Income Inequality

        Mark Twain famously said, “There are lies, damned lies and statistics.” An op-ed column in today’s rag clearly demonstrates the validity of this point. The author, one Alyssa Ahlgren, is a relative newcomer to the cadre of conservative whores who will espouse any point of view if someone else will pay them to write it, or, in the case of Sean Hannity, and actually the entire Fox News organization, pretend to believe it.

       Her column is entitled, “No We Don’t Have an Income Inequality Problem.”  She professes that the Left’s “obsession” with income inequality is “falsely seen as a benchmark for negative economic and fiscal health.”  She then makes a statement which, depending on one’s political point of view may be seen as logical or not. That is, and again I quote: “To the left, (income) disparity is the result of discrimination. To the right, disparity is the inevitable result of equal opportunity and meritocracy.”

       Taking the last half of that statement first, it is difficult to disagree with the statement that a meritocracy will, or at least should, allow those with motivation and talent to rise and prosper. Of course, this presupposes equal access to all the tools which make for such success. We can argue ‘til dawn as to the availability of such tools and, as an educator, I will argue the far left’s point that these “tools” are categorically separated or denied on racial lines. This was undeniably true in my youth (1950s-60s) but is demonstrably less so now, although still disturbingly evident in places. In 20 years in public education, and before that 26 years in the Navy, I saw talent rise, regardless of color. Don’t misinterpret what I say here; there is little doubt that economic conditions continue to influence student readiness and predisposition to take advantage of the opportunity. That said, in my experience, students who use the tools and opportunities presented generally do well. My list of former students of all ethnicities, now Facebook friends, is exemplary of that last statement.  

       Since that’s out of the way, let us return to Ms. Ahlgren’s scribble. To “illustrate” her statement regarding income inequality, she compares the USA to other nations which she states (correctly) have higher levels of wealth and income equality, yet their citizens are not “better off.” Along the way she also positively cites higher earner tax decreases as healthy, ignoring the fact that they benefit few of the fiscally disadvantaged

       Now to the part about damned lies and statistics. Ms. Ahlgren cites one group of nations which all have higher levels of equality of income and wealth than the USA yet are worse off. Wow, what could that mean? For starters, the countries she cherry picks to make this comparison statement are Burundi, Uruguay, Tunisia, Slovenia and Morocco! She’s right, you know (using this horribly ill-chosen group); If everyone is equally impoverished, income equality is meaningless. These nations, by the way,  also lead the league in human rights violations among other negative attributes.

        Right off the bat, let’s acknowledge one precept of statistics, that being that comparing “apples to okra” is bad math and worse logic. Comparing (for example) a farming/herding nation (Burundi) to an industrialized nation state (The USA) is sophomoric lunacy. Here’s Burundi “by the numbers:” Hungriest nation on earth. With a GDP per capita of USD $267, the country's 10.16 million people are among the poorest in the world. Burundi ranks 180 out of 186 in the latest Human Development Index. As much as 89% of the active population depends on farming a territory as densely populated as Belgium! The other countries she uses are similar in many respects.

        So, what’s my point? Simply that to analyze anything related to a nation state, just as in Real Estate appraisal, one must use comparables to make the comparison. For the United States, that comparable group is universally (with the obvious exception of Ms. Ahlgren) considered to be the Organisation for Economic Co-operation & Development (OECD) states.

        Just to set the stage for what follows,  these nations are:  Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, and the United Kingdom.  Founders of this group, established in 1961 in Paris, include the US, UK, France and (West) Germany.

        Now for apples to apples: among this group, the US has the third highest income inequality index, lower than only Mexico and Turkey (not really members, but usually included for statistical analysis, and also notorious for miserable human rights records!) This, then, is the company we keep in this metric. The USA has also made less recent progress in reducing this situation than any OECD member.

       Since we’re dealing with OECD stats, the US also has the highest health care costs per capita, the effects of which are to further marginalize lower income families and individuals. In fact, about three in ten (29%) of all US adults report not taking their medicines as prescribed at some point in the past year because of the cost. This includes about one in five who say they didn’t fill a prescription (19%), and about one in 10 (12%) who say they cut pills in half or skipped a dose. Three in ten of those who report not taking their medicines say their condition got worse as a result (8% of the public overall). And we have the “best medical system in the world?”

        Ms. Ahlgren then goes on to state that the rich are getting richer but that the poor are getting richer too. So? Another statistically meaningless statement if the cost of living and especially necessities like health care are increasing faster than wealth (which is happening in the USA). A better metric is to look at the percentage of population which meet the OECD standard for “poverty” which is “income below 50% of national median.” By this measurement, the OECD average is 10.5%. The USA average is 18%. Only Mexico is worse. Is that the standard with which we should be content?

