Income inequality bandwagon

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In a previous column, I noted the sudden new interest in income inequality on the part of the New York Times and Wall Street Journal. The Christian Science Monitor and Business Week since have jumped on the bandwagon. The latest entry in the Times series predictably noted the Bush tax cuts are exacerbating the maldistribution of income.

As I said earlier, I don't believe this heavy coverage of a not remotely time-sensitive issue is coincidental. One clue comes from the University of Texas Inequality Project, which recently produced a paper showing Democratic presidential candidates did better in states with high income inequality.

It isn't much of a surprise that inequality is an issue that plays for Democrats. Bashing the rich is in their blood, and no Democrat is happier than when engaging in class warfare. Consequently, it is in the Democrats' interest to play up inequality and any sign of the rich getting richer, especially if they can show it is at the expense of the poor and middle class.

There is an unlimited supply of liberal economists at the University of Texas, the Center on Budget and Policy Priorities and elsewhere who are eager to manipulate the data to ?prove? inequality is worsening. But average people don't believe it. What really matters, both economically and politically, is what they see with their own eyes in their own lives. On this basis, the evidence of rising inequality is very weak indeed.

The American Enterprise Institute compiled a useful compendium of data on this subject a few years ago. According to this study, people were first asked in 1964 in what economic class they had grown up and to what class they belonged at the time of the study. Pollsters asked again in 1978, 1984 and 1996. In every case, there was solid evidence people were in a higher economic class than the one in which they were raised.

Interestingly, the strongest evidence is found in the most recent poll, taken in March by, ironically, the New York Times. According to this study, 18 percent of people reported living in the lower class as children. But today, only 7 percent say they belong to that class. Another 44 percent say they had a working-class childhood. However, only 35 percent say they are part of the working class today. In short, the percentage of the population living in the bottom two income classes fell from 62 percent to 42 percent -- an impressive improvement, greater than in any other survey.

Concomitantly, the ranks of the middle and upper middle classes have increased. Only 28 percent of people reported growing up middle class and just 8 percent said they had lived in an upper-middle-class home. Today, 42 percent say they belong to the middle class and 15 percent are part of the upper middle class. Only 1 percent of say they were in the upper class as children, the same percentage that say they belong to this class today.

In other words, there is no evidence whatsoever of economic class stagnation or deterioration in the data. Fewer people live poorly and more people live well. The data are unambiguous because people report their relative position in society as they see it. And in this case, perception is reality.

People were asked if they thought it was still possible to start out poor in this country, work hard and become rich. The first time this question was asked in 1983, only 57 percent of people thought it possible.

In 1998, in the midst of exceptionally strong economic growth, 70 percent of people thought it was possible to get rich. Today, 80 percent say it is possible to become rich in America and a mere 19 percent say it is not.

People were also asked how they saw their own personal prospects for becoming rich. Amazingly, 11 percent said they thought it very likely. Another 34 percent thought it was somewhat likely. Only 22 percent thought they had no chance.

This may explain why so many people in the Times poll said they favor abolishing the estate tax. Only 17 percent of people favor this tax and an overwhelming 76 percent oppose it. Obviously, many people who know they themselves will never, ever pay this tax nevertheless favor its abolition.

I believe the recent media interest in inequality is part of a last-ditch effort to save the estate tax from repeal this year. The Times poll suggests it will be an uphill effort.

Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.