Inequality Metrics Exclude Effects of Government Actions to Reduce Inequality

I have seen this fact a number of times and am always amazed when I read it, since poverty figures are never, ever presented with this bit of context

LBJ promised that the war on poverty would be an "investment" that would "return its cost manifold to the entire economy." But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.

That is in part because the government's poverty figures are misleading. Census defines a family as poor based on income level but doesn't count welfare benefits as a form of income. Thus, government means-tested spending can grow infinitely while the poverty rate remains stagnant.

Rector argues that poor today is very different than poor in  Johnson's day, and that perhaps we might celebrate a bit

Not even government, though, can spend $9,000 per recipient a year and have no impact on living standards. And it shows: Current poverty has little resemblance to poverty 50 years ago. According to a variety of government sources, including census data and surveys by federal agencies, the typical American living below the poverty level in 2013 lives in a house or apartment that is in good repair, equipped with air conditioning and cable TV. His home is larger than the home of the average nonpoor French, German or English man. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flat-screen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.

Remember what I presented a while back.  This is what the Left thinks, or wants us to think, American income inequality looks like -- our rich are richer than comparable European welfare states because our poor are poorer.

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And this is what income inequality in the US actually looks like -- our rich and middle class are richer, but our poor are not poorer.  A less redistributionist approach floats all boats.  I compared the US to many European welfare states, using the Left's own data source.  Here is an example, but hit the link to see it all.

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  • Richard Harrington

    Don't forget that most of those non-cash entitlements are tax free, effectively increasing their value. For example, as a tax payer that $1.00 loaf of bread was bought with $1.25 of earnings (yes, very round numbers to make the point).

  • jimbeaux

    I wish I could afford a wide, flat-screen TV. Not in the budget this year, although prices are dropping to nearly within range.

    I don't understand the motivation of non-politicians to represent the poor in our country as being relatively worse off than the poor in other countries. What does the average man in the street get from believing that the poor are doing much more terribly than they really are? I can understand wealth-envy - believing that rich fat cats don't deserve to have a better life than I do (financial security, material goods, luxurious vacations, etc) - but what's the emotional payoff in believing that low income people have it much rougher than I do?

  • Nehemiah

    Progressive politicians need a "poor" constituency that they can play against conservatives. It doesn't hurt if the "poor" believe they are victims of conservative policies. .

  • curmudgeon

    There have been an increasing number of commentators acknowledging the deliberate omission of non-taxed items whcih are equivalent to income but nave no effect at higher
    income levels: medicaid, EITC, section 8 or other housing supplements, for some, utility cost supplements, and the newest favorite, the 'obamaphone' which is worth somewhere
    between $10 and 30/month. Some of these are restricted to unattached females with dependent children but the jobs crisis has expanded the elgible group as has the ACA in
    blue and some red states. And then there is the 7-9% estimate of the black economy, which tends to be more significant at the lower economic levels and lower income states.
    The feds do have economic indicators that take these factors into account but they are not publicized, only the ones looking at the AGI in cash.

  • Matthew Slyfield

    $1.25 is not a round number. Round numbers end in zeros.

  • MingoV

    Paul Krugman and others use the same types of biased income data to show that the middle class has lost ground over the years. The reality is that benefit dollars (mostly health insurance and vacation and sick time) increased greatly. When those benefits are included, the middle class income gains are ahead of inflation.

  • MingoV

    Also, if the poor population declines, tens of thousands of government jobs will (or should) disappear.

  • MingoV

    You are incorrect. It's quite common to round to the nearest five rather than the nearest ten. There are some situations where rounding to the nearest even number is appropriate.

  • demockracy

    Income inequality factors into crime rates (higher the higher the inequality), teen pregnancy, health (more unequal societies are unhealthier, even the wealthy citizens), etc. See http://www.equalitytrust.org.uk/resources/spirit-level-why-equality-better-everyone or http://www.ted.com/talks/richard_wilkinson.html

    People, especially poor people, don't compare their condition to the Norwegians or Swedes, although given the lower gini coefficient (higher social mobility) and better, cheaper Scandinavian health care, they might complain if they did. They compare their condition with their neighbors, or with the people / lifestyles they see on TV.

