Jim Tankersley of the Washington Post believes he has discovered “The Big Issue With Hillary Clinton Running Against Inequality”:

“Inequality got worse under Bill Clinton, not better. That’s true if you look at the share of American incomes going to the 1 percent, per economists Emmanuel Saez and Thomas Piketty. It’s also true when you look at the share of American wealth going to the super-super-rich, the top 0.1%, per research by Saez and Gabriel Zucman.”

What this actually reveals is the absurdity of (1) defining inequality solely by top 1% shares of pretax income less government benefits, and (2) judging any strong economic expansion as a failure because top 1% income shares always rise during strong economic expansions.

The graph uses the Congressional Budget Office estimates of top 1% shares, because (unlike Piketty and Saez) they include government benefits as income and subtract federal taxes. What it shows is that both affluence and poverty are normally highly cyclical. When the top 1 percent’s share of after-tax income jumped from 11.2% in 1996 to 15.2% in 2000, the poverty rate simultaneously dropped from 11% to 8.7%. Meanwhile, median income, after taxes and benefits, rose from $50,900 in 1993 to $61,400 by 2001, measured in 2011 dollars. 

Conversely, when the top 1% share fell from 16.7% in 2007 to about 12% in 2013 (my estimate), the poverty rate rose from 9.8% to 15%. If we adopt the egalitarians’ top 1% mantra, must we conclude that inequality “got better” lately as poverty got worse?

The income peak of 2000 is a tough act to beat, and few of us are ahead of it today — least of all the top 1%. The brief surge in top incomes of 2006–2007, like the related speculative surge in housing prices, proved unhealthy and unsustainable. But weak economic performance and high poverty in the past four years is no reason to dismiss the 3.7% average economic growth of 1983–2000 simply because such prolonged prosperity made more people rich.

Tankersley also asks us to “look at the share of American wealth going to the super-super-rich, the top 0.1%, per research by Saez and Gabriel Zucman.” As I’ve explained in The Wall Street Journal, however, the Saez-Zucman estimates misinterpret shrinking shares of capital gains and investment income still reported on individual tax returns, or shifted from the corporate tax to a pass-through firm, rather than (like most middle-class savings) sheltered in IRA, 529 and 401(k) plans.

It is easy to envision Republican partisans welcoming and adopting the Tankersley theme that Hillary Clinton should now be ashamed of the strong economy of 1996–2000 because “inequality got worse” as many new firms were created and stock prices soared. Yet whenever stocks crashed and the top 1% share fell (making inequality “better”?) the poverty rate rose and median incomes were flat or down.

Some Republican candidates have already alluded to the same pretax, pre-transfer “top 1%” figures to claim inequality worsened under Obama — meaning since 2009. According to Piketty and Saez, real average incomes of the top 1% were indeed higher in 2013 ($1,119,315) than in the crash of 2009 ($975,884). Before crashing below $1 million in 2009, though, top 1% incomes had been much higher in 2007 (the equivalent of $1,533, 064 in 2013 dollars) and in 2000 ($1,369,780). The rising tide has not lifted many small boats or big yachts since 2009, because the tide hasn’t risen much; higher tax rates in 2013 certainly didn’t help.

The trouble with Republicans using highly cyclical top 1% statistics as a political weapon against Democrats is that doing so requires capitulating to the divisive and dishonest leftist fallacy that poor people and middle-income people do best when the top 1% is doing badly.

The truth is that the poverty rate fell sharply and middle-incomes rose briskly in President Clinton’s second term, and the top 1% gladly reported more taxable income and paid more taxes as the tax on capital gains was cut from 28% to 20%. There is a lesson to be learned here, but it is not to denigrate the so-called rising inequality of the late 1990s.

Jason Furman, chairman of the Council of Economic Advisers, set out to explain “middle-class economics” in the Wall Street Journal, March 11, in an earlier Vox blog and in a presentation to National Association of Business Economists (NABE), as well as the first chapter of the Economic Report of The President. 

The intent is to make the recent economy look healthier (massaging 2.3–2.4 percent growth for 2013–14 into 2.7 percent), and to claim that “subpar” 2010–14 income gains for the middle class (generously defined as the bottom 90 percent) are not due to a subpar recovery but to something that has gone on ever since 1973. His Wall Street Journal article complains of “the decades-long trend of slower income growth for the middle class.”

