Separate and Unequal Income

July 8, 2010

Income inequality!

With the exception of “climate change,” do leftists have a bigger bugaboo? America, so their story goes, is a place where the rich can never fall and the poor can never rise. The chasm between the affluent and the rest of us is huge -- and the unfairness worsens every day. (Yes, yes, we know: George W. Bush is mostly to blame.)

Intellectually honest researchers have persistently punctured income-inequality poppycock. The neoconservative Heritage Foundation has shown that the exclusion of both tax burdens and welfare programs makes the rich-poor gap appear larger than it actually is. Economist Alan Reynolds makes a persuasive case that capitalism’s widespread furnishment of quality goods and services is shrinking the difference between the meek and the moneyed. “Once we adopt the habit of surveying the economic landscape through the lens of real consumption and real standards of living,” Reynolds averred in a 2007 paper for the libertarian Cato Institute, “moral outrage over income inequality and the related push for a renewed regime of corrective redistribution simply look like mistakes.”

Now the Tax Foundation has weighed in on the inequality issue with another clear-headed analysis, “Income Mobility and the Persistence Of Millionaires, 1999 to 2007.” Foundation senior fellow Robert Carroll, whose new work echoes decades-old research by economists as well as the Treasury Department, argues that “people often occupy different places in the income distribution over time.”

Carroll explored the ways Americans move up and down the wealth scale over an eight-year span. Breaking tax returns up into quintiles -- each comprising 20 percent of households -- did not yield results populists want to hear. Carroll discovered that “42 percent of taxpayers remained in the same quintile in 1999 and 2007; that is, 58 percent moved to a different quintile.” Nearly 60 percent of households in the bottom quintile in 1999 moved up at least one notch by 2007. For returns in the top group, 40 percent dropped one or more positions.

“Concerns over increased income inequality,” Carroll dryly concludes, “should be tempered to the extent that mobility through the income distribution is substantial.”

So the income-inequality “crisis” has been dealt another brutal blow. It’s a timely wound, since the media, after years of neglect, have started to recognize a real inequality problem: the disparity in compensation between public and private employees.

Local governments are broke, states are flat busted, and Washington’s debt is nearly uncountable. But the good times continue to roll for workers paid from public treasuries.

Late last year, Dennis Cauchon, USA TODAY’s invaluable fiscal-beat reporter, found that federal bureaucrats “making salaries of $100,000 or more jumped from 14 percent to 19 percent of civil servants during the recession’s first 18 months -- and that’s before overtime pay and bonuses are counted.” A few months later, Cauchon was back, with the revelation that federal employees “earn higher average salaries than private-sector workers in more than eight out of ten occupations.” The overall wage premium is 20 percent, and the advantage for benefits is insulting: “$40,785 per federal employee in 2008 versus $9,882 per private worker, according to the Bureau of Economic Analysis.”

The divergence is even worse at the state and local level. The U.S. Bureau of Labor Statistics found that in 2009, earnings for nonfederal government employees were 28 percent more than for private-sector workers. Healthcare and pensions are better, too.

Overly generous pay and wildly out-of-whack benefits are the most visible manifestations of public-private employment inequality. But let’s not forget double dipping.

In May 2009, Boston Herald columnist Howie Carr reported on Kenneth J. Donnelly, a retired fireman enjoying a $51,187, state-income-tax-free pension who also pulls down $61,440 as a state senator.

Last fall, the Los Angeles Times exposed “thousands of [California] state employees” who were “collecting government pension checks along with their paychecks.” A Republican state senator and former highway patrolman drew “a $98,600 annual state pension while also collecting a six-figure salary as a lawmaker.” A psychiatrist at a state hospital had an annual pension of $117,840, and “also received $104,200 in state wages in the last fiscal year.”

A few weeks ago, an investigation by Ohio newspapers revealed that “32,000 double-dipping [Ohio] state and local employees collected more than $1 billion in pension payouts last year on top of their paychecks. Three-fourths of those dollars went to State Teachers Retirement System members.”

Turns out, inequality-driven redistribution is in order. “Spread the wealth around,” bureaucrats -- back to the folks who are forced to pay for your inflated compensation packages.

D. Dowd Muska ( is a writer, commentator and lecturer. He lives in Connecticut.

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