Income and Wealth Distribution, or, Watching Professional Republicans Sell Their Souls Back in 1992: Hoisted from the Archives

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I have long wanted an undergraduate to write a senior thesis about this episode. I have never found one to advise to do so:

Hoisted from the Archives: The income distribution came on to the stage that is America's public sphere between February 14 and December 12, 1992. And the rhetoric of "X% of gains in per capita income over years Y-Z went to the top W%-iles of the income distribution" became a one in American political-economic discourse over that time period as well. Over those ten months then-New York Times economics reporter Sylvia Nasar wrote eight stories about income inequality in America. All of them were pitched at a high substantive and intellectual level—they would have fit into the New York Times's later Upshot (which has recently refocused at a less analytically-substantive level as concerned with "politics, policy, and everyday life"). This was, needless to say, very unusual for the New York Times.

Sylvia's first story addressed the peculiar fact that the "80's Boom", as Reagan Republicans and the New York Times called it, had seen the poverty rate not diminish but rise. Sylvia attributed that rise to union-busting, and a growing disparity between high- and low-wage jobs springing from a decline in relative manufacturing employment and possibly from boosted high-wage white-collar productivity from computerization. Her second story, on March 5, took a turn. Instead of continuing to investigate the causes of rising poverty and wage stagnation in a decade of supposed boom, it focused on "who had reaped the gains" from "the prosperity of the last decade and a half". It highlighted the "Krugman calculation". It began:

Populist politicians, economists and ordinary citizens have long suspected that the rich have been getting richer. What is making people sit up now is recent evidence that the richest 1 percent of American families appears to have reaped most of the gains from the prosperity of the last decade and a half. An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least $310,000 a year...

And she, referring to his "testimony before Congress several weeks ago", aggressively quoted Paul Krugman, who had taken the CBO's income-distribution estimate numbers and presented them in, as one economist said to me at the time, "the most inflammatory fashion possible that was not actively misleading":

We know that productivity has increased since 1977 and that more people are working. Where did all that extra income go? The answer is that it all went to the very top.... The number that no one had seen was how much of the growth went to a few people...

(How Paul Krugman came to be browsing and what he found in the House Was and Means Committee's Green Book: Background Material on Family Income and Benefit Changes, Committee Print 102-30 (December 19,1991), pp. 61-81; what his "testimony before congress" was; and how Sylvia Nasar found out about it and decided it was interesting—these are not things that I ever got completely straight.)

What happened then? Well, two months later Sylvia Nasar's May 11 story is headlined: "The Richest Getting Richer: Now It's a Top Political Issue". According to Bill Clinton's press secretary Deedee Myers, Clinton read the March 5 study, went wild, and incorporated it into his stump speeches. Nasar called Clinton "one of the few Presidential candidates since Harry S. Truman to woo the middle class by pummeling the rich". She called Republicans furious: "The Joint Economic Committee's... minority report accuses Democrats of using Joseph Stalin's approach to rewriting history. Supply-side architects... blasted the figures as 'propaganda, not data'.... Economic adviser Michael J. Boskin said he was livid... an editorial response signed by the President's counselor for domestic policy, Clayton K. Yeutter".

And then it becomes coy: seeming to minimize Sylvia Nasar's role in this:

When the Congressional Budget Office first released its income data... only a handful... paid much attention.... Even after... Paul R. Krugman... concluded that the major share... had gone to the richest... had trouble getting anyone to listen...

And then: "But Mr. Krugman's arithmetic ultimately crystallized the issue..." It was Krugman's arithmetic, Sylvia Nasar's putting it on the front page of the New York Times, and Bill Clinton's adding it to his stump speech that "crystalized the issue".

