Marginal Notes Triggered by the U.C. Davis Seminar on Historical Scholarship and New Media
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Brendan Nyhan: Wall Street Journal Dissembles on Status of the Poor

Why oh why can't we have a better press corps? The editorial page of the Wall Street Journal and Senator Judd Gregg defecate in the stream of American policy discussion. When Franklin Foer of the New Republic says that liberals should crusade to defend the independence of the Wall Street Journal, this is what he is defending.

Brendan Nyhan reports:

Brendan Nyhan: WSJ dissembles on status of the poor: Time for yet another reminder of why you can never, ever trust the Wall Street Journal editorial page. This is a basic rule for life -- the intellectual equivalent of telling children not to talk to strangers and to look both ways before they cross the street. Here's what the Journal wrote (sub. req.) about a new Congressional Budget Office study (PDF) in an editorial titled "The Poor Get Richer":

It's been a rough week for John Edwards, and now comes more bad news for his "two Americas" campaign theme. A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991.

The CBO results don't fit the prevailing media stereotype of the U.S. economy as a richer take all affair -- which may explain why you haven't read about them. Among all families with children, the poorest fifth had the fastest overall earnings growth over the 15 years measured. (See the nearby chart.) The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s.

The Journal then writes euphemistically that "Earnings growth tapered off as the economy slowed in the early part of this decade, but earnings for low-income families have still nearly doubled in the years since welfare reform became law."

However, as [Jon] Chait points out, this portrayal is highly misleading at best:

But wait. Why fifteen years?... 1991... was a recession year, when incomes for [the poor] group collapsed. So the CBO study that [Judd] Gregg demanded measures the change from a recession year to a boom year. Incomes for the poor -- or anybody -- always rise over the course of a business cycle. The measurement Gregg demanded is simply useless. If you look closely at the study, you find that [more than] all the low-income growth occurred in the 1990s.... It peaked in 2000, and has fallen since....

The interesting question is whether, by the time the current business cycle hits its peak, incomes for people at the bottom will recover to where they were at the peak of the last business cycle. As of 2005 they still haven't caught up.

The answer is: probably not.