Cato Has a *Severe* Quality Control Problem
"People who would portray the two claims as contradictory are much more interested in convincing you that there's no inequality problem than they are in finding out what's happening with inequality..."

Cato Has an Even More Severe Quality Control Problem than I Realized

Last March, Alan Reynolds attacked Washington Post columnist Steven Pearlstein. First Reynolds teed up the ball:

The Top 10 Percent, Again: [T]he eternal ambition of Robin Hood economics is to steal money from those who earned it and "redistribute" it to those with more political clout. When in pursuit of such a worthy cause, it appears quite respectable to torture innocent statistics. Those deploying statistics in this campaign take special care to select their favorites. Washington Post columnist Steven Pearlstein.... "in 1979, the top 10 percent of households earned 33 percent of all pretax income. By 2003, their share had climbed to 44 percent. The shares of everyone else declined."

Then Reynolds struck, claiming that the Congressional Budget Office's estimates do not show an increase in income inequality:

Where did [Pearlstein's] numbers come from?... Pearlstein's statistics obviously didn't come from the CBO... [which] estimates that in 1979 the top 10 percent of households earned 39.3 percent of all pretax income. By 2003, their share had dropped to 38.3 percent (or 33.7 percent after taxes).... It is easy to see why the CBO is not Pearlstein's favorite source of income statistics...

Paul Krugman pointed out that the CBO's estimates did show a substantial increase in income inequality. Reynolds had simply looked at the wrong table. Reynolds had looked at Table 3: Elderly Households and not at Table 1: All Households, which showed that between 1979 and 2003 the percent of income received by the top tenth had increased from 30.5% in 1979 to 37.2% in 2003.

Yesterday I find Reynolds, in the Washington Times, misrepresenting not only others but himself as well:

My [March] column showed their estimated 44 percent [figure cited by Pearlstein] is much higher than any official source. The authors exclude Social Security and other transfer payments from the denominator (total income), then pump up top incomes with such indefensible items as accelerated business deprecation and nontaxable IRA rollovers... That [I read from the wrong table] is true. I missed that fine print when the spreadsheet popped up on my monitor. How does the fact that the correct figure is even smaller than I said (37.2 percent, not 38.3 percent) debunk my skepticism about that bloated 44 percent figure?...

As Reynolds knows very well--but as he hopes that his Washington Times readers are too gullible to figure out--back in March Reynolds was claiming that Pearlstein's conclusion was cherry-picked from a particular analysis favorable to Pearlstein's priors. The conclusion that income inequality had risen was, Reynolds claimed, contradicted by other analyses like the CBO's.

That, as Reynolds knows well but hopes his Washington Times readers won't discover, is the claim is debunked by pointing out that Reynolds read from the wrong table.

And the reference to "fine print"? "All Households" and "Elderly Households" are not in fine print at the bottom of the tables; they are in BIG PRINT at the top of the tables--they are in the tables' titles, after all I have never before seen anyone claim that the title heading of a table is "fine print." Never.