Is the rising tide lifting all boats?

• Author: Moore, Stephen

The class warfare lobby is singing its "soak the rich" anthem again. For example, a recently released report by the liberal Center on Budget and Policy Priorities (CBPP) suggests that "income disparities between the top fifth of families with children and families at the bottom and middle of the income scale have grown substantially over the last two decades."

The report arrived just one month after the latest release by the Census Bureau on income and poverty levels. Income redistributionists seized upon the Census data to declare that, in the U.S., the rich are getting richer and the poor are getting poorer.

Is the divide really growing as rapidly as those reports indicate? Admittedly, there is some bad news. The poorest 20% saw their incomes decline in real terms by two percent in 1996, while the richest fifth saw their real incomes rise by two percent. Today, the top 20% have around half of the total income in America -- up from about 46% in 1990.

Income mobility

Nevertheless, there are five highly encouraging trends in Americans' income since 1980. First, people constantly are moving up and down the income ladder. This phenomenon is known as income mobility, and it is almost unique to the American experience. Yes, there are millions of poor households today, but they are not the same families that were poor 10 or 20 years ago. The statistic that best captures this point comes from the Census Bureau, which found that a family that was "poor" in 1980 (i.e., the lowest 20% in income) was more likely to have moved all the way up to the richest fifth in income than to have remained poor at the end of the decade.

Second, family incomes, adjusted for size of household, show a fairly steady ascent over the past quarter-century. Here are the numbers for a family of four in 1996 dollars: 1970: $42,458; 1980: $46,536; 1996: $51,405.

The median family income data do not show nearly the same amount of improvement because the average household is smaller today than 20 years ago. A family of four with a $60,000 income that ends up in divorce now has two incomes of $30,000, which leads to a 50% decline in household income, even though the total income has not declined by as much as a penny.

Third, the great middle class is not stumbling down the income ladder, as the CBPP study implies. Here is the statistic that troubles the Left: in 1970, about 62% of households had incomes between $15,000 and $50,000; today, about half do. The middle class appears...