Are the rich really getting richer? That’s a pretty standard line from the Left, a lament usually cited in the course of calling for higher tax rates. Robert Reich is particularly fond of this mode of attack: A recent post of his was headlined, “For 70 years, the wealthy have grown wealthier.” Professor Reich probably doesn’t write his own headlines, but it’s a common enough sentiment for him, and his prose is rich with phrases such as “the super-rich got even wealthier this year.”
He isn’t alone in employing this mode. Take this from an April 7 Salon article: “And surely the rich don’t need that 25 percent top rate in the way poor folks need programs like TANF and seniors need Medicare — about 90 percent of all American income gains since the 1970s have gone to the top 10 percent of earners.”
This is not true.
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The numbers generally cited in support of this argument do not actually tell us much about what has happened to the incomes of wealthy households over time. That’s because the people who are in the top bracket today are not the people who were in the top bracket last year. There’s a good deal of socioeconomic mobility in the United States — more than you’d think. Our dear, dear friends at the IRS keep track of actual households (boy, do they ever!), and sometimes the Treasury publishes data about what has happened to them. For instance, among those who in 1996 were in the very highest income group isolated for study — the top 0.01 percent — 75 percent were in a lower income group by 2005. The median real income of super-rich households went down, not up. The rich got poorer. Among actual households, income grew proportionally more for those who started off in the low-income groups than those that began in high-income groups.
That wasn’t even an unusually good decade in terms of mobility. During the horrible, horrible Reagan years, as National Review noted back in 1991, the average income growth for actual households in the lowest income bracket was 77 percent over the course of a decade; income growth for actual households in the top group was only 5 percent during those same years. Of those who were in the poorest fifth in 1979, 85.8 percent had moved to a higher bracket by 1988, and 14.7 percent of them moved to the top bracket — which is to say, the poor of 1979 were more likely to be the rich of 1988 than to be the poor of 1988. The poor got richer, and some of them got a lot richer. Reagan’s record has not been matched — Ronald Reagan was the champion of the poor, as it turns out — but economic mobility has been pretty stable for the past 20 years: About 50 percent of U.S. households move from one income group to a different one every decade, and actual households initially in the low-income groups see proportionally more income growth than do actual households initially in the high-income groups.
When somebody says that that top 1 percent saw its income go up by X in the last decade, they are not really talking about what happened to actual households in the top 1 percent. Rather, they are talking about how much money one has to make to qualify for the top 1 percent. All that really means is that the 3 million highest-paid Americans in 2010 made more money than did the 3 million highest-paid Americans in 2000, the 100,000 highest-paid Americans this year made more money than did the 100,000 highest-paid Americans made in 2000, that the 50,000 highest-paid Americans made more money this year than did the 50,000 highest-paid Americans made in 2000, that the 1,000 highest-paid Americans this year made more money than did the 1,000 highest-paid Americans made in 2000, etc., which is not shocking. But, as the Treasury data show: They are not the same people.
When Robert Reich writes that “super-rich got even wealthier this year,” he is making a statement that is not true in most cases — 75 percent of the Clinton-era super rich were not members of the Obama-era super rich. In fact, Treasury found:
Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within ten years.
About 55 percent of taxpayers moved to a different income quintile within ten years.
Among those with the very highest incomes in 1996 — the top 1/100 of one percent — only 25 percent remained in the group in 2005. Moreover, the median real income of these taxpayers declined over the study period.
The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
Economic growth resulted in rising incomes for most taxpayers over the study period: Median real incomes of all taxpayers increased by 24 percent after adjusting for inflation; real incomes of two-thirds of all taxpayers increased over this period; and median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.
Or, as the authors of the study put it: “While the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income.” (Incidentally, Treasury underestimates mobility by excluding the most mobile population from its study: those under 25. It does this in order to avoid including school-to-work transitions in the data, though presumably it’s catching a fair number of law-school graduates and freshly minted MBAs.)
