The study, Pulling Apart, was the work of the Center on Budget and Policy Priorities and the Economic Policy Institute (EPI) and based on U.S. Census data. It claimed that the disparity in income between the top 20 percent of earners and the bottom 20 percent has grown in the last 20 years. The incomes of the countrys richest families have climbed substantially over the past two decades, while middle- and lower-income families have seen only modest increases, said a press release from EPI.
Newspapers across the country picked up the study and at least 12 ran with it. Each newspaper was eager to report the findings in some localized form, but the study lacked balance and so did several of the news accounts. Several of the stories began in an almost identical way. One such story was from The Washington Posts DVera Cohn: The gap between the citys richest and poorest families has continued to widen since 2000, as incomes at the top soared and those at the bottom barely budged, according to a report based on census data.
Half of the papers that covered the report didnt even bother to point out that the think tanks releasing the study were both left-wing. The papers that took that route included: The Post, New York Newsday, The Kansas City Star and The Philadelphia Inquirer.
Newsday at least recorded reaction from both sides of the political spectrum, including comment from the Manhattan Institute, a conservative think tank and the Fiscal Policy Institute, a liberal-leaning think tank. But the Newsday piece left out that the original study was produced by two liberal think tanks. Instead, Newsday staff writer Randi F. Marshall treated it as if the report were neutral and needed a response from both sides.
The Miami Herald referred to EPI as a liberal, independent think tank. Niala Boodhoo, who wrote the piece, didnt explain what she meant by that, nor did she include a similar conservative, independent think tank in her report. She did, however, get response from Republican Gov. Jeb Bushs office. The Chicago Tribune took a wiser tack and called EPI a liberal think tank and naturally sought a response from The Heritage Foundation.
While the conservative Heritage Foundation and the Manhattan Institute were allowed comment, those critiques were limited and left out several key points.
Thomas J. DiLorenzo, an economics professor at Baltimores Loyola College, noted some problems with typical income gap analysis in his book How Capitalism Saved America. DiLorenzo explained that such studies often fail to track how individuals perform and ignore the mobility available for individuals to move up from one group to another. In reality, the bottom 20 percent is constantly made up of different people, he stated.
His book cited an analysis of more than 50,000 Americans by two Federal Reserve Board researchers that showed only 5 percent of families in the bottom fifth of income in 1975 were still there in 1991. The study added that the poorest families had actually made the largest gains.
That wasnt the way the Tribune told the story. According to that report by Barbara Rose, Illinois richest families saw their incomes grow more than twice as fast as families at the bottom and middle of the economic ladder during the last two decades. While that was the impression given by the study, it isnt entirely accurate. The study looked at overall statistics for large groups, but made no attempt to gauge whether the rich had gotten richer or poorer. It simply looked at the total for the wealthiest and poorest.
According to a paper by Robert Rector and Rea Hederman, Jr., of The Heritage Foundation, there are four other typical problems involved in income gap studies: the fact that they ignore many types of cash and non-cash income; the failure to include the effects of taxation; using U.S. Census data that divide people into unequal groups, skewing the data; and, the fact that income differences are substantially affected by large differences in the amount of work performed.
A few other points that didnt receive widespread comment:
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The Kansas City Star said that the authors had chosen the
dates of the study because they represented comparably low
points of their respective business cycles. It didnt
question whether that had skewed the results.
CNNs American Morning was the only TV news program to
tackle the story. While Andy Serwer deserves credit for noting
that the studys authors were two liberal think tanks, he
merely noted that conservatives would probably take issue with
the findings but didnt bother to find anyone on the opposite
side.
The studys authors admitted the limitations on their
analysis. We do not, however, include the imputed cash value
of publicly-provided health care benefits, like Medicare and
Medicaid, because of the lack of a generally-accepted method
for accounting for medical benefits or expenditures, they
wrote.
The authors also admitted that there were constraints on how
they handled income for the high-end earners. According to the
report, For example, in 1981, the top-code for earnings from
primary job was $75,000 (in 1981 dollars.) An individual with
a salary of $100,000 was therefore coded as having earnings of
$75,000 $25,000 less than his or her true income from that
job. Lacking accurate data, they estimated it.
The study is only the latest criticism of
the U.S. economy by the liberal Economic Policy Institute (EPI) and
Center for Budget and Policy Priorities (CBPP), two groups critical
of the Bush administration's economic policies, including the 2001
tax cuts.
As recently as January 26, EPI issued a
statement [1]attributing the nation's solid job growth to
government spending, not the 2001 tax cuts. On January 6, CBPP
issued a paper arguing that improving budget deficit projections are
not the result of increased revenue through
tax
cuts [2].
When business media report ongoing coverage of the
economys performance, reporters should be careful to label the
ideological leanings of groups like EPI and CBPP, and to balance
their reports by including criticism from free market-oriented think
tanks.
The Business & Media Institute has documented
previous instances [3] where the media have highlighted findings by
the
Economic Policy Institute [4] while downplaying or ignoring opposing
viewpoints.
Staff Writer Ken Shepherd contributed to this report.