Income Inequality Comes Roaring Back Into The News

With the demise of the Russian collusion hoax, you knew that something would have to emerge to fill the giant hole in the newspapers and the TV news shows. It looks like the old perennial of “income inequality,” after some time mostly off the front pages, is now the first mantra to be found rushing in to fill the vacuum.

So there we had Ray Dalio — serious mega-billionaire and Co-Chairman of the country’s biggest hedge fund, Bridgewater Associates — showing up on CBS’s “60 Minutes” yesterday to proclaim that income inequality is a “national emergency”:

“If I was the president of the United States,” Dalio said, “what I would do is recognize that this is a national emergency. . . .” “The American dream is lost,” he said. “For the most part we don’t even talk about what is the American dream. And it’s very different from when I was growing up.”

Simultaneously, Mr. Progressive himself, New York Mayor Bill de Blasio, turned up in Nevada (of all places) to promote his self-delusional presidential campaign, and chose income inequality as his theme. From today’s New York Post:

[T]here needs to be a “bigger discussion about income inequality and oppression of other groups including Latinos, Native Americans, Asian and women,” he said at the event organized by the immigrant advocacy group Make the Road.

And, somewhat to my surprise, the income inequality drum beaters seem to have enlisted Tucker Carlson of Fox News as one of their spokespeople. Carlson has made statements on this subject several times, but here is an example quoted by Forbes (last November):

The biggest problem this country faces is income inequality, and neither the liberals nor the conservatives see it.

Here’s the problem I have with this: The “income inequality” mantra in the United States is almost as big a hoax as the Trump/Russia collusion scam. I say “almost” as big a hoax, because, unlike the Trump/Russia thing which did not exist at all, I am certainly not saying that there is no income inequality in the U.S. But multiple aspects of what you regularly read about the subject of income inequality in the U.S. are a hoax. For a more detailed discussion of some of these issues, see prior posts here and here. But the public discussion of income inequality fundamentally proceeds from obviously fake data designed to exaggerate the issue to a ridiculous extent, and moves on from there to supposed “solutions” which have zero possibility of affecting “income inequality” as measured, and thus can only be seen as intentionally designed to fool the public into supporting yet another round of fake “solutions” that will again have zero possibility of working. That certainly makes this rise to the level of “hoax,” in my opinion.

Some of the aspects of the income inequality discussion that are clearly a hoax include:

  • At the bottom of the measured income distribution, the large majority of resources available to the poor are systematically excluded when income inequality statistics are calculated. The measurement of “income inequality” in the U.S. by official government data collectors (Census Bureau) intentionally excludes — or, at least, makes no effort to include — vast amounts of income and resources available to those in the lower income brackets. Obvious intentional omissions include (1) approximately $1.2 trillion annually of anti-poverty spending by all levels of government (federal, state, and local), (2) approximately $2 trillion in the underground economy, (3) approximately $500 billion of private charity, and (4) an unknown amount provided by family members such as parents, grandparents, and siblings.

    To give you an idea how significant these exclusions are, U.S. annual GDP is currently running right around $20 trillion. The households at the bottom 20% of the measured income income distribution are said to receive about 5% of the income; and since aggregate household income is well less than GDP (about two-thirds), therefore the measured income of the households in the bottom 20% is well less than $1 trillion. Even if only half of the $3.7 trillion in anti-poverty spending, underground economy, and private charity goes to those in the bottom 20%, that still means that the amount of resources available to these people is well more than triple the income that Census reports for them.

  • At the top of the measured income distribution, taxes paid are not subtracted when income inequality statistics are calculated. The top federal income tax rate currently is pushing 40% (when you include the Medicare tax); and many high-income-tax states — where many of the highest earners live — add income taxes in excess of 10%, for a total income tax take from the highest earners of right around 50%. Even more in some cases.

The fake statistics generated by these omissions give huge latitude for propagandists to move in and deceive the gullible. For example, here is a current presentation from a group called If they ever mention that they are using figures that double the incomes at the top of the distribution, while excluding two-thirds or more of the incomes at the bottom, I can’t find it.

But I still haven’t gotten to the most important part of the income inequality scam. That part is that the proposed “solutions” to income inequality seem to always involve new government expenditures for redistributions that don’t count as income when the Census Bureau computes the statistics. Therefore, after a “solution” is implemented, the government is spending more money and has a bigger bureaucracy, but nobody’s income has actually increased. Meanwhile at the top, the proposed “solution” is always higher taxes — again, not counted when income inequality is measured.

I covered this subject in the October 2017 post linked above, that looked into how Mayor de Blasio was doing in alleviating the “income inequality” in his city that he had identified as the most important issue for him to address. His signature policies to address the problem were universal “pre-K” education, and additional affordable housing. Anybody who follows this at all would immediately know that neither the value of pre-K education received, nor the value of an “affordable” apartment received, will ever be included in anybody’s income when measuring income inequality. Thus the possibility for either of these initiatives to move the needle on income inequality was exactly zero. And of course, about three years into de Blasio’s term, that was the result. Even today, the New York 10 congressional district — home to myself and also Mayor de Blasio’s office at City Hall — remains the district with the highest measured income inequality in the country.

To get yourself a laundry list of the official progressive policies today, supposedly designed to make the country more “equal,” perhaps we should look to the Green New Deal. Here is a summary from CNN of the numerous policies proposed. Go down the list and see if any of them would either add to anyone’s income at the bottom, or subtract at the top, to make measured income inequality decline even by a little. One after the other, the proposed policies are things that obviously don’t count in anyone’s “income”: free health care, subsidized housing, free college, subsidies to renewable energy, cleaner air and water, subsidies for transportation. At the top, it’s higher taxes.

Meanwhile, back in Venezuela, there have been recent reports that Russians have showed up to transport a billion or so dollars worth of the Venezuelan government’s gold reserves off to Moscow. I haven’t seen this definitively confirmed. But it does give you an idea of the end game of the “income inequality” hoax once you put the socialists in charge.