Myths Of Rich And Poor: Why We're Better Off Than We Think (Paperback)

Shattering Modern Economic Fables

The media bombards us daily with stories about economic hardship: corporate layoffs, trade deficits, homelessness, minimum wage battles, families in poverty. Bad news sells newspapers and increases television ratings - it's ironic that the media's own economic interest is served by trumpeting economic disaster.

These messages have been repeated so often they've been exalted to the position of Conventional Wisdom. Everyone knows by now that the poor are getting poorer while the rich are getting richer, that we've become a nation of hamburger flippers, that both parents need to work in order to support a family, and that our children are the first generation in our history who will not be better off than their parents.

Enter Michael Cox, an economist with the Federal Reserve, and Richard Alm, a business journalist. As they state in Myths of Rich & Poor, "these statements of America's economic failure are not just wrong, but, in each and every instance, spectacularly wrong." A combination of statistics and elegant methodologies are the tools they use to shatter these modern economic fables. The clarity of their writing doesn't hurt either.

It's impossible to read this book without realizing that we are winning the war on poverty. Today's average "poor" families have goods and services that rival yesterday's middle class families: 60% have microwaves, 50% have air conditioners, 93% have color televisions, and 60% have videocassette recorders.

More impressive is the income mobility within our economy. Most poor families don't stay poor. Over the sixteen year period tracked by one study, 95% of the families in the lowest income quintile climbed the economic ladder to higher quintiles. Over 80% moved to the top three quintiles, qualifying them as middle class or better. As Cox and Alm repeatedly demonstrate, "the rich may have gotten a little richer, but the poor have gotten much richer."

In another enjoyable section, Cox and Alm deftly reverse the perception that we are becoming a "nation of hamburger flippers." Fast-food jobs supposedly represent the shift of our economy to low-paying service sector jobs. But Cox and Alm point out that everyone from brain surgeons to computer programmers are considered part of the service sector.

Reading this book gives you a perspective you would not otherwise get from the mainstream media. With their relentless daily focus on bad economic news, the media completely miss the big picture - the American Dream is being realized by more people than ever before. As we prepare our children to participate in this economic miracle, it's good to know that boundless opportunities lie ahead for them.

Where the book is too breezy, in my opinion, is in its treatment of the policy implications of its statistics. Suppose we take it as proven, based on their data and analysis, that between 80 and 90 percent of the people below the poverty line are not truly poor, based on what they are able to consume. Two questions arise, which the book fails to answer.

1. To what extent have government programs, such as social security, food stamps, etc., enabled these people to escape true poverty? If government programs are what has alleviated poverty, then the official poverty line may still be a valid measure of the need for government assistance.

2. What sort of solution is there for hard-core poverty--the 2 to 4 percent of the population who are poor by any definition? How much of their poverty is amenable to economic solutions, and how much of it instead requires medical treatment--for mental illness, substance abuse, etc.?

While Cox and Alm help set the stage for more informed policy discussions, they do not really undertake those discussions.