Stiglitz’s Inflated Income Gap

April 11th, 2011 at 7:01 am | 39 Comments |

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I’m never going to win a Nobel Prize.  Maybe in literature.  I don’t know why Joseph Stiglitz’s new Vanity Fair piece on inequality is so off-base.  But it is.  And it’s incredibly frustrating (1) to see someone so intelligent be thwarted by ideology and (2) to watch as his views are propagated on the basis of his name recognition.

What’s a lonely uninvited-to-Davos blogger to do?  Blog.  Herewith, my fact check of the VF article.  Stiglitz writes (henceforth in italics),

The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year.  In terms of wealth rather than income, the top 1 percent control 40 percent.  Their lot in life has improved considerably.  Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

Stiglitz doesn’t cite any of his figures (possibly a limitation of the outlet), but the Piketty & Saez estimate of the top one percent’s income share in the most recent year (2008) was 18 percent, which is just a hair closer to “nearly a quarter” than it is to “just over a tenth”.  Their data says that share was 9 percent in 1985, but that should be adjusted upwards to 13 percent.  Similarly, CBO says the top one percent’s share was 17 percent in 2007 for after-tax income, up from 11 percent in 1989.  Saez’s estimate of the top one percent’s share of wealth is 21 percent for 2000, 21 percent for 1990, and 22 percent for 1985.  Edward Wolff’s is 35 percent for 2007, up from 34 in 1983 (which I doubt is statistically different from 35 in this case).  The top appears to have experienced income and wealth losses from 2007 to 2009 while the bottom experienced gains.  Taken together, the top one percent’s income share rose from 11-13 percent twenty-five years ago to 17-18 percent according to the most recent data.  The top one percent’s wealth share basically hasn’t risen.

[UPDATE: See MIT economist Erik Brynjolfsson's comment below, which led me to add this paragraph.  Brynjolfsson raises an important point (though I wouldn't call it a mistake) in noting that Stiglitz may have been referring to the Piketty and Saez numbers that include realized capital gains in "income".  I chose the series excluding capital gains because the timing of when capital gains are realized has everything to do with tax law, the strength of the economy, and when people retire.  The P&S series including capital gains still doesn't account for all the unrealized gains accruing to people (most importantly, those accruing to people in their retirement accounts).  Capital gains realization is "lumpy" in a way that makes trends problematic.

But I will concede that the level of the top's income share (including realized capital gains) is closer to 25 percent than the P&S numbers I cite above suggest.  Now whether their share of income including unrealized capital gains is closer to 25 percent or 17 or 18 percent is an open question.  And I still say the series excluding capital gains is the way to go for trend estimation.  But look, all this aside, the CBO series includes realized capital gains (but also considers taxes and other things the P&S series leaves out).  And it shows the same basic trend and level as my conclusion above.]

While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall.  For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone.

The 18 percent figure looks to be from Piketty and Saez (the change from 1998 to 2008).  The claim about median incomes falling is incorrect if one takes into account the value of employer- and government-provided health insurance.  (Majorities of workers with employer coverage say they prefer more generous coverage to higher wages, so it turns out employers aren’t crazy in substituting ever-more-costly insurance for wages over time.)  The decline in earnings (not income) for men with just a high school diploma is probably less than 12 percent.  Based on some analyses I’ve been working on using the Current Population Survey, I find that men with a high school diploma but no four-year college degree saw a 12 percent decline in earnings over the roughly 33-year period from 1971-73 to 2003-2007, but that doesn’t take into account the caveats I mention in this post.  And earnings among women with the same level of education rose by over 50 percent, so that’s inconvenient for Stiglitz.

