INCOMES POLICIES HAVE THEIR EFFECTS.

If public moneys go to ameliorate poverty, does it not follow that a reckoning of the presence of poverty ought give due recognition to the role of those public moneys?  What follows will be lengthy and wonkish ...

One of the early reckonings, from 45 years ago, is Eugene Smolensky and Morgan Reynolds, "Post-Fisc Distributions of Income in 1950, 1961, and 1970," in Public Finance Review.  And, yes, if you are familiar with academic economics and the subsequent story arc of those authors, just like in a sea story, no s***, those two collaborated.

Distributions of income after allocating all government taxes and expenditures to households are compared over two decades. Extending prior work back an additional decade and adding extensive sensitivity analyses leave our earlier conclusions unaffected. Specifically, despite efforts towards a more egalitarian distribution and a sizable increase in benefits accruing to the low end of the distribution, aggregate income dispersion in final distributions changed very little between 1950 and 1970.

Despite all the talk about "tax cuts for the rich" and "neoliberalism" the story has changed since then.  Paul "Tax Prof" Caron has the story.  That post rated an Instalanche.

Differences in wealth and differences in income are the wrong ways to measure economic inequality, and going by either of them “dramatically overstates” the degree of inequality in the United States, a working paper argues.

The right measure of economic inequality is differences in spending power, says the paper U.S. Inequality and Fiscal Progressivity: An Intragenerational Accounting, which is by the economist Alan Auerbach of the University of California, Berkeley, the economist Laurence Kotlikoff of Boston University and the software developer Darryl Koehler of Economic Security Planning.

The link to the paper hints at a submission or perhaps an acceptance by Journal of Political Economy, not a bad outlet for a research paper.

The findings, particularly the third point, suggest that transfers matter.

First, inequality in income and, especially, wealth dramatically overstates inequality in spending power. For example, the richest 1 percent of 40-49 year-olds own 29.1 percent of their cohort’s net wealth, but account for only 11.8 percent of its remaining lifetime spending power (LSP). This cohort’s poorest quintile owns just 0.4 percent of the cohort’s wealth, but has 6.6 percent of cohort LSP. Among 20-29 year olds, whose expected human wealth is less dispersed, these discrepancies are even more dramatic. The richest 1 percent have 68.2 of the wealth, but only 9.7 percent of the spending power. The bottom quintile has slightly negative wealth, but 8.3 percent of spending power.

Second, inequality in current-spending-power (CSP)—spending in the current year arising under the household’s possibly constrained consumptionsmoothing plan—differs from LSP, sometimes importantly, due to credit constraints, in-kind government benefits, and other factors.

Third, the U.S. fiscal system is highly progressive once cohorts are old enough to have highly dispersed human wealth. Consider the bottom quintile of 40-49 year-olds. Their lifetime net tax rate (lifetime net taxes divided by lifetime resources) is substantially negative, -44.4 percent, while that of the top 1 percent in the same cohort is 34.7.

Fourth, households’ rankings based on current income can differ substantially from their ranking based on lifetime resources.

Fifth, current-year net tax rates substantially understate fiscal progressivity and, as our analysis of the 2017 Tax Cuts and Jobs Act shows, can significantly misstate a fiscal reform’s fairness.

Students of political economy have long understood the point: those Heritage Foundation studies over the years noting the prevalence of color televisions or refrigerators or air conditioning in the poorer quarters recognize the presence of transfer payments in making those purchases possible.

Whether the incomes policies are good as they are, or whether there is more to be done, gets us into the world of the normative.  For the good as they are, there's the Cato Institute.  That story was nailed to Newmark's Door.

The Census Bureau does not count two‐thirds of government subsidies to households (called transfer payments) as income or any taxes taken as reductions to income, so it overstates both income inequality and poverty. Counting all subsidies and taxes shows that income inequality is far less than claimed and continuing to fall.

These overstatements have justified higher subsidies to lower‐income households, which in turn have caused twice as many work‐age adults in lower‐income households to stop working.

By not counting two‐thirds of all transfer payments as income to the recipients of the transfers and not counting taxes paid as income lost to taxpayers, government statistics dramatically overstate income inequality.

Income inequality is lower today than it was three‐quarters of a century ago. The facts reveal a very different and better America than the one currently described in debates across much of the political spectrum.

That's a policy shop attempt to get at what my one-time professors described as "post fisc" distributions.

Whether the calculations are accurate or not, whether public policy reduces poverty, there are still people who will advocate for more to be done.

This is not to minimize the gains we've made. They just remind us that poverty is a policy choice—and fortunately, we can make different choices.

In 2020, there were over 80 million eligible poor and low-income voters. Fifty million of them voted in the presidential contest, accounting for a third of the electorate overall and even higher percentages in key states in the Midwest and South.

These voters share a common interest in securing healthcare, living wages, decent housing, and safe schools for their kids. If they could be organized to take action together—across race, religion, and other lines of division—we could advance the moral policies we need to fully address poverty.

"What's hurting me in Kentucky is hurting you in Alabama, in West Virginia, and across the nation," said Tayna Fogle, a leader in the Kentucky Poor People's Campaign, earlier this year.

"Can you imagine all the poor and the low-income people coming to the ballot box?" she asked. "What if we did everything we could to make sure that our vote counted? We could overturn this madness that's going on."

If poor people vote in the midterms like they did in 2020, we could make another leap towards ending the madness of widespread poverty in the midst of plenty.

Somewhere Burke, or is it Tocqueville, is nodding: and there might be more than one way to lower the prices of health care or housing, or secure safe schools, as well as more than one concept of morality.