The bottom 90 percent of people got utterly hosed in the Great Recession

The bottom 90 percent of people got utterly hosed in the Great Recession

It's obvious by now that America's economy is not working as advertised. Previously I posted this now-infamous chart by Pavlina Tcherneva laying out the pre-tax distribution of income during postwar economic expansions, showing a steady deterioration in the position of the bottom 90 percent of people, and a corresponding advance of the top 10 percent.

Of course, that's a fairly narrow window of data, and Scott Winship quibbled mightily with the conclusions, arguing that if you take taxes and transfers into account, and exclude capital gains, and look at the full business cycle, then the chart isn't so alarming. But Tcherneva has responded herself, arguing that in one of his charts, Winship was inappropriately double counting years:

I examine periods from peak year to peak year, but I do not double report peak years. Instead, I take the year after a peak to the actual subsequent peak year. For example, looking at the Piketty-Saez spreadsheet, the year 1988 was a peak year for average income, it then started declining in 1989, 1990, and all the way until 1996, when it began gradually recovering culminating in another peak income year in 2000. [New Economic Perspectives]

So by including the whole business cycle, and not just economic expansions, she produced this chart:

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It does change the smoothness of the expansions-only trend somewhat, but it also tells us the Great Recession was and continues to be absolutely terrible for the bottom 90 percent. The main takeaway from this debate, however, is that (as even Winship admits) income inequality has increased dramatically, and is only getting worse.

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Ryan Cooper

Ryan Cooper is a national correspondent at TheWeek.com. His work has appeared in the Washington Monthly, The New Republic, and the Washington Post.