The change in household or family income among men with just a high school diploma was, I’d wager, positive even before factoring in the caveats.  And while I can’t cite the paper yet, research I’ve seen using the PSID rejects the conclusion that wives have been forced to work more due to stagnant husband earnings—the biggest increases in work were among wives with the best-educated husbands, and while the hours of married men declined, those of single men did not (suggesting that the decline among married men was a reaction to increased work among their wives).  I’ll update this post when I can cite the paper (though that won’t be for a couple months anyway).  But think about it–did all these women increase their college-going simply in anticipation of marrying men with stagnant earnings, or did they prefer the fulfilling professional options that a college degree afforded them?  Or consider–is declining fertility, delayed marriage, and increased college-going among women in developed countries around the world all somehow related to rising American inequality?  You can get the basic trend on work by sex by marital status from Table 1 of this paper while you anxiously await my update.

All the growth in recent decades—and more—has gone to those at the top.

Nope, not if “the top” refers to “the top 1 percent” cited two sentences earlier.  According to the Piketty and Saez data, depending on whether one uses the share of nominal or real (inflation-adjusted) gains and whether one includes or excludes capital gains in “income”, the share of income growth going to the top one percent from 1998 to 2008 was between 22 and 33 percent.  If you go back to 1988, the range is from 19 to 32 percent of gains since then.  And keep in mind that when you start from an unequal distribution, if everyone experiences the same rate of income growth, a disproportionate share of gains will go to the top.

In terms of income inequality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride.  Among our closest counterparts are Russia with its oligarchs and Iran.

Compared to nearly all of the major nations of western and central Europe, the U.S. does have higher inequality (but it may not be that far off from the U.K. or Canada).  The only numbers I could find for Russia and Iran are from the CIA World Factbook (the quality of which I can’t speak to).  Out of 136 countries, the U.S. is ranked 40th worst.  Iran is ranked 43rd and Russia 52nd.  So that sounds bad, right?  Meh.  Hong Kong and Singapore rank worse than the U.S., and Indonesia, India, and Ethiopia rank much better than Russia.  Stiglitz will have to do better than this if he wants to argue that American inequality is a big deal.

First, growing inequality is the flip side of something else; shrinking opportunity….Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy.

OK, so now Stiglitz is trying to tell us why we should care about the inequality that he exaggerates.  But these are just assertions.  The best evidence suggests that opportunity for men to move from the bottom to the top over the course of a career hasn’t changed much over the past 35 to 40 years, and it has unambiguously increased for women (see Figures 15A and 15B).  Across generations, the evidence is extremely thin, but it doesn’t point to an unambiguous increase or decrease in opportunity over the past few decades.  As for inequality and efficiency, my dissertation advisor, Christopher Jencks, has found that there is little correlation between economic growth and inequality levels, which doesn’t exactly help those who believe inequality promotes growth but is equally problematic for Stiglitz and others who believe that inequality is inefficient.

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement…

Here Stiglitz is conflating income inequality (growing) with wealth inequality (basically flat and at a historic low in the U.S.).  Whatevs.

America’s inequality distorts out society in every conceivable way.  There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means.

So document it!  The share of families with any debt rose from 72 percent in 1989 to 77 percent in 2007, though note that the share with assets also grew.  Median net worth (assets minus debt) rose from $75,500 to $120,600.  In the wake of the housing bust, it fell, but it was still around $92,000 in 2009.  Among people with debt, median debt payments rose from 15.3 percent of family income in 1989 to 18.6 in 2007.  These are pretty small changes in indebtedness, and I’m not sure how Stiglitz could empirically link them to inequality.

Inequality massively distorts our foreign policy.

Ummm…going for the Peace Prize next?

[T]he chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe.

What little evidence there is suggests that upward mobility is lower in the U.S. only for men and only for those who start out poor.  [UPDATE: Just to clarify, I'm talking about only men who start out poor, not men plus all people who start out poor.  See the linked paper for details, but we're talking about 12 to 13 percent of the population, roughly.]