By May 18 Sylvia Nasar was pushing back against conservatives who claimed (falsely) that America is a land of such great opportunity that static distribution statistics are meaningless: "rags-to-riches remains the economic exception.... A child whose father is in the bottom 5 percent of earners, for instance, has only 1 chance in 20 of making it into the top 20 percent of families.... Much... short-term turnover may be illusory... a large fraction of year-to-year changes... reflects reporting error, timing of income like capital gains, episodes of illness or unemployment and other transitory effects... " On June 17 Sylvia Nasar was refereeing a debate over income inequality and the relevance of the "Krugman calculation" between Belle Sawhill and Mark London of the Urban Institute and Glenn Hubbard of the Treasury (now of Columbia). She scores it three-love for Sawhill and London, quoting Kevin Murphy saying that what drove Hubbard's claims was "not your classic income mobility. This is the guy who works in the college bookstore and has a real job by his early 30's..." She piled on further on July 20:

the Treasury has been quietly circulating a 'primer' on income distribution to journalists and economists. The 24-page document, prepared by R. Glenn Hubbard... asserts that the richest 1 percent of American taxpayers reaped only 11.3 percent of the income gains in the 1980's.... But experts in the field who reviewed the Treasury's calculation were highly critical, saying that the Treasury economist had fallen into a well-known statistical trap.... 'It's not a meaningful calculation', said Lawrence F. Katz.... 'I would ask Treasury to redo their calculation on the top 1 percent defined by 1988 income', said Joel B. Slemrod.... 'I'm pretty sure the numbers would change quite a bit'. A reporter had, in fact, asked Mr. Hubbard several times to make such a calculation, but he refused on the ground that the results would be uninteresting...

The "reporter", we are meant to infer, was Sylvia Nasar, asking Glenn Hubbard a question that he did not dare himself answer, or allow others at his database so they could answer it.

And on August 16, Sylvia Nasar quoted me extensively in an article trying to put the issues in perspective:

By the end of the 1980's... wealth in this country had become more concentrated than at any time since the Roaring Twenties. The share of net worth... held by the top 1 percent... jumped from below 20 percent in 1979 to more than 36 percent in 1989, according to... Claudia Goldin and Bradford De Long... and... Edward Wolff at New York University.... The wealthy's share of the total wealth expanded as much during the Reagan boom as it did in the 100 years—roughly 1830 to 1929—in which America transformed itself from an egalitarian land of small farmers into the world's reigning industrial power.... In some ways, the 1980's resembled the Gilded Age and the era of robber barons.... The biggest difference... had more to do with what was happening at the bottom.... While the pay of corporate presidents soared to 160 times that of the average worker, union membership sank, and pay and productivity, which had advanced handily in the early 20th century, stagnated.... 'John D. Rockefeller was a nasty bastard, but he built the oil industry', said Professor deLong. 'It's the combination of rapidly rising wealth for the Forbes 400 and slow productivity growth for the average American that's worrisome'....

The New Deal took from the monied... gave to the poor and middle class. Washington collected more income and inheritance taxes.... The New Deal saved the homes, farms and businesses of millions of ordinary Americans.... World War II squeezed wealth into the hands of the working classes.... The National War Labor Board—heeding F.D.R.'s directive to raise substandard wages—tended to approve raises for poorer workers while turning down raises for the better paid. The rich, meantime, had nowhere to invest except in war bonds whose value evaporated when the country inflated its way out of its huge wartime debt. It was in the mid-1970s, after Vietnam, the oil crisis and a bad recession shattered business confidence, that the wealthy's share hit a low point.... "Prices doubled, but so did wages and home values," said Professor de Long, "holders of financial assets got hammered." In between, the 1950's and 1960's was a golden age...

Sylvia Nasar closed out the thread on December 12, with a shift toward writing about how the incoming Clinton administration would be able to do only a small share of all the good things it had promised during the campaign.

