The Truth about American Inequality
Economist and Mises Institute Associated Scholar Robert Ekelund recently teamed up with former US Senator Phil Gramm and John Early to write The Myth of American Inequality: How Gernment Biases Policy Debate. The book was released this month by Rowman and Littlefield Publishers.
In it, the authors explore some of the many ways that the debate over inequality in the United States is based on bad research, bad data, and a variety of other misconceptions. I recently asked Prof. Ekelund about some of the ways these errors affect our thinking on US inequality versus the rest of the world.
Ryan McMaken: For many years, we’ve been hearing about how the United States is unique among industrialized nations in that it has unusually high levels of inequality. But this conclusion relies on a small number of reports from a few organizations. What are these sources, and are they reliable?
Robert Ekelund: The United States is not unique among industrialized economies with high levels of income inequality, but inequality is vastly overstated when a proper accounting for all income transfers and taxes paid are considered. The US does have relatively large numbers of high income and high wealth households, but the most unequal nations are typically those where markets are restricted or less developed.
A major part of our book is dedicated to getting the “numbers” correct and letting the chips fall where they may. The important numbers that we have found come from our own Bureau of Labor Statistics (BLS) and the Census Bureau, as well as from international institutions such as the Organization for Economic Co-Operation and Development (OECD). These organizations are “reliable” as far as bureaucracies are concerned, but they have not corrected their reporting for obvious inaccuracies. The Census Bureau, for example, leaves out about two-thirds of transfer payments.
Our team of authors are all economists, but we have a diverse experience in government (Gramm), within the statistical bureaucracy (Early), and academia (myself), and even the private sector. We also have benefitted from the work and input of others, especially your own Mark Thornton. We wanted to rebuild a factual account of income distribution in comparison to the somewhat mythical account that currently dominates public discourse in the popular press.
A central part of our book has been to include the many sources of income transfers received, mostly government, and taxes paid and recalculating the 5 income quintiles for the US. The bureaucracies do not count all or even most of the transfers and taxes. In othe
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