New bill would require better measures of median income (plus a lot more)

GDP is a measure of total income in a country. For at least the two decades before 1980, American median income grew about as fast as GDP and Americans below the median income saw faster growth than Americans who were richer than the median. Income growth was broadly shared and no class of Americans got poorer. The following graphs show the growth rate across the income distribution for all Americans. The median income had real growth of about 1.7% annually in the 1960s and 1970s which was also the growth rate of mean GDP (the green horizontal line).

Since 1980, only the richest 11% of Americans have seen their incomes grow faster than GDP (the average national income growth rate) and the bottom 89% of Americans have seen their incomes grow more slowly. Almost 90% of Americans are below average now! The incomes of the top 1% richest Americans have soared while the very poorest have actually gotten poorer.

The Washington Center for Equitable Growth is a tiny 5-year-old think tank that has compiled statistics about how economic growth is distributed and now there is a new bill in Congress (that will probably go nowhere due to gridlock) to develop official government statistics like the above graphs:

the Measuring Real Income Growth Act of 2018, would require the Bureau of Economic Analysis (BEA), which releases quarterly GDP numbers, to also report how growth is distributed along the income scale. The bureau would have to put together distributional measures of economic growth to be released with quarterly and annual GDP reports starting in 2020, laying out how growth shows up across each decile of earners and the top 1 percent. …[The] bill would require the BEA to produce a new metric, the “income growth indicator,” or IGI, to be reported quarterly and annually with GDP numbers starting in 2020.

Gridlock is only one obstacle to this bill. Additionally, there are well-funded think tanks like the Cato Institute that are ideologically opposed to measuring inequality and the distribution of income. For example, the above article reached out to

Jeffrey Miron, an economist at Harvard University and director of economist studies at the libertarian Cato Institute, …[He] expressed doubts that such a measure was really necessary or would make sense to calculate.

Plus, there is an infinite number of ways to measure economic growth that would be better than our current standard, GDP, and every academic economist who has studied it has an optimal way in mind. They tend to let the best be the enemy of the better and oppose other efforts that aren’t exactly what they personally feel would be optimal for example:

Dean Baker, an economist at the progressive-leaning Center for Economic and Policy Research, also expressed doubts. Current income data from the census and IRS is limited and retrospective, and fielding new surveys to produce the metric the Schumer-Heinrich legislation is proposing would be difficult and, initially, perhaps inaccurate. “I’m just not sure this is at all helpful,” he said. “It might be better to get an official release on something like the tax data when it becomes available with a year or so lag.”

However, the Center for Equitable Growth recognizes that this might not be the perfect legislation, but they argue that it is a good step in the right direction. Their chief economist Heather Boushy argues that the top 1% richest Americans will fight against this kind of effort:

“My guess is that anybody that’s opposed to this is thinking about whether or not they want Americans to know who gained [from GDP growth],” Boushey said. “When it’s 4.1 percent growth, they don’t want people to know that that growth most likely went to the top 1 percent.”

Posted in Inequality, Medianism

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