Paul Krugman also closed out the thread in a fall 2012 piece in The American Prospect, calling to account a great many conservative economists and commentators who had behaved very badly indeed: Michael Boskin, John Taylor, and their staffs at the CEA; the Wall Street Journal; Paul Craig Roberts and Alan Reynolds; Glenn Hubbard; Richard Armey; and, of course, Clayton "Democrats are Stalinists" Yeutter. Paul close his piece with:

The... lesson... is what it says about today's conservative mind-set. It turns out that many conservatives, for all their anti-totalitarian rhetoric, have Orwellian instincts: if the record doesn't say what you wish it did, hide it or fudge it.... Many conservatives not only don't want to discuss substance: they prefer not to face reality, and to live in a fantasy world in which the 1980s turned out the way they were supposed to, not the way they did...

Note that all this predated Donald Trump, the claims that the TCJA would substantially boost American investment and growth, and global warming and AR-15 denial by 25 years.

Armey, Reynolds, Roberts, Yeutter, and the Wall Street Journal editorial page never claimed to be in anything other than the propaganda business.

But how to explain Boskin, Hubbard, and Taylor?

As I understood it, the "Krugman calculation" was all about: "you are no richer today than you would be if your slot in the income distribution had gotten none of the income gains of the 1980s". But, again as I understood it, Boskin, Hubbard, and Taylor believed that Krugman—and Nasar, and Clinton—were crafting their message so that while that may have been what they said, what their audience heard was different: "you are no richer today than you were a decade ago". Rather than Krugman framing the message as "the most inflammatory fashion possible that was not actively misleading", they saw his messaging as inflammatory and misleading.

But they did not, as Goldin, Sawhill and London, everybody else on the left and the center, Paul Krugman himself, and a good many on the then right (i.e., Kevin Murphy) did, attempt to de-mislead by distinctions between the two questions. Instead, they decided to mislead themselves by confusing things as much as possible (nd in the case of Boskin's CEA to throw in additional confusions. I have seen this often: people saying "the other side isn't playing fair, but rather than ask them to follow the rules, we are going to try as hard as possible to be unfair ourselves". It is rarely a good look....


Sylvia Nasar (February 14, 1992: Economic Scene; Puzzling Poverty Of the 80's Boom https://www.bradford-delong.com/2019/10/economic-scene-puzzling-poverty-of-the-80s-boom-the-new-york-times.html: "In at least one vital dimension, the 80's were totally unlike the 60's. The official poverty rate, which counts the number of people whose income falls short of some minimum level, did not come down as the economy rose. While poverty shrank by a quarter in those golden Kennedy-Johnson years, it was actually higher at the end of the Reagan boom than in 1979.... How come trickle-down economics did not work last time around, especially given that the unemployment rate fell by half, or more than five full percentage points, from 1983 to 1989?... Union-busting.... A widening disparity between low-wage and high-wage workers.... Jobs in manufacturing, where unskilled workers used to be able to earn premium pay, shr[a]nk as a share of total jobs... demand for unskilled workers either slipped or grew more slowly than for workers with more to offer. The problem may reflect the much-talked-about computerization of the American workplace...

 

Sylvia Nasar (March 5, 1992): The 1980's: A Very Good Time for the Very Rich https://www.bradford-delong.com/2019/10/the-1980s-a-very-good-time-for-the-very-rich-the-new-york-times.html: "An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least 310,000 a year.... 'We know that productivity has increased since 1977 and that more people are working', said Paul Krugman, an economist at the Massachusetts Institute of Technology and the author of The Age of Diminished Expectations.... 'Where did all that extra income go? The answer is that it all went to the very top.... The number that no one had seen was how much of the growth went to a few people', said Mr. Krugman, who focused on the numbers in testimony before Congress several weeks ago...

...The surge in pay at the top is just too large to be explained solely by working wives and M.B.A. degrees.... It is easy to exaggerate fluidity at the very top, some economists say. For one thing, the rich may get knocked off their perches from time to time, but the fall for most is not usually all that far.... For the present, the numbers are bound to provide yet another battleground for politicians arguing over which tax policy will produce the best combination of growth and 'fairness'...

