The Gini Index

If a Tea Partyer tries to tell you that America is heading toward socialism, you can answer them with two words: “Gini index.”

Gini index
Source: U.S. Census Bureau (PDF) [Note: the 2-point jump in 1992 was due to a change in how the index is calculated]

The Gini coefficient is a measure of statistical dispersion developed by Corrado Gini, an Italian statistician, in 1912. Income equality is often measured by the national Gini index (the Gini coefficient multiplied by 100). The Gini index is a number between 0 and 100, where 0 represents perfect equality (where everyone has the same income) and 100 represents perfect inequality (where one person has all the income, and everyone else has zero income).

The Gini index for the United States has trended upward since 1968, from 38.6 to 46.6 (for 2008, the latest figure available). If the current trend continues, the United States will likely reach a Gini index of 54.6 by 2043. This is equivalent to Mexico in the year 2000. Mexico is not known for having a large, prosperous middle class.

If this trend continues, the American middle class will be a thing of the past – within the lifetime of most Americans living today. Many of the younger Boomer generation, for example, those born between 1960 and 1964, will still be around.

Income inequality varies by state. Interestingly enough New York (49.5) scores about the same as Costa Rica, while Utah (41.0) is equivalent to Russia.

Slate’s Timothy Noah:

Why don’t Americans pay more attention to growing income disparity? One reason may be our enduring belief in social mobility. Economic inequality is less troubling if you live in a country where any child, no matter how humble his or her origins, can grow up to be president. In a survey of 27 nations conducted from 1998 to 2001, the country where the highest proportion agreed with the statement “people are rewarded for intelligence and skill” was, of course, the United States. (69 percent). But when it comes to real as opposed to imagined social mobility, surveys find less in the United States than in much of (what we consider) the class-bound Old World. France, Germany, Sweden, Denmark, Spain—not to mention some newer nations like Canada and Australia—are all places where your chances of rising from the bottom are better…

All my life I’ve heard Latin America described as a failed society (or collection of failed societies) because of its grotesque maldistribution of wealth. Peasants in rags beg for food outside the high walls of opulent villas, and so on. But according to the Central Intelligence Agency (whose patriotism I hesitate to question), income distribution in the United States is more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador. Income inequality is actually declining in Latin America even as it continues to increase in the United States. Economically speaking, the richest nation on earth is starting to resemble a banana republic.

UPDATE: DailyKos: 1/10 0f 1% has 11% of income.

UPDATE:
The Census has released numbers for 2009 showing a record gap between rich and poor. The Gini Index reached a new high, 46.8.

  1. #1 by Glenden Brown on September 13, 2010 - 4:23 pm

    The kind of inequality this represents is tough for people to wrap their heads around; the effect is cumulative, subtle, pervasive. It is largely invisible.

    Brad DeLong wrote a pretty thorough take down of the neo-liberal economic order that has led to this state of affairs in his book The End of Influence.

  2. #2 by brewski on September 13, 2010 - 4:44 pm

    Richard,
    Let me get this straight:
    1. You and the radical left are in favor of having most of Mexico and the rest of the third world move here
    2. You and the radical left are genuinely surprised that we are becoming just like Mexico and the rest of the third world
    3. You don’t see the connection between 1 and 2.

  3. #3 by James Farmer on September 13, 2010 - 8:02 pm

    brew:

    Yet again, your comments suggest you could care less about your own self-interest, to the benefit of the rich and famous. You need to get your priorities in order, dude! Start thinking about your family rather than your outdated political leanings, all of which have been debunked over and again.

  4. #4 by Richard Warnick on September 13, 2010 - 9:12 pm

    brewski–

    I don’t know where you get your information about the “radical left,” but I can guess. FYI I was a registered Republican until this year. I don’t believe progressive policy proposals would result in more immigration than we have currently, and probably won’t happen anyway. We do know that NAFTA and corporate-friendly measures supported by both major political parties sent a lot of middle-class jobs to other countries.

    I would be interested in how the right-wing proposes to put the Gini back in the bottle. Will more tax cuts for the rich do the trick?

  5. #5 by Larry Bergan on September 14, 2010 - 1:38 am

    Holy Moly!

    So Georgia, Massachusetts, South Carolina’s index is equal to Mexico, and Utah is worse off then any of those three?

