The Big Con: income inequality claims are false

Misleading statistics are used as proof of an ever-widening "equity" gap—the justification to massively redistribute wealth. Adjusted Ginia coefficients of U.S. household inequality expose the con.

Democrats push social justice “equity” policies to close what they claim is an ever-widening income inequality gap. The false income inequality claim made by the Democrats, to justify wealth redistribution policies and “transform” America is based on “massively” misleading government statistics.

When measuring income inequality, the Census Bureau doesn’t reduce household income by the amount paid in taxes. Had it done so and counted all transfer payments as income, inequality from 1967 to 2017 would have increased by only 2.3% instead of the reported 21.4%. That’s an inequality gap illusion of almost 90%.

Kamala Harris made the following comments while taking part in an event at the Democratic National Committee's Women’s Leadership Forum hosted by the Congressional Black Caucus Foundation.

"It is our lowest income communities and our communities of color that are most impacted by these extreme conditions and impacted by issues that are not of their own making.” "And so, we have to address this in a way that is about giving resources based on equity, understanding that we fight for equality, but we also need to fight for equity, understanding not everyone starts out at the same place." 

"And if we want people to be in an equal place, sometimes we have to take into account those disparities and do that work," she continued.

Harris faced immediate pushback for the comments, which came the same day that the White House said it was working with Florida Gov. Ron DeSantis and the Federal Emergency Management Agency to provide aid to those impacted by the storm, which has caused death and destruction across the state.

DeSantis's rapid response director tweeted Saturday: "This is false. [Harris's] rhetoric is causing undue panic and must be clarified. FEMA Individual Assistance is already available to all Floridians impacted by Hurricane Ian, regardless of race or background."

The following highlights are from Phil Gramm’s and John Early’s WSJ commentary about the profound flaw in income and child poverty data:

“Census Bureau income data fail to count two-thirds of all government transfer payments—including Medicare, Medicaid, food stamps and some 100 other government transfer payments—as income to the recipients. Furthermore, census data fail to count taxes paid as income lost to the taxpayer. When official government data are used to correct these deficiencies—when income is defined the way people actually define it—“income inequality” is reduced dramatically.”

“If you count all government transfers (minus administrative costs) as income to the recipient household, reduce household income by taxes paid, and correct for two major discontinuities in the time-series data on income inequality that were caused solely by changes in Census Bureau data-collection methods, the claim that income inequality is growing on a secular basis collapses. Not only is income inequality in America not growing, it is lower today than it was 50 years ago.”

“Moreover, if the Census Bureau had included the missing $1.9 trillion in transfer payments, child poverty would have been only 3.2% in 2017, compared with the official rate of 17.5%. Government transfer payments that were distributed in 2017 had already cut child poverty by 82%.”

“Democrats claim the equity gap is the result of a fatal flaw in capitalism and an “existential” threat to democracy. From 1967 to 2017, income inequality in the U.S. spiked 21.4%, and everyone from U.S. senators to the pope says it’s an urgent problem. Yet the data upon which claims about income inequality and child poverty are profoundly flawed.”

“The official poverty estimate by the Census Bureau not only overstates the level of poverty, but it distorts the policy debate. Politicians use the overstated poverty numbers as a rationale for additional transfer payments. The new transfer payments aren’t counted as household income, so there is no improvement in the official poverty rate. This process is repeated over and over. In the past 50 years the real value of taxpayer funding for transfer payments to the poorest 20% of American households has risen from an average of $9,677 to $45,389.”

“This vicious circle of deception drives up the deficit and the national debt without solving America’s real poverty problem. Constantly increasing government means-tested transfers doesn’t address the basic needs of the 2% of American households that actually are poor.”

The Big Con will continue until congress requires the official Census Bureau numbers to reflect reality by including the effects of all transfer payments and taxes.