David Leonhardt Says “Inequality Has Actually Not Risen Since the Financial Crisis”

The main point of David Leonhardt’s article “Inequality Has Actually Not Risen Since the Financial Crisis,” which appeared in The New York Times on February 17, 2015, is that it’s important to pay attention to details and, rather than gloss over them, consider their impact — and the trends they suggest.

Leonhardt links to a December 2013 report on income inequality by the Pew Research Center to reference an historical perspective on inequality: the increasing gap between rich and poor, at an all-time high since 1928.

With that trend in mind, Leonhardt points to a recent study by an economist at George Washington University:

“No question, inequality is extremely high from a historical perspective – worrisomely so. But a new analysis, by Stephen J. Rose of George Washington University, adds an important wrinkle to the story: Income inequality has not actually risen since the financial crisis began.”

However, Leonhardt notes at the end of his article, there’s some hope that the government can and does have a role in reducing the inequality gap:

“But the fact that inequality hasn’t continued rising in the last several years matters – first, because facts matter, and, second, because it helps show what Washington has the potential to do. For much of the last few decades, rather than attacking inequality, government policy has exacerbated it. Tax rates on the very rich, the same group receiving the largest pretax raises, have fallen the most.

In the last several years, however, the federal government has tried to combat inequality, through a combination of tax and spending policies. These efforts weren’t aggressive enough to bring major raises to most families. The financial crisis was too big, and Washington’s response was too restrained. Yet the efforts were aggressive enough to make a difference.

They are a reminder that rising inequality is not inevitable, and that the country has the power to shape its economy.”

Agree or disagree with this interpretation, there’s some wisdom in Leonhardt’s overall point that details matter — and that paying attention to them can help us focus on ways to effect real economic change.

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