    No wonder Utah has more jobs then some of the other states.

    If Mitt Romney gets to be president, maybe Utah can move up to where Massachusetts is, huh?

    No thanks!

  6. #6 by Larry Bergan on September 14, 2010 - 1:52 am

    This is why I get so angry and say things I shouldn’t say to bloggers with no names who post here. They are smarter then I am but don’t give a hoot about the fact we are sinking.

    I just don’t get it!

  7. #7 by Larry Bergan on September 14, 2010 - 2:05 am

    It always makes us feel better to look down on the other poor bastard who is worse off then we are.

    According to this index, Utah IS the other poor, dumb, bastard.

    VOTE IN SECRET ON THE MACHINES! VOTE REPUBLICAN, UTAH! :)

  8. #8 by Richard Warnick on September 14, 2010 - 8:44 am

    Utah has the least income inequality (Gini 41.0, equivalent to Russia), and New York has the most (Gini 49.5, equivalent to Costa Rica).

    I don’t know why, could have something to do with demographics or that fact that lots of big corporations and their CEOs are headquartered in New York.

  9. #9 by Larry Bergan on September 14, 2010 - 9:58 am

    I hate charts!

  10. #10 by cav on September 14, 2010 - 1:40 pm

    Lar, you need a delectible banana cream pie-chart, as only United Fruit Corporation can provide. Chased, of course with a nice cuppa tea.

  11. #11 by Larry bergan on September 14, 2010 - 4:49 pm

    cav:

    You got it.

    I need some rest!

    No more charts or graphs.

  12. #12 by brewski on September 14, 2010 - 5:12 pm

    Will more tax cuts for the rich do the trick?

    You know my ideas on taxes. I have stated them many times. So why did you ask a dumb question like that?

  13. #13 by Richard Warnick on September 14, 2010 - 10:12 pm

    I’m just curious if the right-wing Republican agenda contains any realistic proposals to address the rising tide of income inequality. Details about what the Republicans would do if they regain control of Congress next year are hard to come by.

  14. #14 by shane on September 15, 2010 - 4:20 pm

    brewski :

    Will more tax cuts for the rich do the trick?

    You know my ideas on taxes. I have stated them many times. So why did you ask a dumb question like that?

    Maybe because so many facts state that your ideas on taxes make things worse, and he is hoping you have changed your mind?

  15. #15 by brewski on September 15, 2010 - 9:47 pm

    Shane, give me evidence as to the “facts” that “state that my ideas on taxes woud make things worse.”

    So you mean a tax code like Norway’s with a 28% top marginal rate has hurt them so much? That with a 28% top marginal rate and a Gini index among the lowest in the world? Far far lower than the US’s.

    You have no evidence. All you have is your opinion and your deep feelings. You don’t worry about things like facts so don’t use words you don’t know what they mean.

  16. #16 by shane on September 15, 2010 - 10:01 pm

    brewski, did you read the article you are posting under?

    President Clinton raised taxes on the rich and conservatives claimed it would destroy the economy. But after the tax increases the economy was great, millions of jobs were created and the huge Reagan/Bush I budget deficits (caused by tax cuts and military spending increases) turned into surpluses. Here are some charts that show deficits and jobs following Clinton’s tax increases. First compare job growth after Clinton’s tax increases and Bush’s tax cuts:

    http://farm5.static.flickr.com/4131/4970768767_f97117bf44.jpg

    It’s obvious. Right in front of our faces. Tax increases did not slow the economy or cost jobs, and tax cuts did not create jobs. This next chart shows how the budget went from deficit to surplus after Clinton’s tax increases and then, after ‘W’s tax cuts, to massive, huge, incredible deficits:

    http://farm5.static.flickr.com/4149/4970686649_d727ff00fe.jpg

    It’s obvious, right in front of our faces. So how do they distract from that? Well, they just lie!
    Conservatives explain the huge 2009 $1.4 trillion Bush budget deficit by just saying it’s Obama’s. Have you heard that “Obama tripled the deficit”? Look at “Obama’s Deficit in Pictures” from Heritage Foundation, claiming Obama has “quadrupled the deficit with his stimulus package”.

