As illustrated by my recent three-part series (here, here, and here), I care about helping the poor rather then hurting the rich.
More broadly, I want a bigger economic pie so that everyone can have a larger slice. And I don’t particularly care if some people get richer faster than other people get richer (assuming they are earning money honestly and not relying on government favoritism).
In other words, it doesn’t bother me if someone like Bill Gates is getting richer faster than I’m getting richer, so long as there’s an economic environment that gives both of us a chance to prosper based on how much value we are providing to others.
But some folks are fixated on how the pie is sliced.
For instance, the Peterson Institute for International Economics recently tweeted that there is too much inequality in the United States (compared to Europe) and that something should be done to “fix” this supposed problem.
This type of data irks me because some people will assume that rising levels of income for the rich somehow imply falling levels of income for everyone else.
That may be true in nations with despotic socialist governments, such as Cuba, North Korea, and Venezuela, where the ruling class lines it pockets at the expense of the general population.
However, let’s focus on the United States and Europe, since the Peterson Institute wants readers to think that politicians in Washington should “fix” the distribution of income in America so that we resemble our friends on the other side of the Atlantic Ocean.
But first we must answer two very important questions: Are the non-rich in the United States suffering because rich people are doing well? And are the non-rich in Europe better off than the non-rich in America?
Earlier today, I answered those questions with three tweets.
I started with this tweet pointing out that average living standards are far higher in the United States than they are in Europe.
I then shared this tweet pointing out that the bottom 10 percent of people in America would be middle class compared to their counterparts in Europe.
I then concluded with this tweet showing that the bottom 20 percent of people in the United States have incomes higher than the average income in most European countries.
The moral of this story is that ordinary people are better off in America.
And that’s almost certainly because there’s generally more economic freedom in the United States – including lower tax burdens and less enervating redistribution.
P.S. While the Peterson Institute is very misguided on the tradeoff between inequality and growth, it is quite good on trade-related issues (see here, here, here, here, here, here, and here).
[…] The bottom line is that the United States is becoming more like Europe and the economic data tells us that means less prosperity and lower living standards. […]
[…] been warning that the United States should not copy Europe’s fiscal policy, largely because living standards are significantly lower in nations with large welfare […]
[…] been warning that the United States should not copy Europe’s fiscal policy, largely because living standards are significantly lower in nations with large welfare […]
[…] state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big […]
[…] The bottom line is that the United States is becoming more like Europe and the economic data tells us that means less prosperity and lower living standards. […]
[…] First, I want to laugh at anyone who thinks Europeans have a better distribution of income. […]
[…] First, I want to laugh at anyone who thinks Europeans have a better distribution of income. […]
[…] The bottom line is that the United States is becoming more like Europe and the economic data tells us that means less prosperity and lower living standards. […]
[…] The bottom line is that the United States is becoming more like Europe and the economic data tells us that means less prosperity and lower living standards. […]
[…] P.P.P.P.S One obvious takeaway from Cochrane’s data (though not obvious to President Biden) is that the United States should not be copying Europe. Unless, of course, one wants ordinary Americans to be much poorer. […]
[…] you look at both types of data, you learn that ordinary Americans are much better off than ordinary people in other nations – which is the opposite of what is implied by the […]
[…] means more economic stagnation for Europe (and those of us in America face that possibility as […]
[…] means more economic stagnation for Europe (and those of us in America face that possibility as […]
[…] means more economic stagnation for Europe (and those of us in America face that possibility as […]
[…] state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big […]
[…] state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big […]
[…] favor policies that would make the United States more like Europe, so it’s worth noting that lower-income people in America are usually better off than middle-class people on the other side of the […]
[…] why on earth would we want to copy nations where living standards are far below American levels? Heck, poor people in America tend to be more prosperous than middle-class people in […]
[…] why on earth would we want to copy nations where living standards are far below American levels? Heck, poor people in America tend to be more prosperous than middle-class people in […]
[…] Or cite at least one person who could have pointed out that low-income people in the United States enjoy higher living standardsthan middle class people in nations with bigger welfare states? […]
[…] Or cite at least one person who could have pointed out that low-income people in the United States enjoy higher living standards than middle class people in nations with bigger welfare states? […]
The Peterson Institute changed a lot after its namesake died. He’d torch the place Wyatt-style now.
Does gov’t transfer payments figure in this? Why certainly.
Very well done article!
Mr. Mitchell,
I agree wholeheartedly with you.
Kevin
Susquehanna County, PA
Sent from my Behemoth Dell 690
The big thing that I noticed in the Peterson Institute graph was that it looked at BEFORE TAX income, not after tax income. I’m sure the numbers would be more equal after taxes because the rich pay most of the taxes in the United States, whereas the poor are overly burdened with taxes in Europe.
Silly you. You think logic works?
Inequality is not the problem, it is the unequal treatment by government, by legislators and their lobbyists, along with the rest of the swamp creatures.
Yes, those 1% vs bottom half comparisons are fairly meaningless.
BEFORE:
* Top 1% makes $500k, or 15% of total.
* Bottom 50% makes $30k, or 20% of total.
* Joe makes $50k.
Joe then creates and sells an innovative new hover car that everyone really likes. Joe becomes fabulously wealthy. Here’s the After picture (for simplicity, assume no other incomes change):
AFTER
* Top 1% makes $600k, or 16% of total.
* Bottom 50% makes $30k, or 19% of total.
* Joe makes $5 Billion.
Now, the top 1% earns a higher share of total income. But it’s because one person went from middle-class to fabulously wealthy (by supplying society with a desirable product), so is this really a problem?
Now, the bottom 50% earns a lower share of total income. But it’s because Joe earns more, NOT because the bottom half earns less, so is this really a problem?