I’ll close this section with some raw stats comparing the US to the OECD average:

Long term care facilities covered by national insurance:

OECD average – More than 3 times that of the US

Total health care spending (Mandatory and Out of Pocket):

US twice OECD average 17.7% of GDP, (OECD 8.3% of GPD)

Highest to lowest income spread:

US More than twice OECD average

Wouldn’t you think that with this kind of wealth………? Not so much.

       Of the OECD nations, only Greece, Italy and Portugal have higher National Debt to GDP ratios than the US, which is over 100%, meaning we owe more than we make. The World Bank compares countries based on their total debt-to-gross domestic product ratio. It considers a country to be in trouble if that ratio is greater than 77%. The U.S. ratio is 104%. That's the $22.16 trillion U.S. debt as of September 28, 2019, divided by the $20.658 trillion GDP. 

        I point this out because, of course, Ms. Ahlgren is a strong and very vocal Trump supporter.    Apparently, it is relatively unimportant to her that the same man who, as candidate in 2016, promised to eliminate the national debt in 8 years, yet has actually increased it. Trump's budget for fiscal year 2020 projects the debt would increase $5 trillion during his first term. That's as much as Obama added while fighting a recession. Think about that the next time someone throws out the tired old “tax and spend Democrats” shibboleth.

        I realize the above paragraph has strayed a bit from income equality…except that it hasn’t. All these metrics are related. Health care, tax cuts on the wealthy beneficiaries of the continuing income division, national debt service (interest, over  $11 billion this year),  etc. are all part of the overall thing we call “the economy” yet are being supervised by a man whose combined businesses carried as of 2016, $1.11 billion in debt.

        Ms. Ahlgren cites Jeff Bezos and Bill Gates when she exemplifies high earners, yet she also never mentions the reality which is that both, like equally rich and philanthropic Warren Buffett,  were self-made, not trust fund babies (see Trump, Eric and Don Junior), and both are giving away much of their income or like Bezos and Elon Musk, furthering Space research, largely  on their own dime. 

       Curiously absent are those whose wealth, rather that the rewards for hard work, came as a result of birth or (Betsy DeVos) marriage.  Three dynastic wealth families—the Waltons, the Kochs, and the Mars—have seen their wealth increase nearly 6,000 percent since 1982. Meanwhile, median household wealth over the same period went down by 3 percent!  Over a third of the members of the Forbes 400 own fortunes derived from companies that were founded by earlier generations. (Bush anyone?).

        Historically, Americans have iconized the wealthy, while being chronically underpaid or, in many cases, treated like chattel (see Ford, Henry). Some, like JP Morgan, made it and kept it, having inherited much of it. Others, equally industrious, such as J.D. Rockefeller, were also ruthless and miserly until their imminent mortality spurred some (small) sense of charity. Then there was Andrew Carnegie who said, “He who dies rich, dies disgraced” and gave almost all of his money away.

        We have relatively few of those men today. Buffet and Gates being examples. Finally, since many liberal minded folks love to throw stones at the Buffets, Gates’ and especially Bezos: Looking at the corporate policies of Microsoft and Amazon is revelatory especially in the areas of insurance, matching employer contributions and almost every other employment quality stat.  Both are paradigms for decent compensation and policies in general, Amazon, just for a quick example, has extremely generous matching policies for 401K contribution, up to 14 weeks paid maternal of paternal leave, company funded health savings plans, stock options as well as pioneering the $15 starting hourly wage worldwide. These perks are effective the first day of employment.

        And, of course, the haters chant, “but what about all that wealth?” “All that wealth” in Bezos’ and Gates cases is in the value of the stock they hold. That “wealth” only is realized (or tangible) if the stock is sold. Amazon’s stock at IPO was priced at $18 per share. It is now at somewhere over $1800 per share. In like fashion, in the early 80s, Bill Gates and Paul Allen had been giving stock to get good employees and had given so much that they were forced to register with the SEC, at which point Microsoft went public at an initial IPO of $21 per share. Since that time, it has split 17 to 1 in nine splits. Obviously, Gates and Allen became wealthy as did anyone else smart enough to see the future of home computing. No one "scammed" or abused anyone. Of course, between them, they gave away well over $30 billion (so far). Bezos, to date has given away $2 billion while still active. Additionally, he sells off $1 billion in stock annually to finance Blue Origin, which has yet to return any profit, but does space research the government would otherwise finance. By contrast, Donald Trump has contributed roughly zero of his self-proclaimed “great personal wealth” to his “Foundation” since 2008.    

       So what? Not all wealthy persons are created equal or behave equally, nor are they, by definition, the root cause of income equality. While what they do with their wealth is significant, There are many other and more complex factors, government tax policy and health care issues chief among then. Finally, let's all be adults, however briefly, and admit that we all bear more than a little responsibility for the way our life turns out. We aren't, like Mongo, simply "a pawn in the game of life."