 

Sylvia Nasar (May 11, 1992): The Richest Getting Richer: Now It's a Top Political Issue https://www.bradford-delong.com/2019/10/the-richest-getting-richer-now-its-a-top-political-issue-the-new-york-times.html: "When Bill Clinton wants to galvanize his audience, he thunders from the podium that the top 1 percent of families got 60 percent of the gains from economic growth during the 1980's and owns more wealth than the bottom 90 percent.... 'He was reading the paper that morning and went crazy', said Dee Dee Myers, the campaign's press secretary, referring to an article in The New York Times on March 5.... Mr. Clinton is one of the few Presidential candidates since Harry S. Truman to woo the middle class by pummeling the rich.... The furor over the rich getting richer infuriates Republicans.... The Joint Economic Committee's annual minority report accuses Democrats of using Joseph Stalin's approach to rewriting history. Supply-side architects of the Reagan tax cuts blasted the figures as 'propaganda, not data'. Even the President's notably unemotional economic adviser, Michael J. Boskin, said he was livid. The White House itself took the unusual step of delivering an editorial response signed by the President's counselor for domestic policy, Clayton K. Yeutter.... Oddly, when the Congressional Budget Office first released its income data—the numbers that are now being hurled on the hustings—only a handful of Congressional aides and professional economists paid much attention. And even after the economist Paul R. Krugman of the Massachusetts Institute of Technology crunched the numbers and concluded that the major share of the gains in average family income between 1977 to 1989 had gone to the richest of the rich, he had trouble getting anyone to listen. But Mr. Krugman's arithmetic ultimately crystallized the issue...

 

Sylvia Nasar (May 18, 1992): Rich and Poor Likely to Remain https://www.bradford-delong.com/2019/10/rich-and-poor-likely-to-remain-so-the-new-york-times.html: "One school of thought says... even if the raw numbers are accurate, these economists say, the portrait fails to capture the amazing fluidity and flux of American society... But... rags-to-riches remains the economic exception, not the rule.... If anything, economists say, the climb out of poverty has become harder in the last decade or two.... A child whose father is in the bottom 5 percent of earners, for instance, has only 1 chance in 20 of making it into the top 20 percent of families, according to a coming article in The American Economic Review by Professor Solon.... 'All you have to do is look at L.A. to decide that there are lots of people who think their permanent prospects are pretty crummy', said David M. Cutler, an economist at Harvard University.... Apart from changes in income and wealth that reflect the normal lifetime pattern... most Americans do not move a great many rungs up or down.... Much... short-term turnover may be illusory... a large fraction of year-to-year changes... reflects reporting error, timing of income like capital gains, episodes of illness or unemployment and other transitory effects...

 

Sylvia Nasar (July 20, 1992): The Rich Get Richer, but the Question Is by How Much https://www.bradford-delong.com/2019/10/the-rich-get-richer-but-the-question-is-by-how-much-the-new-york-times.html: "The Treasury has been quietly circulating a 'primer' on income distribution to journalists and economists. The 24-page document, prepared by R. Glenn Hubbard, Deputy Assistant Secretary for Tax Analysis, asserts that the richest 1 percent of American taxpayers reaped only 11.3 percent of the income gains in the 1980's.... But experts in the field who reviewed the Treasury's calculation were highly critical, saying that the Treasury economist had fallen into a well-known statistical trap that all but guaranteed that the gains for the top group of income earners would appear modest. 'It's not a meaningful calculation', said Lawrence F. Katz.... 'I would ask Treasury to redo their calculation on the top 1 percent defined by 1988 income', said Joel B. Slemrod, an economist at the University of Michigan. 'I'm pretty sure the numbers would change quite a bit'. A reporter had, in fact, asked Mr. Hubbard several times to make such a calculation, but he refused on the ground that the results would be uninteresting...