    Or…

    No serious person denies that Reagan’s 1981 tax cuts and military increases threw the country into a pattern of borrowing and borrowing that we have not escaped. When Reagan took office the national debt was $995 billion. When Reagan left office it was $2.87 trillion and climbing fast.
    No serious person denies that Bush’s 2001 tax cuts and continued military increases dramatically worsened the problem. Bush’s last budget year ended with a record single-year deficit of $1.4 trillion.
    As the country discusses what to do about the borrowing the elephant in the room is that everyone understands that restoring top tax rates to pre-Reagan levels and cutting the military budget in half would solve the problem completely. But we can’t do that. We can’t even discuss it.
    And we all know why. And we all know why. It is because the Reagan Revolution transformed the country from a democracy to a plutocracy — a country run by and for the wealthy.
    Such sensible and simple ideas are considered off-limits. To even bring up the idea of restoring tax rates to pre-Reagan levels and cutting military spending invites terrible consequences. The speaker risks becoming the target of the money’s noise machine: Limbaugh, Hannity, Drudge, Fox. Smears. Humiliation. Banishment. Or the noise machine cranks up a campaign of misinformation, convincing people –especially DC people — that what they see in front of their eyes just isn’t so. Repeat it enough and it becomes solid knowledge.
    We all know this is the way it is. So don’t tell me that “we don’t have the money” to keep 300,000 teachers from being laid off, or to help the long-term, mostly older unemployed workers get something to live on and keep their health care. The money is right there in front of us, but the Congress is bought and paid for.

    Frankly, coming from you, “don’t worry about things like facts so don’t use words you don’t know what they mean” is pretty damn funny. The only more fact free zone on this blog is inside the head of he who cannot be named.

  17. #17 by brewski on September 15, 2010 - 10:17 pm

    So I guess the fact of Norway’s 28% top marginal tax rate and a much much much lower Gini index is just an “inconvenient truth” to you.

    The second half of the Clinton era was largley a bubble which was created by Alan Greenspan. It was based on too easy money, “irratational exuberabance” and a divided Congress which shut down the government rather than spend will-nilly. The surpluses were partially attributable to extra tax receipts on capital gains created by the asset bubble, which crashed and burned like a balsa-wood Pinto 10 months before Clinton left office.

    So again , I ask you, support your own assertion, how would Norway’s tax code make things worse in the US. It is your statement so you need to back it up…or shut up and apologize.

  18. #18 by Larry bergan on September 15, 2010 - 10:42 pm

    You can’t always look to the tax rates brewski. Some businesses find enough loop holes to actually get a negative tax rate. I heard it on NPR last week.

  19. #19 by brewski on September 16, 2010 - 1:39 pm

    Larry, yes they do.

    That has nothing to do whether Norway’s tax structure “would make things worse” as Shane asserted with no evidence of any kind.

  20. #20 by James Farmer on September 16, 2010 - 3:21 pm

    So again , I ask you, support your own assertion, how would Norway’s tax code make things worse in the US.

    Because we cannot afford the low marginal rate. Further, Norway doesn’t have two unfunded wars to fight, thanks to GWB, the Worst President Ever!

  21. #21 by Richard Warnick on September 16, 2010 - 4:24 pm

    brewski–

    Since you seem to agree that a rising Gini index is bad for America, can you answer my question? What does the right-wing have to offer that can solve the problem? Not in Norway, but in the USA. Norway has a value-added tax (VAT).

  22. #22 by James Farmer on September 16, 2010 - 4:48 pm

    What does the right-wing have to offer that can solve the problem?

    brew:

    You are joking, right?

  23. #23 by brewski on September 17, 2010 - 11:46 am

    Because we cannot afford the low marginal rate.

    Yes we can if we:
    1. Expand the universe of income which is taxable, thus applying a lower rate on a much larger pool of income
    2. Eliminate all deductions
    3. Eliminate all corporate welfare in the tax code
    4. Eliminate all sorts of wasteful subsidies (remember the “line by line” promise?)
    Examples: Agribusiness $25B, Energy subsidies $20B, Housing subsidies $45B, Federal subsidies of local transportation projects $85B, Federal subsidies of local education $40B
    5. Tax pollution heavily (coal, gasoline, methane)

  24. #24 by Richard Warnick on September 17, 2010 - 12:53 pm

    The DOD budget request for 2011 is $721.3 billion, more than the combined military budgets of every other nation in the world. It does not include emergency supplementals for the wars.

