Wednesday, August 1, 2012

Thomas Sowell's cherry-picking straw man

Thomas Sowell says President Obama and the elites are lying to you because, get this:
Perhaps the biggest lie of this election year, and the one likely to be repeated the most often, is that the income of “the rich” is going up, while other people’s incomes are going down. If you listen to Barack Obama, you are bound to hear this lie repeatedly. 
But the government’s own Congressional Budget Office has just published a report whose statistics flatly contradict this claim. The CBO report shows that, while the average household income fell 12 percent between 2007 and 2009, the average for the lower four-fifths fell by 5 percent or less, while the average income for households in the top fifth fell 18 percent. For households in the “top 1 percent” that seems to fascinate so many people, income fell by 36 percent in those same years.
Several big problems in two paragraphs:

• Having spent some time reading about this issue the last couple of years, I can tell you that the argument is not that the rich are getting richer and that the poor are getting poorer. Rather, it's that the super-rich rich are getting richer...and everybody else has been stagnating for the last 30 years or so, resulting in a reduced share of the nation's mostly growing prosperity during that time.

• That's actually been happening. The CBO took on that question in another report last year. And here's what they found:
As a result of that uneven income growth, the distribu- tion of after-tax household income in the United States was substantially more unequal in 2007 than in 1979: The share of income accruing to higher-income house- holds increased, whereas the share accruing to other households declined. In fact, between 2005 and 2007, the after-tax income received by the 20 percent of the population with the highest income exceeded the after- tax income of the remaining 80 percent.
Live by the CBO, die by the CBO. Here's a picture of that conclusion:

• That doesn't mean Sowell's CBO statistics are wrong, only that they provide too narrow a snapshot of the country's income—and at a bad time, during the brutal heart of the recession. Yes, all groups' income fell during that time period. Nobody denies that. The case is that the broad trend toward inequality is probably still under way, though we won't have CBO-generated post-2009 examination of the data for awhile yet. 

But there are plenty of hints—in continued high unemployment, in the still-staggering poverty rate—that post-2009 is going to look like the inequality trend is continuing. Will it? We'll have to see. But Sowell's numbers don't really prove what they say he proves. 

No comments: