You’ve Got a Refrigerator so Shut Up Shut Up

Nominee Aparna Mathur
Nominee Kevin Hasset

We have an entry in the Most Stupid Study from Right-Wing Talk-Tanks category. It’s entitled A New Measure of Consumption Inequality, it’s from the American Enterprise Institute, and it was written by Kevin A. Hassett and Aparna Mathur. Their mothers must be so proud: just being nominated is a huge honor. And, of course, the fabulously wealthy AEI donors are thrilled to know that they haven’t really screwed the little people who made them rich.

I knew I was onto something special when I read the foreword. The authors explain that the election may involve a discussion of income inequality and middle class welfare. The issue arises from the work of Thomas Piketty and Emanuel Saez, who use income tax data to show that we are at Gilded Age levels of income inequality, and suggest raising the top tax rates to Eisenhower levels.

In this study, Kevin A. Hassett and I set out to refute the common claim that inequality has grown to the extent suggested in Piketty and Saez’s work.

Now some people have pointed to problems in the Piketty-Saez data, principally on the irrelevant grounds that they don’t consider transfer payments, or that tax changes make it look like the income of the richest Americans hasn’t really gone up that much because it was always high.

But that isn’t the route taken by Hassett and Mathur. They just create their own way to measure inequality:

It is widely acknowledged that consumption is a better measure of household welfare than annual income. The reason consumption may be more informative than income when studying inequality is because, in general, individuals are better able to smooth consumption rather than income over their life cycle.

Who cares about the soaring income of the top .01%? Consumption is the important issue. As long as you can eat and the rich can eat, you don’t have an inequality issue! And it doesn’t matter how you eat. The rich get money from their investments, so they’re good. The middle class smoothes its income out which means they borrow money to keep from starving. Everyone else gets food stamps. So it’s all good.

Of course, no nominee for this prestigious category would be complete without a killer graph, so here it is:

Hassett and Mathur's Killer Chart

That should end the discussion, according to Hassett and Mathur, because look, the share of consumption expenditures for the top quintile hasn’t really changed much over the last 25 years. Fellow-traveling media tried to hype this graph. The headline in the Business Insider was “this Chart Destroys Conventional Wisdom About America’s Wealth Gap”.


All the buzz we’ve been hearing about America’s wealth gap would have us believe it’s reached epic proportions. However, in a new paper two economists argue that it hasn’t grown much at all in the past three decades, and the way we’ve been tracking it is totally off.

Of course, what the chart actually shows is the simple fact that as incomes rise, people don’t consume the entire amount of the rise. They save it, or gamble with in the Wall Street casino, but after you have your Hastens mattress ($59,750, not available at Target) in the master bedroom of every house, you don’t buy more.

The authors recognize that there are some differences, for example, 52% of the households with incomes under $20K don’t have computers, compared with 3% of households with incomes over $120K. See Table 1C. For Hassett and Mathur, the level for being rich is income over $120K. Killer Table 1C shows the underlying silliness of this argument: no one on earth thinks that a US person making $120K is a problem for democracy. And no one thinks that income inequality in the top quintile is a problem either.

The problem with income inequality isn’t that being grotesquely rich hurts someone else. It’s what you do or don’t do with the money. If you invest the money directly into a business, you are creating possibilities. If you give it to a hedge fund for speculation, you run the risk of crashing the economy. That’s where the money is going, and that is a problem for the welfare of the middle class.

And most important, there is no entry in the consumer expenditures data used by the authors to measure the purchase of senators, representatives, governors, state legislators, legislation, regulation, law enforcement, news media, propaganda PR people, radio shouters, dissemblers, evangelical preachers, academics and with them, the opinions of people who can be persuaded by the circus show. Collecting these sell-outs is the current hobby of the Koch Brothers, the creepy Walton heirs, Sheldon Adelson, and the other crackpot billionaires who stand behind the likes of Paul Ryan’s wolfish eat grandmother budget, and the Erskine-Bowles catfood plan. That collection of fake intellectuals and flacks and their billionaire paymasters are a real threat to middle class welfare.

Hassett and Mathur look great in that pseudo-intellectual clown garb, and they have produced a real thigh-slapper for their patrons.

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