I happened to read this article last night and after finally getting through it, I felt kind of disappointed.  It just seemed like he was going on about a whole lot of nothing.  Well, not much anyway.  The thing is, there does appear to be a widening gap between the superrich and the rest of us, but they really are a very small minority. I think Kravitz came pretty close to hitting the nail on the head as to where the problem lies...corrupt corporations and way overpaid execs.  But it's not like all of us aren't at least a little bit to blame.  As investor's we should demand to know what these people are paid, both over and under the table.  But Krugman just seems to be once again beating a dead horse.  Acting as though there is some out of control income distribution phenomenon at work here that I just don't see.  I'm apparently not the only one either...check out the following from a couple of guys that have thought it out in greater detail than I have:

BTW- I like Dale's idea best. Simple for everyone to figure out plus it would save me a whole lot more of my annual paycheck! 

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Is the increase in inequality as adverse for the lower and middle income groups as Paul Krugman claims? To view the actual data, go here (and scroll down to the second table, which adjusts income for inflation). The Census Bureau reports, you decide.

Krugman pre-emptively delegitimizes any who would view the data as something other than alarming.

The concerted effort to deny that inequality is increasing is itself a symptom of the growing influence of our emerging plutocracy...politically motivated smoke screens...the ideas that were taken up by business schools, that led to nice speaking and consulting fees...

In other words, anyone who would dispute Krugman must have been influenced by the malefactors of great wealth. Only the great Paul Krugman remains incorruptible and honest.

In my view, it is difficult to dispute that the rich are getting richer. However, it is equally difficult to dispute that the poor are getting richer. For example, W. Michael Cox and Richard Alm in Myths of Rich and Poor have pointed out that in spite of the rise in inequality a poor household in the 1990's was more likely than an average household in the 1970's to have a washing machine, clothes dryer, dishwasher, refrigerator, stove, color television, personal computer, or telephone.

Cox and Alm see the improvement in the lives of the poor as a sign that the glass of economic growth is half full. Krugman sees the even-larger increases in incomes of the rich as a sign that the glass is half empty. I see the case for treating income inequality as a national crisis as being almost entirely empty.

Discussion Question. The Census Bureau data show that on an inflation-adjusted basis, households in the middle quintile of the income distribution today have the income level that the quintile above them enjoyed 30 years ago. How does this help make Krugman's case that we are losing the middle class?

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John Ray on Krugman's article

I have noticed a few mentions of the latest NYT rant by Leftist economist Paul Krugman but have yet to see much in the way of a reply -- so I thought I might point out a few things. He is pushing the old Leftist wheelbarrow that inequality is once again on the rise in the United States. “The rich are getting richer ..... “ You know the tune! Anyway, to quote:

“Over the past 30 years most people have seen only modest salary increases: the average annual salary in America, expressed in 1998 dollars (that is, adjusted for inflation), rose from $32,522 in 1970 to $35,864 in 1999. That's about a 10 percent increase over 29 years -- progress, but not much. Over the same period, however, according to Fortune magazine, the average real annual compensation of the top 100 C.E.O.'s went from $1.3 million -- 39 times the pay of an average worker -- to $37.5 million, more than 1,000 times the pay of ordinary workers

and

“the top 10 percent contains a lot of people whom we would still consider middle class, but they weren't the big winners. Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent

So that is his beef. The average American is gradually getting richer -- not poorer -- but the corporate top dogs are really getting obscene. And he is of course right. As a company shareholder myself, I think that something has gone wrong when those who run companies can pay themselves whatever they like out of company funds without shareholders having any effective say in it. But corporate governance in the USA is acknowledged by all and sundry to be in a mess and the collapses at Enron etc have exposed that for all to see. And the first steps are now being taken to make CEOs more accountable. Nobody needed Krugman to tell us that there is a problem there that needs fixing.

But Krugman sees it all as a deep problem in American society -- which it clearly is not. It is a problem like many others but a problem-free society has yet to be invented. And a problem affecting only 1% of society is surely the sort of problem all governments would like to have. Mass poverty, for instance, would be a much harder problem -- and by far a more common problem worldwide.

I will leave a major dissection of his rant to people who have better access to current economic statistics than I do but I cannot resist also noting the superficiality of his argument about Sweden. He thinks Sweden is a much better place than the USA, of course. He admits that the average Swede produces 16% less of goods and services per hour worked than the average American does but then goes on to say that this is only an average and that people at the bottom end of the income scale in Sweden actually do a lot better than people at the bottom end of the income scale in the USA.

Of course they do! The whole reason people find the comparison between Sweden and the USA interesting is that huge slabs of the Swedish national income are diverted out of the pockets of those who earn it and into government coffers. Much of that income gets eaten up feeding bureaucrats of course but the whole rationale of the exercise is to equalize incomes no matter what a person does -- and that does happen on a much much larger scale in Sweden than it does in the USA. So Krugman is really telling us only what we already knew. Incomes are more equal in Sweden not because the sub-rich earn more but because they are given more out of everybody else’s pocket. The real issue -- what effect does this destruction of incentives have on national productivity -- he glides over. But that 16% difference suggests the answer. The Swedish system just does produce a much smaller pie to share out.

Krugman also makes much of life-expectancy statistics. He says that Swedes have a life expectancy three years longer than Americans, for instance. But what that has to do with economics he does not tell us. So maybe Americans die younger through eating more junk-food. But if so, that is their free choice. It is, however, unlikely to mean that they are less well-off -- as Krugman implies.