 

Sylvia Nasar (August 16, 1992): THE NATION: The Rich Get Richer, But Never the Same Way Twice https://www.bradford-delong.com/2019/10/the-nation-the-rich-get-richer-but-never-the-same-way-twice-the-new-york-times.html: "By the end of the 1980's... wealth in this country had become more concentrated than at any time since the Roaring Twenties. The share of net worth... held by the top 1 percent... jumped from below 20 percent in 1979 to more than 36 percent in 1989, according to... Claudia Goldin and Bradford De Long... and... Edward Wolff at New York University.... The wealthy's share of the total wealth expanded as much during the Reagan boom as it did in the 100 years—roughly 1830 to 1929—in which America transformed itself from an egalitarian land of small farmers into the world's reigning industrial power.... In some ways, the 1980's resembled the Gilded Age and the era of robber barons.... The biggest difference... had more to do with what was happening at the bottom.... While the pay of corporate presidents soared to 160 times that of the average worker, union membership sank, and pay and productivity, which had advanced handily in the early 20th century, stagnated.... 'John D. Rockefeller was a nasty bastard, but he built the oil industry', said Professor deLong. 'It's the combination of rapidly rising wealth for the Forbes 400 and slow productivity growth for the average American that's worrisome'....

The New Deal took from the monied... gave to the poor and middle class. Washington collected more income and inheritance taxes.... The New Deal saved the homes, farms and businesses of millions of ordinary Americans.... World War II squeezed wealth into the hands of the working classes.... The National War Labor Board—heeding F.D.R.'s directive to raise substandard wages—tended to approve raises for poorer workers while turning down raises for the better paid. The rich, meantime, had nowhere to invest except in war bonds whose value evaporated when the country inflated its way out of its huge wartime debt. It was in the mid-1970s, after Vietnam, the oil crisis and a bad recession shattered business confidence, that the wealthy's share hit a low point.... "Prices doubled, but so did wages and home values," said Professor de Long, "holders of financial assets got hammered." In between, the 1950's and 1960's was a golden age...

 

Sylvia Nasar (December 12, 1992): Tapping the Rich May Prove Tricky https://www.bradford-delong.com/2019/10/tapping-the-rich-may-prove-tricky-the-new-york-times.html: " https://www.nytimes.com/1992/12/12/business/tapping-the-rich-may-prove-tricky.html?searchResultPosition=257: "Getting the really rich—the people who reaped an outsize share of the economic gains of the 1980's—to pay more was a major plank of the Democratic campaign.... The problem is that while higher tax rates on high incomes are likely to provide a good deal of new money, they are not likely, barring an unexpectedly buoyant economy, to generate the 92 billion over four years that the Clinton camp has claimed.... Where does that leave the middle-class tax cut?... 'Even without the middle-class tax cut, the plan is mildly deficit-increasing', said Paul R. Krugman, an M.I.T. economist. 'It would be nice to get a sense from Little Rock that there are some hard choices being made'.... Clinton made two proposals during the campaign... relief to middle-class taxpayers... expanding the popular earned-income tax credit.... Taken together, the two changes, if carried out on this scale, would swallow up the revenue raised from the rich and then some...

 


CBO (March 1992): Measuring The Distribution of Income Gains https://www.bradford-delong.com/2019/10/cbo-march-1992-_measuring-the-distribution-of-income-gains_-for-several-years-the-congressional-budget-office-cb.html: "For several years, the Congressional Budget Office (CBO) has developed estimates of the distribution of income and federal taxes in response to requests from Committees of the Congress. CBO published the original estimates, and various publications of the Committee on Ways and Means have included more recent estimates along with explanations of the methodology used to calculate them and the staffs descriptions of the patterns they reveal. Policy analysts, commentators, and the media frequently reconfigure, interpret, analyze, and criticize the estimates. In the process, the interpretations and conclusions of these secondary appraisals are sometimes-and incorrectly-attributed to CBO. A case in point: recent media stories have used CBO statistics on incomes to buttress a contention about the increasing inequality of after-tax incomes among families. For example, The New York Times reported on March 5 that 'The richest 1% of families received 60% of the after-tax income gain' between 1977 and 1989. That figure, which was attributed to both CBO and Professor Paul Krugman of the Massachusetts Institute of Technology, was actually Professor Krugman's reconfiguration of CBO data contained in a December 1991 report issued by the House Committee on Ways and Means. Many of the commentaries that resulted criticized CBO's estimates and methodology or ascribed the conclusions in the original article to CBO. This memorandum seeks to clarify some of the confusion...

