Pew Research Center Reveals Startling Data

ImageIt has been a long time since I’ve seen or heard a story or report on the Occupy Wall Street movement.  I have not read about a protest, seen a report on an action, or a street closure.  It is easy to pretend that as the ruling class promised, the movement burned bright and then petered out because of the assumed nature of the protesters.  Or, perhaps, as another line of  ruling class narrative went, the problems were over-stated to begin with, and the US is actually the greatest nation with the greatest amount of economic opportunity.

Well, clearly Occupy has not gone away (http://www.japantimes.co.jp/news/2013/12/01/world/occupy-wall-street-activists-buy-up-americans-personal-debt/#.UrSYf7T-1iM), one just needs to know where to go to find the news.  However, was the ruling class correct, were the problems overstated?  Were people really manipulating numbers when  they said the top 1% received 95% of the income growth in the recovery, or that the income earned by the 1% now exceeded that of the era right before the Great Depression?

While the meaning of various 1% measurements can be debated and parsed by economists from all sides of the political spectrum, what cannot be denied is that the US is no longer THE land of economic opportunity.  According to data released this week by the Pew Research Center.  In terms of economic equality, the United States ranks behind nations such as Ireland, Chile, and Portugal.

The Pew Center’s data comes from a study done by the Organization of Economic Cooperation and Development (OECD), which analyzed information “after taxes and transfers.”  Or put in simpler terms, after taxes and redistributive “entitlements” such as social security, welfare benefits, unemployment benefits and other ameliorative measures are deducted.   The hallmark of the OECD analysis is the use of the Gini coefficient that measures inequality based on the frequency of distribution, thus purporting to be a more accurate measure of inequality when compared to simple income or wealth levels.   The headline in the Pew Center’s release of the report, and indeed their accompanying graph suggested (if one only gave a cursory read)  that the US ranks tenth in income distribution.  However the story revealed something far more damning (http://www.pewresearch.org/fact-tank/2013/12/19/global-inequality-how-the-u-s-compares/).

The OECD measures distribution before and after the tax and social welfare disbursements, and the US does indeed rank tenth pre-tax and transfer.  However, after the transfers, the US ranks ahead of only Chile.  Let that sink in for a moment:  the US has the second highest level of income inequality in the worldSo what does this mean for the US economy, for those who tell us we have the greatest everything, and perhaps worst of all, that the poor already have too much?     Image

First and foremost it means that they are dreadfully, stunningly, startlingly wrong.  The argument that many on the right make, such as the Cato Institute , and politicians from Paul Ryan to Jack Kingston, is that the poor have It too easy, that they are getting more than their share, and perhaps most disgustingly, they are “takers.”  However the OECD report suggests that after transfers, the takers are not actually the poor, but rather the ruling class (go ahead, tell me you could not see it coming).  The income “gap” actually widens after taxes and transfers.    This should not actually come as a shock – we live in a nation that condones Walmart and McDonalds paying their employees so little that they have no choice (and in fact are encouraged) but to apply for food stamps and other welfare benefits, making the real beneficiary the corporation, not the individual.

But the data points to a more  fundamental issue of this economy.  There was much handwringing and shouting from the rooftops that the US was headed down the dire road of socialism should we support things like the Obama stimulus packages.  Those on the right behaved as if they were latter day Paul Reveres, awakening us to the arrival of the communists; the so-called left in this country claimed the stimulus was necessary but then cravenly allowed nearly 2/3 of it to fall into private hands in the form of tax cuts and rebates.  But there was a third option, that this Pew Center data can only hint at, but it IS in fact in the numbers.

Most of the money ended up in private hands anyway, that is the takeaway.  But imagine if in 2009 instead of a milquetoast stimulus, the president, on the heels of a historic victory that was in fact a mandate, had proposed a strong stimulus that focused on increasing consumption.  A package of incentives that truly DID redistribute money, that gave incentives for hiring, one that created new consumers – not by the thousands but by the hundreds of thousands.  The economy would have rolled, the rich would have still become richer, and there would be a more equitable distribution of income

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