The Myth of American Inequality: How Government Biases Policy Debate by Gramm
Feminine Triumphs in Academia
Boost in Women's Degrees
There's been a sweeping change on the academic front; the number of degrees earned by women has increased remarkably. From earning 43.4% of all bachelor's degrees in 1967, women made a leap to 57.3% in 2017. Their presence has been felt across master's degrees and doctoral degrees as well, where they pocketed 59.4% and 53.3% respectively in 2017.Women Emerge in Medicine and Law
Notably, the surge also enveloped fields traditionally dominated by men. One could see women breaking into medicine and law. Women bagging doctorate degrees in medicine swelled from 7.9% in 1967 to almost half at 47.4% in 2017. Degrees in dentistry and law saw a swell too, with women earning at the rate of 47.9% and 49.6% respectively in 2017.Unfaltering Domination in Nursing
Contrastingly, in some spaces, things stayed largely the same. Nursing, a field long-held by women, remained steadfast, with a stratospheric number of women clinching bachelor's and master's degrees. The numbers sat comfortably high at 87.4% and 87.9% for both years under consideration.Occupational Trends Among High Earners
Selective Income Categories of Top Earners
Splendidly, a dive into the financial universe uncovers the occupational tendencies of the elite earners. These aren't just individuals lounging around, basking in their opulence. Instead, they represent a broad mix, spanning various professional territories throughout the economy.
Navigating the Structural Complications
However, a slight kink in the exercise emerges due to the data procurement method. Taxpayers self-report their occupation titles while the IRS logically allocates them into fitting categories. Add to this mix an inconsistent classification of job descriptions and suddenly, things aren't as smooth as expected.
Finding the Hidden Gems in Financial Figures
The data is as intriguing as it is complex. encompassing both salaried income and the fascinating realm of pass-through income. Remarkably, this showcases an elaborate picture, including CEOs, physicians, lawyers, accountants, to solitary farmers reporting earnings made from their respective enterprises.
Reevaluating America's Economic Well-being
Income Inequality: A Deeper Look
The understanding of the extent of income inequality in America appears to be skewed, with most people believing it is high and increasing. Official records from the Census Bureau however, display a smaller disparity between top and bottom income brackets, a deviation mainly accredited to not including government transfer payments in their measurements.
The Hidden Impact of Government Assistance
Official poverty rates have seemingly remained constant since the War on Poverty. Yet, these figures overlook the considerable uptick in government transfer payments to households in the lowest income brackets during the same timespan. This signifies the probability that poverty rates are understated, failing to reflect how much government assistance has likely aided in reducing poverty.
Flaws in Measuring Inflation
Gramm contends that the way we measure inflation might not be capturing the true changes in consumer prices. Notable examples such as the advent of cell phones and medical treatment advancements haven't been fully incorporated into these official measures. Consequently, the cost of living may be overstated, leading to a flawed understanding of real wages and living standards.
Unravelling the Income Inequality Misconception
A Distorted Conception of Income Inequality
The income parameter utilized by the US Census Bureau to ascertain income inequality and evaluate poverty rate fundamentally misrepresents actuality. This distortion occurs because the Census primarily identifies cash payments as income and overlooks noncash remunerations, such as government subsidies and employer-provided perks.
Impact of This Flawed Methodology
Because of the failure to factor in these benefits, income inequality and poverty rates are drastically overstated. Notably, in 2017, the lowest-earning 20% of households received upwards of $45,000 from government transfers. Alas, around $32,000 of these payments were omitted in the calculations made by the Census.
A Growing Distortion over Time
Over time, the increasing volume and size of transfer payments have amplified this overstatement of disparity and poverty. Noncash benefits unaccounted by the Census range from Medicare, food stamps, housing subsidies to tax reliefs.
Income Misestimation: A Tale of Unacknowledged Taxes and Benefits
An impressive rise in government transfers from 2.5% of the total personal income in 1947 to 18.2% in 2017 was seen. Yet, the Census merely counts a third of these transfers as income. Any inequality narrative unadjusted for paid taxes, which make up 34.1% of all income, is profoundly misleading, leaving two-thirds of all state and local transfers unnoticed.
Exposing the Gross Misrepresentation
Consequently, the current approach for measuring income results in an exaggerated portrayal of income inequality and poverty in America. Thus, it's prudent to factor in unaccounted benefits and tax contributions while discussing income disparity.
