Twitter can highlight some interesting intellectual chiaroscuro. Left-leaning think-tank Center for Economic and Policy Research posted this today:
Samuelson was dancing around whether incomes had actually risen or not. CEPR made some good points, but I think missed the most fundamental ones.
First, to Samuelson, who wrote about the “myth of stagnant incomes.” He pointed to a Congressional Budget Office report that he claimed “found that most Americans had experienced clear-cut income gains since the early 1980s.”
You know what the latter means. The definition of the former, according to the original CBO report, is as follows:
Means-tested transfers are cash payments and in-kind services provided through federal, state, and local government assistance programs. Eligibility to receive such transfers is determined primarily on the basis of income, which must be below certain thresholds. The largest means-tested transfer programs consist of transfers provided through Medicaid and the Children’s Health Insurance Program (measured as the cost to the government of providing those benefits); the Supplemental Nutrition Assistance Program (formerly known as the Food Stamp program); and Supplemental Security Income.
Another reasonable name for it would be the social safety net. Here’s the graph that seems to have caught Samuelson’s attention:
And his thesis:
If the bottom 99 percent experienced stagnation, their 2015 incomes would be close to those of 1979, the study’s first year. This is what most people apparently believe.
The study found otherwise. The poorest fifth of Americans (a fifth is known as a “quintile”) enjoyed a roughly 80 percent post-tax income increase since 1979. The richest quintile — those just below the top 1 percent — had a similar gain of nearly 80 percent. The middle three quintiles achieved less, about a 50 percent rise in post-tax incomes.
Taking the numbers simply as figures, yes, there is an increase. But it doesn’t truly support what Samuelson represents.
Dean Baker at CEPR goes into greater detail to find a different interpretation for Samuelson’s rosy view. For one thing, more people in families work more hours in total, primarily due to women working. But there’s little direct financial gain even with households that have two working adults.
Most of the improvements, small as they are, came before 2000. “From 2000 to 2015, income for the fourth quintile rose by just 5.5 percent, for the third quintile 0.2 percent, and for the second quintile, it fell by 6.7 percent,” Baker wrote.
Most importantly, in my view, is his third point, that government transfers have provided the real lift and that has happened”most importantly from the increased availability and cost of health care provided through Medicaid, subsidies on the health care exchanges, and CHIP.”
And that comes to what I want to address. There is an ultimately game of three-card “who has the income” monte going on because of terminology. Different terms become the cards. You keep looking for the big actual income gains, but everywhere you point, they don’t actually appear.
The transfers are indeed of great value to those who need them. But although economists might like the terminology, they aren’t income.
Transfers are social welfare used to help those in need—in need because they don’t make enough money. Because they require help and, as a society, we have decided not to take a strictly Darwinian view of life. Our approach owes in large part to the genius of people is cooperation, not all-out bellicose competition. But the fields still tilt greatly toward the rich and powerful who make the rules.
It’s charity, not income. With enough income, people wouldn’t need the charity. But that would require the end of a different sort of charity: the subsidies heaped upon employers that will not pay enough for people to live. Yes, employers do get put upon by our society that has decided the workplace is the logical way to provide health insurance, which is utterly ridiculous and unnecessary. Still companies get massive charity.
Let’s be clear. People by and large haven’t seen larger incomes. They’ve seen increased government help to manage in a current state of life in which fewer taxes on corporations and the rich help are supposed to make everything better.
Trickle-down economics never worked in the first place, hasn’t since it’s introduction, and isn’t about to. Let’s pay people enough to live and have corporations bear their fair share rather than pretend they believe in market-driven economies while they demand ever increasing special consideration.