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If self-described progressives decry anything more fiercely than poverty, it is income and wealth inequality. Some have even suggested that they would prefer low-income equality to inequality, regardless of how affluent the lowest level was. What counts is the gap.

The terms poor and low-income are relative, of course. We’d be better off talking about the poorer and lower-income. Also, it’s better to be poor in America than anywhere else if we factor in immeasurables such as good prospects. However, some people don’t understand the point or perhaps don’t want to understand it. Reasonable people ask, “How am I doing and how can I do better?” not, “How much less am I making than Jeff Bezos and Elon Musk [but not Taylor Swift or Juan Soto]?”

So let’s talk about inequality—not in the legal and political sense but in terms of income and wealth. You can’t go a day without hearing politicians and commentators complain about the top 1, 10, or 20 percent. Those complaints seem to be backed up by government statisticians and parts of the economics and sociology professions. Dissenters are rarely invited on television and podcasts. The impression given, to which compassionate laypeople will be vulnerable, is that America is riddled with extreme, even obscene (so Bernie Sanders says) inequality. Is it true?

Economists Phil Gramm and Donald Boudreaux make an overwhelming case against it in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Gross inequality is one of those myths. (Last week I discussed their chapter on poverty.)

“[T]he claim that income inequality in America is high and rising on a secular basis is almost universally accepted as true,” Gramm and Boudreaux report. But: “Census numbers overstate the difference between the top and bottom quintile household incomes by over 300 percent.” Can they back up that claim? Let’s see.

The U.S. Census Bureau tells us that in 2017 the average income of households in the richest quintile (the top 20 percent) was 16.7 times greater than the average in the lowest quintile. No one can say, without other information, whether that number is appropriate or not. But is it accurate?

“The official Census data also show,” Gramm and Boudreaux continue, “that income inequality has grown on a secular basis and, by 2017, was 22.9 percent higher than in 1947.” That’s not all. According to the Organization for Economic Co-operation and Development, the United States has the worst record on this count among the wealthy countries—and it’s been getting worse.

Let’s pause for a word about the morality of income and wealth inequality. Individuals contribute unequally to the production of wealth, which improves living standards even for those who contribute little or nothing. So why would anyone expect their incomes and wealth to be equal? Now back to our regularly scheduled program.

Gramm and Boudreaux disclose a puzzle about the government’s numbers: “According to the official statistics of the nation’s two leading statistical agencies, the bottom 20 percent of American households had an average income of $13,258 in 2017 yet, in that same year, consumed $26,091 of goods and services.”

This fact raises the obvious question of how the bottom 20 percent of households can consume twice their income. This extraordinary gap between the official measure of income and the official measure of consumption has grown more or less steadily since 1967, when funding for the War on Poverty began to ramp up.”

That indeed is a puzzle. Could it be that the government agencies do not count everything that’s relevant? 

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