    Oddly at variance with the cited figures, here's median income compared for 2010 (from http://en.wikipedia.org/wiki/Median_household_income):

    Norway: PPP $32,405, nominal $52,575

    Sweden: PPP $24,278, nominal $31,878

    U.S. : $29,056 (both PPP and nominal)

    Yep, those democratic socialists have higher median real income than the U.S! I'm not sure how to reconcile this with the figures from Luxembourg (LIS) that contradict that for all but the poorest deciles. After all, if all deciles of U.S. income are higher than the Scandinavian democracies, then the median ought to be higher too. Right?

    Meanwhile, Luxembourg is a banking center roughly like the Cayman Islands. I'm guessing whoever the Forbes author is calling a lefty is not too far left. You know, like our Kenyan socialist president whose signature legislative accomplishment was originally proposed by Nixon, codified by the (right-wing) Heritage Foundation, and originally passed by Mitt Romney in Mass. The White House killed the public option when they had the votes in congress too.... But oooh he's such a lefty! Right.

    I'd hate to see even more right wing lies about this, but wouldn't be too surprised. After all.... Benghazi!

    Of course I expect many readers of this blog will say that the U.S. coddles the poor, and the Forbes article that's the source of the interesting graphs cited admits libertarian bias (taxes are coerced, dammit!)

    The surveys of what people, never mind the left, think of income distribution is nothing like the graphs in Forbes, too. See http://www.youtube.com/watch?v=QPKKQnijnsM for a look at the expected v. actual income distribution of income and wealth.

    If these inequality facts grate enough to motivate misdirection (the Swedish poor are poorer, dammit!)... well, I guess the issue is starting to get some traction. This would be quite a change from the Reagan years when the top marginal tax rates on the wealthy were cut in half, and (between Reagan and Bush 41) payroll taxes quadrupled. Yow!

  • obloodyhell

    When your "poverty" metric is a relative number, and not based on actual realistic values, then of course it's not going to ever improve.

    You might as well complain that 50% of the country has below-median incomes, and demand something be done about it.

    This is, in fact, what most poverty crap is all about -- they're just using a different number than "the median" because it's comically obvious how stupid the above concern is.

  • Matthew Slyfield

    Rounding doesn't make a round number. Round numbers end in 0

  • obloodyhell

    Restating your idiotically incorrect point does not make it correct.
    Round numbers are numbers that have been rounded.
    The modulo being used is utterly irrelevant to the principle of rounding.

  • Russ R.

    I've stopped calling it "income inequality"... I prefer to think of it as "socio-economic diversity".

  • obloodyhell

    There are so many holes in your claims and arguments that it's not even
    worth identifying them all. They've each and every one been debunked in
    so many venues that if you haven't found them you haven't been
    interested in looking -- or have refused to believe them because they
    did not match your determination to claim otherwise.

    Hint: Citing
    Wikipedia is as reliable stats is hardly a sign you have done any
    actual fact checking for yourself. There's a reason you generally get
    gigged for points when citing it in a HIGH SCHOOL term paper. But
    perhaps you did not finish high school, and thus didn't encounter this
    fact, so "heads up, genius"... :-/

    The video you posted is
    nothing but a blatant peon to greed and envy -- The notion that you
    imagine that the top 10, 5, or even 1% is a FIXED GROUP is the biggest,
    most glaring flaw in it. It's an INCOME CLASS -- and people move up and
    down in it all the time.

    Income Mobility is Much More Important Than Rising Income Inequality or Stagnating Household Income, and We Have a Lot of It.
    When you track PEOPLE you find that they are moving up and down the ladder all the time. While the top 0.1% probably is fairly stagnant, there are few who are attempting to do better who don't do so over time, and particularly in-family -- that is, it's not that tough for someone who is "very poor" to have children who become "quite well off"

  • c_andrew

    Rand had a cogent description of these gov't office seekers; "Double parasites gorging themselves on the blood of the productive and the sores of the poor."
    Also, when I ran across Krugman's latest defense of Obamacare, "The Big Kludge," I thought he had adopted a new byline. With his cobbled together political economy, maybe we could refer to him as the Big Kludge. Or, perhaps, Kludgeman.

  • Matthew Slyfield

    Of course you stating my point is incorrect, does not make it so.

