Tuesday, June 21, 2011

How well off are Americans?

As Alice Rivlin notes, tax increases on the rich (which are, in my view, necessary and, in light of recent changes in income, appropriate) are not enough to bring about long-term fiscal balance (the short run is another matter--fiscal tightening at the moment makes no sense to me).  So the question is, in the long term, how far down the income distribution should we go when we ask Americans to sacrifice?

An OECD report, Growing Unequal? Income Distribution and Poverty in OECD Countries, provides country ranks for average income for ten income deciles.  For the top four deciles, seven, eight, nine and ten, Americans earn more than their counterparts in all other countries, save Luxumbourg, a country whose population is about the same as Dane County, Wisconsin.  For the next decile down, only people in the Netherlands and Luxembourg have higher average incomes.  One could argue, then, that anyone in the top five deciles is pretty well served by being an American.

Things turn a little worse after that: the fifth decile ranks five; the fourth ranks 6, the third ranks 10th, the second ranks 14th and the bottom decile ranks 19th!  In light of this, it seems reasonable to say that the median and below is about the place where we might not wish so ask for more sacrifice.

(BTW, thanks to my USC student Sarah Mawhorter for digging the data out of the report for me).

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