All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

Oh boy, the shift to political science by economist pundits is always fraught with danger.  The 2010 election is a single data point (and an off-year election, when voting rates are much lower).  I’ll just quote from a fact sheet from a Tufts research center that studies civic engagement among youth:  “The 2008 election marked the third highest turnout rate among young people since the voting age was lowered to 18.”  What any of this has to do with inequality is anybody’s guess.

In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies that they inhabit….The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next?…As we gaze out at the popular fervor in the streets, one question to ask ourselves it this: When will it come to America?

My guess is never.  By the way, Joe, be honest–were you using a pseudonym here?

Originally published at The Empiricist Strikes Back.

Recent Posts by Scott Winship



39 Comments so far ↓

  • Smargalicious

    But of course. Take the upper one percent’s money and re-distribute it to inner-city thugs, illegals, or their anchor babies.

    They deserve it.

    Sheesh.

  • ggore

    Good one, Smarg, but isn’t that what the French aristocracy and Louis (who made and controlled 99% of the money) said right before the “rabble” dispatched with their heads, the Bastille, etc? Just sayin’. Things tend to get ugly eventually when all the wealth is controlled by a very few; and when those very few get a little carried away, such as the situation a few years ago when the rich started gambling amongst themselves in their byzantine housing derivitives market and subsequent meltdown; the remaining 99% are expected to bail them out so that the rabble doesn’t get so put down that they do revolt.

  • ggore

    Just one more little thing, that was announced last weed but oddly completely ignored by Fox News and all the Republicans: the program passed by Congress to fix the almost total destruction of the U.S. economy called TARP actually MADE money for the U.S. government. Imagine that, a government program that actually worked! I am amazed.

    Speculators are even now running up the price of oil even though demand is up but only by a very small amount, as the world economy is still not completely recovered from the effects of the previous disaster caused by our rich people. Wonder what’s gonna happen when the price of gas gets to $5 this time. Anyone remember what happened last time?

  • StarSpangledSpanner

    Some Facts are always good.

    Here are visuals that show how the super rich are doing against you and me. If you believe that this is how a healthy society should look then maybe you are reading the graphs upside down!

    This also is a disgrace and maybe explains some of the former numbers, death is a great business to be in it seems.

    “The United States has increased its military spending by 81 percent since 2001,” SIPRI said. “At 4.8 percent of gross domestic product, U.S. military spending in 2010 represents the largest economic burden outside the Middle East,” said SIPRI Military Expenditure Project chief Sam Perlo-Freeman.

  • sdspringy

    Maybe someone could explain how Warren Buffet, Bill Gates, or Steve Jobs having lots of money precludes me from any more money. How exactly does a group of rich people prevent me from becoming rich?

    Is there only so much room on the “rich people street”?
    Do rich people prevent me from saving?
    Do rich people prevent me from opening my own business?
    Do rich people prevent me from furthering my education and getting a better job or higher income?

    How exactly do the 1% club control the actions of the other 99% and convince them that further increases in their income is impossible.

    I have always found the premise of the argument flawed, because my own experience, no college education, has not stopped me from a successful career and from also having interest in two other businesses. Never felt the heavy hand of the 1%ers holding my down.

    You want more money go get it, if your satisfied with your current position, enjoy it.

    • ottovbvs

      We’re all lost in wonder at your achievements Springy. The answer to two of your questions is yes, and one of them, probably. But that is not what is being discussed here. Are you confused?

  • ottovbvs

    I don’t know why Joseph Stiglitz’s new Vanity Fair piece on inequality is so off-base. But it is.

    Having opened his comment by saying Stiglitz’s piece is wildly off base Winship then goes on at length to demonstrate that (where he quotes him correctly) Stiglitz is at worst perhaps slightly off base. Where he quotes him incorrectly he constructs elaborate rebuttals of something Stiglitz didn’t say. For example:

    Nope, not if “the top” refers to “the top 1 percent” cited two sentences earlier.