Unveiling American Poverty: A New Perspective
Unboxing The Poverty Paradox
The conundrum of persistent poverty in America, despite the decades-long 'War on Poverty', is an intriguing one. There’s a surprise revelation though. Poverty rates aren’t as high as suggested, rising between 11.1% and 15.2%. Rather, skewed methods of calculations, discounting all government transfer incomes, inflate the poverty figure. Count those in and lo and behold! The rate plummets to a mere 2.5%!
Beyond the Annual Income
Now, the paradigm of assessing poverty based solely on annual income is rather narrow. It doesn't account for transient income deficiency or irregular job patterns. Likewise, the 'family basis' assessment can lead astray, especially when unrelated adults share a household. Now, when we consider transfer payments as income, poverty levels notably decrease, specifically among children and seniors.
Debunking Misconceptions
Poverty isn't as grave as it's believed to be. Insiders reveal that the official poverty measure is fourfold the actual rate. Sprucing up the picture further are consumption data and living standards metrics that vouch for a middle-class living condition for even the so-called 'poor' households. Also, rejecting the claims of widespread hunger or malnutrition, data indicates its rarity and the steady spread of amenities of daily life.
Exploring The Success & Failure
The decline in poverty owes itself to the effective economic system and taxpayer aid. However, the War on Poverty hasn’t fully succeeded in enabling impoverished individuals to stand on their own feet. Instead, it has pushed an increasing number of people to lean on government subsidies, keeping them from exploring and exhibiting their potential.
Debunking Myths About Income Inequality
A Fresh Perspective on Income Inequality
Income inequality is a hot topic nowadays, often presented as rapidly increasing. Contrary to this popular belief, it has actually been on the decline over the past seven decades. This might come as a surprise, but once you factor in overlooked elements such as transfer payments and taxes, the scenario changes significantly.
The Influence of Transfer Payments and Taxes
Imagine this: a significant portion of transfer payments, coupled with a variety of taxes, have been ignored in most income inequality assessments. Now consider the impact when these elements are actually included. The previously inflated income inequality starts to shrink. Notably, transfer payments and taxes have grown at uneven rates, with some categories increasing faster than others, further distorting the landscape.
Overcoming Oversights in Income Measurement
Precisely quantifying income is not as straightforward as it seems. Some common pitfalls, such as overlooking employer-paid benefits or certain earnings, have further skewered perceptions of income inequality. When these are taken into account, income inequality decreases. This points towards the need for a more comprehensive approach to assessing income inequality that covers all income sources.
Dissecting Earned-Income Inequality Growth
Postwar Income Inequality - The Causing Factors
The expanding gap in earned-income inequality in postwar America isn't a fluke but can be ascribed to specific reasons. Foremost among them are the declining percentage of prime working-age adults who are employed, and the rising value of a college degree. Additionally, advancements in education have ramped up salary prospects and indirectly increased inequality.
Education and Economic Divide
Education plays a significant part in economic stratification. Over the years, the gap in educational attainment has increased causing greater instances of inequality. A college degree, especially, has started to hold a much greater value, with degree holders securing higher income brackets than their non-degree counterparts.
The Rise of the Two-Earner Household
The growth in the number of women entering the workforce has indirectly amped up inequality. With more households having dual income earners, their earning potential has significantly increased. Additionally, occupational choices heavily influence earned-income inequality as some jobs pay much higher than others.
Unraveling the Growth of Inequality
The surge in earned-income inequality from 1967 to 2017 can be extensively explained by variations in work effort, strides in education, and the college premium. On the upside, factors like the increase in labor productivity and the entry of women and minorities in high-paying jobs have slightly neutralized this inequality. Amid the criticism, it's important to realize that this growth in inequality is not rooted in the economy's failure, but rather a wave of personal decisions, societal norms shifts, and governmental policies.
Debunking Economic Well-Being Measures
Understanding National Economic Well-being
In the realm of economics, several official statistics help ascertain national economic well-being. Concepts like real average hourly earnings, real median household income, real GDP, productivity, and the poverty rate offer key insights. In order to shield from the distorting effects of inflation, these figures are evaluated over time and tweaked in accordance with dollar's purchasing power changes.
Dissecting Price Indexes for Economic Measures
Having said that, the reliability of these measures closely knits with the accuracy of price indexes purposed for inflation adjustments. It's worth noting that the integrity of government consumer price indexes has been a matter of debate among eminent economists for over half a century. To counter this, the US government employs five diverse price indexes to rectify inflation's influence on economic well-being measures.
Beyond the Glamour of Wage Growth
Real average hourly earnings offer interesting insights, having witnessed a series of ebb and flow eventually peaking in recent years. But, the oft-repeated claims of wage stagnation don't always account for the rising employer-paid benefits during the past 50 years. Also overlooked is the reality that 'average' comprises both, novices as well as seasoned professional's earnings.