Furman says, “Congressional Budget Office data (with a minor extrapolation) show, median U.S. incomes are up 17 percent since 1973.” Actually, CBO data start with 1979 and end with 2011, so it takes more than minor extrapolation to extend that back to 1973 or forward to 2013. CBO estimates show real after-tax median income rising from $45,400 in 1983 to $68,000 in 2008 (in 2011 dollars), but not yet back to the 2008 level by 2011. Making up a number for 1973 can’t undo stagnation after 2008. 

He continues: “But from 1948–73, median incomes rose 110 percent, according to broadly comparable Census estimates.” Yet the two series aren’t remotely comparable. Unlike pre-tax “money income” from the Census Bureau, the CBO subtracts federal taxes (middle-income tax rates were nearly cut in half since 1981) and includes rapidly increased health and other in-kind benefits from employers and government (Medicaid, SNAP, CHIP and housing allowances). 

Furman repeatedly sets up 1973 as the ideal, with productivity, incomes, and fairness all supposedly downhill after that. The reason this old trick is still so popular is that 1973 was the last year Nixon’s price controls appeared to keep the consumer price index artificially low – creating a brief artificial spurt in measured real wages and productivity. When price controls exploded in a wave of shortages, average weekly earnings (in 1982–84 dollars) dropped from $341.36 in 1973 to $314.77 in 1975, $308.74 in 1979, and $290.80 in 1980. A falling dollar and rising tax rates stimulated demand and discouraged supply, giving us two nasty episodes of “stagflation.” Amazingly, those trying to blame current discontents on the distant past continue to hold up 1973 or 1979 as ideals — idolizing the economics of Richard Nixon and Jimmy Carter. 

Furman writes, “In 1973 the bottom 90 percent of households received 68 percent of the nation’s income, a figure that has fallen to 53 percent today.” But because this is no measure of the nation’s income, Furman has no idea what the bottom 90 percent share has been. Instead of using any official measure of personal or household income, Furman is citing an untenable private estimate of income reported on tax returns –with income frequently redefined by changing tax laws. “From 1944 on,” Piketty and Saez explain (Table A0), “total income is defined as total Adjusted Gross Income less realized capital gains in AGI, taxable Social Security and Unemployment Insurance benefits, and adding back all adjustments to gross income. Income of non-filers is imputed as 20 percent of average income (50 percent in 1944–1945).” 

As I pointed out in a recent article and blog post, the data Furman cites report that the average real income of the bottom 90 percent was higher in 1968 than it was in 2013. Claiming to actually believe such preposterous data is a mark of unlimited gullibility or deception. 

In the State of the Union address on January 20, President Obama said, “those at the top have never done better… Inequality has deepened.” The following day, Fox News anchor Brett Baier said, “According to the work of Emmanuel Saez, a professor at the University of California, Berkeley, during the post-recession years of 2009–2012, top earners snagged a greater share of total income growth than during the boom years of 2002–2007. In other words, income inequality has become more pronounced since the Bush administration, not less.” 

Senator Bernie Sanders agrees that “in recent years, over 99 percent of all new income generated in the economy has gone to the top 1 percent.” And Senator Ted Cruz likewise confirmed that, “The top 1 percent under President Obama, the millionaires and billionaires that he constantly demagogued earned a higher share for our income than any year since 1928.” 

When any statistic is so politically useful and wildly popular among left-wing Democrats and right-wing Republicans you can be pretty sure it’s baloney. Bipartisan baloney.

In November 2013, I wrote that, “Because reported capital gains and bonuses were…shifted forward from 2013 to 2012 [to avoid higher tax rates], we can expect a sizable drop in the top 1 percent’s reported income when the 2013 estimates come out a year from now. The befuddled media will doubtless figure out some way to depict that drop as an increase.” As predicted, the New York Times took one look at a 14.9% drop in top 1% incomes and concluded that “The Gains from the Recovery are Still Limited to the Top One Percent” That involved slicing the same old baloney very badly.

Three weeks later, on until February 17, The New York Times finally made a modest gesture of repentance. In “Inequality Has Actually Not Risen Since the Financial Crisis,” David Leonhardt professed amazement at his own title. “How could that be?” This supposedly shocking revelation came from Stephen Rose, one of several liberal/​progressive economists who do not let a policy agenda cloud their judgment about data. 

“Fascinatingly,” writes Leonhardt, “Mr. Rose’s case is not based on a new or previously undiscovered data set. It’s based on the same statistics most commentators have been using to discuss inequality.” No kidding. On January 6, Gary Burtless of Brookings Institution wrote, “Since 2000 pre-tax and after-tax incomes have improved among Americans in the bottom 90% of the income distribution. Among Americans in the top 1% of the distribution, real incomes sank.” I had earlier displayed the same Piketty and Saez data shown in the nearby graph to make the same point.