    ETA:

    http://en.wikipedia.org/wiki/Round_number

    "A round number is mathematically defined as the product of a considerable number of comparatively small factors[1] as compared to its neighbouring numbers, such as 24 = 2*2*2*3 (4 factors, as opposed to 3 factors for 27; 2 factors for 21, 22, 25, and 26; and 1 factor for 23).

    However, a round number is informally considered to be an integer that ends with one or more zeroes (0), such as 1,000, 1,500,000, etc., and a number ending in 5 might be considered in a way more "round" than one ending in neither 0 nor 5. Even a non-integer such as 2.5 might be seen as more round than, say, 2.497 (especially if written as 2.500)."

    Please note that neither the mathematical definition of round number nor the informal definition have anything to do with rounding in the mathematical sense.

  • John White

    @matthewslyfield:disqus a simple google will tell you that rounding a number does not have to end in zero. A round number will end in zero, but that is different to rounding.

  • Matthew Slyfield

    I know that and that's what I have been saying since my first reply. Tell that to obloodyhell and MingoV who are the ones who have been insisting otherwise.

  • Rick C

    How did your nitpicking advance the discussion? Oh, right, it didn't.

  • Matthew Slyfield

    On what basis are the comments by obloodyhell and MingoV any less nitpicking than mine? Oh, right, they aren't.

    ETA: One more question. In what way does your complaining about my nitpicking advance the discussion? Oh, right, it doesn't.

  • Rick C

    So you dragged started an argument about something pointless, then complain when the atmosphere's ruined? Excellent job. If you could make it rain, hotels and beaches would pay you to stay away.

  • irandom419

    I'm a little suspicious of those figures. An example being the moronic GINI index which uses pretax in some countries and post tax in others. Canada and I believe the UK have high non-fatal crime rates, roughly twice that of America. Look into the UK and TWOC for wonderful under reporting techniques. The "individual" mandate proposed by Heritage was by carrot through incentives, not by stick with penalties.

  • Me too

    I nominate this discussion on rounding numbers as the best of coyote blog 2014

  • http://togetrichisglorious.blogspot.com/ Colin77

    Income inequality factors into crime rates (higher the higher the inequality), teen pregnancy, health (more unequal societies are unhealthier, even the wealthy citizens), etc. See http://www.equalitytrust.org.u... or http://www.ted.com/talks/richa...

    Not one but two links based on The Spirit Level -- why am I not surprised you would link to something that has been comprehensively debunked? But don't take my word for it -- here is The Economist:

    http://www.economist.com/node/21564421

    “The Spirit Level” caused a sensation when it was first published in Britain, probably because it reflected the post-crash Zeitgeist. Its conclusions, however, have been largely debunked. In a devastating critique, published by the Democracy Institute, Christopher Snowdon showed that Mr Wilkinson and Ms Pickett made highly selective use of statistics.

    More debunking here: http://www.tino.us/2011/01/nicholas-kristof-makes-a-fool-of-the-new-york-times/

    Now that some of your evidence has been exposed as garbage will you change your thinking? My guess is no.

    Oddly at variance with the cited figures, here's median income compared for 2010...

    There is no conflict between the numbers. Look at the chart -- it plainly stated "Disposable Household income -- After Tax and Transfers" which is not the same as the figures you linked to. Given that both Sweden and Norway have higher taxes than the US, it should be no surprise that Americans have more disposable income with which to actually buy things. Which leads to another point: the point of income is consumption, and I would be highly surprised if the typical poor American did not consume a lot more than the average poor Swede or Norwegian.

    As for the youtube clip, I have already seen this posed numerous times on social media and have yet to understand the point.

  • bigmaq1980

    Warren...thanks for your update to your awesome set of charts.

    I came across this post at Political Calculations that compares different measures of the GINI Coefficient. Surprisingly (or not), if one looks at the GINI by Individuals (by those who actually receive the income) vs the GINI by Family or by Households (i.e. the only GINI figures reported in the news), one finds that the GINI has been coming DOWN where it counts!

    Conclusion: Individuals are not getting poorer relative to the rich - just the opposite. The GINI number for Family or Households is more a reflection on how individuals sort themselves out socially, and says nothing about any one getting richer or poorer.

    http://politicalcalculations.blogspot.com/2011/10/real-story-behind-rising-us-income.html

    This corroborates your charts/information.

  • bigmaq1980

    Add the analysis on GINI coefficient which I posted elsewhere on these comments.