All of the numbers that are being thrown around are the inequality of market incomes. Yes, even the US Census calculation of the gini index is about market incomes, before the influence of the taxation system and most of the welfare and benefits system. It’s worth noting here that almost every other country reports theirs after the influence of those two systems. The US is more unequal than most countries but not by as much as the officially reported figures would lead you to believe.
The real importance here is that of course the most obvious way of reducing inequality is to tax those rich people more and give the money to the poor. But if we’re measuring everything by market, before tax and redistribution policies, incomes then we’re committing Worstall’s Fallacy. We’re trying to decide what we should do without taking account of what we’re already doing.
Which leads us to this lovely report from the Minneapolis Fed. Have a look at these two charts:
Worstall’s Fallacy is so newly named it doesn’t even have a Wiki page.
But Mr. Worstall makes a great point in noting that gov’t expansion is almost always based on numbers that presume we haven’t done a darn thing to help X or Y class ….yet.
The truth is that all sorts of programs exist and do help people.
Those aids should be taken into account before we add more aid.
It reminded me of the horror stories about how many thousands, hundreds of thousands, even millions of jobs the Sequester would cost.
But the Sequester numbers are out.
All told the Sequester only cost one guy in the Dept of Justice his job.
Only ONE person!