by Kip Hagopian, Lee Ohanian
August 06, 2012
The Congressional Budget Office (CBO) published a report showing that aggregate income in the highest income quintiles grew more rapidly than income in the lower quintiles. Much of what has been reported about income inequality is misleading, factually incorrect, or of little or no consequence to our economic well-being. Middle-class incomes have risen significantly over the 29 years covered by the CBO study. Americans should care about the well-being of the nation as a whole rather than whether some people earn more than others. Policies designed to reduce income inequality inevitably involve redistribution of income through increases in transfer payments and marginal tax rates. But these policies discourage hiring and investment, which depresses economic growth and opportunity. In sharp contrast, policies designed to enhance equality of opportunity will increase economic well-being for all, most particularly those in lower income households.