Sunday, December 29, 2013

On the Appropriateness of Including Transfer Payments When Calculating Income Inequality

As I understand it, the entire point (the hard-left's anyway) of this whole income inequality argument was to underscore just how terribly off those in the bottom income quintile truly are. But how in the hell do you accomplish that if you fail (and/or refuse) to include in the calculations ALL of the disposable income that the groupings under study have at their disposal? The fact of the matter is that if you also include all of the transfer payments (and, no, it isn't just welfare - it also includes such things as Social Security and the Earned Income Tax Credit) that those at the bottom rung of the income ladder have been given, the actual level of income inequality (especially if you gauge it predominantly on consumption - which is now quite close to 200% of income in the bottom quintile) is significantly less than what a lot of these tables have been showing (in fact, according to UCLA economist, Lee Ohanian, the disparity has been SHRINKING!!). I mean, I know that the radicals are desperate to make some sort of political point here and all but at some juncture you have to be fair and include ALL of the statistics (which would also include items such as capital income, under the table income, tips, taxes, etc.).

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