Progressives ignore this income mobility when denouncing the wicked, wicked rich and their income-hogging ways. This leads to a lot of bad analysis and stupid rhetoric. From Robert Reich, for example: “[The poor] see people at the very top getting away with, well, the equivalent of murder.” Does he really mean the equivalent of murder? Yes, and he writes wistfully of the lynching to come: “An angry population and an angry populace could just as easily turn their anger toward the very rich. Again, it is in the interest of the people at the top to actually call for a more equitable distribution of the gains of economic growth and a better tax system.” Listen up, Thurston Howell III: It’s Reichonomics — or else. But the income-mobility figures suggest that those gains already have been more widely distributed than most people think. (In no small part, incomes are distributed over time: Most people earn more money as they get older.)
So, about those rich, and about that Reich: You’d think a guy who used to be secretary of labor would know better. And I think he does.
— Kevin D. Williamson is a deputy managing editor of National Reviewand author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Onlinehere.
Robert Reich knows better, but he has been peddling his tax raising message consistently, just as Democrats consistently push for more spending on education every year.
They love to demonize anyone that earns an honest living, while insisting their government funded base grows and gets ever increasing funds for never improving results.
Don't tax the rich beyond 25%, but get rid of all loopholes, and don't increase spending on education, all you get is more liberal teachers and no improved education results. Teachers have more than doubled, while class sizes have been cut by more than 50% and scores are declining or flat for 30 years.
If you tax the rich, all you get in return is another 1,000,000 teachers and even more bloated government.
When people like Robert Reich say silly things such as only the "rich" have gotten richer over the last 70 years, I like to retort that if this is the case, doesn't it mean that their philosophy has failed? After all, isn't the point of progressivism to make incomes more equitable and fair among the people? If so, and the rich have gotten only richer during the past seventy years, when progressivism was tried in earnest, doesn't this mean that progressivism has failed?
Robert Reich does know better -- than Mr. Williamson, who tries to confuse us with this story about people moving in and out of income groups. yeah, there's some of that, but by and large there's a group at the tippy-top and a group at the bottom and moving from worst to next-to-worst ain't all that great and moving from best to second-best ain't that bad.
by and large there's a group at the tippy-top and a group at the bottom and moving from worst to next-to-worst ain't all that great and moving from best to second-best ain't that bad.
Where are you getting this? Michael Moore's website?
Thank you, Mr Williamson, for going to an excellent base data source and clearly parsing the numbers and what they mean. Ronald Reagan, the champion of the poor...That's priceless, and the basis for the comment, the bottom 15% of 1979 were more likely to be in the top 15% in 1988. The opportunity to make this happen, poorer people able to move up, is what the lefties desperately want to choke off with high tax rates, ueber-regulation of all business activities, e.g. from blocking offshore oil drilling to licensing for home hair braiders...Wonderful article, thank you.
Yesterday on ABC's This Week, Donna Brasille had the gall to state that Ryan's new budget 'takes money from the poor and gives it to the rich'. (First time I heard the classic class warfare tripe in this most deceitful form!).
No one held her accountable on this although George Will did have his typical muted disgust look.
As long as Democrats can successfully lie to a gullible public, class warfare will only worsen. That is until there are no classes (but that’s the ultimate goal isn’t....)
But then again there will be 2 classes, the 'erudite empowered elite' and the rest of us shmucks.
@MikeB
You mean that "Tippy-Top" that earns $250,000 or more that Obama wants to punish and raise taxes on and not index to inflation so that in 20 more years due to all of his Fed printing of money 50% of Americans will be making in the Middle Class and all taxed at he highest rate while still broke?
You can't have it both ways libtard. I don't see Obama wanting to only tax the "Tippy-Top". So I think the article has the facts correct, and your "Tippy-Top" is simply your own fantasy as the taxes being discussed start at $250,000 far far far below any "Tippy-Top."
