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The U.S. Census Bureau is a nonpartisan government agency, responsible for not only determining how many representatives each state will have in Congress for the next 10 years, but also for collecting income data. By asking about income, the Bureau’s intent is to “help communities enroll eligible families in programs designed to assist them.”
But what if the data that the Bureau gathers isn’t telling the whole story or, even worse, inaccurate? That’s what a new book by former U.S. Senator Phil Gramm asserts. Straight Arrow News contributor Robert Doar lays out the argument:
I have long thought that government statistics aren’t telling the whole story about poverty and inequality in America.
During 20 years of leading social services programs in New York, I saw a tremendous amount of aid flowing from federal, state, and local treasuries to low-income households. And even as I saw many of our programs reducing poverty in real-time by combining work requirements with work rewards, the official poverty rate has hovered around 13%. And as a result, our anti-poverty programs have not gotten the credit they deserve. And many people still believe that poverty in America is far worse than it really is.
Now government statistics have also fostered the popular portrayal of America as a vastly unequal country. Where, in the words of Senator Bernie Sanders of Vermont: “A handful of billionaires have enormous wealth and power, while working families have been struggling in a way we have not seen since the Great Depression.” Claims like this one rely on the Census Bureau’s official household income measure, which is the standard for federal estimates of Americans’ wealth.
A new book offers compelling evidence that the Census has been measuring income wrong, and misdirecting public policy in the process. In “The Myth of American Inequality: How Government Biases Policy Debate”, Phil Gramm, an economist at AEI, as well as a former United States Senator, and his co-authors, John Early and Robert Ekelund, have analyzed 50 years of federal data to set the record straight on the last 50 years of household income in America.
They first looked at how the Census measures income. When the Census Bureau adopted the current household income measure in 1967, the Census Bureau decided not to subtract taxes, and did not include all transfer payments. Graham and Early found that as a result, the Census measure left out two-thirds of all federal, state and local transfer payments going to households, most of whom were near the bottom of the income scale. And because they ignore all of these payments, the official statistics underestimate the income received by households with lower earnings from work, and overestimate the real income enjoyed by households with higher earnings. And by reviewing 50 years of Census data and adding in transfer and subtracting taxes, Graham and Early revealed a very different picture of income in America.
