The American dream is not dead yet
One of the best-selling books of 2014 is Capital in the Twenty-First Century by French economist Thomas Piketty, a 696-page doorstop tome on economic history. Why is a data-heavy treatise from the “dismal science” so appealing? Because it is about income inequality and immobility, which in a December 2013 speech President Barack Obama called “the defining challenge of our time,” concluding that it poses “a fundamental threat to the American dream.” But does it? Maybe not.
The rich are getting richer, as Brookings Institution economist Gary Burtless found by analyzing tax data from the Congressional Budget Office for after-tax income trends from 1979 through 2010 (including government assistance). The top-fifth income earners in the U.S. increased their share of the national income from 43 percent in 1979 to 48 percent in 2010, and the top 1 percent increased their share of the pie from 8 percent in 1979 to 13 percent in 2010. But note what has not happened: the rest have not gotten poorer. They’ve gotten richer: the income of the other quintiles increased by 49, 37, 36 and 45 percent, respectively. (continue reading…)