to being a senior editor at the New York Times is not good.
The idea that the $5000 less may deny someone nutrition or needed care, or a new roof or a necessary car repair, but that the $1000000 less means the other party has to perhaps sell one of many houses, or borrow, or just not get the new Ferrari seems to really confuse Leonhardt.
Jay, a few clarifications:
1. I didn’t make a claim about Hamas – I identified Naureckas’ opinion regarding Hamas.
2. Hamas took over Gaza in a bloody coup.
3. Given that Naureckas is an apologist for Hamas, he has entirely squandered any progressive or journalistic bona fides, and should be ignored as to any and every subject, including income inequality.
4. Since you’re also an apologist for Hamas, your opinions are also worthless.
Now do you get it?
@Jay
William is a lonely person looking for attention by inserting insulting, yet irrelevant comments about the author of this piece, Jim Naureckas, after each FAIR column written by Mr. Naureckas. Your observation that Hamas was elected, in 2006, as the government in Gaza, turned you into an apologist for them over something you haven’t even mentioned, but that he sees as their sins…and, therefore, his advanced logic concludes, nothing you say is worthwhile. Plus he gets to insult you, as if you were family.
Some dogs only have one trick. This is his.
Steve, you deserve points for chivalry. But demerits for being yet another Hamas apologist.
William:
You do understand that many equate actions by the IDF with acts of terror.
“coup”? Not really.
I suggest you look up the work “apologist”.
And not one of your points is relevant to the lies Leonhardt published in the NYT.
This is fun. The total temperature increase since the late 1800s is less than .7 of a degree from an unusually cool period. Sea level increases has been lower than historical averages over the same period. There are far fewer severe storms now than the historical averages suggest is normal. Yet cherry picked factoids have been used by the climate hysteria folks to prove a looming catastrophe. You want to look at business cycle comparisons? Let’s compare Obama’s first six years to Reagan’s first six years. Then lets stop pretending that Obama’s recession was worse than the recession Reagan was handed by Carter, and his Democratic congress. If you stop cherry picking facts, the Democratic party will be truly unable to lie anymore, and that’s the only thing they do well.
@Will Hayes,
Source the .7 increase claim?
Did banks start lending furiously to the middle class in 2010?
Did oil drop in price to $20 a barrel in 2010?
Sorry Reagan had it easy in the early 1980s compared to Obama in 2009.
You have zero idea how close things came to a full blown depression in 2010.
In 1981, banks were more regulated, also helped Ronny back then, as did the prime rate dropping by 2/3s in 2 years or so.
Jay, I’ll try one more time, but you’re testing my patience:
1. Of course people label the IDF as terrorist. Israel is the “Jew among nations.”
2. A coup – really. (And truly.)
3. I looked up the word “apologist.” Guess what? It turns out that someone who sheds tears for Hamas is – can you guess it now? – an apologist for terrorism.
4. My point is certainly relevant. By cozying up to fascists like Hamas, Naureckas entirely discredits any genuinely progressive analysis of income inequality or any other subject.
Now do you finally get it?
@William:
Some weaknesses in your “thinking”:
You clearly don’t have access to a decent English dictionary. Insisting that “apologist” means something it doesn’t is not doing your case any good.
The crimes of the IDF don’t have much to do with anything other than xenophobia, on the part of the IDF. Ironic, given how many times xenophobia has in resulted in attacks on Jews.
Insisting that an election were a coup reads like various teapartiers.
And your point 4, you undid that for yourself:
“fascists like Hamas”. It’s best to avoid the IslamoFascism claims if you want to be treated as someone who’s thought about the world.
Try objecting to particular acts of Hamas, if you want to be treated seriously.
But then you also have to acknowledge the crimes of the the IDF.
Jim who provided you with your graphs and statistics because you are out of orbit on this topic.
William,
A little bit of indisputable historical fact:
1. Hamas was elected in 2006 by a large majority of Palestinians to seats in the Palestinian Legislative Council. This included both the West Bank and Gaza.
2. Shortly after this election, which was widely regarded as free and fair. Fatah executed an armed coup-d’etat to retake control of the government. There is evidence that Fatah received Israeli/US assistance in executing this coup.
3. After bloody fighting, Fatah succeeded it overthrowing governance of the West Bank, and Hamas succeeded in retaining the government only of Gaza.
Wikipedia -hardly a anti-Semitic or leftist, or Islamist organization, is your friend…
AS others have suggested, Mr. Naurekas fails to make by far the most powerful argument against the NYT pundit Leonhardt’s bogus argument. And that is the same argument we have always used to explain the simple justice of graduated progressive taxation. And it is this:
When someone earning $20K per year – every dollar of which is spent on necessities, loses 20 percent of their income, the result can be homelessness and freezing to death.
When someone earning $50 million per year loses 90 percent of their income, they can still live a fabulously lavish existence.
I am disappointed that Mr. Naurekas didn’t make this argument. But I understand why. The mentality of economic neoliberalism that saturates our entire media – news, entertainment, and advertizing on the web, cable and broadcasting, can seep into brains of the best of us!
Pat Norton:
Give a look at this Saez article Leonhardt links, graphs at the end of the PDF:
http://eml.berkeley.edu/~saez/saez-zucmanNBER14wealth.pdf
Hey, William (Michael e, is that really you?), shut the f*uck up about the Hamas already. At least go to the thread whence you came and deliver your childish rants and ill-conceived lies there. You’ll still be at FAIR, our new resident troll, and at least you won’t be completely off-topic, you schmuck.