    And of course Winship trots out the hoary old chestnuts (employer provided health insurance should be treated as income) to suggest median incomes aren’t really falling. As the StarSpangledHammer’s (sic) charts summarise there’s no question that Stiglitz is broadly correct on every count. Just look at the trend lines rather than individual years because these can be distorted by capital markets where the wealthy have so much wealth/income concentrated. Finally Winship uses snarky comments to dismiss an observation that in the next para he concedes is broadly correct viz.

    Ummm…going for the Peace Prize next?

    Not all this growth in income disparity is the fault of the Republicans, although they certainly have prevented attempts to meliorate it, but Winship’s attempt to suggest this problem doesn’t even exist is puerile.

    • sdspringy

      Not confused at all Otto. The assertion is the same as always when whinny Liberals are involved, someone has more than I do.

      And your assertion that Warren Buffett having more money precludes you and me from improving our economic condition is as limp as your other male appendages.

      Rather narcissistic really of the Lib that the 1% are even concerned at all with your feeling of inadequacy.

      Really Is time Otto for you to grow up, grow a pair, or maybe just go to work.

      • ottovbvs

        Actually I worked (not totally unsuccessfully) for 50 years, my first job was when I was 15 as a deckhand on a oil tanker. Now I get to indulge my predilection for puncturing the pompous platitudes of know nothings who don’t even understand what’s being debated.

        • sdspringy

          Apparently you should have remained a deck hand since you have not learned to appreciate the work of your own hands.
          And in your old age now feel that you are owed more than you have aquired. Must be from recieving all those new government checks.

          Walmart could always use a greeter but with such a sour puss for an expression its doubtful you would be hired.

        • ottovbvs

          I loved being a deckhand but I also ended up running a group of companies employing nearly 4000 people so no need for Wal Mart. Fortunately this range of experiences has not filled me with the rancor and hate which you so consistently exhibit. However, I will fess up to acerbity when faced with ignorance, intolerance, and obtuseness.

        • Smargalicious

          Go springy go!! LOL!! :D

  • Stan

    It sounds pompous when you read it, but the Roman historian Tacitus really nailed it: “It is characteristic of human nature to hate those you have wronged.”
    Think about this the next time you read a Wall Street Journal editorial about the “lucky duckies” who earn too little to pay federal income tax or a Paul Ryan speech about how society can’t keep supporting the “takers” at the bottom of the income pyramid. Or some of the comments in this thread.

  • YuriPup

    This article rises to the level of propaganda. There are numerous factual errors and deliberate attempts to mislead. Scott Winship is straight up lying in this piece and it needs to be removed.

    http://www.econ.berkeley.edu/~saez/estatelong.pdf is from 2004 and here’s the conclusion:

    It is striking that, in both the United States and the United Kingdom, top wealth shares have increased so little in spite of a surge in top income shares. Atkinson (2002) shows that the top 1% income share increased from less than 5% in the late 1970s to over 10% in 1999 in
    the United Kingdom. The increase for the United States has been from less than 8% to about 16% during the same period (Piketty and Saez, 2003). Such a pattern might not last for very long because our proposed interpretation also suggests that the decline of progressive taxation observed since the early 1980s in the United State s63 and in the United Kingdom could very well spur a revival of high wealth concentration during the next few decades.

    Wolff too, draws the opposite conclusion that is presented by Scott:

    Trends in wealth since 2001 document an explosion of household debt and the rise of the middle-class squeeze. There was a middle-class squeeze in the sense that, for the middle three wealth quintiles, there was a substantial increase in the debt-to-income ratio and in the debt-equity ratio.

    As a postscript, we can see how the rising debt of the middle class made them vulnerable to income shocks and set the stage for the mortgage rises of 2008 and 2009 and the resulting financial meltdown. The rapid decline in housing prices over these two years (on the order of 20 percent) has left many middle-class families “underwater” (i.e., with greater mortgage debt than the value of their homes) and, coupled with a spike in unemployment, unable (or unwilling) to repay their mortgage loans. Recent years, then, can best be seen as the “squeeze before the storm.”

