CPI

Bob Herbert peddles one of the Left's favorite myths....

"Working people were not just abandoned by big business and their ideological henchmen in government, they were exploited and humiliated. They were denied the productivity gains that should have rightfully accrued to them. [...] As hard as it may be to believe, the peak income year for the bottom 90 percent of Americans was way back in 1973, when the average income per taxpayer, adjusted for inflation, was $33,000. That was nearly $4,000 higher, Mr. Johnston pointed out, than in 2005."

I addressed many of these "stagnant wages" arguments at TCS Daily in 2006 and at QandO.  I won't repeat those arguments here.  Instead, I'll outsource this dispute to somebody Bob Herbert may know: Paul Krugman.  While acknowledging income inequality, Krugman nevertheless realizes that the "morality play" about stagnant wages and oppressed workers was mostly "a statistical illusion" attributable to poor measurements of inflation that underestimate income gains.

[O]ne thing is now clear: the truth about what is happening in America is more subtle than the simplistic morality play about greedy capitalists and oppressed workers that so many would-be sophisticates accepted only a few months ago. There was little excuse for buying into that simplistic view then; there is no excuse now.

I find it remarkable that Republicans have not done more to pursue better measurements of inflation - CPI may be the best proxy we have for inflation, but it is a very flawed proxy.  What's more, Republicans need to demand a re-consideration of the CPI numbers we currently use to evaluate the past 30+ years. The systematic errors in CPI create the statistical illusion that things are getting worse when that clearly is not true.  Indeed, this is a view that has been supported by economists from Paul Krugman to Alan Greenspan, from Brad DeLong to Ben Bernanke.

A more accurate index of inflation would have two crucial effects.

1. It would reduce our long-term deficit, as it would reduce the growth of entitlement spending.
2. It would destroy the Democrats fundamental economic premise.  Inequality may be growing, but the poor are not, in fact, getting poorer.

This is a case where the science - the experts - are on the side that Republicans ought to take.  Republicans should take advantage of that.  We should not let the "would-be sophisticates" of the world - e.g., Bob Herbert - peddle the morality play about "greedy capitalists and oppressed workers".  There is no excuse, either for that simplistic argument or for Republican inaction at this opportunity to accurately recapture the economic narrative.