The core argument of the Occupy movement and its Obamacrat friends is this: The rich stole all the money. That explains why over the past four decades, the income of the broad American middle class supposedly has stagnated even as the economy expanded. Why? Did you forget already? The rich stole all the money. And now it’s time to take it back.
And here are the numbers behind that claim, as calculated by the University of Chicago’s Tino Sanandaji (an absolute must-follow blogger, too): Between 1970 and 2008, real per capita GDP increased by 108 percent (based on national accounts data calculated by the Bureau of Economic Analysis). But according to economists Thomas Piketty and Emanuel Saez — favorites of inequality alarmists — the taxable income of the bottom 99 percent increased by just 12 percent. So the real GDP per person doubled but middle class incomes barely budged? Income inequality must be the culprit. The rich stole (nearly) all the money.
But, as Sanandaji points, Piketty and Saez dramatically underestimate income growth during the period, finding that real average taxable income for everyone grows by just 29 percent. His solution:
My simple method is combining the best income-distribution estimate (from Pickety&Saez) with the best income-growth estimates (from GDP numbers). This method shows that that between 1970-2008 the real per capita income of the “Bottom 99 Percent” grew by 80%, and the income of the “Bottom 90 Percent” grew by 60%.
Well, 80 percent is a lot more than 12 percent. But let’s look at things another way. From 1975-2009, real per capita GDP increased by 90 percent vs. 17 percent growth in real median household income, as measured by the Census Bureau. What happened? Again, the rich stole all the money. Yet if you make a couple simple adjustment for household size and a more accurate inflation measure, a different picture emerges, as Sanandaji illustrates:
These calculations are in line with new research from University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan, who find that “median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009.”
Let’s sum up. Income inequality may have increased in recent decades, but a stagnating middle class has not been the result. And the 1 percent didn’t steal all the money.