The disappointingly slow economic recovery from the Great Recession has a silver lining: inequality has decreased across the United States. According to a recent report by Brookings Institution economist Gary Burtless, left-leaning economists like Emmanuel Saez have painted an unnecessarily dire picture of the Great Recession and American inequality.
Burtless found that when one accounts for the effects of taxes and welfare transfers, most groups saw far less extreme income losses than Saez claimed. The very poorest Americans actually saw income gainsduring the Great Recession.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
Michael Mauboussin's notes from his presentation at the 2020 Morningstar Investment Conference, held on September 16th and 17th. Q2 2020 hedge fund letters, conferences and more Michael Mauboussin: Challenges and Opportunities in Active Management Michael Mauboussin is Head of Consilient Research at Counterpoint Global in New York. Previously, he was Director of Research BlueMountain Capital, Read More
US Income Inequality
The middle class also did much better than Saez found by looking at market income alone. As Burtless explains,
Among households in the middle fifth of the before-tax income distribution, average market income fell more than 10 percent in the Great Recession. If we include government transfers in the income definition, average income fell 4.4 percent. If we account for the federal taxes families pay, average net income fell just 1 percent.
Since America’s middle and lower class suffered relatively small losses, and the brunt of the recession was borne by the richest Americans (a far more diverse group than you might think, with high turnover), the result has been a decrease in total inequality.
According to the Congressional Budget Office’s tabulations, inequality in America was nearly 5 percent lower in 2013 than in 2007.
Chelsea Follet works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.
This article was originally published on FEE.org. Read the original article.