Friday, January 27

CNN's taxing video

How can CNN recommend the video entitled "Income Inequality" as a featured video on its website? (I don't know how to link directly to the video, but if you go to CNN it is in the box of videos on the right.)

The video is from that morning show with Soledad O'Brien (whose very presence on the air irks me even when I'm nowhere near a television set) and the smirky Miles O'Brien (no relation). Their guest (didn't catch his name) presents statistics from what he describes as two "liberal think-tanks" that purport to show that the income gap between the rich and the poor in this country is growing.

Fair enough. Except that he keeps talking about the gap between the top quintile of earners versus the bottom quintile, while the graphic he displays clearly says "Top 5%" and "Bottom 20%." Needless to say, the numbers aren't particularly believable the way he tells them. For example, he claims that the top fifth of earners in Arizona take home fourteen times as much as the bottom fifth--$223,081 to $15,719--which is self-evidently absurd. The O'Briens point out the discrepancy between his comments about the "top fifth" and the graphic depicting the "top 5%," but he claims that the graphic is incorrect. "Got it," says O'Brien (Miles). Unless Bill Gates has taken up resident in the Copper State, the idea that the top 20% of workers in Arizona earn $223,081 is one only someone making as much as the O'Briens could swallow.

I don't have time to go into greater detail, but the actual reports are described more accurately (I assume) here. Nationwide, apparently, the top quintile made 7.3 times as much as the bottom quintile. Slightly more plausible.

The reports themselves are here and here. I haven't read them, but I have a few off-the-cuff comments on the possible explanations for this allegedly increasing income gap on the CNN video.

1. The guest notes that Arizona (which has the biggest gap according to his graphic) has lots of retirees. Huh? Wouldn't retirees tend to have less income than in the years just before they retire? Again, I haven't looked into this, but I often read stories about how Americans don't save enough for retirement and how retirees are such a poor segment of our population (isn't this partly why we have Medicare?). Maybe all the rich retirees move to Arizona, but surely some of them head to California or Florida, neither of which cracks the top 5, and New Jersey and Kentucky are both in the top 10--not classic retirement destinations.

2. Tax cuts are also blamed, but the numbers are described on the video as covering the last 20 years. After Reagan signed the Tax Reform Act of 1986, the top income tax bracket fell from 50% to 28%. Since then, it has crept back up to 35% (it was at 39.6% before the first Bush fils tax cut, which also lowered the bottom tax bracket to 10% and took many poor families off the tax roll altogether). The biggest tax increases came under Bush père, who signed the Revenue Reconciliation Act of 1990. So, the income gap has been growing while the top income tax bracket has been increasing?

3. The fact that the minimum wage hasn't increased in some time is also cited. But many States listed on the video (and even communities within those States) have minimum wages higher than the national rate, and many of them have been increasing since the mid-1980s at a faster rate than the national wage. New York, and New Jersey both have minimum wages higher than the national rate, and both are in the top four for income disparity listed on the video.

Besides, it is far from clear to me that an increased minimum wage would increase the income of the lowest quintile (though it might bring down that of the highest earners as the companies they work for lose money or lay off workers). Which brings me to the final explanation given: globalization. If globalization (particularly increased competition from cheaper production abroad) is responsible for lowering the wages of America's poor (while increase their purchasing power by providing cheaper goods, of course), then the solution would hardly be to price American companies further out of the market by increasing the national minimum wage.

Each of these issues--taxes, minimum wages, and globalization--is both endlessly complex itself and notoriously difficult to isolate as a factor in light of the scores of other economic variables. To glibly suggest that one or the other "might be" responsible for an increase in the income gap is irresponsible journalism. Or whatever it is that morning shows think they practice. (Note, I reserve the right to glibly refute these arguments with equally disputable facts.)

Finally, the "income gap" is a distraction from the traditional issue of poverty. Real poverty, not the bogeyman of "relative poverty" dreamed up by the grievance industry when the problem of real poverty was largely solved in America decades ago. I don't know why I bothered typing this post. I should have just said this and left the rest well enough alone. Now I've wasted an hour criticizing a CNN morning show segment that won't even be accessible on the web in a day or so. Surely that's something to bewail on my deathbed.