CBO (March 1992): Measuring The Distribution of Income Gains https://www.bradford-delong.com/2019/10/cbo-march-1992-_measuring-the-distribution-of-income-gains_-for-several-years-the-congressional-budget-office-cb.html: "See, for example, Subcommittee on Human Resources of the Committee on Ways and Means, U.S. House of Representatives, Background Material on Family Income and Benefit Changes, Committee Print 102-30 (December 19,1991), pp. 61-81, and Committee on Ways and Means, U.S. House of Representatives, 7997 Green Book Overview of Entitlement Programs, Committee Print 102-9 (May 7, 1991), pp. 1286-1329. CBO discussions of these issues appear in The Changing Distribution of Federal Taxes: 1975-1990 (October 1987); The Changing Distribution of Federal Taxes: A Closer Look at 1980 (July 1988); and testimony of Robert Reischauer before the Committee on the Budget, U.S. House of Representatives, July 17, 1991, and the Committee on Finance, U.S. Senate, November 26, 1991...

 


Clayton Yuetter (March 24, 1992): When 'Fairness' Isn't Fair https://www.bradford-delong.com/2019/10/clayton-yuetter-march-24-1992-_when-fairness-isnt-fair_-class-warfare-discredited-throughout-the-former-commun.html: " : https://www.nytimes.com/1992/03/24/opinion/when-fairness-isn-t-fair.html?searchResultPosition=1: "Class warfare, discredited throughout the former Communist world, seems to have found new life in American political circles. A front-page article in the March 5 New York Times described one example: an allegation that the recovery of the 1980's—and hence the conservative philosophy of the Bush Administration—helped the rich and hurt the poor. This analysis, a reprise of the so-called fairness argument, rests on a Congressional Budget Office study and an analysis by a Massachusetts Institute of Technology economist, Paul Krugman. The C.B.O. and Mr. Krugman have played prominent roles in shaping the liberal version of the fairness debate, and their allegations have become a staple in the speeches of Democratic politicians. But the analysis suffers from grievous flaws... throwing in data from the Carter era... gives the impression that American society consists of stationary social classes—a sort of human layer cake in which a haughty, unchanging upper class rests atop an oppressed, unchanging underclass... the C.B.O. study creates the impression of an increasingly divided America by overstating the 'wealth' of the top 1 percent.... But the fairness story involves far more than statistics. It involves values. Many advocates of the 'fairness' critique want to stoke middle-class resentment by implying that the rich take from the poor. They never seem to realize that a dynamic, entrepreneurial economy can create a bigger pie for everyone.... The politics of redistribution are as dead as Leninism. Today, people in former Communist lands beg for copies of the Federalist Papers and "The Wealth of Nations"—not for "The Greening of America." They don't seek a sleeker socialism. They seek something like what President Bush calls the Good Society—one built on hard work, decency, thrift, service, family—one that places the individual before government. The C.B.O.-Krugman assault on the Reagan-Bush recovery avoids all these factual and moral subtleties, and muddles a debate that matters to most of us. That's a shame because the fairness debate will shape our destiny. As we take on the tangled issues that arise from it, we will need all the facts and all the real fairness we can get...

 


Paul Krugman (Fall 1992): The Rich, the Right, and the Facts: Deconstructing the Inequality Debate https://www.bradford-delong.com/2019/10/the-rich-the-right-and-the-facts-deconstructing-the-inequality-debate-the-american-prospect.html: "This public debate was remarkable in two ways.... The conservative side displayed great ferocity.... Conservatives chose to take an odd, and ultimately indefensible, position. They could legitimately have challenged... on the grounds that nothing can, or at any rate should, be done about it. But with only a few exceptions they chose instead to make their stand on the facts to deny that the massive increase in inequality had happened... [in] an extraordinary series of attempts at statistical distortion.... The combination of mendacity and sheer incompetence displayed by the Wall Street Journal, the U.S. Treasury Department, and a number of supposed economic experts demonstrates something else: the extent of the moral and intellectual decline of American conservatism...

