A correspondent writes:
Here is Chait's Alan Reynolds profile from January of this year in its full glory:
Boy, is he shrill!
Flat-Earth economics.
If there is one trend in American life that most irks economic conservatives, it is probably rising inequality. It's not the inequality itself that bothers them, as most will happily admit. It is the perception of inequality and, worse, the constant discussion ofinequality that is so irritating. It offends their view of capitalism, helps justify all sorts of nefarious government interventions, and makes the conservative economic agenda (most of which tends toincrease inequality) appear unfair. They would very much like for itnot to be true. Failing that, they would like for the public not tobelieve that it's true--or, at the very least, not to be sure whetherit is true or not. This is where Alan Reynolds comes in.
A manager at J.C. Penney who attended graduate school at night, Reynolds was plucked from obscurity by William F. Buckley in the 1960s after writing a few pieces for The National Review. (He's still "acouple of classes" short of his masters degree in economics.) He later went to the conservative Hudson Institute and from there made his wayto the Cato Institute, where he is now a senior fellow. From this perch, and as a syndicated columnist, Reynolds offers up conventionals upply-side economic views; but his specialty is denying that incomeinequality has grown. He has been at this task for almost two decades,and, as the economic consensus that inequality is increasing has grownstronger and stronger, so, too, has his importance to the right.
Reynolds's crucial role within the conservative movement was on fulldisplay at a packed-house Cato forum last week in which he defended a paper--titled "Has U.S. Income Inequality Really Increased?"--hep ublished earlier this month and summarized in a much-discussed WallStreet Journal op-ed. Reynolds was introduced by Chris Edwards, the director of tax policy studies at Cato, who began by noting that it is a matter of opinion whether income inequality matters at all. (In hisopinion, it doesn't.) Nonetheless, he suggested, "Economists andreporters need to be extremely careful in looking at trends in incomestatistics over time. All sources of income data have various quirks and shortcomings." In other words, conservatives aren't sure whetherinequality is rising, and they don't really care if it is. Theirprimary concern is that newspapers treat the question as a matter ofdispute rather than a settled fact.
If this sounds like the conservative stance on global warming orevolution, it shouldn't come as a surprise. Like those two issues, theexistence of rising inequality is beyond dispute among academics whostudy it. This applies even to conservative economists with strongRepublican pedigrees. (Harvard economist and former Reagan adviserMartin Feldstein: "There has no doubt been a relatively greaterincrease in higher incomes in recent years in the United States."Columbia's R. Glenn Hubbard, a Bush alum: "We have an issue withemerging inequality in the country.") And so the ambition of the conservative counterestablishment in these areas is not to overturn the scholarly consensus but simply to make the topic appear socomplicated that laypeople and the press don't know what to believe.
And the science of measuring inequality, like most sciences, issubject to complicating details. The traditional method of measuringinequality has been to examine data from the Census Bureau. Unfortunately, census data isn't very good at detecting shifts amongthe uppermost slice of the very rich, because it has historically grouped high incomes into broad categories--say, over $999,999. So, in the last few years, economists Thomas Piketty of the École NormaleSupérieure and Emmanuel Saez of the University of California,Berkeley, have started looking instead at tax returns, which haveshown explosive income growth among the top 1 percent of tax-filers compared with everyone else. Last spring, they published a paper titled "The Evolution of Top Incomes: A Historical and International Perspective," which offered some startling findings: Since 1980, theshare of income accruing to the highest-earning 1 percent of U.S. taxreturns doubled, the share of the top one-tenth of 1 percent tripled,and the share of the top one-hundredth of 1 percent quadrupled. Theirresearch was widely quoted in places like The Economist and The WallStreet Journal. Greg Mankiw, a former Bush economist, has called thestudy "very solid empirical work."
That was Reynolds's cue to spring into action. In his Journal op-ed,Reynolds lists a series of potential flaws in the Piketty-Saez data.Most of the complaints are simply picayune details. He writes, forinstance, that "not everyone files a tax return, not all income istaxable (e.g., municipal bonds), and not every taxpayer tells thecomplete truth about his or her income." All these points are trueenough. But is there any reason to think they would change the overallpicture very much? Not really, unless you think undeclared earningsand municipal bonds are a huge and growing share of our income andthat the rich are substantially less likely than the rest of us tocheat on their taxes or own municipal bonds.>
And some of Reynolds's critiques are simply mistaken. For example, heargues that Piketty and Saez's data does not account for the massiverise of tax-sheltered pensions, such as 401(k) plans, which are"invisible in tax return data." Because 401(k) plans are now commonamong middle-class earners, tax returns miss a huge source of theirwealth and thus make them look misleadingly poor. This sounds sensibleenough, but it is wrong on several levels. 401(k)s didn't just appearout of nowhere; they mostly replaced defined benefit pensions. And,like the old pensions, 401(k)s do appear on tax returns when theaccounts are withdrawn. On top of that, economists think most tax-favored assets are concentrated in the hands of the rich anyway, so,even if Reynolds were right about tax returns, it would very likelymake inequality look even worse.
But whether the missing data would make inequality look worse orbetter is really beside the point. Reynolds's role is merely to pointout that the data is imperfect. The skeptic challenging the expertconsensus must be fluent enough in the language of the experts tonibble away at their data. (The evolution skeptic can find holes inthe fossil record; the global-warming skeptic can find periods ofglobal cooling.) But he need not--indeed, he must not--be fluentenough to assimilate all the data himself into a coherent alternativeexplanation. His point is that the truth is unknowable.
You might suppose that somebody in Reynolds's position would do everything he could to mask his own ideological preferences in order to lend credibility to his research. But Reynolds is completely upfront about his beliefs, which are on display in the weekly op-edcolumns he churns out. He is a libertarian conservative of the"taxation is theft" variety. "Aside from government subsidies andtransfer payments, income is not 'distributed' at all," he wrote lastyear in a typical passage. "Most income is either earned or stolen. Ifsome group's income was earned by legitimate means, then it is theirincome, not 'ours.'" (So, for instance, if a soldier loses his legs inbattle and is forced to subsist on disability checks from thegovernment, his income is stolen. If, on the other hand, a wealthyheir hires an economist to crank out tracts persuading the public toprotect his fortune from taxation, that economist's income is earned.)
This is not a slip-up. Introducing ideology into a debate is one ofthe think-tank hack's strongest weapons. It demystifies a complicatedissue, moving it from the realm of science into the realm of politics.The think-tank hack confesses he has his biases but then claims thathis opponents in academia or government do, too. Evolution is thesecularist science establishment's campaign to discredit religion;global warming is being pushed by regulators who would gain enormouspower from new pollution controls; et cetera.
Since the goal is not winning these debates but merely achievingsymmetry, the hack's most effective technique can be taking theaccusation that would seem to apply to him and hurling it at hisopponents. "The politically correct yet factually incorrect claim thatthe top 1 [percent] earns 16 [percent] of personal income appears tofill a psychological rather than logical need," Reynolds writes in theJournal. "Some economists seem ready and willing to supply whatever isdemanded." So, while you might think Reynolds is a hack mining thedata for results that would conform to his political preferences, hehas already made the same charge against the other side. Who can tellwho's right?