The myth of American inequality How government biases policy debate

Former U.S. senator Gramm and economists Ekelund (coauthor, The Economics of Art) and Early claim in this wonky yet misleading study that, contrary to popular belief, income inequality in America is declining, not rising. The root of that faulty perception, they argue, lies in the U.S. Census Bureau's policy of not counting food stamps, Medicaid and Medicare benefits, and many other kinds of "transfer payments" as income, and in not deducting taxes paid from household incomes. If those numbers were adjusted, the authors claim, income disparity would appear one-fourth as large as it currently does. They also quibble with the price indexes the government uses to measure inflation, dismiss arguments that America's "super wealthy" don't pay their fair share of taxes, and cite Ebenezer Scrooge as an example of "how wealth accumulation benefits society" ("His investments created jobs and growing prosperity for others just as Warren Buffett's investments do today"). The authors' assumption that only those "physically or mentally unable to care for themselves" would fall through the cracks of America's social safety net rings false, as does their claim that the 40-hour work week is a natural by-product of "the massive wealth and productivity of our modern economy," and not of labor reform activism. Myopic and ill-considered, this provocation won't change minds. (Sept.)