Virtually all of the data cited by the left to decry the supposed explosion of income inequality, as Lee Ohanian and Kip Hagopian point out in their seminal paper, "The Mismeasure of Inequality" (Policy Review, 2011), use a Census Bureau definition of "money income" that excludes taxes, transfer payments like Medicaid, Medicare, nutrition assistance, the Earned Income Tax Credit, and even costly employee benefits such as health insurance.Of course, income inequality is a poor measure of gauging an economy. Who cares if income is unequal? That’s always going to be the case. Equality is nothing but a pipedream.
Thus the data that is conventionally used to calculate the so-called Gini coefficient—the most commonly used measure of income inequality—ignore America's highly progressive income tax system and the panoply of benefits and transfer payments. According to Messrs. Ohanian and Hagopian, once the effect of taxes and transfer payments is taken into account, "inequality actually declined 1.8% during the 16-year period between 1993 and 2009, when the Gini coefficient dropped from .395 to .388."
The real concern should be whether there is enough economic mobility to allow people to rise from one income level to another. The focus should not be equality, but mobility — and to no one’s surprise, that's been doing well as well:
With respect to upward mobility, longitudinal studies conducted by the U.S. Treasury have found that there was "considerable income mobility" in the decades 1987-1996 and 1996-2005. For example, roughly half of those in the bottom income quintile in 1996 had moved to a higher quintile by 2005. The "median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups" in that decade, while the real incomes of two-thirds of all taxpayers experienced an increase.Funny how Obama has done the exact opposite of creating such economic growth. Then again, it would be consistent with his opposite nature.
Here is the bottom line: In periods of high economic growth, such as the 1980s and 1990s, the vast majority of Americans gain, and have the opportunity to gain. In periods of slow growth, such as the past four and a half years since the recession officially ended, poor people and the middle class are hurt the most, and opportunity is curbed.