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Department of Never Mind

Since I recently suggested  CEOs should address the issue of income inequality as a high-priority concern, I feel compelled to advise you of an opposing view: according to Robert Grady, an investment banker and economic adviser to NJ Governor Chris Christie, concerns about inequality are overblown and distract from the real goal -- economic growth.

To quote Mr. Grady: "If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth—not income inequality or the redistribution of wealth—is the defining challenge of our time."

Who could be against growth?

Well, my problem with Mr. Grady's argument is that inequality actually increased during the last period of high economic growth from 1979 to 2007, as shown in this report from the Congressional Budget Office.

Shares of income

Mr. Grady attacks "liberals" for ignoring the impact of government transfers, such as food stamps and earned income tax credits, when measuring before-tax income. But he fails to note that the CBO study noted above does take these factors into account.  

But he does go to great pains to point out that the CBO report shows income gains "in every quintile" during this period. Indeed. But he fails to note that incomes in all but the highest quintile were lower in 2007 than in 1979,  showing that inequality grew in the period, which is kind of the point.

Continuing with his data cherry-picking, he cites a study indicating that a widely used measure of inequality across nations shows an improvement in the U.S. from 1993 to 2009 of 0.007 points. He does not admit that left our relative position unchanged.

Given the opportunity, Mr. Grady moves so eagerly to show the glass half full, he nearly tips it over. For example, he points out that "roughly half of those in the bottom income quintile in 1996 had moved to a higher quintile by 2005," apparently not concerned that half stayed where they were. And he ignores other data suggesting that American economic mobility lags other nations'.

Finally, apparently forgetting President Obama's proposal to establish an Infrastucture Bank, not to mention the GOP's determination to "starve the beast," he blames the president for "a sharp drop in real spending by the government on nondefense infrastructure."

He even blames the president for including tax cuts in the recession-driven stimulus bill. Then, in the very last sentence, he lauds the president's stated goal of "making sure our economy works for every working American," but warns that his real goal is "redistribution."

Leaving aside the fact that Mr. Grady provides no evidence to support this alleged plot, it's a little curious it would bother him since he also credits "government transfers" for lowering inequality, starting with his second paragraph: "Virtually all of the data cited by the left to decry the supposed explosion of income inequality ... excludes transfer payments like Medicaid, Medicare, nutrition assistance, the Earned Income Tax Credit, and even costly employee benefits such as health insurance."

I suspect the real problem here is a suspicion that "liberals" will try to expand these transfers, diverting resources that could be invested in growth. That's why so many "conservatives" are opposed to expanding unemployment insurance and intent on slashing the supplementary food nutrition progam (i.e., food stamps).

On the other hand, confronting data such as that cited above, "liberals" have given up waiting for the rising tide that, according to "trickle down" econimic theory, will rise all boats.

But the real issue on which we should all focus: why have past growth investments failed to reduce inequality? 

For example, why, as reported by Bloomberg, is New Jersey the "least upwardly mobile state for low-wage workers." The second worse for the unemployed. And why did it have a negative GDP of 1.28% -- 47th in the nation -- from 2008 to 2012, including the first two years of his advisee's administration?




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