@Mike B
As usual, Mike B misses the point -- entirely. And in a typical liberal debating move, he attempts to shift the conversation by making an irrelevant/unsubstantiated statement.
When people say those things about the rich getting richer faster, do they even correct for inflation? I'm not convinced that the gap in real terms has ever widened. The difference in standard of living and purchasing power between the 95th percentile and the 5th percentile in 1911 was a lot wider than it is today. It's just that with dollars inflated, what used to be a difference between $200 and $5,000 is now a difference between $10,000 and $250,000.
MikeB: Would you prefer that everyone except those who run govt be dirt poor? That's how it is in countries that actually adopt the type of govt you support.
I agree with the (to me) very rich Mr. Reich & by extension P.J. O'Rourke. Since you Mr. Reich are very rich, I would look over your shoulder. Us unwashed masses are gettin' mighty resentful.
I love the way liberals assume that people are entitled to money from the govt, but that you aren't entitled to keep the money that you earn.
That's how they can come up with the logic that reducing the growth rate of welfare is "taking money from the poor", but dropping tax rates, is giving money to people.
Good article. It reminds me of the Charles Murray lecture that Derb posted at the Corner about America coming apart at the seam. Perhaps the super-rich are not getting richer, but it's certainly true that there're more rich people than before. Increased competition pushes the 1% top income cut-off point ever upward. One can see it as the emergence of a more meritocratic order. From a sociological standpoint though, it also means greater stratification.
Your argument seems to me to be misleading. Of course income mobility exists. Nevertheless the data to me suggests that wealth disparity is indeed a large and growing problem.
Putting income aside for just a moment, net worth is increasingly concentrated in the hands of just a few people. This statistic does not lend itself so easily to arguments about income mobility.
Also, despite mobility, the fact that the ratio between top income earners and bottom income earners is increasing dramatically is a worrying signal. Especially because top income earners are increasingly earning their income through the FIRE economy rather than through productive activities.
I'm not sure if Reich knows that he's uttering sheer nonsense. It might be hard-wired into his statist DNA that "the rich" are a class of people who are "getting away with murder." Now, earning lots of money is never remotely close to murder (I'm sure he at least knows that), but it would be useful to strip away the aggregation and consider individuals. Some individuals have made out extremely well in recent years owing to the fact that they're well placed in the world of crony capitalism. The way to stop that is to dismantle the apparatus of crony capitalism, but I have never heard a peep from Reich on that.
On the other hand, others have made a great deal of money by starting businesses that produce goods and services consumers want, and useful employment for many workers. Is that "getting away with murder"? Do you want to drain their accounts so they can't do that any more, or do less of that, Mr. Reich?
Evidently, it is vital to the statists that they continue to hold the equivalent of Two Minute Hate rallies (as in Orwell's 1984) where "the rich" are denounced as the enemies of the people.
realistic and Mike: Would either of you care to state just why you feel a rising level of income inequality is a problem. And no, the fact that it makes people like you more jealous than ever is not a valid answer.
Robert Reich and other liberals are really talking about income dispersion across our population. Kevin Williamson misses their point by talking about income mobility. However, liberals will never grasp the true cause of the income dispersion they complain of.
I believe that we do have a much wider income and wealth dispersion today than we did from 1945 to 1970. It would be impossible for us not to because we have imported approximately 60 million poor people into our country.
Many of these immigrants are able to rise up from humble beginning. However, they start out very poor, and there are so many of them that they are forcing a downward shift in the equilibrium price of un-skilled and semi-skilled labor. This immigration situation both creates more poor people and makes the pre-existing poor in our country even poorer.
Enforcing our nation's immigration laws will go a long way toward decreasing income and wealth dispersion. The liberals will never embrace the policy implications of the income dispersion issue because they want high levels of immigration. They hope to replace the current U.S. population with one that will be more compliant to the demands of big government.