All anyone ever had to do was look at the data shown in the graph, which shows average real income of the top 1% from Table A‑6 in Piketty and Saez. Top income spiked in 2012 to avoid the Obama tax increases, as I predicted, then fell 14.9% in 2013. I have averaged 2012 and 2013 as Saez requests, to gloss over any embarrassment. Even so, the 2012–2013 incomes of the top 1% were clearly much lower than in 2005–2007, and had not even climbed back to the previous peak of 1999–2000. 

Leonhardt just can’t bring himself to admit that top incomes have not only “not increased” but declined. Top 1% income in 2012–13 was down 20.6% since 2007 and down 11.2% since 2000. Anyone who claims to see a continuous upward trend in top 1% incomes isn’t looking at the right data. 

The U.S. job market has tightened by many measures — more advertised job openings, fewer claims for initial unemployment insurance, substantial reduction in long-term unemployment and the number of discouraged workers. Yet the percentage of working-age population that is either working or looking for work (the labor force participation rate) remains extremely low. This is a big problem, since projections of future economic growth are constructed by adding expected growth of productivity to growth of the labor force.

Why have so many people dropped out of the labor force? Since they’re not working (at least in the formal economy), how do they pay for things like food, rent and health care?

One explanation answers both questions: More people are relying on a variety of means-tested cash and in-kind benefits that are made available only on the condition that recipients report little or no earned income. Since qualification for one benefit often results in qualification for others, the effect can be equivalent to a high marginal tax rate on extra work (such as switching from a 20 to 40 hour workweek, or a spouse taking a job). Added labor income can often result in loss of multiple benefits, such as disability benefits, supplemental security income, the earned income tax credit, food stamps and Medicaid. 

This graph compares annual labor force participation rates with Congressional Budget Office data on means-tested federal benefits as a percent of GDP. The data appear consistent with work disincentives in federal transfer payments, labor tax rates and refundable tax credits.

Social Security Disability Insurance (SSDI) provides benefits to 11 million individuals, costing $140 billion annually. Its trust fund will become insolvent by 2016, so policymakers have little time to reform the system.

Funding is not the only issue facing the program. A new report from the Washington Post highlights the long list of disability cases waiting to be adjudicated.

Individuals apply to the Social Security Administration (SSA) to claim disability benefits. The file is reviewed by an administrator who makes an initial ruling, with 32 percent of applicants qualifying. Individuals who are denied can appeal the ruling. Eleven percent of appeals are approved for benefits. More than 633,000 individuals are waiting on initial claims with 170,000 waiting on appeal.

An individual’s second appeal goes to one of SSA’s 1,445 judges, whom are tasked with more than 990,000 individuals waiting on appeals. The average wait for a hearing is longer than a year.

The backlog for a hearing before an appeals judge is not new. It started during the Gerald Ford administration and SSA has never caught up. The agency tried various tactics to solve the problem, but nothing seemed to work.

Several years ago, the SSA tried a different approach. The SSA pressured judges to decide 500 cases annually, but that led to a different problem.

The Washington Post explained:

The problem was rooted in a flaw in the system. Judges complain that saying “yes” is a lot easier — and faster — than saying “no.” A negative decision often requires a lengthier write-up, which goes through all the different ailments that might have rendered this person disabled. That means 10 pages of text to prepare for a future appeal. A “yes” decision is rarely appealed. So, they say, it takes less writing.

“So, what happens when you’re pressed for time? You end up paying [approving] cases,” said Thomas Snook, a judge who has worked in the Miami office for 17 years and has been active in the judges union.

Snook is not the only judge that felt the pressure. The Washington Post notes “across the system, judges approved more than half of the cases they saw — up to 62 percent, according to Social Security’s figures. Congressional investigators found 92 judges were even more generous: They had been saying yes to 90 percent of their appeals.”

SSA acknowledged the incentives faced by judges and tweaked their requirements. The Washington Post said:

Today, Social Security officials seem to have backed off their push for faster decisions. They’ve now limited all judges to 720 cases a year and imposed new checks to make sure the “yes” decisions are as well thought-out as the “noes.”

Today, judges approve just 44 percent of cases, a marked decline. At the same time — even as the agency has hired dozens more judges — the backlog has reached its highest level in history. It increased by 13,000 people in the first half of this month alone.

SSDI blames the backlog on less funding over the last few years, last year’s government shutdown, and a large increase in applicants due to the weak economy. 

But with a backlog since 1975, there are much larger issues: SSDI is suffering from decades of missteps.

