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Claim that most economic gains made by top 1 percent mostly true but needs clarification

The statement

"Since Barack Obama became president of the United States, 95 percent of economic gains have been made by the richest 1 percent."

Joe Scarborough, Jan. 21 on MSNBC's Morning Joe

The ruling

Scarborough's statement goes back to a study from University of California at Berkeley economist Emmanuel Saez. In the years from 2009 to 2012, Saez found that the income flowing to families in the top 1 percent went up by more than 30 percent, while for the rest, income grew by less than half a percent.

"Hence, the top 1 percent captured 95 percent of the income gains in the first three years of the recovery," Saez wrote.

The main caveat with Saez's work is that he used preliminary data for 2012 and didn't include two significant kinds of income — money from the government (Social Security, welfare, food stamps, etc.) or the value of health insurance benefits.

We'll now walk you through some other ways of looking at this question.

We came across a study that measured income by measuring capital gains regardless of whether the owner cashed out and including government assistance programs.

That study, published by the National Bureau of Economic Research, found a wide income disparity as well, but noted that the gap actually narrowed between 1989 and 2007.

There's another argument that it makes more sense to calculate consumption rather than income. Economist Aparna Marthur of the American Enterprise Institute, a free-market-oriented think tank in Washington, thinks what people spend shows you how well people are actually living, and it doesn't matter if they pay for it using credit cards, their weekly paycheck or their savings.

"We find that consumption inequality is much narrower than income inequality," Marthur said. "And has shown no trend toward widening over the last few decades."

There is one other criticism of Saez's analysis. Eugene Steurele, a fellow at the Urban Institute, a D.C.-based academic center, warned about using 2009, the very bottom of the recession, as the starting point.

"The economic cycle messes up this comparison," Steurele said. "In recovering from a recession, if an unemployed person stays with the same unemployment benefits, and a wage earner doesn't increase her wages, but the stock market recovers enough so there are more capital gains, then one might get these types of results."

Work by the Congressional Research Service, the nonpartisan policy analysis arm of Congress, goes at least part way toward addressing Steurele's concern. A 2011 report chose two points at the same place in the economic cycle, 1996 and 2006. It also factored in taxes, and if its results are not exactly comparable to the Saez article, they point in the same direction.

"The poorest tax filers (the bottom fifth) saw average after-tax income fall by 6 percent between 1996 and 2006," the report said, while "the richest 1 percent of tax filers experienced a 74 percent increase in after-tax income."

Scarborough's statement is accurate but in need of clarification. We rate it Mostly True.

Edited for print. Read the full version at PunditFact.com.

Claim that most economic gains made by top 1 percent mostly true but needs clarification 01/24/14 [Last modified: Friday, January 24, 2014 5:53pm]
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