The Myth of American Inequality

How Government Biases Policy Debate

Phil Gramm; Robert Ekelund and John Early

A Wall Street Journal Best Book of 2022: Politics • Winner of the 2024 Hayek Book Prize, Manhattan Institute

Everything you know about income inequality, poverty, and other measures of economic well-being in America is wrong. In this provocative book, a former United States senator, eminent economist, and a former senior leader at the Bureau of Labor Statistics challenge the prevailing consensus that income inequality is a growing threat to American society. By taking readers on a deep dive into the way government measures economic well-being, they demonstrate that our official statistics dramatically overstate inequality. Getting the facts straight reveals that the key measures of well-being are greater than the official statistics of the country would lead us to believe. Income inequality is lower today than at any time in post- World War II America. The facts reveal a very different and better America than the one that is currently described by policy advocates across much of the political spectrum. The Myth of American Inequality provides clear and convincing evidence that the American Dream is alive and well.

Rowman & Littlefield Publishers

Pages: 264 • Trim: 6¼ x 9

978-1-5381-6738-0 • Hardback • September 2022 • $29.95 • (£25.00) - Currently out of stock. Copies will arrive soon.

978-1-5381-6739-7 • eBook • September 2022 • $28.50 • (£19.99)

Subjects: Political Science / Public Policy / Economic Policy, Business & Economics / Economic Conditions, Business & Economics / Economics / Social & Behavioral

The Myth of American Inequality

How Government Biases Policy Debate

Hardback

eBook

Summary

A Wall Street Journal Best Book of 2022: Politics • Winner of the 2024 Hayek Book Prize, Manhattan Institute
Everything you know about income inequality, poverty, and other measures of economic well-being in America is wrong. In this provocative book, a former United States senator, eminent economist, and a former senior leader at the Bureau of Labor Statistics challenge the prevailing consensus that income inequality is a growing threat to American society. By taking readers on a deep dive into the way government measures economic well-being, they demonstrate that our official statistics dramatically overstate inequality. Getting the facts straight reveals that the key measures of well-being are greater than the official statistics of the country would lead us to believe. Income inequality is lower today than at any time in post- World War II America. The facts reveal a very different and better America than the one that is currently described by policy advocates across much of the political spectrum. The Myth of American Inequality provides clear and convincing evidence that the American Dream is alive and well.

Details

Rowman & Littlefield Publishers

Pages: 264 • Trim: 6¼ x 9

978-1-5381-6738-0 • Hardback • September 2022 • $29.95 • (£25.00) - Currently out of stock. Copies will arrive soon.

978-1-5381-6739-7 • eBook • September 2022 • $28.50 • (£19.99)

Subjects: Political Science / Public Policy / Economic Policy, Business & Economics / Economic Conditions, Business & Economics / Economics / Social & Behavioral

Author

Phil Gramm served six years in the US House of Representatives and eighteen years in the US Senate where he was Chairman of the Banking Committee. Gramm is a Visiting Scholar at the American Enterprise Institute. He was Vice Chairman of UBS Investment Bank and is now Vice Chairman of Lone Star Funds. He taught Economics at Texas A&M University and has published numerous articles and books. Gramm lives in the Helotes, Texas.
Bob Ekelund is currently professor and eminent scholar in economics (emeritus) at Auburn University, beginning his career at Texas A&M University. He is the author of more than 20 books and several hundred articles on the history of economic theory, economic history and economic policy in the specific areas of art, religion, and regulation. He lives and works in Auburn, Alabama.
John Early is a mathematical economist who began working as a legislative assistant to a US Senator and assistant commissioner at the Bureau of Labor Statistics. He has served in senior leadership positions in global consultancies on quality and financial performance and as chief customer and strategy officer for a Fortune 100 company. His publications include improving measurements of price change, labor force dynamics, and improving healthcare. He lives joyfully in Charleston, South Carolina.

Table of Contents

Preface
Chapter 1: Every Official Measure Understates America’s Wellbeing
Chapter 2: Inequality in Producing and Consuming in America
Chapter 3: Poverty in America
Chapter 4: Trends
Chapter 5: Causes of Earned Income Inequality
Chapter 6: Measures of Wellbeing
Chapter 7: Super Rich
Chapter 8: Mobility
Chapter 9: Fifty Years of Growth
Chapter 10: Solutions
Bibliography
Appendices
About the Authors

