Rich Lowry

If you don't yet believe that we live in a de facto caste system, just wait until the new Democratic economic populists take over Congress. They will rely on the usual myths to portray the American economy as an engine of inequity and dispossession, benefiting only the very rich.

In advance of this onslaught, Cato Institute scholar Alan Reynolds has written a new book, "Income and Wealth," that explodes much of the downbeat economic conventional wisdom.

The key difference between the richest and poorest households, Reynolds finds, is simply work: "Most income in the top fifth of households is from two or more people working full time. Most income in the bottom fifth is from government transfer payments." According to the Census Bureau, there are almost six times as many full-time workers in the top households as in the bottom, and 56.4 percent of the bottom households didn't have anyone working at all in 2004.

For Reynolds, the small number of workers in poor households casts doubt on the category of the "working poor." A member of the working poor is commonly defined as someone earning an hourly wage too small to support a family of four. But Reynolds points out that most of these low-wage workers "are not supporting more than one person." He notes that the poverty rate among married couples was just 5.4 percent in 2003, and a mere 2.6 percent among full-time, year-round workers more than 16 years of age.

"The vanishing middle class" is another concept Reynolds doesn't buy. If the middle class is perpetually defined as those earning between $35,000 and $50,000, it will constantly vanish as people get richer. In this vein, one liberal study complained that 31.3 percent of families earned more than $75,000 in 2002, whereas only 11.1 percent earned that much in 1969. "By this measure," it concluded, "America's broad middle class has been shrinking." No, members of the middle class were getting richer.

This isn't supposed to happen, according to the oft-cited datum that the wages of American workers have been stagnant since 1973. This isn't true. "Average real wages and benefits have risen by nearly 40 percent since 1973, after adjusting for inflation," Reynolds writes. U.S. consumers spent $25,816 per person in 2004, almost double the amount spent in 1973. Who is doing all the consuming if American workers are exactly where they were 30 years ago?

Rich Lowry

Rich Lowry is author of Legacy: Paying the Price for the Clinton Years .
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