Elizabeth Warren’s Disappearing Middle Class Incomes – It’s A Statistical Lie Folks, That’s All

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Senator Elizabeth Warren has decided to treat us all to her insistence that she’d make a really good President of the United States. That’s what her announcement of an exploratory committee means. Essentially, she can collect and spend money exploring the idea of running for the Presidency without actually running for it and thus coming up against campaign finance limits. Isn’t it just so great when those insisting there should be campaign finance limits adhere to the spirit of the law so completely?

I wouldn’t say that I’m entirely looking forward to all this despite the fact that any campaign by Warren is going to provide good copy to someone like me, an economically literate journalist.

So, the basic idea:

Senator Elizabeth Warren jumped into the race for president on Monday, announcing she is forming an exploratory committee for 2020. The Massachusetts Democrat, known for her critiques of big banks and corporations, became the first major candidate to declare her intentions with a video posted online on New Year’s Eve. “America’s middle class is under attack,” she said. “How did we get here? Billionaires and big corporations decided they wanted more of the pie and they enlisted politicians to cut them a fatter slice.”

The tweet and video is here:

So, to that first bit of actual economic journalism of this campaign. Warren uses this chart, derived from the Center for American Progress:

Middle class share of us income

Looks scary, eh? Sadly, it’s all a statistical lie. It’s derived from Census, which says this about their income calculations:

The income and poverty estimates
shown in this report are based solely
on money income before taxes and
do not include the value of noncash
benefits, such as those provided by
the Supplemental Nutrition Assistance
Program (SNAP), Medicare, Medicaid,
public housing, or employer-provided
fringe benefits.

This makes the chart meaningless to try to say something about how that middle class is doing. Just to think about one point, who pays the taxes:

The share of reported income earned by the top 1 percent of taxpayers rose slightly to 20.7 percent in 2015. Their share of federal individual income taxes fell slightly, to 39.0 percent.
In 2015, the top 50 percent of all taxpayers paid 97.2 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.8 percent.
The top 1 percent paid a greater share of individual income taxes (39.0 percent) than the bottom 90 percent combined (29.4 percent).

The top 20% – those too rich to be middle class any more – pay the majority of income tax. Money which is then largely spent upon that middle class again.

That is, what is being measured here is income before everything government does to make income more equal – taxes and benefits. In fact, this is even before employer things like health care benefits. And yes, that has been an increasing part of income over the these decades.

Do note what is being done here. Warren is showing us changes in income before the things government does to redistribute income. She’s then using that to show that we must use government to redistribute income. But that’s not logically fair. We need to see income after government has redistributed it in order to work out whether government should do more – or possibly less – of that redistribution.

For example, the share of income tax paid by that top 20% has increased dramatically over the decades of that chart. Sure, that’s as it should be. But we’d better take account of that as we work out how much more to do of it, no?

Senator Elizabeth Warren has opened her presidential campaign – not that we should call it that quite yet – with a statistical lie. It’s going to be a long couple of years, isn’t it?