Quality Upgrades Lost in Inflation Adjustments
Despite economic advancements and a rise in household assets, these improvements are typically glossed over in official economic well-being measures. The root of the issue lies in official price indexes used for inflation adjustments being unable to factor in the enhanced quality of products and services. This results in inflated figures for inflation and a reciprocal dwindling of economic well-being measures like hourly earnings, household income, GDP, and productivity.
Correct Measures, Correct Policy Decisions
Furthermore, allowing for more authentic price indexes could trigger an appreciable surge in economic well-being measures, pushing down poverty rates. However, the negative portrayal of inflation also bears fiscal impact. It escalates government spending on benefits and skews tax collections. Had a more accurate measure of inflation been in place, national debt could've been significantly lesser. Hence, to facilitate worthwhile policy discussions and decisions, a call for accurate and reliable measures of economic well-being is imperative.
Unraveling the Super Rich: Impact and Contributions
Looking at the Super Rich
Exploring the conversation on income inequality reveals an emphasis on the 'super rich.' These outliers in income distribution cover a large spectrum, with sub-categories reaching down to the top 0.001%. The segmentation reflects significant variations in income even within the top 0.1% tier.
Who Are These Individuals?
The 'super rich' encompass individuals from a diverse range of industries – law and medicine, arts and sciences, media and sports and many others. It includes star performers in entertainment and sports to even university football coaches.
Not Your Usual Affluent Household
Interestingly, despite preconceived notions, names such as Warren Buffet, Bill Gates, or Larry Ellison are not typical representatives of the top 1% or top 0.1%. Their dwelling within exclusive income groups can be fleeting due to the unstable nature of capital gains.
The Worthwhile Contributions of Billionaires
Billionaire and super-rich households, contrary to some popular opinions, make significant contributions to the economy. Their wealth, funnelled into entrepreneurial activities and investments, spurs job creation and injects vitality into the market. Furthermore, their large tax payments reflect their hefty earnings too.
The Upswing of American Income Mobility
Embracing the American Dream
In the land of opportunity, the American Dream of progressing beyond the economic standing of previous generations remains a vibrant reality. At the heart of this dream lies income mobility, signifying the temporal alterations in individual's income. This cycle begins with non-paying or minimum-wage jobs which, supplemented with education and training, evolve into lucrative careers.
Historical Impressions of Income Mobility
Undeniably, income mobility has been an ingrained aspect of American life since the colonial period. It is evidenced by the immigrant pursuit of socio-economic advancement, the swell of income among former slaves post-Civil War, and the rags-to-riches narratives, like that of Cornelius Vanderbilt, a progeny of a Dutch farmer who amassed admirable wealth.
Manifestations of Creative Destruction
Creative destructive phenomenon is also interlinked with income mobility. This economic mechanism fosters innovative goods and services to replace antiquated ones, propelling enterprising individuals towards affluence. Consequently, rather than establishing a hereditary aristocracy, the vast fortunes in America are transitory; epitomized by once wealthiest families such as the Vanderbilts and Rockefellers dwindling from the Forbes 400 list.
Inter-Generational Income Advancement
Vital to note is that income mobility isn't bereft of intergenerational dimensions. Research reveals that adult children generally out-earn their parents, with maximum upward mobility witnessed in the lower income quintile. Albeit, some correlation exists between progenitors' and offspring's income, its influence over ultimate outcomes is slight. Thus, economic mobility is instrumental in intensifying prosperity, which subsequently fosters further mobility.
The Unseen Economic Progress
Unraveling the Real Progress
Over the last fifty years, the United States has experienced a considerable economic advancement, often overlooked due to negative economic narratives. However, the official statistics fail to reveal the whole story. They neglect to count government transfer payments as income and utilize faulty price indexes, obfuscating the true magnitude of economic progress.
Income Growth and Declining Poverty
When every transfer payment is considered as income, most households in 2017 had incomes on par with the top quintile of 1967. Interestingly, the rise in income and improved life quality have not been accurately reflected in the CPI. There has also been a significant reduction in the poverty rate, especially among the Black and Hispanic populations.
Factors Impacting Income Disparities
Divergences in income among racial and ethnic groups primarily result from varying factors like education, occupation choices, age, and geography. Notably, households led by unmarried women with children have seen sizeable progress, with their erstwhile overrepresentation in the bottom quintile witnessing a decrease over time.
The Regional Reduction in Income Inequality
Income inequality has been narrowed down in certain regions of the United States, particularly the South. Consequently, various racial and ethnic groups, as well as households led by unmarried women, have seen the economic benefits distributed widely, indicating a golden age of economic growth in the United States over the last fifty years.
