Every argument has three parts: definitions, premises and logical reasoning. When conservatives and progressives disagree about a specific issue, each side often leaps to the conclusion that the other side is being illogical (or dishonest, or stupid).

In my experience, however, most disagreements don’t stem from faulty reasoning. We usually disagree because we don’t accept the same sets of facts. Or we define our terms in very different ways.

For example, are the incomes of North Carolinians and their counterparts in other states diverging in unfair and dangerous ways? Are the richer getting richer and the poor getting poorer — as the middle class disappears?

Most progressives say yes. Most conservatives say no. I’m in the latter camp, and have devoted hundreds of columns, many lengthy articles and monographs, and large swaths of my books to exploring the subject in some detail. It’s a technical debate, in part, having to do with alternative ways of measuring incomes, living standards, and price changes. But the core dispute is about whether government efforts to redistribute income ought to be fully counted in income comparisons.

I think the answer to that question is clearly yes. If government decides to address economic inequalities by supplying public housing or health care to low-income households, or giving them earned-income tax credits, not counting the value of those subsidies as income seems obviously silly to me. Such a measure no longer reflects the reality of people’s lives. It’s purely theoretical.

Unfortunately, that’s our current reality. The official government statistics you see on income inequality and poverty do not count those and other sources of income. That’s why they massively overstate both inequality and poverty.

Former U.S. Sen. Phil Gramm and former Bureau of Labor Statistics official John Early explained the consequences in a recent Wall Street Journal piece. According to the official U.S. Census Bureau measure, income inequality in the United State rose 21 percent from 1967 to 2017. But that measure excludes about two-thirds of what the government spends on transfer programs, expenditures that in turn flow overwhelmingly to lower-income people.

What happens if you add that income in? “Not only is income inequality in America not growing,” they wrote, “it is lower today than it was 50 years ago.”

As for poverty, of course there are still many people in North Carolina and elsewhere who have inadequate food, clothing, shelter and health care. But official poverty measures that leave out public-assistance spending not only exaggerate the rate but also obscure the tremendous decline in poverty we’ve experienced over the past two generations.

According to analysis by Bruce Meyer of the University of Chicago and James Sullivan of Notre Dame, a corrected measure based on living standards (not reported cash income) shows that the poverty rate fell from 16.8 percent in 1972 to 2.8 percent in 2018.

If you find a 2.8 percent poverty rate implausible and would rather raise the income threshold for what classifies someone as “poor,” we can have that conversation. I may even agree with you. But remember that raising the threshold would change the endpoint in 2018, not the trendline. Whatever threshold we choose, the data would still show a massive decline in poverty since the early 1970s — a fact that neither progressives nor conservatives have adequately factored into their policy analysis.

Remember my original observation about the origins of political disagreement? Assuming it derives from the stupidity, dishonesty or bad intent of your opponent is almost always mistaken and counterproductive. If you think the gap between rich and poor is soaring and I don’t, based on the fact that we’re looking at different measurements, we probably won’t be able to come up with a shared vision of what our economic policies should be.

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John Hood is a Carolina Journal columnist.

He is the author of the forthcoming novel Mountain Folk, a historical fantasy set during the American Revolution. (MountainFolkBook.com).

(1) comment


Two can play at this game. First of all, section 8 housing and Medicaid are decidedly not income sources, and should not be counted as such. North Carolina has completely done away with earned income credits, so that direct income subsidy no longer exists – thank your local conservatives for that. In fact, conservatives actually want to defund all of the social benefits John Hood praises for reducing poverty here, so what are we even talking about? And why does the government need to subsidize income for workers in the first place? Workers who provide labor and wealth for the richest companies on the face of the earth (such as Wal-Mart and Amazon), which employ nearly 50% of all Americans? Because their earned incomes are too low to lift them above the poverty threshold. These government programs don't just lift the poor out of poverty either, they also increase the profits of companies who don't have to pay their workers living wages. The vast majority of Americans used to earn within 20% of the median household wage. Lower earners earned within 20% below the median, high earners within 20% above the median. That is objectively no longer the case. John Hood needs to put down the Milton Friedman and diversify his bookshelf. The highest earners in this country used to be taxed at a confiscatory rate. Also no longer the case; if that was the ONLY piece of information you had, you would still have to concede that wealth inequality is increasing by that fact alone. Fortunes the size of Gates’, Musk’s, and Bezos’ simply could not exist several decades ago. Our tax system made sure of that. And if you insist on adding government subsidies to find the “actual” income of poor Americans, you must also add overseas tax havens, legal loopholes, income and tax underestimates and underpayments, passive income, stock holdings, real world capital, etc. to the incomes of the wealthy. I absolutely guarantee you that the scales are objectively and extremely tipped if you do your due diligence on this matter.

This says it all: “If you think the gap between rich and poor is soaring and I don’t, based on the fact that we’re looking at different measurements, we probably won’t be able to come up with a shared vision of what our economic policies should be.” I suppose if you get your data solely from The Wall Street Journal and Neoliberal strongholds like the University of Chicago, that is probably true. If you pad the incomes of the poor for your statistics, but then take the earned income of the wealthy only at face value, sure. Whatever. I have no problem calling this dishonest and bad faith. But I won’t call John Hood stupid, because he knows exactly what he is doing. Remember Erin Brockovich? How she exposed PG&E for not only polluting water reserves with carcinogens, but then lying to the public to tell them it was actually GOOD for them? Hood is doing the same thing with his toxic brand of economic theory here.

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