The true poverty rate, they show, is less than 3 percent

From Impoverished by “Equality” by Amity Shlaes.  The subheading is A new book demonstrates the consequences of the endless war on poverty.

All the more valuable, then, is The Myth of American Inequality: How Government Biases Policy Debate, a book that in galley form so allured me that I wrote a blurb for the jacket. In this authoritative volume, based largely on official statistics, former U.S. senator Phil Gramm and economists Robert Ekelund and John Early crack open the databases to examine the great mystery of poverty. In the process, they reveal an astounding fact: Lyndon Johnson has finally won his war.

The true poverty rate, they show, is less than 3 percent—not 11.6 percent, the figure the Census Bureau gives for 2021. The disparity between top earners and bottom earners is not 16 or 18 to one but four to one. The bottom half of American households earn or receive, one way or another, about the same amount in money or money equivalents. There’s no need to establish universal basic income, the current anti-poverty favorite. Lower earners already receive such income in the form of the earned income tax credit and more than 100 other forms of payment or benefit. The year is only 2022; yet, to cite Vonnegut, everybody is finally equal.

For this, we can thank Johnson and the political culture of redistribution he installed. As Gramm and his coauthors explain, the official Census Department poverty measure is so much higher than their own because the Census ignores benefits that lower earners receive as well as the tax rebates of the earned income tax credit. The Bureau of Labor Statistics reports that lower earners spend twice what they receive as income. As for the income disparity between rich and poor, the authors point out another distortion: such statistics do not count the taxes higher earners pay under our progressive rate structure. Households in the 96th, 97th, or 98th percentile of income are no Warren Buffetts. They still earn much of their money in the form of wages, which means they shoulder a heavy tax burden. Top earners also pay into a Social Security system loaded against them and toward lower earners. The top 1 percent makes for a good class-war target, but they make up only a small share of Americans.

Among the many perversities covered in The Myth of Inequality is Medicare. Here, perhaps, lies another clue to our complacency. Medicare flows to all senior citizens, not just the poor. Citizens who are themselves habituated to benefits tend out of guilt to feel that they aren’t doing enough for others, so they support yet more benefits for lower earners. Yet the rich not only pay for but also employ or invest in many other people. The authors devote an entire chapter to this group.

The fallacy in the anti-poverty undertaking holds that differences in earnings or wealth betray something inherently wrong about America. After all, we no longer all dwell on some greedy lord’s estate, but rather in a society that often permits even the non-landed to make their way—and even to become wealthy. This transpires through the development of productive ideas we could not have imagined just five years ago, let alone when Johnson signed the Great Society into law. The motivation of capital gains or business profits—to name two forms of revenue so vilified nowadays—has given us products from which most of us benefit, from Amazon to Uber to lifesaving drugs.