    Winfield is 0 for 2 on sources I clicked through and checked.

  • Rabiner

    Sdspringy:

    “Maybe someone could explain how Warren Buffet, Bill Gates, or Steve Jobs having lots of money precludes me from any more money. How exactly does a group of rich people prevent me from becoming rich?

    Is there only so much room on the “rich people street”?
    Do rich people prevent me from saving?
    Do rich people prevent me from opening my own business?
    Do rich people prevent me from furthering my education and getting a better job or higher income?

    How exactly do the 1% club control the actions of the other 99% and convince them that further increases in their income is impossible.

    I have always found the premise of the argument flawed, because my own experience, no college education, has not stopped me from a successful career and from also having interest in two other businesses. Never felt the heavy hand of the 1%ers holding my down.

    You want more money go get it, if your satisfied with your current position, enjoy it.”

    It precludes you when you’re paying higher marginal tax rates than they are since everything they earn is in capital gains rather than earned income. Tax revenues have to come from somewhere to pay for every day life. Also surprisingly you mention Bill Gates and Warren Buffet who both think tax rates are far too low for people like them.

    • ottovbvs

      It’s typical Springy bs, in this case he’s simply begging the question, drawing irrelevant conclusions and throwing in the odd strawman for luck.

  • quanta

    Taken together, the top one percent’s income share rose from 11-13 percent twenty-five years ago to 17-18 percent according to the most recent data. The top one percent’s wealth share basically hasn’t risen.

    13%->17% is a 30% increase (relative)
    11%-18% is a 64% increase (relative)

    You can’t claim that the top one percent’s wealth share basically hasn’t risen when their share has risen 30-60%.

  • ottovbvs

    Stiglitz is an entirely credible economist even if you don’t agree with all his conclusions. Winship’s basic claim (ie. that Stiglitz is lying about or distorting the the data) is ludicrous and what’s more he’s missing the whole point of his VF article which is about the damage that’s being done to our long term economic prospects and the distortions it’s producing in our society (eg.the absence of the upper classes in the military). When historians look at the extent to which the US declines relatively over the next fifty years, they are going to be paying a lot of attention to the role of income inequality.

  • Frumplestiltskin

    Timothy Noah did a very well researched and lengthy article about just this topic on slate, it is a good read.

    Middle Class incomes have been stagnant for decades rising only during the terms of Bill Clinton.
    Winship is ignoring this issue, the Bush tax cuts were the absolutely stupidest policy ever enacted, accelerating the capital flight from America to the developing world.
    My wife’s family has a factory in China, the average wage of the workers in the factory is around $300 a month, no health care benefits, no pension, etc. They are doing quite well, 4 houses (or 3, they knocked down walls and combined 2), none of the goods produced are even exported to America.

    It is possible to make a lot of money in the states and have zero workers in the states, enjoying the protection and the freedom that America assures while paying very little by way of taxes.
    These types of trends will only increase since it is the Republican policies that make this most possible. Hell, pigs like the Koch brothers can buy up US resources, ship them to Chinese factories and pay slave wages, use this income earned abroad to maximize their control of limited resources in the states and to make tax policy which most benefits them directly.

    Winship has ZERO answers as what to do about it. In fact, he is completely oblivious to it.

  • LVTfan

    Most of the big “capital” gains are not the result of selling one’s appreciated residence upon retirement, or selling appreciated stocks or mutual funds as one moves into retirement; rather, they appear to be the result of selling a “small” business for a windfall gain. One doesn’t repeat this year after year, or do it in small bits.

