In the just-published issue of Regulation, I have a feature on Bidenology (also called “Bidenomics”) and its cousin “Trumpology.” The two assemblages of policies share a basic ideology of collective decision-making as opposed to private choices—which explains, or is explained by, the convergence between the Democrats and the Republicans (see “Is ‘Bidenomics’ Just ‘Bidenology’ or ‘Trumpology’?” Regulation, Fall 2023; pp. 30-36 in the Gutenberg version).
What I want to emphasize here is how the Democratic version of populism is based on a false evaluation of material equality. In my article, I cite the fascinating book by Phil Gramm, Robert Ekelund, and John Early, The Myth of American Inequality. I will review this book in the Winter issue of Regulati0n (out in late December), but my current Regulation article provides a peek:
People in the ambit of the Democratic Party show a concern for inequality and poverty in American society. This concern, however, is not well grounded in economic reality, and sometimes not in logic either. …
In reality, the actual degree of inequality and poverty in the United States is greatly exaggerated, as shown by the calculations of economists Phil Gramm, Robert Ekelund, and John Early in their recent book The Myth of American Inequality. Correcting the official poverty rate with other government data (such as transfer payments like food stamps and refundable tax credits, which are not counted by the Census Bureau as income received), they calculate that the poverty rate was down to 1.1 percent in 2017, less than a tenth of the Census Bureau published rate of 12.3 percent. (The latest Census Bureau figure is 11.6 percent.)
The poorest Americans are not as poor as they are assumed to be, nor the richest as filthy rich as rumored. The 1 percent of households on top of the income ladder starts at about $600,000 in pretax annual income. On average, those households pay 39.8 percent of their income in taxes, according to unpublished numbers provided by Early. By comparison, the average tax rates for the first four quintiles of income are 7.5, 14.1, 22.7 and 28.4 percent, respectively.
Reliable measures of inequality are, even among most of the 1‑percenters, a reflection of entrepreneurship, work effort, educational achievements, and individual freedoms such as marriage choices. The data presented by Gramm et al. suggest a quite reasonable degree of inequality in American society, even before the large government redistribution through transfer payments (essentially to the bottom and second quintile) and taxes (more than 80 percent of which are paid by the top two quintiles).
You’ll find more in my forthcoming review of the Gramm et al. book. This is just a trailer. And my current article on Bidenology covers much more than this topic: I lead you in the bowels of Bidenonomics and Trumponomics.
