Obama, the Great Equalizer, forgets about economic growth


The essence of the Obama presidency and Obamanomics revolves around redistributing wealth and reducing income inequality. Those are the president’s Big Ideas. To him, fixing those problems means fixing what he perceives has gone wrong with America during the past generation.

In Osawatomie, Kansas, last year, Obama said the election “was about making choices that benefit not just the people who’ve done fantastically well over the last few decades, but that benefit the middle class, and those fighting to get into the middle class, and the economy as a whole.” Obamacare, the Buffett rule, letting the Bush tax hikes expire, raising taxes on corporations — none of that has anything to do with economic growth or job creation. They’re all about the Great Leveling that Obama desires.

And liberals like Obama think the numbers justify their focus on inequality. They point to the much-publicized work of economists Thomas Piketty and Emmanuel Saez. Using IRS data, they find a sharp rise in the share of pretax income earned by the top 1%. It roughly doubled over the past thirty years. But there are a number of issues with the Piketty Saez approach. One big one: The study ignores transfer payments such as Social Security, Medicare, food stamps, and other low-income programs.

Another way to gauge standards of living over time is by measuring consumption, since it better tracks the overall economic resources at a person’s command. And unlike income, consumption remains more or less steady throughout life since individuals borrow during years with low income and save in high-income years.

Turns out that the consumption gap across income groups has remained remarkably stable over time. AEI’s Kevin Hassett and Aparna Mathur in the WSJ today:

According to data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, if you sort households according to their pretax income, in 2010 the bottom fifth accounted for 8.7% of overall consumption, the middle fifth for 17.1%, and the top fifth for about 38.6%. Go back 10 years to 2000—before two recessions, the Bush tax cuts, and continuing expansions of globalization and computerization—and the numbers are similar. The bottom fifth accounted for 8.9% of consumption, the middle fifth for 17.3%, and the top fifth for 37.3%.

While this stability is something to applaud, surely more important are the real gains in consumption by income groups over the past decade. From 2000 to 2010, consumption has climbed 14% for individuals in the bottom fifth of households, 6% for individuals in the middle fifth, and 14.3% for individuals in the top fifth when we account for changes in U.S. population and the size of households. This despite the dire economy at the end of the decade.

Hassett and Mathur also have a paper on the subject.

And even if you want to focus on incomes, the picture looks not nearly as dire as Piketty and Saez argue. Work by economist Richard Burkhauser suggests middle class incomes rose 37% from 1979-2007 vs. 53% for the top quintile and 63% for the top 5%. Income inequality increased, but everyone made out pretty well.

Bottom line: America’s biggest problems are slow economic growth and anemic job creation. That is what Washington should be focused on.

17 thoughts on “Obama, the Great Equalizer, forgets about economic growth

  1. I see you are an unrepentent Republican who relishes in manipulating the truth. You should be ashamed of yourself. Would you want your family to be as hateful as you. Do you even believe in God? Shame on you.

      • Not only that, but attacking based on nothing but an accusation of “manipulating the truth” (a phrase that doesn’t even make any sense), name-calling (“hateful”), and implication of atheism (which is immaterial).

        Ric doesn’t even attempt to make up facts to support the attack.

  2. Moving resources around can ONLY produce growth IF you are moving them toward uses which have higher economic return. That’s just portfolio math 101. Democrats are simply willing to sacrifice growth for what they see as political advantage.

  3. Whooo! Called it!

    By the way, I emailed the Census Bureau a few weeks ago asking why they use income and not consumption to measure well-being. I’ve not heard back. It makes me sad.

  4. James,

    I write as someone who appreciates and is ideologically sympathetic with your work and views. Having said that, however, I feel like I have spotted a potential flaw in Hassett and Mathur’s work: By measuring consumption, which can be – and was, during much of the 2000s – fueled by debt, have those two perhaps ignored the possiblity that consumption’s “stability” among income levels in the past decade or so was actually fueled by private debt? I could be quite wrong–I am not trained as an economist. But I would appreciate a rebuttal to this idea, as I feel it is also an objection that liberals might make to the study.

