[Note: This item comes from friend David Rosenthal. DLH]
Income and Wealth Distribution, or, Watching Professional Republicans Sell Their Souls Back in 1992: Hoisted from the Archives
By Brad DeLong
Oct 7 2019
I have long wanted an undergraduate to write a senior thesis about this episode. I have never found one to advise to do so:
Hoisted from the Archives: The income distribution came on to the stage that is America’s public sphere between February 14 and December 12, 1992. And the rhetoric of “X% of gains in per capita income over years Y-Z went to the top W%-iles of the income distribution” became a one in American political-economic discourse over that time period as well. Over those ten months then-New York Times economics reporter Sylvia Nasar wrote eight stories about income inequality in America. All of them were pitched at a high substantive and intellectual level—they would have fit into the New York Times’s later Upshot (which has recently refocused at a less analytically-substantive level as concerned with “politics, policy, and everyday life”). This was, needless to say, very unusual for the New York Times.
Sylvia’s first story addressed the peculiar fact that the “80’s Boom”, as Reagan Republicans and the New York Times called it, had seen the poverty rate not diminish but rise. Sylvia attributed that rise to union-busting, and a growing disparity between high- and low-wage jobs springing from a decline in relative manufacturing employment and possibly from boosted high-wage white-collar productivity from computerization. Her second story, on March 5, took a turn. Instead of continuing to investigate the causes of rising poverty and wage stagnation in a decade of supposed boom, it focused on “who had reaped the gains” from “the prosperity of the last decade and a half”. It highlighted the “Krugman calculation”. It began:
Populist politicians, economists and ordinary citizens have long suspected that the rich have been getting richer. What is making people sit up now is recent evidence that the richest 1 percent of American families appears to have reaped most of the gains from the prosperity of the last decade and a half. An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least $310,000 a year…
And she, referring to his “testimony before Congress several weeks ago”, aggressively quoted Paul Krugman, who had taken the CBO’s income-distribution estimate numbers and presented them in, as one economist said to me at the time, “the most inflammatory fashion possible that was not actively misleading”:
We know that productivity has increased since 1977 and that more people are working. Where did all that extra income go? The answer is that it all went to the very top…. The number that no one had seen was how much of the growth went to a few people…
(How Paul Krugman came to be browsing and what he found in the House Was and Means Committee’s Green Book: Background Material on Family Income and Benefit Changes, Committee Print 102-30 (December 19,1991), pp. 61-81; what his “testimony before congress” was; and how Sylvia Nasar found out about it and decided it was interesting—these are not things that I ever got completely straight.)
What happened then? Well, two months later Sylvia Nasar’s May 11 story is headlined: “The Richest Getting Richer: Now It’s a Top Political Issue”. According to Bill Clinton’s press secretary Deedee Myers, Clinton read the March 5 study, went wild, and incorporated it into his stump speeches. Nasar called Clinton “one of the few Presidential candidates since Harry S. Truman to woo the middle class by pummeling the rich”. She called Republicans furious: “The Joint Economic Committee’s… minority report accuses Democrats of using Joseph Stalin’s approach to rewriting history. Supply-side architects… blasted the figures as ‘propaganda, not data’…. Economic adviser Michael J. Boskin said he was livid… an editorial response signed by the President’s counselor for domestic policy, Clayton K. Yeutter”.
And then it becomes coy: seeming to minimize Sylvia Nasar’s role in this:
When the Congressional Budget Office first released its income data… only a handful… paid much attention…. Even after… Paul R. Krugman… concluded that the major share… had gone to the richest… had trouble getting anyone to listen…
And then: “But Mr. Krugman’s arithmetic ultimately crystallized the issue…” It was Krugman’s arithmetic, Sylvia Nasar’s putting it on the front page of the New York Times, and Bill Clinton’s adding it to his stump speech that “crystalized the issue”.
By May 18 Sylvia Nasar was pushing back against conservatives who claimed (falsely) that America is a land of such great opportunity that static distribution statistics are meaningless: “rags-to-riches remains the economic exception…. A child whose father is in the bottom 5 percent of earners, for instance, has only 1 chance in 20 of making it into the top 20 percent of families…. Much… short-term turnover may be illusory… a large fraction of year-to-year changes… reflects reporting error, timing of income like capital gains, episodes of illness or unemployment and other transitory effects… ” On June 17 Sylvia Nasar was refereeing a debate over income inequality and the relevance of the “Krugman calculation” between Belle Sawhill and Mark London of the Urban Institute and Glenn Hubbard of the Treasury (now of Columbia). She scores it three-love for Sawhill and London, quoting Kevin Murphy saying that what drove Hubbard’s claims was “not your classic income mobility. This is the guy who works in the college bookstore and has a real job by his early 30’s…” She piled on further on July 20:
the Treasury has been quietly circulating a ‘primer’ on income distribution to journalists and economists. The 24-page document, prepared by R. Glenn Hubbard… asserts that the richest 1 percent of American taxpayers reaped only 11.3 percent of the income gains in the 1980’s…. But experts in the field who reviewed the Treasury’s calculation were highly critical, saying that the Treasury economist had fallen into a well-known statistical trap…. ‘It’s not a meaningful calculation’, said Lawrence F. Katz…. ‘I would ask Treasury to redo their calculation on the top 1 percent defined by 1988 income’, said Joel B. Slemrod…. ‘I’m pretty sure the numbers would change quite a bit’. A reporter had, in fact, asked Mr. Hubbard several times to make such a calculation, but he refused on the ground that the results would be uninteresting…
The “reporter”, we are meant to infer, was Sylvia Nasar, asking Glenn Hubbard a question that he did not dare himself answer, or allow others at his database so they could answer it.