    How’s this for wasteful spending?

    1. F-35 Joint Strike Fighter ($323 billion)
    2. Ballistic missile defense (more than $100 billion)
    3. Virginia class submarine ($50.4 billion)
    4. V-22 Osprey ($27 billion)
    5. Carrier Replacement Program (more than $95 billion)

  25. #25 by brewski on September 17, 2010 - 1:52 pm

    Also good ideas.

  26. #26 by James Farmer on September 17, 2010 - 2:34 pm

    1. Expand the universe of income which is taxable, thus applying a lower rate on a much larger pool of income
    2. Eliminate all deductions
    3. Eliminate all corporate welfare in the tax code

    brew:

    Your teabagging brethren would call these steps tax increases; better watch your back at the next bagger rally!

  27. #27 by brewski on September 17, 2010 - 2:55 pm

    Jimbo,
    All these can be designed to be tax neutral.

  28. #28 by Ronald D. Hunt on September 17, 2010 - 3:44 pm

    “All these can be designed to be tax neutral.”

    Except to those that receive those deductions, for them it would be a huge increase.

    And Trust me attacking the tax benefits of all of the rural farm States, Coal States, and oil States is a recipe for electoral suicide, Especially for republicans who largely make up the power base of those States.

  29. #29 by brewski on September 17, 2010 - 4:38 pm

    Ron,
    It could be revenue neutral as a whole, so some people would end up paying more and some people would end up paying less. A lot of those people who receive those deductions today might benefit also from the lower marginal rate and the large standard deduction, as I have explained before. Also, at some point, if we are going to fix our problems we need to get away from the holding onto our little group gimme benefit and think about the big picture.

  30. #30 by James Farmer on September 17, 2010 - 6:14 pm

    Also, at some point, if we are going to fix our problems we need to get away from the holding onto our little group gimme benefit and think about the big picture.

    I say we start with the top 2% on income earners; strip them of their little group gimme benefits (e.g., tax loopholes) and make them pay their fair share. We can start with letting the Bush tax holiday expire for these folks. Ten years is about long enough!

  31. #31 by Ronald D. Hunt on September 17, 2010 - 7:19 pm

    “It could be revenue neutral as a whole”

    I am not arguing that, I would love to see an end to our Neo Liberal taxation system.

    “Also, at some point, if we are going to fix our problems we need to get away from the holding onto our little group gimme benefit and think about the big picture.”

    Our politicians campaigns are funded by the people receiving those “little group gimme benefits”. We won’t get better tax policy until we fix the campaign system.

    And if we get to that point we also need to figure out how we are going to direct industrial and agricultural policy without deductions and subsides. The biggest problem with the whole dump the benefits and let the market do its thing idea is that we are the sole and only country that will do it. With the onslaught of sovereign equity funds, other countries engaging in disproportional industrial and agricultural policy, countries that treat human life as expendable, or countries that run on alternative economic systems that put us at a huge disadvantage.

    China has no income tax or capital gains tax or sales tax or export tax, Instead the Chinese government owns 51% of every corporation in the country and runs huge sovereign equity funds that buy out American corporations and uses their ownership to direct these corporations for political purposes rather then profit purposes.

    The international private bailout of Duibai is another great example of the distortion of sovereign equity funds using American companies for political purposes rather then profit purposes.

    We can’t just recklessly start screwing without tax system, as badly designed as it it could still be much much worse. What do we do to replace the policy ends of our system of deductions? Whatever it is you want todo, how do we move to it without large disruptions during the conversion?

    The issues we face are much deeper and more complex then anyone wants to admit to or realize.

  32. #32 by brewski on September 18, 2010 - 7:02 pm

    ur politicians campaigns are funded by the people receiving those “little group gimme benefits”. We won’t get better tax policy until we fix the campaign system.

    Sadly this is true, as the “Pander Bear” showed us.

    I say we start with the top 2% on income earners; strip them of their little group gimme benefits (e.g., tax loopholes)

    I am pretty sure my proposal does that by broadening the definition of income, no deductions and one rate.

  33. #33 by Richard Warnick on September 28, 2010 - 11:45 am

    The Census has released numbers for 2009. The Gini Index reached a new high, 46.8.

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