    But I submit to you that true capital does not appreciate. Most of what appreciates is land value, the value of natural resources and privileges, and the value of urban land or land near our urban centers. A fair argument can be made that the landholder does not contribute any more to that appreciation than does the next fellow, his employee or neighbor, or, for that matter, the fellow who has fallen into the social safety net. It is our presence, our activity, and public investment in infrastructure and services — highways, bridges, tunnels, airports, air traffic control, trains, subways, water systems, sewers, paved streets, cleaned streets, garbage pickup, plowing, emergency services for individual and large-scale disasters, libraries, courts, prisons, public health systems, etc., etc. — that gives value to urban land. It is our demand for newer technologies and for warmth and cool and electricity that gives value to natural resources.

    So few people seem to have any interest in the structures that pour natural resource wealth into the pockets of the shareholders of corporations and “small businesses” or the FIRE sector, which Stiglitz has pointed out is skimming 40% of the profits of the productive sector.

    Capital doesn’t appreciate. Your car depreciates. Your house depreciates. Even the best-maintained equipment depreciates. What rises in value is land, natural resources and privilege. (Did you know that the board game Monopoly was based on an earlier game designed to teach these concepts, The Landlord Game? Search for Lizzie Magie 1902 Landlord Game for details.)

    I’m not suggesting we blame those who take advantage of privileges. I’m suggesting that we examine those privileges and their effects, and have a society-wide conversation about whether we want to continue extending these privileges and suffering their effects, or change the system so that the value of those privileges is collected as the primary source for public revenue. I consider it Natural Public Revenue.

    Or perhaps most of us think we’re going to be in that top 1% if we wish hard enough, or make the right connections, and those privileges will start to work for us — and consider that enough reason to subject our fellow human beings to the effects of privilege.
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  • LVTfan

    oops! got a duplicate, which I’ve removed. Sorry!

  • ottovbvs

    But I submit to you that true capital does not appreciate.

    So when I bought that Cat stock for $23 in April 2009 and it’s now selling for $113 my capital didn’t appreciate? Okaaay.

  • PatrickQuint

    Scott Winship: “Taken together, the top one percent’s income share rose from 11-13 percent twenty-five years ago to 17-18 percent according to the most recent data. The top one percent’s wealth share basically hasn’t risen.”

    ‘Cause, you know, “up” is basically the same as “down”.

    17.5 – 12 = 5.5 <<< That looks to me like a ~50% increase in share. That's a long, long way from nothing.

    I… I don't know what more there is to say. Mr. Winship has just told us something on the order of "2+2=5".

  • cporet

    All I know is that when my wife lost her job in September ’08 our income dropped $39200. Down 58%. Ha! Beat that!

  • LVTfan

    ottovbvs, most likely, you bought that stock from someone else, not from Cat. It rose in value, but Cat didn’t see a penny of that. Does that count as “capital” by any logical definition of the word? Speculation, sure. And if Cat was paying a dividend, or there was some prospect it would pay a dividend, you were purchasing that actual or potential stream of dividend income from the previous owner. But you didn’t inject $23/share worth of capital into the company’s coffers. We accept impolite fictions, and don’t examine them. It doesn’t turn them into truth. Your purchase of your shares didn’t create a single job. (And incidentally — and significantly — expending one’s savings or borrowing power to purchase land doesn’t create any jobs either. Our high land prices force entrepreneurs to pay sellers a lot for value the sellers didn’t create, before they can begin to execute their business plan.) Think about what this means to our economy and our opportunities as workers. I think the key to solving some of our economy’s most serious problems lies in this direction.

    PatrickQuint, don’t confuse the share of wealth held by the top 1% of wealth holders with the share of income received by the top 1% of income recipients in a particular year. There is considerable overlap in the two groups, but they aren’t identical, and wealth and income are two different things which it is easy to confuse when both are mentioned in the same paragraph or sentence. I had to read the initial post several times before I concluded that Scott Winship had stated things accurately.

  • ottovbvs

    Does that count as “capital” by any logical definition of the word?