...My own contribution to this discussion was to point out that there is a sense in which the rise in incomes at the top is in fact a major economic issue, and to offer a shorthand way of conveying that point: the now infamous 'Krugman calculation' that 70 percent of the rise in average family income has gone to the top 1 percent of families.... To help attract attention to a trend that I thought had been neglected I proposed the following thought experiment. Imagine two villages, each composed of 100 families representing the percentiles of the family income distribution in a given year in particular, a 1977 village and a 1989 village. According to the CBO numbers, the total income of the 1989 village is about 10 percent higher than that of the 1977 village; but it is not true that the whole distribution is shifted up by 10 percent. Instead, the richest family in the 1989 village has twice the income of its counterpart in the 1977 village, while the bottom forty 1989 families actually have lower incomes than their 1977 counterparts. Now ask: how much of the difference in the incomes of the two villages is accounted for by the difference in the incomes of the richest family? Equivalently, how much of the rise in average American family income went to the top 1 percent of families? By looking at this measure we get a sense of who was "siphoning off" the growth in average incomes....

Many conservatives were furious when the income distribution story surfaced in early 1992.... Indeed the belated attention to inequality during the spring of 1992 clearly helped the Clinton campaign find a new focus and a new target for public anger: instead of blaming their woes on welfare queens in their Cadillacs, middle-class voters could be urged to blame government policies that favored the wealthy. So the dismay and anger of conservatives was understandable. The response from the administration, the Journal, and other conservative voices was, however, inexcusable: instead of facing up to the fact of rapidly growing inequality under conservative rule, they tried to deny the facts and shoot the messengers....

The CEA calculation... includ[ing] sheer growth in working-age population gets us completely away from those questions.... Many conservative commentators including Paul Craig Roberts, Alan Reynolds, Representative Richard Armey, and the editorial page of the Wall Street Journal have bitterly attacked the CBO for including capital gains.... Excluding capital gains from the CBO numbers makes very little difference.... Alan Reynolds... as well as... Republican Congressman Richard Armey... did not bother to read the study before attacking it....

The second line of conservative defense has become a familiar one: they claim that the growth record of the Reagan years shows that supply-side policies produce gains for everyone, and that it is destructive to worry about or even to notice the distribution of income.... The basic proposition that the "Krugman calculation" was meant to convey is that income inequality has been increasing so rapidly that most families have failed to get much benefit out of long-term growth. This proposition stands. One need not take seriously the efforts by supply-siders to chop the past fifteen years into little slices, and claim the good ones while disclaiming the bad ones.

The Conservative Response 3: Income Mobility.... The Hubbard Study... a report claiming that... 86 percent of individuals who started in the bottom quintile in 1979 had moved out by 1988.... But this report was based on what we may charitably call a strange procedure.... It tracked a group of individuals who paid income taxes in all ten years from 1979 to 1988, and compared their incomes not with each other but with those of the population at large. The restriction to individuals who paid taxes in all years immediately introduced a strong bias toward including only the economically successful; only about half of families paid income taxes in all ten years.... [Plus] the report essentially treated the normal tendency of earnings to rise with age as representing social mobility....

The surprise lesson of the income distribution controversy, then, is what it says about today's conservative mind-set. It turns out that many conservatives, for all their anti-totalitarian rhetoric, have Orwellian instincts: if the record doesn't say what you wish it did, hide it or fudge it.... Many conservatives not only don't want to discuss substance: they prefer not to face reality, and to live in a fantasy world in which the 1980s turned out the way they were supposed to, not the way they did...

 


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