SSDI is ripe for reform and spending cuts. Good intentions from federal policymakers led to bureaucratic headaches and years of waiting. Slashing requirements and reorganizing the program will allow funds to be dedicated to the truly needy.

President Lyndon Johnson’s legacy was the so-called Great Society (read: entitlement programs). As these programs have matured, along with the U.S. population, the proportion of the people dependent on the State has soared. Indeed, spending on entitlement programs gobbles up bigger and bigger chunks of the federal budget.

As the population grows older, entitlements will grow. Worryingly, the ratio of people receiving government benefits to those paying taxes will continue to climb, too. As the accompanying chart shows, those who receive government goodies already number the same as those who pay taxes (the ratio is one). With the steady progression of the ratio, it will be very hard to put the genie of the Great Society back in the bottle. Can you just imagine how difficult it will be to cut entitlement programs when those who are dependent on the government outnumber taxpayers by two to one?

House Speaker John Boehner (R‑Ohio) has announced his intention to sue President Obama for “failure to faithfully follow the nation’s laws” by taking extra-legal executive actions in some areas and failing to execute the laws in other areas such as immigration, judicial appointments, health care, foreign affairs, and so on.

One area where he’s failing to execute the law is Social Security. For instance, the President and his leadership have repeatedly failed to publish on time the Annual Report of the Social Security Trustees, the yearly description of the program’s finances and future outlook. The legal deadline for its publication is April 1—see section 201 (c)(2) of the Social Security Act. We’re now more than three months past that deadline and there’s no indication that it will appear soon.

Social Security’s ex-officio trustees include the secretaries of the Treasury, Labor, and Health and Human Services, and the (currently acting) commissioner of the program. There are also two public trustees, nominated by the President and confirmed by the Senate. (The two public trustees may not be from the same political party.)

It’s well known that Social Security benefits comprise the largest share of income for a majority of retirees—incomes that they could not do without. So the Trustees’ Report is a crucial document. The information it contains is important to millions of stakeholders—retirees, disability beneficiaries and applicants, financial planners, workers nearing retirement, and others.

Policymakers need to know this information so they can make timely decisions intended to ensure that the program remains on a sound financial footing. For example, the 2013 Report (which didn’t appear until the end of May last year) estimated that the Disability Insurance (DI) Trust Fund will be exhausted and the program will be unable to pay full benefits at some point in 2016. Not much time remains for lawmakers to consider and enact sensible reforms to DI—and the clock is ticking.

No doubt, there could be valid reasons for publication delays. New information about the program’s financial status may not become available in a timely manner, and the development of new estimates using updated technical methods may take longer than anticipated. However, there are professional cadres of actuaries and economists dedicated to completing this task. They should, more often than not, anticipate such issues, and instances of publication delay should be the exception rather than the rule.

The table below notes the report’s publication dates during the Bill Clinton, George W. Bush, and Obama (to date) presidencies. It shows that the Obama administration has always been consistently and exceptionally late in issuing the report. In only one of the last six instances has Obama’s designees managed to get the report out within one month after the statutory deadline. In contrast, George W. Bush’s administration released five of its eight annual reports on time and always released the report within a month of the deadline; Bill Clinton released three of his eight reports on time and usually managed to issue the report within a month of the deadline. President Obama’s consistently tardy publication record is difficult to attribute to extenuating circumstances.

There are other instances of slippage by the Social Security Administration in executing the program’s laws faithfully. For instance, Reps. Darrell Issa (R‑Calif.), Jim Jordan (R‑Ohio), and James Lankford (R‑Okla.), senior members of the House Committee on Oversight and Government Reform, recently issued a stern letter to Social Security’s acting commissioner, Caroline Colvin, charging the agency with consistently failing to “confront the problems of rapidly rising disability rolls” and “abdicating its responsibility to protect the truly disabled and taxpayers from out-of-control ALJs (Administrative Law Judges) who refuse to follow the law.” This letter cites the report by the committee entitled, “Systemic Waste and Abuse at the Social Security Administration: How Rubber-Stamping Disability Judges Cost Hundreds of Billions of Taxpayer Dollars.”

Such failures are symptomatic of a failing presidency. Multiply the likelihood of poor compliance with the law across all government departments—you can be the judge on whether that’s happening—and President Obama’s historic low poll ratings (currently in the low 40s) seem surprisingly high. It brings to mind an important sound-bite from the 2008 presidential campaign: Hillary Clinton’s question about who would be more competent to answer a 3 AM phone call on a policy emergency. The White House phones must be ringing constantly, like church-bells.