    Yes…my capital

    capital

    Definitions (3)

    1. Cash or goods used to generate income either by investing in a business or a different income property.

    2. The net worth of a business; that is, the amount by which its assets exceed its liabilities.

    3. The money, property, and other valuables which collectively represent the wealth of an individual or business.

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  • think4yourself

    I read Winthop’s review and then read Stiglitz’s article. I did not take the time to review all the research on incomes (but did look a little at Piketty & Saez).

    The old saw is that their are “lies, damn lies, and statistics”. You can take any set of year’s and create whatever curve you want. If you run a 20 year review of incomes and household wealth and end it in 2007 you’ll get a different result than if you end it at 2009.

    I don’t like Stiglitz and Krugman, they are in my opinion chief examples of Liberal/Socialist economists who pick out parts of economic theory to justify their viewpoint (I find the Austrian school economists equally as bad).

    However Winthrop is taking parts of Piketty & Saez’s research to argue the direct opposite of their conclusion. http://elsa.berkeley.edu/~saez/saez-UStopincomes-2006prel.pdf.

    In fact, they argue that income for the top 1% of incomes has increased dramatically over the last 17 years (actually 1999 – 2006) – 5.7% average real annual income increase, especially during the Bush administration, while those who are in the bottom 99% (which also includes the next 9% who make between $104K – $382K per year so we ain’t talkin’ about just the poor here). The bottom 99% had an average real annual income increase of 1.9% (.9% during the Bush administration). I suspect that if you further broke that down to households making under $35K per year it would show real income losses.

    However to rebut Stiglitz; Piketty & Saez show that wealth concentration at the top is not nearly as great as it was in the first part of the 20th century, due to the fact that many of the wealthy today are “new rich” and have earned their money recently (if you take a look at the Forbes 400 between 2010 – 1990, I’ll bet you see a lot more new faces on it, than in 1990 – 1970). Which goes to show (in my opinion) that you can still rise to the top in America.

    I’m not ready to nationalize all parts of economic life as are Stiglitz & Krugman. However, for Winthrop to play with statistics to try and show that the poor really are doing pretty good is disingenous to say the least (they traded wages for health insurance – really? How come 40 million people don’t have health insurance?).

    • ottovbvs

      I don’t like Stiglitz and Krugman, they are in my opinion chief examples of Liberal/Socialist economists who pick out parts of economic theory to justify their viewpoint (I find the Austrian school economists equally as bad).

      They also happen to be Nobel Laureates. Can you name any living Austrian economists that have Nobel prizes. Not Monetarists…Austrians? Austrians are joke economists Stiglitz and Krugman are among the leading economists in the world and only about two months ago Krugman was voted one of the three most influential economists in the world by a group of his peers. He’s also the author with his wife of probably the major economic textbook used in the US university system. I don’t know what criteria you use to arrive at this value judgement, it sounds like pure prejudice.

      If you run a 20 year review of incomes and household wealth and end it in 2007 you’ll get a different result than if you end it at 2009.

      Well of course you will but you’ve obviously never heard of a trend line, and you’re giving us value judgements on the professional competence and standing of Krugman and Stiglitz. What’s next your value judgement on concert pianists, Chefs, brain surgeons, flamenco dancers?

      • think4yourself

        I’m happy to give you my opinion on all of the above especially flamenco dancers.

        Of course I know what a trend line is, I also know that trend lines can be affected by significant short term changes (I would classify a 3 year recession that was only topped by the Great Depression as a signifcant event in a 25 year trend line). I also understand how regression to the mean affects those trend lines.

        As for Stiglitz and Krugman – yep, I’m making a pure value judgment on their work based on my personal opinion same as every poster here makes judgment calls.. They have expressed the view that we must nationalize all banks, have single-payer health care and raise taxes significantly on corporations and the most wealthy for the sole purpose of income redistribution.

