Wow. Our experiment is off to a great start—let's see if we can finish it off sooner than expected.
James Pethokoukis is on a mission to show that rising income inequality isn't really a big deal. The big gun in his arsenal is a 2009 paper by Robert Gordon, which says:
This paper shows that the rise in American inequality has been exaggerated in at least three senses. First, the conventional measure showing a large gap between growth of median real household income and of productivity greatly overstates the increase compared to a conceptually consistent alternative gap concept, which increases at only one-tenth the rate of the conventional gap between 1979 and 2007....Second, the increase of inequality is not a steady ongoing process; after widening most rapidly between 1981 and 1993, the growth of inequality reversed itself and became negative during 2000-2007.
Pethokoukis, responding to a CJR piece by Ryan Chittum, says: "Chittum, nor other liberal economic pundits such as Ezra Klein, Jonathan Chait, Kevin Drum, Ryan Avent, have made an effort to dispute Gordon, hardly a conservative economist. Liberals don’t even like quoting that above bit."
Gordon is a good economist, and I haven't made an effort to dispute him because I don't really dispute most of what he says. I just think it's largely irrelevant. Let's take the various claims in his paper one at a time:
Jon Chait has a somewhat more epic response here. The nickel version, though, is that Gordon's paper does say that income inequality has increased dramatically over the past three decades.1 He just has some caveats to the data. But while those caveats are interesting, none of them change the fact that the rich have hoovered up a vastly disproportionate and increasing amount of America's income growth since the mid-70s. There's just no getting away from that simple raw reality.
UPDATE: Matt O'Brien tweets: "I talked to Robert Gordon here. He was flabbergasted his work was being used to argue inequality is a myth." Here's more:
Consider the research and writing of Robert Gordon, a professor of social sciences at Northwestern University. He has done pioneering work questioning the extent of the aforementioned gap between productivity and median wages—work that Pethokoukis misappropriates to claim that income gains have been shared “fairly equally.” Gordon found that the productivity gap may be about a tenth the size as what is commonly thought, but, as he told me, that doesn’t negate the story about runaway wealth at the top of the income distribution. “The evidence on the long-term increase of inequality within the bottom 99 percent is ambiguous and complex, but what stands out like a searchlight is the unprecedented and increasing inequality between the bottom 99 percent and the top 1 percent,” Gordon told me.
There's more at the link on Pethokoukis's other claims.
1Here's the direct quote: "The evidence is incontrovertible that American income inequality has increased in the United States since the 1970s."