Reviews

What makes this book an invaluable new resource for public policy and economic education is its focus on how the experiences of Americans of different living standards evolved over time and how earned income and consumption diverged for the poorest households. It traces improvements in the living standards of the poor to transfer programs, shows how taxation of the rich has flattened the distribution of consumption across households, and documents how measurement errors have distorted general beliefs about economic inequality.
But that’s not all. This book is written in straightforward American English, not in economic think-tank jargon. It shows clearly how each element of the analysis (taxation, transfers, inflation adjustment) contributes to its conclusions. Graphs and tables are comprehensive and comprehensible. The style is lively and lucid. The analysis probes deeply to demonstrate the robustness of its conclusions.
Most important, the authors don’t clutter their analysis with contentious approaches to measurement, and they limit their policy recommendations to those that flow self-evidently from the facts they document. It is encouraging that three disparate economists can together write an objective book about the measurement of living standards, poverty and inequality without engaging in partisan advocacy that undermines their findings.
The Myth of American Inequality will have a positive effect on the quality of policy discussions, and may well achieve its objective of changing the ways in which government agencies report information about American household income and consumption. At a time when partisan tribalism makes serious discussion almost impossible in Washington, this book shows that economics is still a powerful tool kit for informing and disciplining our thinking across the partisan divide.

— The Wall Street Journal

For an impeccably researched book that backs up... findings with overwhelming evidence, consult The Myth of American Inequality[.]

— Forbes

Gramm, Ekelund, and Early are owed a debt of gratitude. With admirable clarity, their book demonstrates that the federal government egregiously overstates the degree of inequality and poverty in the world’s wealthiest nation. Skewed statistics have led to a skewed perception of life in America, and in turn to a skewed political debate on spending, taxing, and the social safety net. The Myth of American Inequality refutes the demagoguery, and convincingly shows that the gap between top and bottom is not wider than ever, but narrower.

— The Boston Globe

There is much more in Myth of American Inequality, including a close look at the rapid turnover in America’s economic hierarchy. Gramm’s strongest policy recommendation is simply for Congress to fix how the government measures income. Even Democrats might find something to like: As things are currently reported, Joe Biden had to deal with headlines showing record-high inequality during his first year in office while he was shoveling trillions of dollars in additional transfer payments out the door. But a better reason to fix how we measure inequality is simply that it is better to tell the truth.

— National Review

From all those lists of best books of 2022, here’s one with the potential to change public policy debate and discourse for the better.

— Washington Examiner

Phil Gramm, a seasoned politician and accomplished economist, recognizes government statistics that misdescribe reality. He demonstrates that the nation's condition is much better than it is portrayed by numbers misused to advance political agendas. Thanks to Gramm's mind-opening book, facts—you remember them: they used to appear in political debates—might make a
comeback.

— George F. Will

Phil Gramm elevates every argument he steps into. In this slim volume the former senator and his two distinguished coauthors undo the cozy myth of unfairness, lay their academic opponents flat, and unveil the shining potential America offers for all. Lucid, bold, and transformative, The Myth of Inequality gives us that missing primer needed on every inquiring high schooler's shelf.

— Amity Shlaes, author, Great Society and The Forgotten Man

Our national debates about economic disparities are driven by government metrics that paint a distorted picture. The American Dream is not dead, and upward mobility is alive and well. In cogent, accessible prose, The Myth of American Inequality offers a useful and timely corrective to a popular narrative that is at odds with reality. Regardless of your politics, this book deserve to inform the conversation going forward.

— Jason L. Riley, Wall Street Journal columnist and author of The Black Boom

Finally, a good news story about income inequality in America. Phil Gramm, Robert Ekelund, and John Early show that when properly measured, inequality is declining in the U.S., and the prosperity of people at the economic margins is rising. Read The Myth of American Inequality to be encouraged about the future of the American free enterprise system.

— Arthur C. Brooks, professor, Harvard Kennedy School and Harvard Business School, and #1 New York Times bestselling author

It’s not often you read a book that can have a significant effect on the future of our country. Gramm and his coauthors show that when all government transfer payments are counted as income for the recipients of these benefits and taxes paid are reported as income lost to those who pay them, government statistics dramatically overstate income inequality and the poverty rate. Contrary to current political rhetoric, income inequality is actually declining and poverty in America has almost been eliminated.

— Frederick W. Smith, founder and executive chairman, FedEx

Alarmism about inequality from America's left has been a key political force dividing America for decades. This is the one book everyone should read about inequality. It is carefully researched. well written and respectful of the importance of the topic. It brings together a mountain of new and well documented evidence to show that misconceptions and lies about inequality have had a terrible impact on the lives of ordinary Americans. If we are to come together as a people, books like this that document the unbiased facts about important issues will be a driving force.

