The paradox of income inequality is that all the official progressive programs that supposedly will make it better actually make it worse. And thus we have the ridiculous phenomenon that those places in the country that are the hottest hotbeds of progressivism, and that put in place the most expansive array of programs to "help" the poor and ameliorate income inequality, then end up with the very highest levels of income inequality as measured by the official government statistics. As I have noted before, the Congressional District with the very highest "Gini Coefficient" (the sophisticated snob's official best measure of income inequality) is none other than my own district, New York 10, home of Greenwich Village, the Upper West Side, the New York Times, the most generous welfare and housing and Medicaid programs in the country, and of a stifling progressive orthodoxy that you can't cut through with a machete. Might we be doing something wrong?
An article in yesterday's Financial Times, "The riddle of black America's rising woes under Obama," by Edward Luce, does a real service in highlighting some of the statistical data on income and wealth inequality, particularly as it relates to the disaster that Barack Obama and his policies have brought upon black America. But Luce then proceeds to draw some seriously dumb conclusions.
First, the bad news. Most of the time you have to do serious digging to find out how bad Obama has been for black Americans. The mainstream media just won't report on this. So, thank you Mr. Luce for pulling some of this together:
Since 2009, median non-white household income has dropped by almost a 10th to $33,000 a year, according to the US Federal Reserve’s survey of consumer finances. As a whole, median incomes fell by 5 per cent. But by the more telling measure of net wealth – assets minus liabilities – the numbers offer a more troubling story.
The median non-white family today has a net worth of just $18,100 – almost a fifth lower than it was when Mr Obama took office. White median wealth, on the other hand, has inched up by 1 per cent to $142,000. In 2009, white households were seven times richer than their black counterparts. That gap is now eightfold. Both in relative and absolute terms, blacks are doing worse under Mr Obama.
And then, without any intermediate steps, Mr. Luce jumps to the following conclusion:
Without Mr Obama’s efforts, African-American suffering would have been even greater. He has fought Congress to preserve food stamps and long-term unemployment insurance – both of which help blacks disproportionately. The number of Americans without health insurance has fallen by 8m since the Affordable Care Act came into effect. . . . By no honest reckoning can Mr Obama be blamed for the decline in black America’s fortunes.
Note first that Mr. Luce's switches back and forth between African-American "suffering" and African-American "fortunes" as measured by median income and median net worth, without alerting the reader that the two may not be the same thing. If your chosen measures of black well-being are median income and median net worth, there can be no question but that the massive increases in food stamps and Medicaid have been the main causes of things getting worse. Probably all or nearly all of the declines in black income and net worth can be directly attributed to the massive increases in food stamps and Medicaid under the Obama administration.
Why? First, of course, because the provision of food stamp and Medicaid benefits is not counted in the government statistics on income and wealth. So when the government hands out an additional $40 billion in annual food stamp spending, and an additional $50 billion of annual Medicaid spending, as it did between 2009 and 2013, that adds exactly a big goose egg to the measured incomes and net worths of the recipients. Meanwhile, to get these handouts you must meet income and asset tests -- or, to put it another way, you must get your income and assets below certain thresholds. Of course, the limits vary in an enormously complex patchwork among the states. For example, here is information from the New America Foundation on asset limits relevant to food stamp eligibility. With all kinds of loopholes and exceptions, it remains the case that in the large majority of states if you want food stamps you need to get your assets under $5000.
So can it possibly be any surprise that as food stamp recipients went from about 27 million to almost 50 million under Obama, lots of people with assets in the high four figures and low five figures were spending those assets down in order to qualify? Let's see, I have saved $10,000 and I don't qualify for food stamps; but if I spend $5000 on a big TV, then I will qualify for an $8000 per year handout (which, however, will not count in my measured income or net worth). And thus the food stamp explosion is a very effective way to drive the median net worth of African Americans toward zero.
So, Mr. Luce, has African American "suffering" (your word) increased or decreased under Obama? You say that "without Mr. Obama's efforts, African-American suffering would have been even greater." But what has occurred is that African Americans have traded market income and net worth for increased government handouts and dependency. Which is the path of more "suffering," and which of less? I go with your initial take that black fortunes have "declined," even though the increase in handouts may well exceed the decrease in market incomes and net worth. But that's because I think that being trapped in dependency on government handouts is a terrible thing for the recipients.