Paul Krugman: Consumer Spending and Inequality Denial

I’ve been debating rising inequality with the usual suspects for a couple of decades (despite what it says on this piece, it was actually published in 1992). And what you always encounter from the right is a sort of defense in depth: claims, based on tortured statistics, that it isn’t happening; claims, based on similarly tortured statistics, that it doesn’t matter; and claims that anyway it’s a good thing. You might think that people would have to choose one of these lines: you can’t simultaneously say that inequality isn’t rising and that the rise is a good thing, can you? Well, yes you can; we’re engaged in a political defense of the 1% here, not research.

So, the latest is a piece by Donald Boudreaux and Mark Perry purporting to debunk the notion of middle-class stagnation. Their key piece of evidence is the claim that spending on “basics” has been steadily falling as a share of income, showing that people are finding it ever easier to meet the essential demands of middle-class life.