— Kevin Hassett, 29th chairman and the President's Council of Economic Advisers and former senior advisor to the president

[An] impressive, clearly written book that can introduce everyday readers to the sausage-making process behind the numbers they see cited in the media. It also leaves room for disagreement about the authors' corrections to the official estimates, as well as their policy recommendations.... There are any number of ways to fix the official numbers, and Gramm et al.'s approach is just one of them. But they have done a stellar job of critiquing the statistics at the heart of so many economic debates and providing a thought-provoking alternative.

— Washington Free Beacon

What would you say if someone told you that many academics, the US government, and the media overstate income inequality, understate the real income growth of US households, overstate poverty, and understate income mobility? If someone had asked me, I would have said I believe it. I’ve followed these issues, and even written about most of them. But on reading The Myth of American Inequality: How Government Biases Policy Debate, even I was blown away by the strength of the evidence for these conclusions.

— Hoover Institution

[V]aluable…. In this authoritative volume, based largely on official statistics, former U.S. senator Phil Gramm and economists Robert Ekelund and John Early crack open the databases to examine the great mystery of poverty.

— City Journal

What books do you think should be required reading? Because this book definitely makes my list. Phil Gramm, Robert Ekelund, and John Early authored this book to dispel a myth that we are often sold by the American Left. It’s a must-read.

— Conservative Bookstore.Com

This book is written at a level that most high-school graduates can understand. Yet it has enough detail that it could be used as a college textbook. Best of all, it tells you most of what you need to know in the first twelve pages. It is a must read and a great reference for anyone engaging in the debate over income inequality in America and what, if anything, should be done about it.

— Oklahoma Council of Public Affairs

The federal government significantly and intentionally misreports income distribution, sparking bad policies and political divisions. That’s the argument former senator Phil Gramm and two other economists, Robert Ekelund and John Early, lay out in their compelling and essential new book, The Myth of American Inequality. .... Recognizing that numbers are just tools used to inform policy judgments that involve a range of unquantifiable values and concerns, the authors note that they intend their book to start rather than end a more rigorous debate about inequality and transfer payments. ... Facts may be stubborn things, but ideology may prove to be even more intractable.

— RealClearPolitics

This book offers a magnificent combination of sophisticated empirical work, historical wisdom and keen policy relevance.... [The authors] answer the call to make America a better place to live in by demonstrating that the official statistics we rely on grossly misstate poverty, income inequality, and other measures of well-being. This book launches heretofore unknown good news about these issues and is destined to have a major benign impact on debate and policies about poverty and inequality.

— Quarterly Journal Of Austrian Economics

The notion of rising income inequality has permeated modern American discourse and is assumed as inherent to our economic system such that any claim to the contrary is easily dismissed as ignorance or insincerity. Indeed, The Myth of American Inequality: How Government Biases Policy Debate is a rather jarring title. American inequality a myth? Yes, claim Phil Gramm, Robert Ekelund, and John Early. To show we have been misled, the authors dive into the obscure world of bureaucratic statistics. In the process, they fearlessly confront the dominant narrative and demonstrate that government’s ambitious tax and transfer programs have substantially mitigated income inequality (properly measured) while incentivizing idleness. As the authors wisely point out: We must get our facts straight first before we can implement better policies. The Myth of American Inequality is a major step in that direction. It deserves a wide readership.

— Stephen Barrows; Action Institute

We will hear a lot about a ‘gender pay gap’ in this election cycle. We explain why almost all of the claims are wrong…. For years, serious economists have discounted claims of a so-called 'gender pay gap,' the assertion that women are being discriminated against by only paying them 84 cents for every dollar a man is paid. While there was pay discrimination in the past, that practice is illegal today. Whatever pay gap still exists is shrinking over time and is easily explained by economic, not discriminatory, factors. Pay-gappers point to Federal Reserve Bank data showing median earnings for full-time work for those 18 and older. For men it’s $391 per week, but only $330 for women. Thus, women earn roughly 84 cents for every dollar a man earns. But that’s not the whole story. Fortunately, The Myth of American Inequality by former Senator Phil Gramm, Robert Ekelund, and John Early, provides the rest of the story.... The authors claim that when all factors are considered, there is only a 1.5-cent pay gap.

— Institute for Policy Innovation / PolicyBytes

Everyone knows inequality is growing. As a trio of economists consisting of former senator Phil Gramm, economics professor Robert Ekelund, and economist and former assistant commissioner of the Bureau of Labor Statistics John Early demonstrate, however, everyone is wrong. The supposed rise in American inequality to unacceptable levels has been greatly overstated. Gramm, Ekelund, and Early help us get the facts straight.

— Independent Institute

The Myth of American Inequality is an important contribution [that] shows how the story is built on a foundation of theoretical and empirical sand.

— Econlib