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# Posted 6:58 PM by Ariel David Adesnik

INEQUALITY VS. POVERTY: Responding to my initial post about inequality, DP writes that

The real question is: How poor is America willing to let its least fortunate be?...Those that advocate assistance to the poor are in essence trying to raise the standard of living for the poor to some minimum standard...

If the poor already had [this minimum], would we be worrying about the poor at all? Would we care how wealthy the rich are? It seems to me that complaints like Kevin's are not precisely about the wealthy are making so much more money than everyone else, but that they are doing so while the poor have an inadequate standard of living.

I agree that our objective should be to establish a minimum standard of living rather than a minimum share of income growth. At the same time, we have to recognize that what we consider a minimally acceptable standard of living rises over time. Fifty years ago, it was acceptable to live without a washing machine, a television, or a computer. Now it isn't.

That aside there are some reasons to think that the inequality situation isn't as bad as Kevin makes it out to be. CS points out that according to the Census data Kevin cites

"The official income estimates in this report are based solely on money income before taxes and do not include the value of employment-based fringe beneifts nor of gevernement-provided noncash benefits, such as food stamps, Medicare, Medicaid, and public or subsidized housing."

In other words, Kevin's data provide no indication of the degree to which major government programs have actually mitigated extant inequality. While it's fair to say we should be doing more for the poor, especially in terms of education (remember the President's campaign promise?), one has start by establishing exactly how much the government does for them already.

JV adds that if the top 5% of American households earned $687 billion more than they "should have", much of that $687 will be sent to Washington as taxes, since -- contrary to popular myth -- the rich pay much more in taxes than the poor. (JV kindly provides a link to this page on the Cato Insitute website which has the hard data she is working with.)

On the other hand, if that growth were proportionately distributed in the first place, we wouldn't need the government to collect taxes and redistribute them!

Moving on, JAT writes in to emphasize just how much the changing nature of the family has contributed to inequality. As he says,

Remember, households aren't people. There are two major, major changes
that have occurred in household structure, especially in the last twenty years:

1) Increase in women's participation in the workforce, especially at the upper income ranges, and

2) Increase in divorces, single motherhood (and fatherhood), and a later age of first marriage.

You discussed the first, let's also consider the second. For background, here's the census data on household structure.

Consider the following [initial] situation:

Household A - married couple, making a total of $100,000
Household B - married couple, both making $50,000 [Total: $100,000]

No household income inequality. The top 50% of households make 50% of the
income.

After a divorce in Household B:

Household A - married couple, making $100,000
Household B - single man, making $50,000
Household C - single woman, making $50,000

Now only the top 33% of households make 50% of the income. Much more income inequality!

See the problem? Of course, this is a simplification. But economists and demographers can tell you that, given various societal trends, income inequality as measured by households was bound to increase in the last twenty years.

All these seem like good points to me. But to paraphrase Donald Rumsfeld, I don't even know what I don't know about economics. I sense that the arguments made above are just the tip of the iceberg.

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