Inequality Statistics and Poverty Facts

James Banks /

“Facts are stubborn things,” wrote Mark Twain, “but statistics are more pliable.” Jonathan Alter amply demonstrates this truism in last weekend’s New York Times Book Review. In regard to income inequality—a perennial favorite among the media and liberals—he opines:

Over the last three decades, the top 1 percent of the country has received 36 percent of all the gains in household incomes; 1 percent got more than a third of the upside. And the top one-tenth of 1 percent acquired much more of the nation’s increased wealth during those years than the bottom 60 percent did. That’s roughly 300,000 super-rich people with a bigger slice of the pie than 180 million Americans. The collapse of the American middle class and the huge transfer of wealth to the already wealthy is the biggest domestic story of our time and a proper focus of liberal energy.

This interpretation of income inequality statistics grossly misrepresents the true data. As The Heritage Foundation’s research on the subject reveals, income inequality in the United States is frequently overstated. Conventional measurements of income inequality do not include the impact of taxes on the wealthy and the middle class; the value of realized capital gains; the value of welfare benefits such as food stamps, public housing, the school lunch program, and the earned income tax credit; the value of employee health benefits; and insurance values of Medicaid and Medicare benefits.

Alter goes on to claim that income inequalities are “the result of politics and policies” that can “be tilted back over time.” It is true that government policies can increase poverty, but this is probably not what Alter has in mind. Government has contributed to inequality through its social welfare policies rather than its economic deregulation.

In America, a primary cause of child poverty is family breakdown. Today, four out of ten children is born outside of marriage. Sadly, children of single-parent families are seven times more likely to be exposed to poverty than peers in intact families. If unwed mothers married the fathers of their children, their likelihood of living poverty would be reduced by two-thirds.

In this regard, government policies have only worsened problems, penalizing marriage and incentivizing perverse behavior. The Heritage Foundation has set forth the foundations of a new policy to restore the institution of marriage. Hopefully, the nation’s leaders will take note, because poverty growth resulting from out-of-wedlock births is not just a statistic; it is a fact that becomes less tractable every year.

James Banks is currently a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm