President Obama, many Democrats and editorial page writers have been working to convince the nation that it is wracked by inequality, a disappearing middle class and a lack of opportunity. The charge of growing inequality is partly correct, mostly because those at the top of the income distribution have pulled away from the rest of us. But the other charges are wrong or misleading.
First, consider the claim that the nation’s economic growth in the past three decades has gone straight to the richest Americans. The focus on the “1 percent” too often leaves out consideration of the overall distribution of income. Economist Richard Burkhauser of Cornell shows in a forthcoming paper in National Tax Journal that, when the insurance value of health care and the value of certain government transfer payments are included in income, the top 20 percent of the income distribution experienced income growth of about 50 percent between 1979 and 2007 (in dollars adjusted for inflation).