Reframing Inequality and Poverty
Uncovering Hidden Income and Poverty
We're diving into a critique of our understanding on income inequality and poverty. Some authors argue that current statistics are flawed-- they overlook significant elements like government transfer payments as part of the income and disregard taxes as income lost. This skewed perspective has steered policy debates on spending and the government’s role, stirring some controversy.
Paving the Way for Equal Opportunities
The drive is towards a system that encourages work, elevates education, and knocks down barriers to success. Particularly in the spotlight are practices like cronyism. Greater focus is being given to crafting equal opportunities for everyone to thrive and be self-reliant. This approach not just takes cue from the cornerstone principles of equality that America was built on by figures like Thomas Jefferson, but also acknowledges the broader impacts of inequality throughout history.
From Zero-Sum to Wealth Expansion
It's insightful to realize that economics hasn’t always been the zero-sum game it was in the past when wealth acquired by one meant a loss to another. The winds of change were ushered in during the Enlightenment and the Industrial Revolution, democratizing wealth creation like never before. With this came higher wages, greater consumption, and capital build-up-- all harbingers of a prosperous society where opportunities exist for shared growth and for everyone to prosper.
Myths, Measures and Money Matters
Tackling Misconceptions
Ever heard that famous Mark Twain quote about what you know for sure that ain't so? Oddly enough, there's no concrete evidence he actually said it. This idea parallels the complexity of analyzing income inequality. How many firmly held beliefs might we have that just aren't supported by the facts?
We find discussions like these pervade conversations around wealth distribution, especially involving the top 0.1% of earners. Bernie Sanders, for example, made it a key topic during his 2014 speech.
Getting Gritty with Gini
Measuring income inequality isn't a simple task. It involves intricate factors like Gini ratios, household incomes across different races and origins. These factors also span across broad periods, like from 1967 to 2017, as analyzed by the Census Bureau. Real wages have shown minimal growth over this duration, reports Pew Research Center.
Data Deep Dive
Comparable patterns also emerge when exploring social benefits and mean household income data from government surveys and reports. Whether it's statistical details from the Bureau of Labor Statistics or analyses of child labor during the Industrial Revolution, the story remains consistently intriguing.
Socioeconomic Shifts
No discussion about income inequalities is complete without reflecting upon the changing conditions of the working class. From 1209 to 2004, the worker's life in England evolved drastically. Nutrition, life expectancy, taxes impact on different income groups, and even food stamps, all contribute to shaping overall economic landscapes.
Unlocking the Mysteries of American Statistics
Unveiling the Truth in Numbers
'Get the Facts Straight: America's Eminent Statisticians' pulls back the curtain on America's statistical data, demonstrating it's essentiality in shaping welfare perceptions. Co-authored by Gramm, Ekelund, and Early, this insightful read unravels the importance of accurate information in molding public policy, dictating governmental role, and impacting our freedom and contentment.
Dissecting the Current American Measures
The authors' different social-political perspectives and career walks offer a broad view of the issues plaguing America's economic statistics. They found inconsistencies when comparing reality with current measures such as GDP, economic growth, poverty rate, and income distribution. The trio seeks not only to outline these flaws but also propose potential remedial actions.
The Triumvirate's Shared Journey
Kicking off their collaborative journey in the summer of 1967, Gramm and Ekelund, later joined by expert statistician John Early, embarked on a quest to shed light on the flaws in American statistics. With complimentary contributions from Peterson, Solon, and Thornton, they believe this collaboration gets closer to disclosing the real facts about America's state of economic well-being.
Deconstructing Federal Transfer Programs
Dissecting Federal Financial Aid
Whether it's helping the elderly, the unemployed, or the low-income populace, federal transfer programs play a significant role. Some such programs like Social Security Old-Age and Survivors Insurance, and Unemployment Insurance are recognized in both the Census Money Income and the Congressional Budget Office (CBO) estimates.
Navigating the Aid Programs
Let's take a closer look at the bigger picture. The Federal Pell Grants are noted in the Census estimate count but missed by the CBO. Likewise, Medicaid and the Earned Income Tax Credit slip into the CBO's radar but are overlooked by Census. Interestingly, many beneficial programs don't get listed in either of the estimates!
Making Sense of the Unattributed Transfers
Certain unattributed transfers, like Public Housing and Family Planning, remain invisible in both Census or CBO's estimates. It's fascinating how diverse these programs are, touching upon all walks of life, from nutrition for women and infants to housing loans and even dealing with life-altering diseases like HIV/AIDS.