        I disagree. I think this country would be better if we went back to the Clinton tax rates at all levels. That means everyone pays some tax – rich and middle class (a family of 4 making $50K per year paid no Federal income tax in 2009 & 2010 – I think it’s okay to pay some tax for the privilege of living in the United States of America). So yes, raise the tax revenue. If you make over $250K per year your taxes should go up from these almost historically low levels. However, I also believe that business does have a place in creating economic wealth and it is not the role of government to do so, even though gov’t can help set the stage and plays an important role in protecting the disenfranchised from the more powerful. Even though there are wealthy people whose sole aim is to continue to cling to power and privilege, I don’t assume that all people who earn over $382K per year (top 1%) are that way (described as such by Stiglitz in the article). Case in point are Gates and Buffet, who by the way are making great strides to change fundemental inequities and not using your or my tax dollars to do so.

        I think we need a strong national health care program that makes sure that all people have access to affordable health care – but it shouldn’t be free, because you don’t value what you don’t pay for. I believe we will need to make significant restructering to our social networks that may include benefit cuts, raising eligibility ages, means testing and additional tax support. Given that people live longer and are generally healthier than when these programs were instituted I don’t think that’s a bad thing, just difficult to do. And no Paul Ryan’s plan is not the answer. I do think we need to make serious and strategic investments in infrastructure, education and technology, but do so in a manner that recognizes the challenges of the future and in my opinion, all too often the Liberal entrenched interests are focusing on past problems not future options.

        I don’t agree with Scott Winship and even said the research he cited drew a different conclusion to the one he made. I don’t agree with Paul Ryan and said so as well. I’m not a knee jerk Liberal or a knee jerk Conservative. Does that make me a better economist than Stiglitz & Krugman? Nope, but it doesn’t make me wrong in my assessment that they use economics to support a particular Liberal worldview, which not every economist shares.

        • ottovbvs

          As for Stiglitz and Krugman – yep, I’m making a pure value judgment on their work based on my personal opinion same as every poster here makes judgment calls.. They have expressed the view that we must nationalize all banks, have single-payer health care and raise taxes significantly on corporations and the most wealthy for the sole purpose of income redistribution.

          Yes but it’s a totally inappropriate one. Austrian economists are cranks while Krugman and Stiglitz are leading and respected members of the international economic academic community. You’re also mixing up their political judgements many of which I disagree with also (eg. nationalising the banks) and their economic analysis. I think Krugman is invariably right in his economic diagnoses but often wrong on the politics.

          Otherwise I almost entirely agree with your comments @ 9.23. And apologies if I was pouring on the satire a little too heavily.

        • think4yourself

          :) – this is good forum, Smarg et al notwithstanding.

        • beleg

          Regarding your opinion of Krugman and such, I think you’re making a mistake in judging them based on their politics. I don’t understand economics well enough to make informed criticism of his methods. But the thing that makes him a worthwhile economist is that he has a long history of making economic predictions, and they have born out well. If he were simply manipulating numbers to promote his ideology, reality would not so often confirm his work. Especially since his proposed solutions have rarely been enacted.

        • ottovbvs

          A classic case where Krugman gots his economics and politics mixed up was the stimulus. He said all along that $800 billion was not enough and he was right. He then said this was the presidents fault because he “didn’t try hard enough” which is nonsense. The 800 billion just squeaked through as it was. It was the same with the banks. He diagnosed the problems correctly and proposed a set of actions most of which the administration took apart from nationalising them which would have been a disaster.

  • ottovbvs

    LVT fan:

    wealth and income are two different things which it is easy to confuse when both are mentioned in the same paragraph or sentence.

    Well I suppose they are if you’re economically illiterate.

    • PatrickQuint

      Wealth =/= income

      You… dispute this? The bare definitions?

      I certainly think that it’s possible to have a great deal of wealth without income, and it’s also possible to have a great deal of income without much wealth.

      • ottovbvs

        You misunderstood me…I was being ironic…If you read this guys comments he obviously has some weird ideas about economics.

  • Joe In NH

    You don’t have to be a rocket scientist or an economist to know we have seen 30 years of trickle-up economics making the rich richer and the rest of us stuck treading water at best.