    • Jack,

      You could counter with the fact that consumption inequality even now hasn’t changed, even as consumers deleverage. In theory, if the consumption was fueled by debt, then as people deleverage, the inequality would increase. It has not, rather, staying about the same.

      In fact, if we look at the amount of labor one has to spend to obtain certain goods (I like to call it the real cost of living), then we see near universal drops in price.

      So, you can rebut that some of the consumption may have been fueled by debt, but considering the stability of the numbers and falling prices, debt is not playing a major factor in the consumption.

      • By the way, I do not profess to speak in James’ name, but I am an economist myself, and I do profess to speak in my own name.

  5. The messiah is a product of affirmative action. For the last 40-years, this feckless and incompetent simpleton has been told by liberal “feel-good” propagandists that he is something special. He still buys into this bullshlt and thinks that YOU do.

    But we saw the results. It iooks like Hamburg after WWII.

  6. Socialists/Progressives hate capitalism and the unmanaged freedom of lightly regulated human interaction (the market). They think that rational management by them can’t help but produce a boom in prosperity, compared to the market’s chaotic interactions.

    But, they also see the market as wonderfully robust, able to deliver wealth to their plans (taxes) in whatever amounts, and able to deliver cheaper electricity and higher-mileage cars by their simple decree. They give this great compliment while regarding the market as unfair and inefficient.

    Obama strongly believes this. He ignored job creation because he believed that economic recovery “just happens”, so he concentrated on how to spend the great wealth to come. Socialists will never learn.

    Richard Epstein is a law professor at the University of Chicago. He described his conversations with Obama [edited]:
    === ===
    The fundamental mistake of Obama’s entire world view is that he treats contracts as devices for exploitation, not as devices for mutual gain, and he assumes that redistribution can take place without any negative impact upon production.
    === ===

    This is the basis for Obama’s regulation and harassment of business in the US. The progressive and Democratic view is that business is theft. It must be closely regulated in detail to prevent the thieves from stepping over the line. If business is supressed along the way, then it is worth it to stop the thievery. In his view, if a business makes a profit, then its prices were not low enough or the wages paid were not high enough.

    Richard Epstein Discusses Barack Obama

  7. As the Tax Foundation showed the other day,, income rises with age. An expected result since workers with more experience, responsibility and seniority get paid more.

    So inequality is in part the difference in pay between new, younger workers and older experienced workers. What is unfair about that?

    Should an apprentice carpenter or electrician make the same as a 20 year experienced one. Should a starting lawyer make the same as a twenty year successful, experience lawyer?

    There is always inequality in the workplace but that does not mean it is unfair or that income should be taken from those who make more to give to those who make less.


    Record food stamps
    Record bankruptcies
    Record Foreclosures

    And as reported this A.M.…Record Disability Checks.

    Hey, libs. What do like best and what do you want to see more of if your feckless incompetent messiah (America’s #1 Bullshlter) were to win a second term?

    • OBAMA’S GDP BOOM: Not exactly whip-lash:




      And libs wonder why there are no jobs and household incomes are falling. Four more years of failure, poverty and despair? If you like this, then move your butt to Havana.

  9. Obama and other liberals disdain economic growth because it causes the income inequalities they loath. What they fail to comprehend is that government cannot create wealth, it can only transfer it from the productive earners to those who consume it. Obama is an unmitigated econimic disaster.

  10. NY’s #1 Steak House Closed by Obama:

    NY’s Prime Steakhouse since 1927, Gallagher’s, located on 52nd street, and which survive the great depression, is shutting down on January 16. Neither the surging price of meat, nor the ability of patrons to spend $46.95 for an 18-ounce sirloin, has had any impact on the decision to close this iconic restuarant which survived the Great Depression, but failed to survive Obama’s “recovery”.

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