Percent of People Living in Poverty

That decline is the consequence of successive government interventions to improve living standards for lower-income Americans. Today, government transfers and credits keep around 40 million Americans out of poverty. Seven out of eight of these people would be poor today if the safety net were only as effective as it was in 1964, according to calculations by Arloc Sherman at the Center on Budget and Policy Priorities. Social Security alone slashes 8.6 percentage points off the poverty rate, according to the Congressional Budget Office.

Poverty? Government cut that.

Inequality: Mostly in Check

One of the staple progressive mantras is that income inequality is soaring, with the minority at the top vacuuming up most of the national income. But the picture is much more complex, and more positive, than that. Critically, the most dramatic figures for inequality are generated by looking at "market income"—i.e. before any taxes and transfers.

Between 2000 and 2010, the biggest gains in real after-tax income were actually at the bottom of the ladder:

Change in After-Tax Income by Household Position in the Income Distribution, 2000-2010

The maintenance of incomes at the bottom of distribution is the result of strenuous government efforts to mitigate the effects of inequality, especially by cutting taxes and/or providing tax credits to lower-income Americans. Without this government action, inequality almost certainly would have risen quite sharply in the bottom 90 percent.

Having said this, there was a clear a rise in overall inequality in the 1980s, and there has been a pulling-away of the very richest in the top 5 percent or even 1 percent of the distribution in more recent years (see graph below). There may be reasons to worry about the income growth at the very top, particularly in relation to political power. It may be that the redistributive capacity of the government is reaching its political or fiscal limits. And there is good reason to worry about the growth of wealth, as opposed to income, inequality. But in terms of income, the real story of the last few decades is that rising market inequality has by and large not translated into final inequality, largely because of government action.

Inequality? Government curbed that.

Middle Class Income: Supported

The state of the middle class is also a point of distress for many progressives, and there are causes for concern. But the panicked tone of some political rhetoric is misplaced. Certainly the golden years of income growth enjoyed after World War II are behind us. But it is simply false to imagine that the American middle class is sinking. People at the top of the income distribution have done much better than most. But it is also clear that real incomes have risen across the board in the last three decades: