The Gap Between Rich And Poor In Manhattan

Yesterday the Census Bureau released the results of the American Community Survey for 2013.  This is the survey that gives us, among other things, the so-called "poverty rate" and the statistics on "income inequality."  As discussed many times on this site, for example here, these numbers are complete scams.  Equally complete scams are the uses to which the left wing press puts these numbers, whether in ignorance of the underlying government scam or in intentionally misleading use of the numbers.

So the big news coming out of the data release is that yes, once again Manhattan has been found to be the champion of income inequality in the whole United States.  From the New York Times yesterday, we have an article by Sam Roberts headlined "Gap Between Manhattan's Rich and Poor Is Greatest in U.S., Census Finds."  And, if you buy into the numbers broadcast by Mr. Roberts from the Census data, it sure sounds like the gap is rather extraordinary:

The top 5 percent of households earned $864,394, or 88 times as much as the poorest 20 percent, according to the Census Bureau’s American Community Survey, which is being released Thursday and covers the final year of the Bloomberg administration. . . .  In Manhattan, the ratio between the top 20 percent and the lowest 20 percent fluctuated around 36 since 2006, but has soared more than 7 points since 2012.

So the first question I have is, how could it possibly be that the jurisdiction of all in the country that claims to be the most "progressive" and that has the most extensive government efforts to address income inequality still has the very highest income inequality of all?  We have the highest taxes in the country, and also the most extensive variety of social programs for the low income population.  We spend about double the national average per beneficiary on Medicaid, and about double the national average per student on K-12 education.  We have far more public housing than any place else.  We have welfare programs that no one else has.  If any of that stuff worked even a little, wouldn't we at least be somewhere in the middle in the income inequality ranks, rather than right at the very, very top?

The answer, of course, is that exactly none of these measures which seemingly would combat income inequality are counted by the Census Bureau in its measures of income inequality.  Its income numbers are "pre-tax."  That means that that guy at the top who made the $864,394 is counted at $864,394, even though he probably paid close to $400,000 in federal, state and local income tax before he had one dollar to spend for himself.  And at the bottom?  The Census also excludes all the in-kind benefits and all the tax credits from its numbers.  To get the "88 times" gap between rich and poor, they're using a figure of about $10,000 as the "cash income" of the family in the bottom 20%. 

  • Such a family very likely got between $5000 and $10,000 from the EITC; but it doesn't count. 
  • Such a family also very likely got a spot in public housing.  There are about 285,000 people in Manhattan calculated by Census as being "in poverty" and there are 53,570 apartments in low-income housing projects in this borough.  At 3 people per housing unit, that's enough housing right there for over 160,000 people, which would be the majority of the low income population, without even getting started on the huge array of other affordable housing and housing subsidy programs.  The value of an apartment in public housing in Manhattan, measured by the market rent of nearby comparable apartments, averages about $36,000 per year per family.  But it doesn't count.
  • Such a family almost certain receives Medicaid.  The cost of that to the taxpayers in Manhattan exceeds $10,000 per beneficiary per year, $40,000 for a family of four.  But it doesn't count.
  • Such a family almost certainly receives food stamps (SNAP).  That would average about $8000 per year for a family of four.  But it doesn't count.
  • Such a family almost certainly receives free cell phones.  That would be worth about $3000 per year.  But it doesn't count.

Put together all the tax credits and in-kind distributions to which the low income family has access, and it approaches $100,000 per year.  That makes the post-tax, post handout "gap" between the top five percent and bottom 20 percent a factor of about four to five, not the 88 bandied about by the Times and the Census Bureau.  You may think that a gap of four or five is still too high, but at least it's honest.  

But the real fraudulence of the Census figures lies not so much in the gross exaggeration of the income gap as in the implication of the appropriate remedy for the situation.  The universal use of these fake numbers is to advocate for more spending on "programs" to address the income inequality.  The programs advocated for are always the same: higher taxes and more in-kind distributions.  But wait:  neither higher taxes nor in-kind distributions will ever be counted in these numbers.  More taxes and more in-kind distributions will not and cannot improve income inequality as measured by these numbers.  In fact, at least the in-kind distribution part clearly makes the measured income inequality worse by substituting for income that the recipient otherwise would have had to earn in a way that counted.

So here we have Roberts of the Times going to one Andrew Beveridge of Queens College for a typical piece of total ignorance on this subject:

“The recovery seems to be going to those at the top, much more than those in the middle, while those at the bottom may even be losing ground,” said Andrew A. Beveridge, a sociologist at Queens College of the City University of New York. He attributed the disparity to the surging costs of housing and the lack of housing subsidies and other forms of public assistance available to many needy families.

Really, is it possible to be this stupid?  "Surging housing costs" have literally nothing to do with the Census Bureau's income disparity numbers.  Housing subsidies for the low income are not counted in the numbers and they can be doubled, tripled, or quadrupled without raising the measured "income" of the low-income population by a single dime.  To the extent that extensive housing subsidies cause some people to keep their visible incomes low to qualify, housing subsidies do have the effect keeping the measured incomes of low income people down, and thus they increase the measured inequality.  That's why the places like Manhattan with the most in-kind distributions have the highest measured inequality.  Beveridge, Roberts, New York Times, how could you possibly not know this?