Statement by Heather Boushey on congressional hearing about measuring U.S. economic inequality

The Congressional Joint Economic Committee today is holding the first-ever hearing to discuss new proposals to measure who prospers when the U.S. economy grows, an acknowledgement that Gross Domestic Product growth is no longer a sufficient measure for understanding the health of our economy. Congress has already taken a number of actions to press the Department of Commerce’s Bureau of Economic Analysis to show how economic growth is distributed among income groups.

In 2018, Rep. Carolyn Maloney (D-NY), the current vice-chair of the JEC, and Senate Democratic Leader Charles Schumer (D-NY) and Sen. Martin Heinrich (D-NM), the ranking JEC Senate Democrat, introduced the Measuring Real Income Growth Act of 2018, which would require BEA to include an estimate of income growth within deciles of income in its quarterly GDP reports. Rep. Maloney reintroduced the measure earlier this year, and Sen. Heinrich and Sen. Schumer are expected to do so soon.

In March 2019, the conference report accompanying the Consolidated Appropriations Act of 2019 included a clause instructing BEA to report income growth within deciles of income starting in 2020. In their appropriations bill for the Department of Commerce for fiscal year 2020, House appropriators instructed BEA to report on its progress toward carrying out the FY2019 appropriations language.

Most recently, Senate appropriators allocated $1 million in FY2020 funds for BEA to implement the congressional instructions. The House and Senate FY2020 appropriations bills have not yet been reconciled.

Rep. Maloney today will release a letter from Secretary of Commerce Wilbur Ross committing to issue prototype measures of the distribution of national income during calendar year 2020. She will also release a letter from about 20 faith-based groups supporting the Measuring Real Income Growth Act, as well as statements of support from a coalition of labor unions and think tanks.

Following is a statement by Heather Boushey, president and CEO of the Washington Center for Equitable Growth, who will be a witness at today’s hearing. Equitable Growth’s GDP 2.0 project has played a key role in advancing research on Distributional National Accounts, the dataset that will enable the Commerce Department to show how the benefits of economic growth are distributed by income:

The dramatic rise in inequality our nation has experienced over the past 40 years is obstructing, subverting, and distorting the way our economy functions. For these reasons, we cannot be indifferent to how economic growth is distributed. One of the most important tools policymakers need to ensure strong, stable, and broadly shared growth is the ability to track inequality and growth together. This is so when the economy grows, we can see whether the benefits are widely distributed or, as we have seen increasingly in recent decades, those gains go disproportionately to those at the very top.

We applaud Rep. Maloney, Sen. Heinrich, Sen. Schumer, and their colleagues for their leadership in introducing legislation directing the Department of Commerce to regularly track and report on inequality alongside growth in national income, and for Congress’ ongoing efforts to better measure who prospers when the economy grows. We also appreciate the support this initiative is now receiving from a broad range of faith-based organizations, labor unions, and think tanks concerned about inequality and economic growth, and we are glad that Secretary Ross is committing to move this effort forward.

Today’s Joint Economic Committee hearing builds on all these positive steps. There is conclusive data showing that inequality in the United States has grown dramatically over the past four decades, a stark contrast to the post-World War II era. When GDP grew from the 1940s to the 1970s, most Americans saw their income grow. But since around 1980, the benefits of GDP growth—higher income, increased wealth—have gone almost entirely to those at or near the top of the income distribution.

Unfortunately, economic policies continue to be based on the notion that GDP growth is the only data point that truly measures the health of the economy. Now we know that GDP tells us nothing about the economic health of most Americans.

Distributional statistics will enable the government to say how Americans up and down the income ladder are faring, highlighting whether Americans on the middle and bottom rungs are experiencing any gains from economic growth. That is a far better measure of economic health than our current aggregate number, which, in our current era of high inequality, can present a misleading picture of the economic fortunes of most Americans.

Distributional measures of growth will help policymakers design policies aimed at raising output while reducing the huge gap between the very rich and the rest of America. Until we change the way we conceptualize, and therefore measure, economic prosperity, we are unlikely to have very much of it. In short, better, fairer growth measures beget better, fairer growth.

The Washington Center for Equitable Growth is a nonprofit research and grantmaking organization dedicated to advancing evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth. For more information, see www.equitablegrowth.org and follow us on Twitter and Facebook @equitablegrowth.