The past several decades have seen the most sustained rise in inequality
since the 19th century after more than 40 years of narrowing inequality
following the Great Depression.
Of course, President Obama and the mainstream media jumped on the Fed Chair's observation, claimg that income inequality is a blight to the nation and irrefutable evidence of the failure of its capitalistic economic system. If only socialism--no, better yet, communism--would rule the economic realm! This despite the Chinese Communist Party's embrace of market reforms to propel Chinese economic growth.
It's bad enough that liberals actually believe what they're touting. But, for a Fed Chair to trumpet their message? Where's the Fed's independence? And, worse yet, doing so based upon phoney-baloney data?
Over at MarketWatch, the Director of Economics21 at the Manhattan Institue, Diana Furchtgott-Roth, takes Ms. Yellen on, offering five reasons that explain the rise in income inequality since 1970 and why it should not be the Fed's concern:
- With more women working outside the home today--a trend that began in the 1980s)--more families have two wage earners. To wit: In 2013, households in the top 25% had an average of 2 wage earners/household while the bottom 25% averaged 0.5% workers/household. What Ms. Yellen conveniently overlooked: Households with more earners are going to have higher incomes than households with one or fewer earners. Well, duh!
- For the past 30 years, households have changed in size. To wit: Households in the bottom 25% average fewer than two members, while households in the top 25% average three members. What Ms. Yellen conveniently overlooked: Income inequality statistics do not account for the higher costs that households with more members must pay. Well, duh!
- In 1987, the U.S tax code was changed to make the top individual income tax rate lower than the top corporate tax rate. Consequently, more businesses filed as individuals. What Ms. Yellen conveniently overlooked: The income bump that appears to have taken place after 1987 reflects these tax changes, increasing individual income and exacerbating income inequality. Well, duh!
- Income inequality statistics rarely factor in government transfer payments or taxes paid. Instead, they examine incomes before taxes and before individuals have received welfare payments. What Ms. Yellen conveniently overlooked, according to professors Bruce Meyer (University of Chicago) and Richard Burkhauser (Cornell University):Inequality has not increased. Ouch!
- Individuals often start poor and move up the income ladder over time. Yet, Ms. Yellen conveniently overlooked this movement--either up or down--the income ladder. Instead, she used official but misleading inequality statistics.
Someone workin in Obamaville must have written the Fed Chief's speech. Testing the waters of social policy, however, Ms. Yellen "got it wrong."
What's next for Ms. Yellen? Income redistribution? Fed economic "social justice"
Perhaps the Fed Chair should direct her focus upon improving economic growth. "Enlarging the pie" not "dividing it up in new ways" will enable more Americans in the lower 25% of wage earners to share in the nation's bounty.
Let the discussion begin...
To read Diana Furchtgott-Roth article at MarketWatch, click on the following link:
"5 reasons Janet Yellen shouldn\'t focus on income inequality."