U.S. income inequality doesn’t have to be the worst in the industrialized world

INCOME INEQUALITY, and the impact of President Trump’s policies on it, looms as a major issue in the 2020 presidential campaign. Fortunately, the nonpartisan Congressional Budget Office has just issued a report on U.S. income inequality through the end of 2016 — that is, about the time Mr. Trump assumed the presidency. Spoiler alert: The situation was improving slightly after eight years of Barack Obama’s presidency but might well have headed in the opposite direction since.

The CBO’s bottom line is that the nation’s progressive income tax system and means-tested benefit programs such as Medicaid (expanded via Obamacare) and nutritional assistance significantly counteracted the increasingly upwardly skewed distribution of income that the market alone delivered, via wages, salaries and investment earnings, between 1978 and 2016. Consequently, the U.S. Gini coefficient — a broad measure of income inequality in which 1.0 is the highest inequality score and 0.0 the lowest — stood at 0.42 at the end of 2016, after accounting for taxes and transfer payments. This was the highest Gini coefficient of any industrial democracy; it was slightly lower, though, than at the end of President George W. Bush’s term. Perhaps most important, the trend was downward, implying decreasing inequality as Mr. Obama left office.

Washington Post Op-Ed