In a 2004 article in the Nation, … Paul Krugman wrote that “According to estimates by the economists Thomas Piketty and Emmanuel Saez- confirmed by data from the Congressional Budget Office- between 1973 and 2000 the average real income of the bottom 90 percent of American taxpayers actually fell by 7 percent.” That claim could not possibly be “confirmed by data from the Congressional Budget Office ,” because CBO estimates only go back to 1979.
Mr. Krugman’s highly improbable claim that real incomes have stagnated since 1973 for all but the top 10 percent was later outdone by an even more outlandish claim that real incomes stagnated for all but the top 1 percent. The AFL-CIO Web site reprinted a graph from an updated version of the Piketty-Saez paper, ostensibly shaowing average real income soaring for the top 1 percent but stagnating “ for everybody else.” Unfortunately, AFL-CIO neglected to reprint a critical footnote from the Piketty-Saez graph. That footnote explained that the graphical illusion of income stagnation among the bottom 99 percent was the result of selecting faulty statistics to minimize their income growth. “ From 1973 to 2000,the average income of the bottom 99 percent would have grown by about 40 percent in real terms instead of stagnating… if we had included all transfers (+ 7% effect), used the CPI-U-RS (+ 13% effect), and specifically defined income per capita (+20 percent effect.)
By confining the facts to a footnote, the graph in Piketty-Saez conveyed the false impression that nearly all U.S Households had experienced stagnating real incomes since 1973, rather than a 40% increase. It appears that the Piketty-Saez estimates have been widely reported but narrowly understood.
From Income and Wealth by Alan Reynolds.
HKO Comments: This is but one of many examples from this very revealing critique of the misinformation we have all been fed about the growing inequality of wealth in this country. It is disturbing that the sychophant media does such a miserable job validating these preposterous claims, or that a credentialed economist like Krugman would lend credibility to and perpetuate such bad information. But it is most disturbing that our political leaders have based their entire economic policy to correct a problem that may not even exist or is at least much less drastic than even they were led to believe.
Such ideologically blind commitment to beliefs and theories is more dangerous than mere ignorance. We have been materially misinformed about many problems in the political realm. Even, sometimes especially, the most educated are susceptible to believing what they want to hear. They jump at facts that confirm their beliefs but are slow at verifying the facts themselves.